As filed with the Securities and Exchange Commission on April 12, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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RUSSELL-STANLEY HOLDINGS, INC.
(Exact Name of Registrant Issuer as Specified in Its Charter)
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DELAWARE 3412 22-3525626
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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685 Route 202/206
Bridgewater, NJ 08807
(908) 203-9500
(Address, including zip code, and telephone number, including area code, of
registrant issuer's principal executive offices)
Daniel W. Miller
Russell-Stanley Holdings, Inc.
685 Route 202/206
Bridgewater, NJ 08807
(908) 203-9500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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With a copy to:
Stephan J. Feder, 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. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum
Title of each Class of Amount to Proposed Maximum Aggregate Offering Amount of
Securities to be Registered Be Registered Offering Price Per Note Price(1) Registration Fee
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10 7/8% Senior Subordinated Notes due 2009 $150,000,000 100% $150,000,000 $ 41,700.00
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Guarantees of 10 7/8% Senior Subordinated
Notes due 2009 (2) $150,000,000 None(3) None(3) None(4)
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) See inside facing page for table of additional registrant guarantors.
(3) No separate consideration will be received for the guarantees of the 10 7/8%
Senior Subordinated Notes due 2009 by the subsidiary guarantors of
Russell-Stanley Holdings, Inc.
(4) Pursuant to Rule 457(n), no separate filing fee is required for the
guarantees.
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
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.
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TABLE OF ADDITIONAL REGISTRANT GUARANTORS
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State or Other
Jurisdiction of
Exact Name of Registrant Incorporation I.R.S. Employer Address, Including Zip Code, and Telephone
Guarantor as Specified in its or Identification Number, Including Area Code, of Registrant
Charter Organization Number Guarantor's Principal Executive Offices
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Russell-Stanley Corp. New Jersey 22-1505645 685 Route 202/206
Bridgewater, NJ 08807, (908-203-9500)
Container Management Services, Inc. South Carolina 57-0941972 685 Route 202/206
Bridgewater, NJ 08807, (908-203-9500)
New England Container Co., Inc. Rhode Island 05-0268961 685 Route 202/206
Bridgewater, NJ 08807, (908-203-9500)
Russell-Stanley, Inc. Illinois 22-2623485 685 Route 202/206
Bridgewater, NJ 08807, (908-203-9500)
RSLPCO, Inc. Delaware 22-3611710 685 Route 202/206
Bridgewater, NJ 08807, (908-203-9500)
Russell-Stanley, L.P. Texas 22-3611707 685 Route 202/206
Bridgewater, NJ 08807, (908-203-9500)
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Subject to Completion, Dated April 12, 1999
PRELIMINARY PROSPECTUS
[Russell-Stanley Holdings, Inc. Logo]
Russell-Stanley Holdings, Inc.
Offer to Exchange All Outstanding
10 7/8% Senior Subordinated Notes due 2009
for 10 7/8% Senior Subordinated Notes due 2009
Which Have Been Registered Under the Securities Act of 1933
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The Exchange Offer
o We will exchange all of our outstanding 10 7/8% Senior Subordinated Notes
due 2009 that are validly tendered and not validly withdrawn for an equal
principal amount of 10 7/8% Senior Subordinated Notes due 2009 which have
been registered under the Securities Act of 1933 and are freely tradeable.
Throughout this prospectus, we refer to the outstanding notes as the
"outstanding notes" and the notes that will be issued in exchange for the
oustanding notes as the "exchange notes."
o You may withdraw tenders of outstanding notes at any time prior to the
expiration of the exchange offer.
o The exchange offer expires at 5:00 p.m., New York City time, on ,
1999, unless extended. We do not currently intend to extend the expiration
date.
o The exchange of outstanding notes for exchange notes in the exchange
offer will not be a taxable event for U.S. federal income tax purposes.
o We will not receive any proceeds from the exchange offer.
The Exchange Notes
o The exchange notes are being offered in order to satisfy certain of our
obligations under the exchange and registration rights agreement that we
entered into in connection with the placement of the outstanding notes.
o The form and terms of the Exchange Notes will be substantially identical
to the form and terms of the Outstanding Notes, except that the Exchange
Notes will be freely tradeable by virtue of their registration under the
Securities Act of 1933, will not bear legends restricting their transfer,
will not be subject to any additional obligations regarding registration
under the Securities Act of 1933, and will not be subject to the special
interest payments resulting from a failure to meet certain registration
obligations. The Exchange Notes will be issued under and entitled to the
benefits of the same indenture that authorized the issuance of the
Outstanding Notes. Consequently, both series will be treated as a single
class of debt securities under that Indenture.
Resales of Exchange Notes
o If you are a broker-dealer and you receive exchange notes for your own
account in exchange for outstanding notes, you must acknowledge that you
will deliver a prospectus in connection with any resale of such exchange
notes. By making such acknowledgment, you will not be deemed to admit that
you are an "underwriter" under the Securities Act of 1933.
o Broker-dealers may use this prospectus in connection with any resale of
exchange notes received in exchange for outstanding notes where such
outstanding notes were acquired by the broker-dealer as a result of
market-making activities or trading activities.
o We will make this prospectus available to any broker-dealer for use in
any such resale for a period of 180 days after the date of this
prospectus.
o A broker-dealer may not participate in the exchange offer with respect to
outstanding notes acquired other than as a result of market-making
activities or trading activities.
o If you are an affiliate of Russell-Stanley or are engaged in, or intend
to engage in, or have an agreement or understanding to participate in, a
distribution of the exchange notes you must comply with the registration
requirements of the Securities Act of 1933 in connection with any resale
transaction.
o See "Plan of Distribution."
You should consider carefully the risk factors beginning on page 13 of
this prospectus before participating in the exchange offer.
Neither the Securities and Exchange Commission nor any state securities
commission has approved the exchange notes or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
The date of this prospectus is , 1999.
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TABLE OF CONTENTS
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Where You Can Find More Information ............ i
Prospectus Summary ............................. 1
Risk Factors ................................... 13
Use of Proceeds ................................ 22
Capitalization ................................. 23
Unaudited Pro Forma Consolidated
Financial Data ................................ 24
Selected Historical Consolidated
Financial and Other Data ...................... 31
Management's Discussion and Analysis
of Financial Condition and Results of
Operations .................................... 34
Business ....................................... 42
Management ..................................... 52
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Ownership of Common Stock ...................... 59
Certain Relationships and Related
Party Transactions ............................ 61
Description of Senior Credit Facility .......... 62
The Exchange Offer ............................. 63
Description of Notes ........................... 75
Certain U.S. Federal Income Tax
Consequences of the Exchange Offer ............. 113
Plan of Distribution ........................... 113
Legal Matters .................................. 114
Experts ........................................ 114
Index to Financial Statements .................. F-1
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-4 under the Securities Act of 1933 with respect to the
exchange notes being offered by this prospectus. This prospectus, which forms a
part of the registration statement, does not contain all of the information set
forth in, or filed as an exhibit to, the registration statement. For further
information with respect to Russell-Stanley and the exchange notes, reference
is made to the registration statement. While we believe that the material
information has been provided regarding the contracts and documents described
in this prospectus, 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.
We are not currently subject to the informational requirements of the
Securities Exchange Act of 1934. Upon completion of the exchange offer, we will
be subject to the informational requirements of the Securities Exchange Act of
1934 and, as a result, will file periodic reports and other information with
the Securities and Exchange Commission. The registration statement and such
reports and other information can be inspected and copied at the Public
Reference Section of the Securities and Exchange 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 Securities and Exchange
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 Securities and Exchange Commission at prescribed rates. Such material
may also be accessed electronically by means of the Securities and Exchange
Commission's home page on the Internet (http://www.sec.gov).
In addition, whether or not required by the Securities and Exchange
Commission, so long as any outstanding notes are outstanding, beginning with
the quarter ended June 30, 1999 we will furnish to the holders of any
outstanding notes, within the time periods specified in the Securities and
Exchange Commission's rules and regulations:
o all quarterly and annual financial information that would be required to
be contained in a filing with the Securities and Exchange Commission on
Forms 10-Q and 10-K if we were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and, with respect to the annual information only, a report
on the annual financial statements by our independent auditors; and
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o all current reports that would be required to be filed with the
Securities and Exchange Commission on Form 8-K if we were required to file
such reports.
In addition, whether or not required by the Securities and Exchange
Commission, we will file a copy of all of the information and reports referred
to above with the Securities and Exchange Commission for public availability
within the time periods specified in the Securities and Exchange Commission's
rules and regulations (unless the Securities and Exchange Commission will not
accept such a filing) and make such information available to securities
analysts and prospective investors upon request.
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"CMS," "Delcon" and "Russell-Stanley" are trademarks of ours. All other
trademarks, service marks or brand names appearing in this prospectus are the
property of their respective holders.
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PROSPECTUS SUMMARY
The following summary contains basic information about Russell-Stanley
Holdings, Inc. and its subsidiaries, and this exchange offer. It may not
contain all the information that may be important to you. You should read this
entire prospectus, including the financial data and related notes, in its
entirety. The term "Russell-Stanley" and references to "we," "us" and "our"
mean Russell-Stanley Holdings, Inc. and its subsidiaries, including predecessor
companies, except where it is clear the context indicates otherwise.
Russell-Stanley
General
We are a leading manufacturer and marketer of plastic and steel industrial
containers and a leading provider of related container services in the United
States and Canada. Our container manufacturing division manufactures and sells
new plastic and steel rigid industrial containers. Our services division (i)
leases plastic rigid industrial containers, (ii) provides plastic container
fleet management services, (iii) reconditions and sells steel drums and (iv)
retrieves and recycles empty industrial containers. Our container manufacturing
and services divisions together have over 1,500 active customers in the
agricultural chemical, food product, lubricant, pharmaceutical and specialty
chemical industries. We believe that our customers base their purchasing
decisions primarily on price, service and quality and are increasingly looking
to maintain relationships with fewer suppliers who can provide a broad range of
high-quality industrial containers and related container services at
competitive prices, often on a national or international basis. We have
increased our net sales from $138.8 million for the year ended December 31,
1995 to $284.5 million on a pro forma basis for the year ended December 31,
1998, representing a compound annual growth rate of 27.0%. During the same
period we increased our Adjusted EBITDA from $17.4 million to $46.2 million,
representing a compound annual growth rate of 38.4%, while our Adjusted EBITDA
margin expanded from 12.5% to 16.2%. The majority of our revenue and Adjusted
EBITDA growth and margin improvement during this period has come from the
successful acquisition and integration of four complementary businesses.
We believe that our container manufacturing division offers one of the
broadest lines of 5- to 70-gallon plastic rigid industrial containers in the
United States and Canada and enjoys the largest share in the U.S. plastic drum
market as well as one of the leading shares in the Canadian plastic drum
market. We are the principal manufacturer in the United States and Canada of
55-gallon plastic tight-head drums, which we sell under the brand names L-1
(LR-1 in Canada) and Delcon. We believe that the design of the L-1 and Delcon
drums is the industry standard for 55-gallon plastic tight-head drums in the
United States and Canada, and we own and/or have a license to use important
proprietary technology relating to the manufacture and sale of these drums. Our
container manufacturing division also offers a broad line of the widely used
55-gallon steel drum and, we believe, enjoys one of the leading shares in the
Northeast, Gulf Coast and Canadian steel drum markets.
Our services division is an innovator and, we believe, the leader in the
United States and Canada in the businesses of leasing plastic containers on a
"per use" or "round-trip" basis and providing plastic container fleet
management services. In our container leasing business, we lease a container to
our customer for filling and shipping to the end-user. We then retrieve the
container directly from the end-user and prepare it for re-use. Container fleet
management involves the same services, but uses containers owned by the
customer. Since 1991, the growth of plastic container leasing and fleet
management has outpaced the growth of the rigid industrial container market as
a whole, and we believe these businesses are among the fastest growing sectors
of the U.S. rigid industrial container market. We believe that our services
division is also the leading reconditioner of steel drums in the Northeast. The
addition of container services to our historical manufacturing business enables
us to serve a wider range of our customers' evolving industrial container
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requirements and is an important aspect of our strategy to retain and enhance
our leading market position as our customers increasingly look to rely on fewer
suppliers.
We currently operate twelve plastic drum manufacturing plants, three steel
drum manufacturing plants and six container services plants throughout the
United States and Canada, enabling us to be strategically located near our
major customers. We sell, lease and service plastic containers in most markets
in the United States and in most of the major industrial regions in Canada. We
sell new steel drums in the Northeast, the Gulf Coast, parts of the Midwest and
Ontario, Canada, regions where there is a high concentration of purchasers of
steel drums, and we sell reconditioned steel drums in the Northeast.
Recent Acquisitions
The rigid industrial container industry has been undergoing consolidation
for a number of years and remains fragmented. We believe that the industry will
evolve to support a few participants who are able to provide a broad range of
containers and related container services. As a result, we began pursuing, and
in July 1997 began consummating, several acquisitions in furtherance of our
goal to become the preeminent provider of rigid industrial containers and
related container services in the United States and Canada. We acquired
Container Management Services (July 1997), Hunter Drums Limited (October 1997),
the plastics division of Smurfit Packaging Corporation (November 1997) and New
England Container (July 1998). We discuss each of the businesses we acquired
under "Business--Recent Acquisitions."
Competitive Strengths
We believe the following competitive strengths are the primary factors
contributing to our leading position in the marketplace:
o We are a leading industry player with strong market positions.
o We have a broad offering of quality products and services.
o We focus on maintaining a competitive cost structure.
o We have a high quality and diverse customer base.
o We have an experienced management team and strong sponsor.
We discuss each of these competitive strengths under
"Business--Competitive Strengths."
Business Strategy
Our goal is to become the preeminent provider of rigid industrial
containers and related container services in the United States and Canada. In
this effort, we intend to:
o Continue to broaden our product and service offering and geographic
reach.
o Continue to improve our cost structure.
o Pursue selective acquisitions.
We discuss each of these strategies under "Business--Business Strategy."
Our Sponsor
Russell-Stanley was incorporated in 1950 as a steel drum manufacturer and
was acquired in June 1989 by affiliates of Vestar Capital Partners. Throughout
this prospectus we refer to Vestar Capital Partners and its affiliates as
"Vestar."
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Vestar, headquartered in New York with an office in Denver, Colorado,
manages over $1 billion in private equity capital. Founded in 1988, Vestar
focuses on management buyouts, recapitalizations and growth equity investments
and to date has completed 26 investments with an aggregate value of almost $5
billion. Previous Vestar investments have included Aearo Corporation, Celestial
Seasonings, Inc., Clark-Schwebel, Inc., Cluett American Corp., Consolidated
Cigar Holdings, Inc., Insight Communications Company, L.P., La Petite Holdings,
Inc., Alvey Systems, Inc., a wholly owned division of Pinnacle Automation,
Inc., Prestone Products Corporation, Pyramid Communications, Inc., Siegel &
Gale Holdings, Inc., Sun Apparel, Inc. and Westinghouse Air Brake Company.
* * *
Russell-Stanley is incorporated in Delaware. The address of our principal
executive office is 685 Route 202/206, Bridgewater, New Jersey 08807, and our
telephone number is (908) 203-9500. We invite you to visit our web site at
http://www.russell-stanley.com. Information on our website is not part of this
prospectus.
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Summary of Terms of the Exchange Offer
On February 10, 1999, we completed the private offering of the outstanding
notes. References to "Notes" in this prospectus are references to both the
outstanding notes and the exchange notes.
We and our subsidiaries which guarantee the outstanding notes entered into
an exchange and registration rights agreement with the initial purchasers in
the private offering in which we and those subsidiaries agreed to deliver to
you this prospectus and to complete the exchange offer within 255 days after
the date of original issuance of the outstanding notes.
The Exchange Offer............ We are offering to exchange up to $150.0
million aggregate principal amount of exchange
notes for up to $150.0 million aggregate
principal amount of outstanding notes.
Outstanding notes may be exchanged only in
integral multiples of $1,000. The form and
terms of the exchange notes:
o will be substantially identical to the form
and terms of the outstanding notes, except
that the exchange notes
o will be freely tradeable by virtue of their
registration under the Securities Act of
1933,
o will not bear legends restricting their
transfer, will not be subject to any
additional obligations regarding
registration under the Securities Act of
1933 and
o will not be subject to the special interest
payments described in "Description of
Notes--Registration Covenant; Exchange
Offer."
The exchange notes will be issued under and
entitled to the benefits of the same Indenture
that authorized the issuance of the
outstanding notes. Consequently, both series
will be treated as a single class of debt
securities under the Indenture.
Resales....................... Based on interpretations of the staff of the
Securities and Exchange Commission set forth in
no-action letters issued to unrelated third
parties, we believe that the exchange notes
issued pursuant to the exchange offer in
exchange for outstanding notes may be offered
for resale, resold and otherwise transferred by
you (unless you are an "affiliate" of
Russell-Stanley within the meaning of Rule 405
under the Securities Act of 1933) without
compliance with the registration and prospectus
delivery provisions of the Securities Act of
1933, provided that you are acquiring the
exchange notes in the ordinary course of your
business and that you have not engaged in, do
not intend to engage in, and have no
arrangement or understanding with any person to
participate in, a distribution of the exchange
notes. Each participating broker-dealer that
receives exchange notes for its own account
pursuant to the exchange offer in exchange for
shares of outstanding notes that were acquired
as a result of market-making or trading
activity must acknowledge that it will deliver
a prospectus in connection with any resale of
the exchange notes. See "Plan of Distribution."
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Any holder of outstanding notes who
o is an affiliate of Russell-Stanley,
o does not acquire exchange offer in the
ordinary course of its business or
o tenders in the exchange offer with the
intention to participate, or for the purpose
of participating, in a distribution of
exchange notes
cannot rely on the position of the staff of
the Securities and Exchange Commission set
forth in the no-action letters that we
referenced to in the preceding paragraph, and,
in the absence of an exemption, must comply
with the registration and prospectus delivery
requirements of the Securities Act of 1933 in
connection with the resale of the exchange
notes.
Expiration Date; Withdrawal
of Tender.................... The exchange offer expires at 5:00 p.m., New
York City time, on , 1999, or such later
date and time to which we extend the expiration
date. We do not currently intend to extend the
expiration date. You may withdraw tenders of
outstanding notes at any time prior to the
expiration of the exchange offer.
Certain Conditions to the
Exchange Offer............... The exchange offer is subject to customary
conditions, which we may waive. We currently
expect that each of the conditions will be
satisfied and that no waivers will be
necessary. Please read the section captioned
"The Exchange Offer--Certain Conditions to the
Exchange Offer" of this prospectus for more
information regarding the conditions to the
exchange offer.
Procedures for Tendering
Outstanding Notes............ If you wish to accept the exchange offer, you
must complete, sign and date the accompanying
letter of transmittal, or a facsimile of the
letter of transmittal, according to the
instructions contained in this prospectus and
the letter of transmittal. You must also mail
or otherwise deliver the letter of transmittal,
or a facsimile of the letter of transmittal,
together with the outstanding notes and any
other required documents to the exchange agent
at the address set forth on the cover page of
the letter of transmittal. If you hold
outstanding notes through The Depository Trust
Company and wish to participate in the exchange
offer, you must comply with the Automated
Tender Offer Program procedures of The
Depository Trust Company, by which you will
agree to be bound by the letter of transmittal.
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Terms and Conditions of the
Letter of Transmittal ......... By signing, or agreeing to be bound by, the letter of
transmittal, you will represent to us that, among other
things:
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o any exchange notes that you receive will be acquired
in the ordinary course of your business;
o you have no arrangement or understanding with any
person or entity to participate in, and do not intend to
engage in, a distribution of the exchange notes;
o if you are a broker-dealer that will receive exchange
notes for your own account in exchange for
outstanding notes that were acquired as a result of
market-making or trading activities, that you will deliver
a prospectus, as required by law, in connection with
any resale of such exchange notes;
o you are not an "affiliate," as defined in Rule 405 of the
Securities Act of 1933, of Russell-Stanley or, if you are
an affiliate, you will comply with any applicable
registration and prospectus delivery requirements of
the Securities Act of 1933; and
o if you are a person in the United Kingdom, that your
ordinary activities involve you in acquiring, holding,
managing or disposing of investments, as principal or
agent, for the purposes of your business.
Special Procedures for
Beneficial Owners ......... If you are a beneficial owner of outstanding notes which
are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee, and you wish to
tender such outstanding notes in the exchange offer, you
should contact such registered holder promptly and instruct
such registered holder to tender on your behalf. If you wish
to tender on your own behalf, you must, prior to completing
and executing the letter of transmittal and delivering your
outstanding notes, either make appropriate arrangements
to register ownership of the outstanding notes in your name
or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may
take considerable time and may not be able to be
completed prior to the expiration date.
Guaranteed Delivery
Procedures ................ If you wish to tender your outstanding notes and your
outstanding notes are not immediately available or you
cannot deliver your outstanding notes, the letter of
transmittal or any other documents required by the letter of
transmittal or comply with the applicable procedures under
The Depository Trust Company's Automated Tender Offer
Program prior to the expiration date, you must tender your
outstanding notes according to the guaranteed delivery
procedures which we explain in this prospectus under the
caption "The Exchange Offer--Guaranteed Delivery
Procedures."
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Effect on Holders of Outstanding
Notes ..................................... As a result of this exchange offer, we will have fulfilled a
covenant contained in the exchange and registration
rights agreement among us and our subsidiaries which
guarantee the outstanding notes and the initial purchases
in the private offering through which we issued the
outstanding notes. Accordingly, there will be no increase
in the interest rate on the outstanding notes. If you do
not tender your outstanding notes in the exchange offer,
you will continue to hold outstanding notes and will be
entitled to all the rights and limitations applicable thereto
under the indenture relating to the outstanding notes and
the exchange notes; however, certain rights under the
exchange and registration rights agreement that
terminate as a result of the acceptance for exchange of
validly tendered outstanding notes pursuant to the
exchange offer will also terminate with respect to such
untendered outstanding notes.
Consequence of Failure to Exchange ......... Holders of outstanding notes who do not exchange their
outstanding notes for exchange notes pursuant to the
exchange offer will continue to be subject to restrictions
on transfer of such outstanding notes. In general, the
outstanding notes may not be offered or sold, unless
registered under the Securities Act of 1933, except
pursuant to an exemption from, or in a transaction not
subject to, the Securities Act of 1933 and applicable
state securities laws. We do not currently anticipate that
we will register the outstanding notes under the
Securities Act of 1933. In addition, the tender of
outstanding notes in the exchange offer will reduce the
principal amount of the outstanding notes outstanding,
which may have an adverse effect upon, and increase
the volatility of, the market price of the outstanding notes
due to a reduction in liquidity.
Certain U.S. Federal Income
Tax Considerations ........................ The exchange of outstanding notes for exchange notes
in the exchange offer, will not be a taxable event for U.S.
federal income tax purposes. See "Certain U.S. Federal
Income Tax Consequences of the Exchange Offer."
Use of Proceeds ............................ We will not receive any cash proceeds from the issuance
of exchange notes pursuant to the exchange offer.
Exchange Agent ............................. The Bank of New York is the exchange agent for the
exchange offer. The address and telephone number of
the exchange agent are set forth in the section captioned
"Exchange Offer--Exchange Agent" of this prospectus.
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Summary of Terms of the Exchange Notes
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Issuer.......................... Russell-Stanley Holdings, Inc.
Notes Offered .................. $150.0 million aggregate principal amount of
10 7/8% Senior Subordinated Notes due 2009.
Maturity ....................... February 15, 2009.
Interest ....................... Annual rate: 10.875%.
Payment frequency: every six months on February 15
and August 15.
Interest on the exchange notes will accrue from the last
interest payment date on which interest was paid on the
outstanding notes or, if no interest was paid on the
outstanding notes, from the date the outstanding notes
were originally issued.
Guarantors ..................... Each guarantor is one of our domestic restricted
subsidiaries. Not all of our subsidiaries are guarantors of
the exchange notes. If we cannot make payments on the
exchange notes when they are due, the guarantors must
make them instead.
Sinking Fund ................... None.
Ranking and Guarantees ......... The exchange notes will rank junior to all of our existing
and future senior indebtedness and will rank senior in
right of payment to all of our future indebtedness that is
expressly subordinated to the outstanding notes. See
"Description of Notes--Subordination."
All of our existing and future domestic restricted
subsidiaries will guarantee our obligation to pay principal,
premium, if any, and interest on the exchange notes. The
guarantees will rank junior in right of payment to all
existing and future senior indebtedness of these
subsidiaries and will rank senior in right of payment to all
of their future indebtedness that is expressly
subordinated to the guarantees. See "Description of
Notes--Subsidiary Guarantees."
At December 31, 1998, we and our guarantors had
approximately $162.4 million of senior indebtedness
outstanding. We do not have any other outstanding
indebtedness that ranks on an equal basis with or junior
to the outstanding notes. In addition, at December 31,
1998, the total liabilities (including trade payables) of our
non-guarantor subsidiary were $17.3 million.
Optional Redemption ............ We may redeem some or all of the exchange notes at
our option at any time on or after February 15, 2004, at
the redemption prices listed in the "Description of
Notes--Optional Redemption."
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
In addition, on or before February 15, 2002, we may, at
our option, use the net proceeds from one or more public
equity offerings to redeem up to 35% of the aggregate
principal amount of the Notes originally issued at the
price listed in the "Description of Notes--Optional
Redemption."
Mandatory Offer to Repurchase ......... If we experience specific kinds of changes of control or
certain types of asset sales, we must offer to repurchase
the Notes at the prices listed in the "Description of
Notes--Repurchase at the Option of Holders--Change of
Control" and "--Asset Sales."
Basic Covenants of Indenture .......... We issued the outstanding notes and will issue the
exchange notes under an indenture with The Bank of
New York (the "Indenture"). The Indenture will limit our
ability and the ability of certain of our subsidiaries to:
o incur more debt;
o pay dividends, redeem stock or make
other distributions;
o issue capital stock;
o make certain investments;
o use assets as security in other transactions;
o enter into transactions with affiliates;
o enter into sale and leaseback transactions; and
o merge or consolidate.
These covenants are subject to a number of important
qualifications and limitations. See "Description of Notes--
Certain Covenants."
</TABLE>
Risk Factors
See "Risk Factors" for a discussion of certain factors that you should
consider prior to tendering outstanding notes in the exchange offer.
9
<PAGE>
Summary Historical and Pro Forma Consolidated Financial and Other Data
Set forth below is summary historical consolidated financial and other
data as of December 31, 1998 and for each of the years in the three-year period
ended December 31, 1998. The summary historical consolidated financial and
other data were derived from our consolidated financial statements and related
notes audited by Deloitte & Touche LLP, independent auditors, which are
included in this prospectus.
Also set forth below is summary pro forma consolidated financial and other
data as of and for the year ended December 31, 1998 which was derived from the
pro forma consolidated financial data included in this prospectus. The summary
pro forma consolidated financial and other data has been derived by the
application of pro forma adjustments to our historical financial statements.
The pro forma adjustments give effect to (i) our acquisition of New England
Container, (ii) the offering of the outstanding notes and the initial
borrowings under our senior credit facility that we entered into concurrently
with the offering of the outstanding notes and (iii) the application of the net
proceeds as intended, as if the transactions had occurred as of January 1, 1998
for the statement of operations and other financial data and at December 31,
1998 for the balance sheet data. The adjustments, which are based on available
information and upon certain assumptions that management believes are
reasonable, are described in the notes to the pro forma consolidated financial
data included in this prospectus. The summary pro forma consolidated financial
and other data does not include any adjustments for anticipated cost savings or
other operating improvements. See "Capitalization," "Unaudited Pro Forma
Consolidated Financial Data" and "Business--Business Strategy."
Russell-Stanley Holdings, Inc. was formed in July 1997 to serve as a
holding company for Russell-Stanley Corp. and its subsidiaries. The transaction
was accounted for in a method similar to a pooling of interests, and therefore
the financial data presented below has been prepared from financial statements
that include the operations of Russell-Stanley Holdings, Inc. and its
subsidiaries as if they had been combined for all periods presented. We
completed three acquisitions during 1997 and one acquisition during 1998, all
accounted for under the purchase method of accounting. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Introduction."
Historical data are not necessarily indicative of future results. The pro
forma data does not purport to represent what our results of operations would
actually have been had the transactions described above in fact occurred on the
assumed date or to project our results of operations for any future period. The
data presented below should be read in conjunction with the discussion under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and the financial statements of
Container Management Services, Hunter Drums Limited and the plastics division
of Smurfit Packaging Corporation and the related notes included in this
prospectus.
10
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
Fiscal Year Ended Fiscal Year
December 31, Ended
----------------------------------------- December 31,
1996 1997 1998 1998
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
(Dollars in Millions)
Statement of Operations Data:
Net sales:
Containers .................................... $ 141.9 $ 161.1 $ 227.4 $ 227.4
Services ...................................... -- 15.2 46.6 57.1
-------- -------- ------- -------
Total net sales .............................. 141.9 176.3 274.0 284.5
Cost of sales .................................. 103.6 133.6 213.2 220.7
-------- -------- ------- -------
Gross profit ................................... 38.3 42.7 60.8 63.8
Selling, general and administrative
expenses ...................................... 24.3 26.8 42.9 45.2
Non-recurring charges (1) ...................... -- -- 6.2 6.2
-------- --------- ------- -------
Income from operations ......................... 14.0 15.9 11.7 12.4
Other (income) expense, net (2) ................ 0.3 0.2 0.5 0.5
Interest expense ............................... 7.5 8.8 16.0 20.5
-------- --------- ------- -------
Income (loss) before income taxes and
extraordinary items ........................... 6.2 6.9 (4.8) (8.6)
Provision (benefit) for income taxes ........... 2.5 2.9 (.5) (2.7)
-------- --------- ------- --------
Income (loss) before extraordinary
items ......................................... $ 3.7 $ 4.0 $ (4.3) $ (5.9)
======== ========= ======== ========
Other Financial Data:
Cash flows from (used in):
Operating activities .......................... $ 4.4 $ 17.7 $ 30.8 $ 30.1
Investing activities .......................... (3.3) (140.3) (41.2) (38.1)
Financing activities .......................... (1.3) 122.5 11.0 8.8
EBITDA (3) ..................................... 19.6 25.8 37.8 39.1
EBITDA margin (3) .............................. 13.8% 14.6% 13.8% 13.7%
Adjusted EBITDA (4) ............................ $ 19.9 $ 26.2 $ 44.9 $ 46.2
Adjusted EBITDA margin (4) ..................... 14.0% 14.9% 16.4% 16.2%
Capital expenditures ........................... $ 3.3 $ 9.9 $ 28.7 $ 29.1
Depreciation and amortization .................. 5.9 10.1 26.6 27.2
Ratio of earnings to fixed charges (5) ......... 1.8x 1.8x -- --
Pro forma ratios of Adjusted EBITDA to
interest expense .............................. 2.3x
Pro forma ratio of total debt to Adjusted
EBITDA ........................................ 3.9x
Balance Sheet Data:
Working capital ................................ $ 12.9 $ 13.5
Property, plant and equipment, net ............. 92.6 92.6
Total assets ................................... 258.3 264.1
Total debt ..................................... 171.6 178.6
Total stockholders' equity (deficit):
Additional paid-in capital .................... 70.2 70.2
Other ......................................... (36.7) (37.4)
-------- --------
Total ........................................ 33.5 32.8
</TABLE>
- ----------
(1) In conjunction with the integration of acquired entities and expansion of
our operations, a plan was developed to rationalize our operations and
sales force and consolidate and relocate our corporate headquarters in
order to improve operating efficiencies and reduce costs. As part of this
plan, we recorded non-recurring charges of approximately $3.5 million
during the year ended December 31, 1998. These charges primarily include
costs related to the closure of a container manufacturing facility,
severance and other personnel related costs and the relocation of our
corporate headquarters. Also included in non-recurring charges at December
31, 1998 are $2.7 million of costs associated with proposed acquisitions
that were not consummated. See "Note 18--Non-Recurring Charges" in our
financial statements included in this prospectus.
(2) Other (income) expense, net is comprised of (gains) losses on disposal of
fixed assets, unrealized (gains) losses on forward foreign exchange
contracts recorded at fair value and other miscellaneous (gains) losses.
(3) We define "EBITDA" as income (loss) before extraordinary items, plus
interest expense, income tax expense and depreciation and amortization. We
define "EBITDA Margin" as EBITDA divided by net sales. EBITDA is
calculated for each of the periods presented as follows:
11
<PAGE>
<TABLE>
<CAPTION>
Pro forma
-------------
Fiscal Year Ended Fiscal Year
December 31, Ended
---------------------------------- December 31,
<S> <C> <C> <C> <C>
1996 1997 1998 1998
---- ---- ---- ----
(In Millions)
Income (loss) before extraordinary items ......... $ 3.7 $ 4.0 $ (4.3) $ (5.9)
Interest expense ................................. 7.5 8.8 16.0 20.5
Provision (benefit) for income taxes ............. 2.5 2.9 (.5) (2.7)
Depreciation & amortization ...................... 5.9 10.1 26.6 27.2
------ ------ ------- -------
EBITDA ........................................... $ 19.6 $ 25.8 $ 37.8 $ 39.1
====== ====== ======= =======
</TABLE>
EBITDA does not represent, and should not be considered an alternative to, net
income or cash flow from operations as determined in accordance with GAAP,
and our calculation therefore may not be comparable to that reported by
other companies. While EBITDA should not be considered in isolation or as a
substitute for net income, cash flows from operating activities and other
income or cash flow statement data prepared in accordance with GAAP, or as
a measure of profitability or operating performance, management understands
that EBITDA is commonly used in evaluating a company's ability to service
debt. However, EBITDA does not take into account our debt service
requirements and other commitments and, accordingly, is not necessarily
indicative of amounts that may be available to us for discretionary uses.
(4) We define "Adjusted EBITDA" as EBITDA plus non-recurring charges and
management fees. Adjusted EBITDA is presented as certain financial
covenants in our borrowing arrangements will be based on similar measures.
We pay management fees to Vestar. See "Related Party Transactions." We
define "Adjusted EBITDA margin" as Adjusted EBITDA divided by net sales.
Non-recurring charges for the year ended December 31, 1998 consist
primarily of costs related to the closure of a container manufacturing
facility, severance and other personnel related costs, the relocation of
our corporate headquarters and costs associated with proposed acquisitions
that were not consummated. See "Note 18--Non-Recurring Charges" in our
financial statements included in this prospectus. Adjusted EBITDA is
calculated for each of the periods presented as follows:
<TABLE>
<CAPTION>
Pro forma
-------------
Fiscal Year Ended
December 31, Year Ended
------------------------------------ December 31,
1996 1997 1998 1998
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
(In Millions)
EBITDA ........................ $ 19.6 $ 25.8 $ 37.8 $ 39.1
Non-recurring charges ......... -- -- 6.2 6.2
Management fees ............... 0.3 0.4 0.9 0.9
------- ------- ------- -------
Adjusted EBITDA ............... $ 19.9 $ 26.2 $ 44.9 $ 46.2
======= ======= ======= =======
</TABLE>
(5) For purposes of determining the ratio of earnings to fixed charges,
"earnings" are defined as income (loss) before income taxes and
extraordinary items plus fixed charges. "Fixed charges" consist of
interest expense on all indebtedness, amortization of deferred financing
costs and one-third of rental expense on operating leases, representing
that portion of rental expense which we deem to be attributable to
interest. Earnings were insufficient to cover fixed charges in the year
ended December 31, 1998 by $4.8 million and in the pro forma year ended
December 31, 1998 by $8.6 million.
12
<PAGE>
RISK FACTORS
Before you participate in the exchange offer you should be aware that
there are various risks, including those described below. You should consider
carefully these risk factors together with all of the other information
included in this prospectus before you decide to participate in the exchange
offer.
This prospectus includes forward-looking statements. All statements other
than statements of historical facts included in this prospectus, including
certain statements under "Prospectus Summary," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business," may
constitute forward-looking statements. We have based these forward-looking
statements on our current expectations and projections about future events.
Although we believe that our assumptions made in connection with the
forward-looking statements are reasonable, we cannot assure you that our
assumptions and expectations will prove to have been correct. Important factors
that could cause our actual results to differ from our expectations are
disclosed below. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
There May Be Adverse Consequences if You Do Not Exchange Your Outstanding Notes
Holders of outstanding notes who do not exchange their outstanding notes
for exchange notes pursuant to the exchange offer will continue to be subject
to restrictions on transfer of such outstanding notes. In general, the
outstanding notes may not be offered or sold, unless registered under the
Securities Act of 1933, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act of 1933 and applicable state
securities laws. Other than in connection with the exchange offer, we do not
currently anticipate that we will register the outstanding notes under the
Securities Act of 1933. In addition, the tender of outstanding notes in the
exchange offer will reduce the principal amount of the outstanding notes
outstanding, which may have an adverse effect upon, and increase the volatility
of, the market price of the outstanding notes due to a reduction in liquidity.
You should refer to "Prospectus Summary--Summary of Terms of the Exchange
Offer" and "The Exchange Offer" for information about how to tender your
outstanding notes.
Substantial Leverage--Our substantial indebtedness could have a material
adverse effect on our financial health and prevent us from fulfilling our
obligations under the Notes.
We have now and after this exchange offer will continue to have a
significant amount of indebtedness. In addition, subject to the restrictions
contained in our indebtedness agreements, we expect to incur additional
indebtedness from time to time to finance acquisitions, for capital
expenditures, to fund working capital and for general business purposes.
The following chart presents certain important credit information assuming
that we had completed the offering of the outstanding notes and made the
initial borrowings under our senior credit facility that we entered into
concurrently with the offering of the outstanding notes (our "senior credit
facility," as described more fully below under the caption "Description of
Senior Credit Facility") and applied the net proceeds as intended as of the
dates or at the beginning of the periods specified below:
<TABLE>
<CAPTION>
At December 31, 1998
---------------------
(Dollars in Millions)
<S> <C>
Total indebtedness ........... $ 178.6
Stockholders' equity ......... 32.8
Debt to equity ratio ......... 5.4x
</TABLE>
Based upon the same assumptions, our ratio of earnings to fixed charges
for the year ended December 31, 1998 would have been insufficient to cover
fixed charges by $8.6 million.
The amount shown above for total indebtedness assumes that we would have
borrowed $29.7 million under our senior credit facility if we had made the
initial borrowings on December 31, 1998.
13
<PAGE>
This is based on the amount of our outstanding indebtedness as of that date.
Concurrently with the offering of the outstanding notes, however, we actually
borrowed $38.3 million under our senior credit facility. This was based on the
amount of indebtedness that was outstanding under our former senior credit
agreement at the time of the offering.
Our substantial indebtedness could have important consequences to you. For
example, it could:
o make it more difficult for us to satisfy or refinance our obligations
with respect to the Notes and our other indebtedness;
o require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, acquisitions or other general corporate purposes;
o impair our ability to obtain additional financing for, among other
things, working capital, capital expenditures, acquisitions or other
general corporate purposes, or prevent us from obtaining financing to
repurchase the Notes from you upon a change of control;
o make us less attractive to prospective or existing customers or less
attractive to potential acquisition targets; and
o limit our flexibility to adjust to changing business and market
conditions, and make us more vulnerable to a downturn in general economic
conditions as compared to our competitors that have less debt.
In addition, our failure to comply with the financial and other
restrictive covenants contained in our indebtedness agreements could result in
an event of default under such indebtedness, which if not cured or waived,
could have a material adverse effect on us. If we cannot meet or refinance our
obligations when they are due, we may have to sell assets, reduce capital
expenditures or take other actions which could have a material adverse effect
on us.
We cannot assure you that our business will generate sufficient cash flow
from operations or that future borrowings will be available to us under our
senior credit facility or otherwise in an amount sufficient to enable us to pay
our indebtedness, including the Notes, or to fund our other liquidity needs. In
addition, we may need to refinance all or a portion of our indebtedness,
including the Notes, on or before maturity. We cannot assure you that we will
be able to refinance any of our indebtedness, including our senior credit
facility and the Notes, on commercially reasonable terms or at all.
See "Description of Notes--Repurchase at the Option of Holders--Change of
Control" and "Description of Senior Credit Facility."
Subordination--Your right to receive payments on the Notes is junior to our
bank and other unsubordinated indebtedness and possibly all of our future
borrowings, and the guarantees of the Notes are junior to all the guarantors'
existing indebtedness and possibly to all their future borrowings. In addition,
our assets will be encumbered to secure our senior credit facility.
Payments on the Notes are subordinated to all of our existing and future
indebtedness, other than trade payables and future indebtedness that expressly
provides that it is equal to or subordinated in right of payment to the Notes.
Similarly, payments by a guarantor on its guarantee of the Notes are
subordinated to all of that guarantor's existing and future indebtedness, other
than trade payables and future indebtedness that expressly provides that it is
equal to or subordinated in right of payment to its guarantee. As a result,
upon any distribution to our creditors in a bankruptcy, liquidation or
reorganization or similar proceeding relating to us or our property, the
holders of our senior debt will be entitled to be paid in full before any
payment may be made with respect to the Notes; and upon any distribution to the
creditors of a guarantor in a bankruptcy, liquidation or reorganization or
similar proceeding relating to that guarantor or its property, the holders of
the guarantor's senior debt will be entitled to be paid in full before any
payment may be made with respect to its guarantee of the Notes.
14
<PAGE>
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to us or the guarantors, holders of the Notes will
participate on a pari passu (or equal) basis with trade creditors and all other
holders of senior subordinated indebtedness of our company and the guarantors.
However, because the Indenture requires that amounts otherwise payable to
holders of the Notes in a bankruptcy or similar preceding be paid instead to
holders of senior debt until they are paid in full, holders of the Notes may
receive less, ratably, than holders of trade payables and other senior
subordinated debt in any such preceding. In addition, any acceleration of the
indebtedness under our senior credit facility will, and acceleration of our
other indebtedness may, constitute an event of default under the Indenture. If
an event of default exists under our senior credit facility or certain other
senior indebtedness, the Indenture may restrict payments on the Notes until
holders of such other indebtedness are paid in full or such default is cured or
waived or has otherwise ceased to exist. In any of these cases, we and the
guarantors may not have sufficient funds to pay all of our creditors and
holders of the Notes may receive less, ratably, than the holders of trade
payables and other senior subordinated debt.
As of February 10, 1999, our and our guarantors' senior debt was
approximately as follows:
<TABLE>
<S> <C>
Our and our guarantors' senior debt collectively ......... $ 38.3 million
Our guarantors' senior debt .............................. $ 28.7 million
</TABLE>
In addition, approximately $61.7 million is available for borrowing as
additional senior debt under our senior credit facility. We will be permitted
to borrow substantial additional indebtedness, including senior debt, in the
future under the terms of the Indenture.
The Notes will not be secured by any of our assets. Our obligations under
our senior credit facility, however, will be secured by a first priority pledge
of and security interest in substantially all of our assets and the assets of
our domestic subsidiaries. If we were to become insolvent or liquidated, or if
payment under our senior credit facility were accelerated, the lenders under
our senior credit facility will be entitled to exercise the remedies available
to a secured lender under applicable law. Accordingly, such lenders will have a
prior claim with respect to our assets securing such indebtedness. See
"Description of Senior Credit Facility" and "Description of
Notes--Subordination."
Holding Company Structure--Our ability to make payments on the Notes depends on
our ability to receive dividends from our subsidiaries.
Substantially all of our properties are owned by, and substantially all of
our operations are conducted through, our subsidiaries. As a result, we depend
on dividends and other payments from our subsidiaries to satisfy our financial
obligations and make payments to our investors. The ability of our subsidiaries
to pay dividends and make other payments to us is subject to certain
restrictions described in this section. See "Risk Factors--Subordination" and
"--Restrictions Imposed by Our Debt Agreements." In addition, the ability of a
subsidiary to pay dividends to us will be limited by applicable law. In the
event of bankruptcy proceedings affecting a subsidiary, to the extent we are
recognized as a creditor of that subsidiary, our claim would still be
subordinate to any security interest in or other lien on any assets of that
subsidiary and to any of its debt and other obligations that are senior to the
payment of the Notes.
Restrictions Imposed by Our Debt Agreements--Covenant restrictions may limit
our ability to make payments on the Notes or operate our business.
Our senior credit facility contains, and certain of our other indebtedness
agreements may contain, covenants that restrict our ability to make
distributions or other payments to our investors and creditors unless certain
financial tests or other criteria are satisfied. In some cases our subsidiaries
are subject to similar restrictions which may restrict their ability to make
distributions to us.
Our senior credit facility will contain, and certain other indebtedness
agreements may contain, additional affirmative and negative covenants,
including limitations on our ability to incur additional
15
<PAGE>
indebtedness and to make acquisitions and capital expenditures which could
affect our ability to operate our business. A failure to comply with these
covenants could lead to an event of default under our senior credit facility,
which could lead to an acceleration of the related indebtedness.
The Indenture for the Notes will restrict, among other things, our ability
to incur additional indebtedness, sell assets, create liens or other
encumbrances, make certain payments and dividends or merge or consolidate, all
of which could affect our ability to operate our business and may limit our
ability to take advantage of potential business opportunities as they arise. A
failure to comply with the restrictions in the Indenture could result in an
event of default under the Indenture. See "Description of Senior Credit
Facility" and "Description of Notes--Certain Covenants."
Not All Subsidiaries Are Guarantors--Assets of the non-guarantor subsidiaries
may not be available to make payments on the Notes.
One of our existing subsidiaries, Hunter Drums Limited, a Canadian
corporation, will not be a guarantor of the Notes. Certain of our future
subsidiaries also may not be guarantors of the Notes. Payments on the Notes are
only required to be made by us and the subsidiary guarantors. As a result, no
payments are required to be made from assets of subsidiaries which do not
guarantee the Notes unless those assets are transferred (by dividend or
otherwise) to us or a subsidiary guarantor.
In the event of a bankruptcy, liquidation or reorganization of any of the
non-guarantor subsidiaries, holders of their indebtedness (including their
trade creditors) will generally be entitled to payment of their claims from the
assets of those subsidiaries before any assets are made available for
distribution to us. As of December 31, 1998, Hunter Drums Limited had total
liabilities (including trade payables) of $17.3 million and $5.8 million was
available to Hunter Drums Limited for future borrowing under our senior credit
facility.
Hunter Drums Limited generated approximately 13.1% of our consolidated
revenues in the fiscal year ended December 31, 1998 and held approximately
11.7% of our consolidated assets as of December 31, 1998. See "Note
21--Guarantor Subsidiaries" in our financial statements included at the back of
this prospectus.
Competition--Competition could have a material adverse effect on our
operations.
The markets for our products and services are competitive. We believe
competition is based primarily on price, service and quality. Price competition
may require us to match competitors' prices to retain business or market share.
Some of our competitors are larger and have greater financial and other
resources than we do, and there can be no assurance that we will continue to be
able to compete successfully with them. We also face competition in certain of
our product lines from producers of other types of industrial containers.
Competition from these and future competitors could reduce sales and prices and
have a material adverse effect on our results of operations. See
"Business--Competition."
Additional Future Capital Requirements--Our operations will require significant
capital expenditures.
We will have to make substantial capital expenditures to maintain our
current level of operations and to fund the growth of our operations. Based
upon the current level of operations and revenue growth, our management
believes that cash flow from operations and available cash, together with
available borrowings under our senior credit facility, will be adequate to meet
our future liquidity needs for at least the next several years. If we are
unable to obtain these funds, or if our growth strategy or current level of
business requires more capital than anticipated, it could have a material
adverse effect on the growth of our operations as well as our current level of
business.
Cost and Availability of Raw Materials and Certain Products--We generally do
not have long-term supply contracts and are subject to market price
fluctuations.
High molecular weight, high density polyethylene resin (or HDPE resin) is
the principal raw material and most significant cost component of our plastic
drums. Cold-rolled steel is the principal
16
<PAGE>
raw material and most significant cost component of our steel drums. We
generally do not have long-term supply contracts with our suppliers, and our
purchases of raw materials are subject to market prices. We generally pass
changes in the prices of raw materials to our customers over a period of time.
We cannot always do so, however, and therefore we cannot assure you that we
will be able to pass through any future raw material price increases. Any
limitation on our ability to pass through any such price increases could have a
material adverse effect on our results of operations.
We rely on a limited number of suppliers of HDPE resin. Should we need to
secure alternative suppliers, only a small number of alternative suppliers
exist. Any significant interruption in the supply of HDPE resin would have a
material adverse effect on our results of operations.
In addition, we obtain from foreign suppliers a significant portion of our
cold-rolled steel. Foreign suppliers of cold-rolled steel have been accused by
domestic producers of exporting steel to the United States at artificially low
prices. As a result, the Commerce Department has recently imposed anti-dumping
duties on steel imported from Japan and Brazil and negotiated a voluntary
reduction in steel imports from Russia. Additionally, Congress is considering
imposing limits on the amount of steel that may be imported into the U.S. which
would result in significant reductions in steel imports. Such measures could
result in a substantial increase in our cost of cold-rolled steel, which could
have a material adverse effect on our results of operations. See "Business--Raw
Materials."
Integration of Acquired Businesses and Acquisition Strategy--Our acquisition
strategy may not be successful.
The rigid industrial container industry has been undergoing consolidation
for a number of years and remains fragmented. We have acquired and seek to
acquire other companies that can benefit from our production, distribution and
management strengths. Our ability to grow by acquisition is dependent upon, and
may be limited by, the availability of suitable acquisition candidates and
capital, and the restrictions contained in the Indenture and our other
indebtedness agreements. In addition, growth by acquisition involves risks that
could have a material adverse effect on our results of operations, including
difficulties in integrating the operations and personnel of acquired companies
and the potential loss of key employees and customers of acquired companies.
While we have experience in identifying and integrating acquisitions, we cannot
assure you that we will be able to identify suitable acquisition candidates,
obtain the capital necessary to pursue our growth strategy, consummate
acquisitions on satisfactory terms or, if any such acquisitions are
consummated, satisfactorily integrate acquired businesses. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
Changing Product Requirements--Increasing usage of IBCs could have a material
adverse effect on our results of operations.
We believe users of rigid industrial containers will increasingly convert
to rigid intermediate bulk containers, or IBCs. Currently, we do not
manufacture IBCs; however, we purchase IBCs which our services division leases
to our customers. Our IBC suppliers are also our competitors in certain product
lines. We do not have long-term contracts for the supply of IBCs with these
manufacturers and compete with other companies for production capacity. Should
we need to secure alternative suppliers, only a small number of alternative
suppliers exist. The unavailability or unwillingness of a manufacturer to
supply IBCs on commercially reasonable terms or at all would restrict our
ability to offer plastic container leasing services to our customers which
could have a material adverse effect on our results of operations. In addition,
the inability of a manufacturer to supply IBCs in a timely fashion, or to
satisfy our quality standards, could cause us to miss the delivery date
requirements of our customers for those items, which could result in a
cancellation of orders, refusal to accept delivery or a reduction in prices
and, as a result, could have a material adverse effect on our results of
operations.
Currently we are evaluating options for obtaining the capacity to
manufacture IBCs. We may decide not to pursue such capacity in the near future
or at all. The combination of competitive pricing pressure and the fact that we
do not manufacture the IBCs leased by our services division results in
17
<PAGE>
IBC leasing contributing a lower gross profit as a percentage of net sales as
compared to plastic drum leasing. To the extent that customers of our services
division convert to IBCs, it could result in a material erosion of our gross
profit as a percentage of sales, which could have a material adverse effect on
our results of operations. In addition, a decrease in the demand for plastic
and steel drums resulting from the increasing usage of IBCs could have a
material adverse effect on the net sales of our container manufacturing
division, which could have a material adverse effect on our results of
operations.
Risk of Economic Downturn--A significant economic downturn, particularly one
affecting the chemical industry, could have a material adverse effect on our
results of operations.
Our results of operations are affected by the level of economic activity
in the industries served by our customers, which in turn may be affected by the
level of economic activity in the U.S. and foreign markets which they serve.
Accordingly, a decline in the level of economic activity in such industries as
a result of a decline in the level of economic activity in the U.S. or foreign
markets which they serve or otherwise may have a material adverse effect on our
results of operations. A significant percentage of our net sales was derived
from customers who serve the chemical industry. As a result, a decline in the
level of economic activity in the U.S. or foreign chemical industry in
particular could have a material adverse effect on our results of operations.
In addition, because we operate with little or no backlog, changes in economic
activity, positive and negative, affect our results of operations more quickly
than such changes would affect the results of operations of a company that
operates with a backlog. As a result, our results of operations, including our
cash flow, are subject to a greater degree of volatility and could deteriorate
more rapidly than a company that operates with a backlog.
Dependence on Licensing Partner--The termination of our license with Mauser
could have a material adverse effect on our results of operations.
Since 1985, we have licensed manufacturing technology for the L-1/LR-1
plastic drum from Mauser-Werke GmbH, a privately-held German corporation with
significant operations in Europe, and we purchase equipment from Mauser for use
in the manufacture of the L-1. We have the exclusive license to manufacture the
L-1/LR-1 throughout all of the United States (other than certain parts of the
Southeast) and Canada, we and one other manufacturer have the exclusive right
to sell the L-1 throughout the United States and we have the exclusive right to
sell the LR-1 in Canada. Mauser can terminate our licenses under certain
circumstances, including a default by us in the payment of certain amounts and
the failure by us to comply with the covenants contained in the licenses. Such
termination would have a material adverse effect on our results of operations.
We do not believe, however, that any of such circumstances currently exist, and
our payment obligations under the licenses are not material. See
"Business--Intellectual Property."
Grand Jury Investigation of Plastic Drum Industry
In November 1995, the Antitrust Division of the United States Department
of Justice served us with an information subpoena in connection with an ongoing
grand jury investigation into possible price-fixing in the plastic drum
industry between 1991 and 1995. We responded to the information subpoena in a
timely fashion. We do not know the current status of, or the identity of the
subjects of, the investigation. We cannot assure you that the Antitrust
Division will not institute proceedings against us in the future as a result of
this investigation.
It is Difficult to Obtain Reliable Market Information
We operate in an industry in which it is difficult to obtain precise
industry and market information. Although we have obtained some industry data
from third party sources that we believe to be reliable, in many cases, we have
based certain statements contained in this prospectus regarding our industry
and our position in the industry on certain assumptions concerning our
customers and competitors. These assumptions are based on our experience in the
industry and our
18
<PAGE>
own investigation of market conditions. We cannot assure you as to the accuracy
of any such assumptions, and such assumptions may not be indicative of our
position in our industry.
Dependence on Key Management--The loss of key personnel could have a material
adverse effect on our results of operations.
Our success depends largely upon the abilities and experience of certain
key management personnel. If we lose the services of one or more of our key
personnel, it could have a material adverse effect on our business and results
of operations. We generally do not have non-compete agreements with such
personnel. In addition, we generally do not maintain key-man life insurance
policies on our executives. See "Management" and "Ownership of Common Stock."
Labor Stoppage--Employee slowdowns, strikes or similar actions could have a
material adverse effect on the results of our operations.
Approximately 29% of our employees are represented under collective
bargaining agreements which expire from May 1999 to June 2002. Unions represent
employees at nine of our 21 facilities. While we believe that our relations
with our unionized employees are good, a prolonged labor dispute could have a
material adverse effect on our business and results of operations. See
"Business--
Employees."
Regulations Regarding Transportation--Our noncompliance with governing
regulations could have a material adverse effect on our ability to sell our
products.
Our operations are subject to federal, state and local transportation laws
and regulations and United Nations international shipping guidelines which
require that plastic and steel containers used in interstate and international
commerce satisfy specified performance requirements. We believe that our
products are in substantial compliance with the terms of all applicable
transportation laws, regulations and guidelines as currently interpreted. While
historically the costs of compliance with these laws and regulations have not
had a material adverse effect on our consolidated financial condition, results
of operations or cash flows, we cannot predict with certainty the future costs
of compliance because of continually changing compliance standards and
technology. We expect that future regulations and changes in the text or
interpretation of existing laws and regulations may subject our operations to
increasingly stringent standards. Compliance with such requirements may make it
necessary for us to incur substantial costs and could have a material adverse
effect on our financial condition, results of operations or cash flows.
Product Liability Exposure--Our insurance coverage may be inadequate.
Our business entails risks of product liability. We maintain $50 million
of insurance coverage for product liability claims. Although we believe this
coverage is adequate, we cannot assure you that coverage under insurance
policies will be adequate to cover product liability claims against us. In
addition, product liability insurance could become more expensive and difficult
to maintain and in the future may not be available on commercially reasonable
terms or at all. The amount and scope of any insurance coverage may be
inadequate in the event that a product liability claim is successfully asserted
against us.
We are Controlled by Vestar
Vestar owns a majority of our outstanding shares of common stock. See
"Ownership of Common Stock." Accordingly, we are controlled by Vestar and they
have the power to elect all of our directors, appoint new management and
approve any action requiring the approval of our stockholders, including
adopting amendments to our certificate of incorporation and approving mergers
or sales of all or substantially all of our assets. In addition, the directors
elected by Vestar have the authority to make decisions affecting our capital
structure, including the incurrence of additional indebtedness, the issuance of
additional capital stock, the implementation of
19
<PAGE>
stock repurchase programs and the declaration of dividends. We cannot assure
you that the interests of Vestar will not conflict with your interests as a
holder of the Notes. See "Management" and "Certain Relationships and Related
Party Transactions."
Environmental Matters--Environmental laws and regulations could have a material
adverse effect on our results of operations.
Our operations are subject to federal, state, local and Canadian
environmental laws and regulations. These laws and regulations 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. We believe that our operations
are in substantial compliance with the terms of all applicable environmental
laws and regulations as currently interpreted. See "Business--
Environmental Matters."
While historically the costs of environmental compliance have not had a
material adverse effect on our consolidated financial condition, results of
operations or cash flows, we cannot predict with certainty the future costs of
environmental compliance because of continually changing compliance standards
and technology. We expect that future regulations and changes in the text or
interpretation of existing environmental laws and regulations may subject our
operations to increasingly stringent standards. Compliance with such
requirements may make it necessary, at costs which may be substantial, for us
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. In addition, we may become
obligated in the future to incur costs associated with investigation and/or
remediation of contamination at our facilities or at other locations. The costs
of such actions could have a material adverse effect on our financial
condition, results of operations or cash flows.
The U.S. Environmental Protection Agency has confirmed the presence of
certain contaminants, including dioxin, in and along the Woonasquatucket River
in Rhode Island. Prior to 1970, New England Container operated a facility in
North Providence, Rhode Island along the Woonasquatucket River at a site where
contaminants have been found. Recent press reports identify New England
Container as a business that may have contributed to the contamination. We are
not aware that any party has been formally identified by the EPA as a
potentially responsible party. Notwithstanding that New England Container no
longer operates the facility, and did not operate the facility at the time we
acquired the outstanding capital stock of New England Container in July 1998,
New England Container could incur liability under federal and state
environmental laws and/or as a result of civil litigation. We believe that any
resulting liability is subject to a contractual indemnity from Vincent J.
Buonanno, one of our directors and the former owner of New England Container.
However, such indemnity is subject to a $2.0 million limit. We currently are
unable to estimate the likelihood or extent of any liability; however, this
matter may result in liability to New England Container that could have a
material adverse effect on Russell-Stanley's financial condition and results of
operations.
Change of Control Offer--We may not be permitted to purchase the Notes upon a
change of control as required by the Indenture.
Upon the occurrence of certain specific change of control events, we will
be required to offer to purchase all outstanding notes from you. However, a
change of control will also constitute an event of default under our senior
credit facility that would permit the lenders to accelerate the debt
thereunder. In addition, our senior credit facility will restrict our purchase
of the Notes upon a change of control. Therefore, prior to purchasing the Notes
upon a change of control, we must either repay the indebtedness under our
senior credit facility or obtain the consent of the lenders thereunder. If we
do not repay our senior credit facility or obtain such consent, we will be
prohibited from offering to purchase the Notes.
The source of funds for any purchase of the Notes would be our available
cash or cash generated from other sources, including borrowings, sales of
assets, sales of equity or funds
20
<PAGE>
provided by an existing or new controlling person. We cannot assure you that
any of these sources will be available. Upon the occurrence of a change of
control event, we may seek to refinance the indebtedness outstanding under our
senior credit facility and the Notes. However, it is possible that we will not
be able to complete such refinancing on commercially reasonable terms or at
all. In such event, we would not have the funds necessary to finance the
required change of control offer. See "Description of Notes--Repurchase at the
Option of Holders--Change of Control."
Year 2000 Risk
As has been widely reported, many computer systems process dates based on
two digits for the year of transaction and may be unable to process dates in
the year 2000 and beyond. There are many risks associated with the year 2000
compliance issue, including but not limited to the possible failure of our
systems and hardware with embedded applications. Any such failure could result
in
o our inability to order raw materials,
o the malfunctioning of our manufacturing or service processes,
o our inability to properly bill and collect payments from our customers
and/or
o errors or omissions in accounting and financial data, any of which could
have a material adverse effect on our results of operations and financial
condition.
In addition, there can be no guarantee that the systems of other
companies, including our vendors, utilities and customers, will be converted in
a timely manner, or that a failure to convert by another company, or a
conversion that is incompatible with our systems, would not have a material
adverse effect on us. We have not yet developed any contingency plans. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance."
No Prior Market for Notes--An active trading market may not develop for the
Notes.
The Notes will constitute a new class of securities for which there is no
established trading market. We do not intend to list the Notes on any national
securities exchange or to seek their quotation on any automated dealer
quotation system. Although the underwriters have informed us that they intend
to make a market in the Notes, they are not obligated to do so, and they may
cease such activities at any time without notice. The liquidity of a market for
the Notes will depend upon a number of factors, including the number of holders
of the Notes and the interest of securities dealers in making a market in the
Notes. Accordingly, we cannot assure you as to the development or liquidity of
any market for the Notes.
If an active trading market for the Notes does not develop, it would have
a material adverse effect on the market price and liquidity of the Notes. If
the Notes are traded, they may trade at a discount from their initial offering
price, depending upon prevailing interest rates, the market for similar
securities, our performance and certain other factors. However, declines in the
liquidity and market price of the Notes may also occur independent of our
financial performance or prospects.
21
<PAGE>
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes. The net proceeds from the issuance and sale of the outstanding notes,
which we estimate were approximately $144.0 million after deduction of
underwriting discounts and other expenses, was applied towards the repayment of
outstanding principal and interest under our former senior credit agreement.
22
<PAGE>
CAPITALIZATION
The following table sets forth our unaudited consolidated capitalization
as of December 31, 1998 on an actual basis and as adjusted to give effect to
the offering of the outstanding notes, the initial borrowing under our senior
credit facility and the application of the net proceeds as intended.
In consideration for issuing the exchange notes as contemplated in this
prospectus, we will receive in exchange a like principal amount of outstanding
notes. The terms of the exchange notes are identical in all material respects
to the terms of the outstanding notes, except that the exchange notes will
generally be freely tradeable by their holders, will not contain terms with
respect to the special interest payments described in "Description of
Notes--Registration Covenant; Exchange Offer" and will not be subject to any
covenant regarding registration under the Securities Act of 1933. The exchange
notes will evidence the same indebtedness as the outstanding notes. The
outstanding notes surrendered in exchange for the exchange notes will be
retired and canceled and cannot be reissued. Accordingly, issuance of the
exchange notes will not result in any change in our capitalization. This table
should be read in conjunction with the financial statements and related notes
and the unaudited pro forma consolidated financial data included in this
prospectus.
<TABLE>
<CAPTION>
December 31, 1998
-------------------------
Actual As adjusted
(In Millions) ---------- ------------
<S> <C> <C>
Cash and cash equivalents ..................... $ 1.6 $ 1.6
======= =======
Long-term debt:
Former senior credit agreement (1) ......... 171.6 --
Senior credit facility (2) ................. -- 29.7
Outstanding notes (3) ...................... -- 148.9
------- -------
Total long-term debt ..................... 171.6 178.6
------- -------
Stockholders' equity:
Additional paid in capital ................. 70.2 70.2
Other ...................................... (36.7) (37.4)
------- -------
Total stockholders' equity .............. 33.5 32.8
------- -------
Total capitalization .......................... $ 205.1 $ 211.4
======= =======
</TABLE>
- ----------
(1) Concurrently with the offering of the outstanding notes, we replaced our
former senior credit agreement with our senior credit facility; $25.0
million of term loan indebtedness outstanding under our former senior
credit agreement remains outstanding under our senior credit facility.
(2) This assumes that we would have borrowed $4.7 million under our senior
credit facility, in addition to $25.0 million of term loan indebtedness,
if we had made the initial borrowings on December 31, 1998. This is based
on the amount of our outstanding indebtedness as of that date.
Concurrently with the offering of the outstanding notes, however, we
borrowed approximately $13.3 million under our senior credit facility, in
addition to the $25.0 million of term loan indebtedness. This is based on
the amount of indebtedness that was outstanding under our former senior
credit agreement at the time of the offering.
(3) Represents the outstanding notes issued at 99.248% of their face amount.
23
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial data has been
derived by the application of pro forma adjustments to our historical financial
statements as of and for the year ended December 31, 1998. The pro forma
adjustments give effect to (i) our acquisition of New England Container, (ii)
the offering of the outstanding notes and the initial borrowings under our
senior credit facility that we entered into concurrently with the offering of
the outstanding notes and (iii) the application of the proceeds from the
offering of the outstanding notes and the initial borrowings under our senior
credit facility (net of fees and expenses) to repay a portion of our
outstanding long-term indebtedness.
The unaudited pro forma consolidated balance sheet has been prepared as if
the transactions described above had occurred on December 31, 1998. The
unaudited pro forma consolidated statement of operations gives effect to the
transactions described above as if they had occurred on January 1, 1998. The
adjustments, which are based upon available information and upon certain
assumptions that management believes are reasonable, are described in the
accompanying notes. The unaudited pro forma consolidated financial data does
not purport to represent what our financial position or results of operations
would actually have been had the transactions described above in fact occurred
on the assumed dates or to project our financial position or results of
operations for any future date or period.
The acquisition reflected in the unaudited pro forma consolidated
financial data has been accounted for using the purchase method of accounting.
The unaudited pro forma consolidated statement of operations does not
include any adjustments for anticipated cost savings or other operating
improvements. See "Business--Business Strategy."
This unaudited pro forma consolidated financial data should be read in
conjunction with the discussion under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our financial statements and
the financial statements of Container Management Services, Hunter Drums Limited
and the plastics division of Smurfit Packaging Corporation and the related
notes included in this prospectus.
24
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 1998
<TABLE>
<CAPTION>
Financing
Historical Adjustments Pro Forma
(In Millions) ------------ ----------------- ----------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents ......................... $ 1.6 $ --(a) $ 1.6
Accounts receivable, net .......................... 29.5 29.5
Inventories ....................................... 18.8 18.8
Other assets ...................................... 6.2 6.2
------- --------- -------
Total current assets ............................ 56.1 -- 56.1
Property, plant and equipment, net ................. 92.6 92.6
Other assets:
Goodwill and other intangibles, net ............... 108.2 108.2
Deferred financing costs and other
noncurrent assets, net ........................... 1.4 7.0 (b) 7.2
( 1.2)(c)
------- --------- -------
Total assets ....................................... $ 258.3 $ 5.8 $ 264.1
======= ========= =======
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses ............. $ 43.1 $ (0.5)(d) $ 42.6
------- --------- -------
Long-term debt:
Former senior credit agreement .................... 171.6 (171.6)(e) --
Senior credit facility ............................ -- 29.7 (f) 29.7
Outstanding notes ................................. -- 148.9 (f) 148.9
Deferred taxes, net ................................ 4.7 4.7
Other noncurrent liabilities ....................... 5.4 5.4
------- --------- -------
Total liabilities ................................ 224.8 6.5 231.3
Stockholders' equity ............................... 33.5 (0.7)(c) 32.8
------- --------- -------
Total liabilities and stockholders' equity ......... $ 258.3 $ 5.8 $ 264.1
======= ========= =======
</TABLE>
25
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Sources and uses for the transactions are as follows:
<TABLE>
<CAPTION>
(In Millions)
<S> <C>
Sources:
Initial borrowings under our senior credit facility and the issuance of the
outstanding notes:
Senior credit facility .......................................................... $ 29.7
Outstanding notes ............................................................... 148.9
-------
Total .......................................................................... $ 178.6
=======
Uses:
Repayment of long-term indebtedness (including current maturities) ............... $ 171.6
Estimated fees and expenses ...................................................... 7.0
-------
Total .......................................................................... $ 178.6
=======
</TABLE>
(b) Represents the estimated fees and expenses attributable to our senior
credit facility and the Notes which will be recorded as deferred financing
costs and amortized over the life of the indebtedness (five years for the
revolving credit facility and eight years for the term loan, each under
our senior credit facility, and ten years for the Notes).
(c) Represents the elimination of existing deferred financing costs incurred in
conjunction with the indebtedness to be repaid. With respect to
stockholders' equity, the effect is net of taxes.
(d) Represents the tax effect on the pro forma adjustments at a 42% effective
tax rate.
(e) Represents the repayment of existing indebtedness.
(f) Represents the initial borrowings under our senior credit facility ($29.7
million) and issuance of the outstanding notes ($148.9 million). Initial
borrowings under our senior credit facility consist of (i) $4.7 million of
revolving indebtedness (based on the amount of our outstanding indebtedness
as of December 31, 1998) and (ii) $25.0 million of term loan indebtedness
outstanding under our former credit agreement and which will remain
outstanding under our senior credit facility. Concurrently with the offering
of the outstanding notes, however, we borrowed approximately $13.3 million
of revolving indebtedness, in addition to the $25.0 million of term loan
indebtedness.
26
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
(a) (b) Acquisition Financing
Historical Acquisitions Adjustments Adjustments Pro Forma
(Dollars in Millions) ------------ -------------- --------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Net sales:
Container manufacturing
division ................................. $ 227.4 $ -- $ -- $ -- $ 227.4
Services division ........................ 46.6 10.5 -- -- 57.1
------- ------ ------- ------- --------
Total net sales .......................... 274.0 10.5 -- -- 284.5
Cost of sales ............................. 213.2 7.5 -- -- 220.7
------- ------ ------- ------- --------
Gross profit .............................. 60.8 3.0 -- -- 63.8
Selling, general and administrative
expenses ................................. 42.9 2.4 (0.1)(c) -- 45.2
Non-recurring charges ..................... 6.2 -- 6.2
------- ------ ------- ------- --------
Income (loss) from operations ............. 11.7 0.6 0.1 -- 12.4
Interest expense .......................... 16.0 0.2 4.3 (d) 20.5
Other (income) expense, net ............... 0.5 1.5 (1.5)(e) 0.5
------- ------ ------- ------- --------
Income (loss) before income taxes
and extraordinary items .................. (4.8) (1.1) 1.6 (4.3) (8.6)
Provision (benefit) for income
taxes .................................... (0.5) (0.2) (0.2)(f) (1.8)(f) (2.7)
------- ------ ------- ------- --------
Income (loss) before extraordinary
items (g) ................................ $ (4.3) $ (0.9) $ 1.8 $ (2.5) $ (5.9)
======== ====== ======= ======= ========
Other Data:
Cash flows from (used in):
Operating activities ..................... $ 30.9 $ (1.2) $ 1.9 $ (1.5) $ 30.1
Investing activities ..................... (41.2) 3.1 -- -- (38.1)
Financing activities ..................... 10.9 (2.1) -- -- 8.8
EBITDA (h) ................................ 37.8 (0.4) 1.7 -- 39.1
Adjusted EBITDA (h) ....................... 44.9 (0.4) 1.7 -- 46.2
Capital expenditures ...................... 28.7 0.4 -- -- 29.1
Depreciation and amortization (i) ......... 26.6 0.5 0.1 -- 27.2
Pro forma ratios:
Earnings to fixed charges (j) ............ --
Adjusted EBITDA to interest
expense ........................ ........ 2.3x
</TABLE>
27
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(a) Represents historical consolidated results of operations, including the
results of operations of New England Container from the date of
acquisition.
(b) Represents the pre-acquisition operations of New England Container which
was acquired on July 23, 1998.
(c) Represents the net effect of applying purchase accounting to selling,
general and administrative expenses in connection with our acquisition of
New England Container, as follows:
<TABLE>
<CAPTION>
Fiscal
Year Ended
December 31,
1998
-------------
(In Millions)
<S> <C>
Amortization expense (1) ............... $ 0.1
Deferred acquisition costs (2) ......... (0.2)
------
Total ............................... $ (0.1)
======
</TABLE>
----------
(1) Represents the increase in amortization expense for the amortization of
goodwill related to our acquisition of New England Container. Goodwill
is amortized over 40 years.
(2) Represents the application of purchase accounting to pre-acquisition
compensation agreements.
(d) Represents the net adjustment to interest expense as a result of the
initial borrowings under our senior credit facility and the issuance of the
outstanding notes, calculated as follows:
<TABLE>
<CAPTION>
Fiscal
Year Ended
December 31,
1998
-------------
(In Millions)
<S> <C>
Senior credit facility (1) ........................... $ 2.7
Outstanding notes (2) ................................ 16.4
Commitment fees (3) .................................. 0.4
Amortization of deferred financing costs (4) ......... 1.0
-------
Pro forma interest expense ........................... 20.5
Historical interest expense .......................... (16.2)
-------
Net interest expense adjustment ...................... $ 4.3
=======
</TABLE>
----------
(1) Represents interest on the initial borrowings of $4.7 million under the
senior credit facility, using an assumed interest rate of 7.70% and
interest on the $25.0 million term loan using a fixed interest rate of
9.48%.
(2) Represents interest on the outstanding notes using an effective interest
rate of 11.00%.
(3) Represents a 0.5% commitment fee on the unused portion of our senior
credit facility.
(4) Deferred financing costs are amortized over the term of the related
indebtedness (five years for the revolving credit facility and eight
years for the term loan, each under our senior credit facility, and ten
years for the Notes).
(e) Represents the net effect of applying purchase accounting to eliminate
certain New England Container shareholder expenses that were terminated
as a result of the acquisition.
(f) Represents the tax effect on the pro forma adjustments at a 42% effective
tax rate. In addition, acquisition adjustments include a pro forma tax
adjustment to treat New England Container as a C-Corporation for federal
and state income tax purposes for the pre-acquisition period.
28
<PAGE>
(g) Income (loss) before extraordinary items excludes $1.0 million, net of
taxes relating to deferred financing costs that we expect to write-off as
a result of the transactions.
(h) We define "EBITDA" as income (loss) before extraordinary items, plus
interest expense, income tax expense (benefit) and depreciation and
amortization. EBITDA does not represent, and should not be considered as
an alternative to, net income or cash flow from operations as determined
in accordance with GAAP, and our calculation therefore may not be
comparable to that reported by other companies. While EBITDA should not
be considered in isolation or as a substitute for net income, cash flows
from operating activities and other income or cash flow statement data
prepared in accordance with GAAP, or as a measure of profitability or
operating performance, management understands that EBITDA is commonly
used in evaluating a company's ability to service debt. EBITDA does not
take into account our debt service requirements and other commitments
and, accordingly, it is not necessarily indicative of amounts that may be
available for discretionary uses. We define "Adjusted EBITDA" as EBITDA,
plus non-recurring charges and management fees. Adjusted EBITDA is
presented as certain financial covenants in our borrowing arrangements
will be based on similar measures.
The calculation of pro forma EBITDA and Adjusted EBITDA is as follows:
<TABLE>
<CAPTION>
Fiscal
Year Ended
December 31,
1998
-------------
(In Millions)
<S> <C>
Income (loss) before extraordinary items ......... $ (5.9)
Interest expense ................................. 20.5
Income tax expense (benefit) ..................... (2.7)
Depreciation and amortization (1) ................ 27.2
-------
EBITDA ........................................... 39.1
Management fees (2) .............................. 0.9
Non-recurring charges (3) ........................ 6.2
-------
Adjusted EBITDA .................................. $ 46.2
=======
</TABLE>
----------
(1) Excludes amortization of deferred financing costs.
(2) Represents fees paid to Vestar.
(3) Represents non-recurring charges incurred during fiscal 1998
consisting of the following:
<TABLE>
<CAPTION>
(In Millions)
<S> <C>
Plant and headquarters closure/relocation costs . .......... $ 1.2
Severance and other personnel related costs ..... .......... 2.2
Professional fees on acquisitions not consummated ......... 2.7
Other ........................................... .......... 0.1
------
Non-recurring charges ........................... .......... $ 6.2
======
</TABLE>
(i) Excludes amortization of deferred financing costs.
(j) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income (loss) before income taxes and
extraordinary items, plus fixed charges. Fixed charges consist of
interest expense on all indebtedness, amortization of deferred
financing costs and one-third of rental expense on operating leases,
representing that portion of rental expense which we deem to be
attributable to interest.
29
<PAGE>
The calculation of the pro forma ratios of earnings to fixed charges is as
follows:
<TABLE>
<CAPTION>
Fiscal
Year Ended
December 31,
1998
-------------
(Dollars in Millions)
<S> <C>
Income (loss) before taxes and extraordinary items ......... $ (8.6)
Fixed charges:
Interest expense .......................................... 20.5
Rental expense ............................................ 1.7
Total fixed charges ........................................ 22.2
-------
Earnings ................................................... $ 13.6
=======
Ratio of earnings to fixed charges (1) ..................... --
</TABLE>
- ----------
(1) Earnings were insufficient to cover fixed charges by $8.6 million.
30
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
Set forth below is selected historical consolidated financial and other
data as of, and for the years ended, December 31, 1994, 1995, 1996, 1997 and
1998. The selected consolidated historical financial and other data as of
December 31, 1997 and 1998 and for the years ended December 31, 1996, 1997 and
1998 were derived from the consolidated financial statements and related notes
audited by Deloitte & Touche LLP, independent auditors, which are included in
this prospectus. The selected consolidated historical financial and other data
as of December 31, 1994, 1995 and 1996 and for the years ended December 31,
1994 and 1995 have been derived from our audited consolidated financial
statements and related notes which are not included in this prospectus.
Russell-Stanley Holdings, Inc. was formed in July 1997 to serve as a
holding company for Russell-Stanley Corp. and its subsidiaries. The transaction
was accounted for in a method similar to a pooling of interests, and therefore
the financial data presented below has been prepared from financial statements
that include the operations of Russell-Stanley Holdings, Inc. and its
subsidiaries as if they had been combined for all periods presented. We
completed three acquisitions during 1997 and one acquisition during 1998, all
accounted for under the purchase method of accounting. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Introduction."
Historical data are not necessarily indicative of future results. The
selected consolidated historical financial and other data presented below
should be read in conjunction with the discussion under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements and the financial statements of Container Management
Services, Hunter Drums Limited and the plastics division of Smurfit Packaging
Corporation and the related notes included in this prospectus.
31
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
---------------------------------------------------------------------
1994 1995 1996 1997 1998
----------- ----------- ----------- ------------- -----------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales:
Container manufacturing
division ........................ $ 126.3 $ 138.8 $ 141.9 $ 161.1 $ 227.4
Services division ................ -- -- -- 15.2 46.6
-------- -------- -------- -------- -------
Total net sales ................. 126.3 138.8 141.9 176.3 274.0
Cost of sales ..................... 95.9 106.5 103.6 133.6 213.2
-------- -------- -------- -------- -------
Gross profit ...................... 30.4 32.3 38.3 42.7 60.8
Selling, general and
administrative expenses .......... 21.6 21.4 24.3 26.8 42.9
Non-recurring charges (1) ......... -- -- -- -- 6.2
-------- -------- -------- --------- -------
Income from operations ............ 8.8 10.9 14.0 15.9 11.7
Other expense, net (2) ............ -- -- 0.3 0.2 0.5
-------- -------- -------- --------- -------
Interest expense .................. 7.8 8.3 7.5 8.8 16.0
-------- -------- -------- --------- -------
Income (loss) before income
taxes and extraordinary items..... 1.0 2.6 6.2 6.9 (4.8)
Provision (benefit) for income
taxes ............................ 0.8 1.2 2.5 2.9 (0.5)
-------- -------- -------- --------- -------
Income (loss) before
extraordinary items .............. $ 0.2 $ 1.4 $ 3.7 $ 4.0 $ (4.3)
======== ======== ======== ========= ========
Other Financial Data:
Cash flows from (used in):
Operating activities ............. $ 2.6 $ 14.0 $ 4.4 $ 17.7 $ 30.8
Investing activities ............. (7.3) (4.9) (3.3) (140.3) (41.2)
Financing activities ............. 4.8 (8.3) (1.3) 122.5 11.0
EBITDA (3) ........................ 15.6 17.1 19.6 25.8 37.8
EBITDA margin(3) .................. 12.4% 12.3% 13.8% 14.6% 13.8%
Adjusted EBITDA (4) ............... $ 15.9 $ 17.4 $ 19.9 $ 26.2 $ 44.9
Adjusted EBITDA margin(4) ......... 12.6% 12.5% 14.0% 14.9% 16.4%
Capital expenditures .............. $ 6.2 $ 4.8 $ 3.3 $ 9.9 $ 28.7
Depreciation and amortization ..... 6.8 6.2 5.9 10.1 26.6
Ratio of earnings to fixed
charges (5) ...................... 1.1x 1.3x 1.8x 1.8x --
Balance Sheet Data:
Working capital ................... $ 16.1 $ 11.7 $ 17.6 $ 20.2 $ 12.9
Property, plant and equipment,
net .............................. 31.4 33.0 31.2 85.0 92.6
Total assets ...................... 96.2 88.4 88.8 245.5 258.3
Total debt ........................ 87.4 83.3 86.2 161.4 171.6
Total stockholders' equity
(deficit):
Additional paid-in capital ....... 7.6 7.6 7.6 69.1 70.2
Other ............................ (19.9) (21.8) (22.1) (30.3) (36.7)
-------- -------- -------- --------- --------
Total ........................... (12.3) (14.2) (14.5) 38.8 33.5
</TABLE>
32
<PAGE>
(1) In conjunction with the integration of acquired entities and expansion of
our operations, a plan was developed to rationalize our operations and
sales force and consolidate and relocate our corporate headquarters in
order to improve operating efficiencies and reduce costs. As part of this
plan, we recorded non-recurring charges of approximately $3.5 million
during the year ended December 31, 1998. These charges primarily include
costs related to the closure of a container manufacturing facility,
severance and other personnel related costs and the relocation of our
corporate headquarters. Also included in non-recurring charges at December
31, 1998 are $2.7 million of costs associated with proposed acquisitions
that were not consummated. See "Note 18--Non-Recurring Charges" in our
financial statements included at the back of this prospectus.
(2) Other expense, net is comprised of (gains) losses on disposal of fixed
assets, unrealized (gains) losses on forward foreign exchange contracts
recorded at fair value and other miscellaneous (gains) losses.
(3) We define "EBITDA" as income (loss) before extraordinary items, plus
interest expense, income tax expense and depreciation and amortization. We
define "EBITDA margin" as EBITDA divided by net sales. EBITDA is
calculated for each of the periods presented as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
----------------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- ----------
(In Millions)
<S> <C> <C> <C> <C> <C>
Income (loss) before extraordinary items ......... $ 0.2 $ 1.4 $ 3.7 $ 4.0 $ (4.3)
Interest expense ................................. 7.8 8.3 7.5 8.8 16.0
Provision (benefit) for income taxes ............. 0.8 1.2 2.5 2.9 (0.5)
Depreciation & amortization ...................... 6.8 6.2 5.9 10.1 26.6
------ ------ ------ ------ -------
EBITDA ........................................... $ 15.6 $ 17.1 $ 19.6 $ 25.8 $ 37.8
====== ====== ====== ====== =======
</TABLE>
EBITDA does not represent, and should not be considered an alternative to,
net income or cash flow from operations as determined in accordance with
GAAP, and our calculation therefore may not be comparable to that reported
by other companies. While EBITDA should not be considered in isolation or as
a substitute for net income, cash flows from operating activities and other
income or cash flow statement data prepared in accordance with GAAP, or as a
measure of profitability or operating performance, management understands
that EBITDA is commonly used in evaluating a company's ability to service
debt. However, EBITDA does not take into account our debt service
requirements and other commitments and, accordingly, is not necessarily
indicative of amounts that may be available to us for discretionary uses.
(4) We define "Adjusted EBITDA" as EBITDA plus non-recurring charges and
management fees. Adjusted EBITDA is presented as certain financial
covenants in our borrowing arrangements will be based on similar measures.
We pay management fees to Vestar. See "Related Party Transactions." We
define "Adjusted EBITDA margin" as Adjusted EBITDA divided by net sales.
Non-recurring charges for the year ended December 31, 1998 consist
primarily of costs related to the closure of a container manufacturing
facility, severance and other personnel related costs, the relocation of
our corporate headquarters and costs associated with proposed acquisitions
that were not consummated. See "Note 18--Non-Recurring Charges" in our
financial statements included at the back of this prospectus. Adjusted
EBITDA is calculated for each of the periods presented as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
--------------------------------------------------------------
1994 1995 1996 1997 1998
---------- ---------- ---------- ---------- ----------
(In Millions)
<S> <C> <C> <C> <C> <C>
EBITDA ........................ $ 15.6 $ 17.1 $ 19.6 $ 25.8 $ 37.8
Non-recurring charges ......... -- -- -- -- 6.2
Management fees ............... 0.3 0.3 0.3 0.4 0.9
------- ------- ------- ------- -------
Adjusted EBITDA ............... $ 15.9 $ 17.4 $ 19.9 $ 26.2 $ 44.9
======= ======= ======= ======= =======
</TABLE>
(5) For purposes of determining the ratio of earnings to fixed charges,
"earnings" are defined as income (loss) before income taxes and
extraordinary items plus fixed charges. "Fixed charges" consist of
interest expense on all indebtedness, amortization of deferred financing
costs and one-third of rental expense on operating leases, representing
that portion of rental expense which we deem to be attributable to
interest. Earnings were insufficient to cover fixed charges in the year
ended December 31, 1998 by $4.8 million.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Introduction
The rigid industrial container industry has been undergoing consolidation
for a number of years and remains fragmented. We believe that the industry will
evolve to support a few participants who are able to provide a broad range of
containers and related container services. As a result, we began pursuing, and
in July 1997 began consummating, several acquisitions in furtherance of our
goal to become the preeminent provider of rigid industrial containers and
related container services in the United States and Canada. Each of these
transactions was accounted for using the purchase method of accounting.
Container Management Services, Inc. In July 1997, we acquired all the
capital stock of Container Management Services. Container Management Services
pioneered the businesses of plastic container leasing on a "per use" or
"round-trip" basis and plastic container fleet management in the United States
and Canada utilizing inventory tracking technology. We believe these businesses
are among the fastest growing sectors of the U.S. rigid industrial container
market and that our acquisition of Container Management Services positions us
as the leader in these businesses in the United States and Canada. Container
Management Services had revenues of approximately $17.8 million for the period
from January 1, 1997 through July 23, 1997 and operated two facilities in South
Carolina.
Hunter Drums Limited. In October 1997, we acquired substantially all of
the capital stock of Hunter Drums Limited. We believe Hunter Drums Limited is a
leading manufacturer and marketer of plastic and steel drums in Canada. Our
acquisition of Hunter Drums Limited, which included an exclusive license to
manufacture and sell the LR-1 drum in Canada, expands our geographic reach for
plastic and steel drums. Located near Toronto, Hunter Drums Limited currently
serves Ontario, Canada and parts of the Midwest and Northeast. Hunter Drums
Limited had revenues of approximately $30.5 million for the period from January
1, 1997 through October 29, 1997 and operated two facilities in Canada.
Plastics Division of Smurfit Packaging Corporation. In November 1997, we
acquired the plastics division of Smurfit Packaging Corporation. At that time,
this division was one of the leading manufacturers and marketers of plastic
drums in the United States. The acquisition of this division broadens our
product line to include open-top drums as well as smaller (i.e., 5- to
20-gallon) plastic containers and enhances our geographic reach and market
position in the United States. The acquisition also provides meaningful
operating efficiency opportunities. The plastics division of Smurfit Packaging
Corporation had revenues of approximately $57.7 million for the period from
January 1, 1997 through November 7, 1997 and operated a facility in each of New
Jersey, Georgia, Illinois, Texas and Delaware.
New England Container Co., Inc. In July 1998, we acquired all the capital
stock of New England Container. We believe that New England Container has the
largest share of the steel reconditioning market in the Northeast and provides
our services division with entry into the steel drum reconditioning market with
a leader in terms of quality and service. New England Container had revenues of
approximately $10.5 million for the period from January 1, 1998 through July
23, 1998, and operated a facility in each of Rhode Island, Maryland and
Virginia.
Substantially all of our revenues are derived from sales of our products
and services. Our expenses consist primarily of cost of sales, selling, general
and administrative expenses and interest expense. The most significant
component of cost of sales is our expense for purchases of HDPE resin (the
principal raw material for plastic drums) and cold-rolled steel (the principal
raw material for steel drums). Over a period of time, we generally pass changes
in the prices for HDPE resin and cold-rolled steel through to our customers,
resulting in relatively consistent gross profit margins on a per unit basis.
Our results of operations are affected by the level of economic activity in the
industries served by our customers, which in turn may be affected by the level
of economic activity in the U.S. and foreign markets which they serve. Because
we operate with little or no backlog, changes in
34
<PAGE>
economic activity, positive and negative, affect our results of operations more
quickly than such changes would affect the results of operations of a company
that operated with a backlog. See "Risk Factors--Cost and Availability of Raw
Materials and Certain Products" and "--Risk of Economic Downturn."
Although we anticipate minimal/flat growth in the overall steel drum
market, we believe opportunities exist to increase our market share for our
steel products mainly from
o competitors,
o companies exiting the business due to a lack of funds for investment in
new products, equipment and environmental and quality initiatives and
o geographic expansion.
We expect plastic drum shipments in the United States to increase by 2-3%
per year for the next few years, with gains being restrained as users of rigid
industrial containers increasingly convert to IBCs. A typical IBC replaces the
need for approximately five 55-gallon drums. Although we provide IBCs through
our services division, currently, we do not manufacture IBCs and are evaluating
options for obtaining the capacity to do so. We may decide not to pursue such
capacity in the near future or at all. For a discussion of the related risks,
see "Risk Factors--Cost and Availability of Raw Materials and Certain Products"
and "--Changing Product Requirements."
The following discussion and analysis provides information that we believe
is relevant to an understanding of our consolidated financial position and
results of operations. The following discussion and analysis should be read in
conjunction with our financial statements and the related notes included in
this prospectus.
Results of Operations
The following table sets forth, for each of the periods indicated, certain
statement of operations data, expressed as a percentage of net sales:
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
---------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Statement of Operations Data:
Net sales ............................................ 100.0% 100.0% 100.0%
Cost of sales ........................................ 73.0 75.8 77.8
Gross profit ......................................... 27.0 24.2 22.2
Selling, general and administrative expenses ......... 17.1 15.2 15.7
Operating income (loss) .............................. 9.9 9.0 4.3
Interest expense ..................................... 5.3 5.0 5.8
Income (loss) before taxes and extraordinary
items ............................................. 4.4 3.9 (1.8)
Income (loss) before extraordinary items ............. 2.6 2.3 (1.6)
</TABLE>
Fiscal Year Ended December 31, 1998 Compared to Fiscal Year Ended December 31,
1997
Net Sales
Net sales increased 55.4% to $274.0 million in 1998 from $176.3 million in
1997. Our container manufacturing division's net sales rose 41.1% to $227.4
million in 1998 from $161.1 million in 1997, due primarily to the full year
volume impact of our acquisitions of Hunter Drums Limited and the plastics
division of Smurfit Packaging Corporation. Our services division's net sales
more than tripled to $46.7 million in 1998 from $15.2 million in 1997, due
primarily to the full year volume impact of the Container Management Services
acquisition and the net sales of New England Container since we acquired it in
July 1998. Selling prices declined for both divisions, primarily in response to
lower raw material prices coupled with competitive pressures.
35
<PAGE>
Gross Profit
Gross profit increased $18.1 million to $60.8 million in 1998 from $42.7
million in 1997, primarily from increased sales volume and the benefit of lower
raw material prices. Gross profit as a percentage of net sales declined to
22.2% in 1998 from 24.2% in 1997. The effect of higher sales volume, favorable
raw material prices and improvements in efficiency were more than offset by the
impact of lower selling prices and a mix shift in our services division as the
growth of IBC leasing outpaced the growth of drum leasing. In addition, gross
profit as a percentage of sales was adversely impacted by short-term
manufacturing inefficiencies as a result of the closure of a container
manufacturing facility and the start-up of a co-located container manufacturing
and services facility.
Selling, General & Administrative Expenses
Selling, general and administrative expenses as a percentage of net sales
increased to 15.7% in 1998 from 15.2% in 1997 primarily due to investments in
computer technology, logistics and sales and marketing infrastructure, as well
as the relocation of our corporate headquarters. Additionally, higher
consulting fees associated with integration activities related to the
acquisitions we made in 1997 and 1998 and for other activities contributed to
the increase.
Non-Recurring Charges
In conjunction with the integration of acquired entities and expansion of
our operations, a plan was developed to rationalize our operations and sales
force and consolidate and relocate our corporate headquarters in order to
improve operating efficiencies and reduce costs. As part of this plan we
recorded restructuring, integration and other charges of approximately $3.5
million for the year ended December 31, 1998. These charges primarily include
costs related to the closure of a container manufacturing facility, severance
costs and other personnel related costs, the relocation of corporate
headquarters, and other miscellaneous costs. Also included in non-recurring
charges at December 31, 1998 are $2.7 million of costs associated with proposed
acquisitions that were not consummated.
Operating Income
Operating income for 1998 decreased by $4.2 million to $11.7 million from
$15.9 million in 1997 as a result of the factors described above. Excluding
non-recurring charges, operating income would have increased $2.0 million.
Other (Income) Expense, Net
Other (income) expense, net increased to $.5 million in 1998 from $.2
million in 1997, primarily due to the continuing devaluation of the Canadian
dollar, which adversely impacted the fair value of foreign exchange contracts.
Interest Expense
Interest expense was $16.0 million in 1998 compared with $8.8 million in
1997. The increase in interest expense is the result of increased debt levels
associated with the acquisitions we made in 1997 and 1998 as well as our
capital and debt restructurings in July and November 1997. See
"--Recapitalization" and "Note 1--Organization and Basis of Presentation" in
our financial statements included in this prospectus.
Income (Loss) Before Taxes and Extraordinary Items
In 1998, the income (loss) before taxes and extraordinary items was ($4.8)
million as compared to income (loss) before taxes and extraordinary items of
$6.9 million in 1997, as a result of the factors described above.
36
<PAGE>
Fiscal Year Ended December 31, 1997 Compared to Fiscal Year Ended December 31,
1996
Net Sales
Net sales increased 24.2% to $176.3 million in 1997 from $141.9 million in
1996, reflecting unit volume growth as well as the impact of our acquisitions of
Container Management Services, Hunter Drums Limited and the plastics division of
Smurfit Packaging Corporation. Our container manufacturing division's net sales
rose 13.5% to $161.1 million in 1997 from $141.9 million in 1996. Excluding the
impact of our acquisition of Hunter Drums Limited and the plastics division of
Smurfit Packaging Corporation, net sales in this division increased 3.9% in 1997
as compared to 1996 on unit volume growth, primarily in plastic drums, offset by
a decline in selling prices. Our services division, which we created in 1997
with our acquisition of Container Management Services, had net sales of $15.2
million in 1997, reflecting Container Management Service's net sales since the
date of the acquisition.
Gross Profit
Gross profit increased $4.4 million to $42.7 million in 1997 from $38.3
million in 1996, resulting from increased unit volume. Gross profit as a
percentage of net sales declined to 24.2% in 1997 from 27.0% in 1996 as
improvements in productivity and efficiency as well as the effect of higher
unit volume were more than offset by increased raw material costs for HDPE
resin and lower customer selling prices due to intensified competition.
Selling, General & Administrative Expenses
Selling, general and administrative expenses as a percentage of net sales
decreased to 15.2% in 1997 from 17.1% in 1996 due to higher net sales and our
focus on expense-containment strategies.
Operating Income
Operating income increased 13.6% to $15.9 million in 1997 from $14.0
million in 1996 as a result of the factors described above.
Other (Income) Expense, Net
Other (income) expense, net declined to $0.2 million in 1997 from $0.3
million in 1996. Unrealized losses on foreign exchange contracts was the
primary component of the amount recorded in 1997. The write-down of an idled
asset was the primary component of the amount recorded in 1996.
Interest Expense
Interest expense increased 17.3% to $8.8 million in 1997 from $7.5 million
in 1996. The increase in interest expense is the result of increasing debt
levels to finance our acquisitions of Container Management Services, Hunter
Drums Limited and the plastics division of Smurfit Packaging Corporation as
well as the restructuring of our capital structure in July and November 1997.
See "--Recapitalization" and "Note 1--Organization and Basis of Presentation"
in our financial statements included in the back of this prospectus.
Income Before Taxes and Extraordinary Items
Income before taxes and extraordinary items increased 11.3% to $6.9
million in 1997 from $6.2 million in 1996 as a result of the factors described
above.
Fiscal Year Ended December 31, 1996 Compared to Fiscal Year Ended December 31,
1995
Net Sales
Net sales increased 2.2% to $141.9 million in 1996 from $138.8 million in
1995, with increases in plastic drum volumes partly offset by a modest decline
in steel drum volumes. Selling prices eroded across the business due to
competitive conditions and lower raw material costs.
37
<PAGE>
Gross Profit
Gross profit increased $6.0 million to $38.3 million in 1996 from $32.3
million in 1995 due to increased plastic drum volumes, reduced purchase prices
for HDPE resin and cold-rolled steel, elimination of plant start-up costs and
improved manufacturing efficiencies. Gross profit margin increased to 27.0% in
1996 from 23.3% in 1995 as these improvements more than offset lower selling
prices and reduced steel unit volumes.
Selling, General & Administrative Expenses
Selling, general and administrative expenses as a percentage of net sales
increased to 17.1% in 1996 from 15.4% in 1995. This increase was driven
primarily by new management incentive plans and increased salaries.
Operating Income
Operating income increased 28.4% to $14.0 million in 1996 from $10.9
million in 1995 as a result of the factors described above.
Other (Income) Expense, Net
Other expense, net was $0.3 million in 1996. The write-down of an idled
asset was the primary component. There was no significant other (income)
expense, net in 1995.
Interest Expense
Interest expense decreased 9.6% to $7.5 million in 1996 from $8.3 million
in 1995. The decrease in interest expense is the result of a reduction in
average borrowings in 1996 as compared to 1995 as we used cash generated from
operations to reduce debt levels during the second half of 1995.
Income Before Taxes and Extraordinary Items
Income before taxes and extraordinary items increased 138.5% to $6.2
million in 1996 from $2.6 million in 1995 as a result of the factors described
above.
Liquidity and Capital Resources
Our principal uses of cash are for capital expenditures, interest expense,
working capital and acquisitions. We utilize funds generated from operations
and borrowings to meet these requirements. For the years ended December 31,
1996, 1997 and 1998, net cash generated by operating activities totaled
approximately $4.4 million, $17.7 million and $30.8 million, respectively.
For the years ended December 31, 1996, 1997 and 1998, we made capital
expenditures of approximately $3.3 million, $9.9 million and $28.7 million,
respectively. In 1998, our capital expenditures included approximately $14.7
million for purchases of containers for our leasing business, $8.5 million for
ongoing maintenance and $5.5 million for productivity and growth initiatives.
We currently have no capital commitments outside the ordinary course of
business. Other significant investing activities included the acquisitions we
made in 1997 and 1998. The aggregate cash purchase price for the acquisitions
was $130.2 million in 1997 and $13.9 million in 1998. In addition, as part of
the consideration for the acquisitions, in 1997 we issued 27,778 shares of
non-voting exchangeable stock exchangeable into 27,778 shares of our Common
Stock under certain circumstances and in 1998 we issued 24,243 shares of our
Common Stock.
Our principal working capital requirements are to finance accounts
receivable and inventories. As of December 31, 1998, we had net working capital
of approximately $12.9 million, including $1.6 million of cash, $29.4 million
of accounts receivable, $18.8 million of inventory, $6.2 of other current
38
<PAGE>
assets and approximately $43.1 million of accounts payable, accrued expenses
and the current portion of long-term indebtedness.
Concurrently with the offering of the outstanding notes, we replaced our
former senior credit agreement with our senior credit facility. Our former
senior credit agreement provided for term and revolving indebtedness. Certain
term loans under our former senior credit agreement bore interest at fixed
rates, and the revolving indebtedness as well as certain term loans bore
interest at a combination of domestic source and Eurodollar borrowing rates
which fluctuated based on our EBITDA and debt levels. At December 31, 1998,
outstanding term loan indebtedness under our former senior credit agreement
bore interest at a weighted average rate of 9.35% and outstanding revolving
credit indebtedness bore interest at a weighted average rate of 9.00%. Our
senior credit facility provides for a $25.0 million term loan and $75.0 million
of revolving credit availability. We borrowed approximately $13.3 million of
revolving credit indebtedness concurrently with the offering of the outstanding
notes. The equivalent of U.S. $15.0 million of revolving indebtedness is
available for borrowing in Canadian dollars by our Canadian subsidiary, Hunter
Drums Limited. The term loan under our senior credit facility bears interest at
9.48% per annum. Revolving indebtedness under our senior credit facility bears
interest at a combination of domestic source and Eurodollar borrowing rates
which fluctuate based on our EBITDA and debt levels currently. As of March 31,
1999, the revolving indebtedness under our senior credit facility bore interest
at a weighted average rate of 8.75% per annum. The term loan under our senior
credit facility matures in two equal installments in June 2006 and June 2007.
The outstanding revolving indebtedness, and the revolving credit commitment,
will mature in February 2004. See "Description of Senior Credit Facility."
Based upon the current level of operations and revenue growth, our
management believes that cash flow from operations and available cash, together
with available borrowings under our senior credit facility, will be adequate to
meet our future liquidity needs for at least the next several years. For a
discussion of the factors that could cause us to have insufficient liquidity
and the related risks, see "Risk Factors--Substantial Leverage," "--Additional
Future Capital Requirements" and "--Risk of Economic Downturn."
Recapitalization
In July 1997, we restructured our capital structure through the following
transactions:
o issuance of 1,222,221 shares of common stock in exchange for
$54,999,940, resulting in additional paid-in capital of $54,987,718,
o repurchase of 122,500 shares of common stock for $4,450,500,
o repurchase of all outstanding senior subordinated notes for $29,257,638,
including make whole payments of $3,025,858 and accrued interest of
$240,080,
o repurchase of $15.00/$17.50 cumulative exchangeable redeemable preferred
stock (Series B) for $37,611,126, including make whole payments of
$7,529,123 and accrued interest of $302,745 and
o conversion/repurchase of warrants for $1,059,190.
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In addition, we restructured our debt through the following transactions:
o repayment of existing bank debt of $25,924,331 and
o borrowing on a new credit facility of $46,102,987.
Immediately following these transactions, we formed Russell-Stanley
Holdings, Inc. to serve as a holding company. The transaction was accounted for
in a manner similar to a pooling of interests, and therefore, our financial
statements as of and for the two years in the period ended December 31, 1997
reflect our results of operations and financial condition as if Russell-Stanley
Holdings, Inc. and its subsidiaries had been combined for the entire period. In
November 1997, we issued 377,779 shares of common stock in exchange for
$17,000,055, resulting in additional paid-in capital of $16,996,277. See
"Description of Senior Credit Facility," "Ownership of Common Stock" and "Note
1--Organization and Basis of Presentation" in our financial statements included
in this prospectus.
Effect of Inflation
Inflation generally affects our business by increasing the interest
expense of floating rate indebtedness and by increasing the cost of raw
materials, labor and equipment. We do not believe that inflation has had any
material effect on our business during the periods discussed herein.
Interest Rate Risk and Foreign Currency Exchange Rate Risk
General
Our results of operations and financial condition are affected by changes
in interest rates and foreign currency exchange rates as measured against the
U.S. dollar. We manage this exposure through internal policies and procedures
and the use of derivative financial instruments. In accordance with our internal
policies, we only use derivative financial instruments for risk management and
not for speculative or trading purposes.
Interest Rate Risk
The revolving indebtedness under our senior credit facility bears interest
at a floating rate. Our primary exposure to interest rate risk is as a result of
changes in interest expense related to this indebtedness due to changes in
market interest rates. We maintain an interest rate collar in an aggregate
notional principal amount of $45.0 million to limit our exposure to interest
rate risk. Under this collar, if the actual LIBOR rate at the specified
measurement date is greater than a ceiling rate stated in the collar agreement,
the other party to the collar pays us the differential interest expense. If the
actual LIBOR rate is lower than the floor stated in the collar agreement, we pay
the other party to the collar the differential interest expense. The collar
terminates on November 30, 2000. A 10% increase in interest rates at December
31, 1998 would not have a material adverse affect on our results of operations,
financial condition or cash flows.
Foreign Currency Exchange Rate Risk
We have operations in Canada and sales denominated in Canadian dollars.
Our primary exposure to foreign currency exchange rate risk is as a result of
changes in the exchange rate between the U.S. dollar and the Canadian dollar.
We currently do not maintain any derivative financial instruments to limit our
exposure to this risk. Our Canadian subsidiary, Hunter Drums Limited, maintains
U.S. dollar denominated foreign currency exchange contracts which were in place
prior to our acquisition of Hunter Drums. At December 31, 1998 Hunter Drums
held $3.9 million of forward foreign currency exchange contracts with
settlement rates ranging from $1.38 to $1.41 Canadian dollars to U.S. dollars
and settlement dates from January 1999 through December 1999. While these
contracts increase our exposure to foreign currency exchange rate risk, due
primarily to
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the relatively short maturities of these contracts, a 10% change in the
exchange rate on December 31, 1998 between the U.S. dollar and the Canadian
dollar would not have had a material adverse affect on our results of
operations, financial condition or cash flows.
Recently Issued Accounting Standard
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". SFAS 133
establishes new disclosure requirements which provide a comprehensive standard
for recognition and measurement of derivatives and hedging activities. This
will require new disclosures, all derivatives to be recorded on the balance
sheet at fair value and special accounting for certain types of hedges. SFAS
133 will take effect in 2000. Based on our current derivatives, an interest
rate collar and foreign currency forward contracts, management does not believe
that SFAS 133 will have a material effect on our financial condition or results
of operations.
Year 2000 Compliance
As has been widely reported, many computer systems process dates based on
two digits for the year of transaction and may be unable to process dates in
the year 2000 and beyond. We believe that we have identified all significant
internal systems and hardware with embedded applications that require
modification to ensure year 2000 compliance. In addition, we have sent
questionnaires to our significant vendors in an attempt to confirm that they
are year 2000 compliant.
Internal and external resources are being used to make required
modifications to or effect replacement of internal systems and test year 2000
compliance. We are currently on schedule to complete the remediation and
testing processes for these applications by September 1999. In addition, we
have contacted the manufacturers of all of our significant hardware with
embedded applications and believe that our significant hardware is year 2000
compliant.
We do not know when our significant vendors will respond to our
questionnaires, if at all. All of our significant vendors are large,
sophisticated institutions, and we expect that they are aware of their year
2000 compliance issues.
There are many risks associated with the year 2000 compliance issue,
including but not limited to the possible failure of our systems and hardware
with embedded applications. Any such failure could result in
o our inability to order raw materials,
o the malfunctioning of our manufacturing or services processes,
o our inability to properly bill and collect payments from our customers
and/or
o errors or omissions in accounting and financial data, any of which could
have a material adverse effect on our results of operations and financial
condition.
In addition, there can be no guarantee that the systems of other
companies, including our vendors, utilities and customers, will be converted in
a timely manner, or that a failure to convert by another company, or a
conversion that is incompatible with our systems, would not have a material
adverse effect on us. We have not yet developed any contingency plans but will
do so if the testing or investigations that we will carry out through 1999
suggest it is necessary.
Through December 31, 1998 we have incurred and capitalized costs of
approximately $3.2 million primarily related to the upgrade and replacement of
our internal systems. We currently expect that we will incur and capitalize
future incremental costs of approximately $0.9 million.
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BUSINESS
General
We are a leading manufacturer and marketer of plastic and steel industrial
containers and a leading provider of related container services in the United
States and Canada. Our container manufacturing division manufactures and sells
new plastic and steel rigid industrial containers. Our services division (i)
leases plastic rigid industrial containers, (ii) provides plastic container
fleet management services, (iii) reconditions and sells steel drums and (iv)
retrieves and recycles empty industrial containers. Our container manufacturing
and services divisions together have over 1,500 active customers in the
agricultural chemical, food product, lubricant, pharmaceutical and specialty
chemical industries. We believe that our customers base their purchasing
decisions primarily on price, service and quality and are increasingly looking
to maintain relationships with fewer suppliers who can provide a broad range of
high-quality industrial containers and related container services at
competitive prices, often on a national or international basis. We have
increased our net sales from $138.8 million for the year ended December 31,
1995 to $284.5 million on a pro forma basis for the year ended December 31,
1998, representing a compound annual growth rate of 27.0%. During the same
period we increased our Adjusted EBITDA from $17.4 million to $46.2 million,
representing a compound annual growth rate of 38.4%, while our Adjusted EBITDA
margin expanded from 12.5% to 16.2%. The majority of our revenue and Adjusted
EBITDA growth and margin improvement during this period has come from the
successful acquisition and integration of four complementary businesses.
We believe that our container manufacturing division offers one of the
broadest lines of 5- to 70-gallon plastic rigid industrial containers in the
United States and Canada and enjoys the largest share in the U.S. plastic drum
market as well as one of the leading shares in the Canadian plastic drum
market. We are the principal manufacturer in the United States and Canada of
55-gallon plastic tight-head drums, which we sell under the brand names L-1
(LR-1 in Canada) and Delcon. We believe that the design of the L-1 and Delcon
drums is the industry standard for 55-gallon plastic tight-head drums in the
United States and Canada, and we own and/or have a license to use important
proprietary technology relating to the manufacture and sale of these drums. Our
container manufacturing division also offers a broad line of the widely used
55-gallon steel drum and, we believe, enjoys one of the leading shares in the
Northeast, Gulf Coast and Canadian steel drum markets.
Our services division is an innovator and, we believe, the leader in the
United States and Canada in the businesses of leasing plastic containers on a
"per use" or "round-trip" basis and providing plastic container fleet
management services. In our container leasing business, we lease a container to
our customer for filling and shipping to the end-user. We then retrieve the
container directly from the end-user and prepare it for re-use. Container fleet
management involves the same services, but uses containers owned by the
customer. Since 1991, the growth of plastic container leasing and fleet
management has outpaced the growth of the rigid industrial container market as
a whole, and we believe these businesses are among the fastest growing sectors
of the U.S. rigid industrial container market. We believe that our services
division is also the leading reconditioner of steel drums in the Northeast. The
addition of container services to our historical manufacturing business enables
us to serve a wider range of our customers' evolving industrial container
requirements and is an important aspect of our strategy to retain and enhance
our leading market position as our customers increasingly look to rely on fewer
suppliers.
We currently operate twelve plastic drum manufacturing plants, three steel
drum manufacturing plants and six container services plants throughout the
United States and Canada, enabling us to be strategically located near our
major customers. We sell, lease and service plastic containers in most markets
in the United States and in most of the major industrial regions in Canada. We
sell new steel drums in the Northeast, the Gulf Coast, parts of the Midwest and
Ontario, Canada, regions where there is a high concentration of purchasers of
steel drums, and we sell reconditioned steel drums in the Northeast.
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Recent Acquisitions
The rigid industrial container industry has been undergoing consolidation
for a number of years and remains fragmented. We believe that the industry will
evolve to support a few participants who are able to provide a broad range of
containers and related container services. As a result, we began pursuing, and
in July 1997 began consummating, several acquisitions in furtherance of our
goal to become the preeminent provider of rigid industrial containers and
related container services in the United States and Canada.
Container Management Services, Inc. Acquired in July 1997, Container
Management Services pioneered the businesses of plastic container leasing on a
"per use" or "round-trip" basis and plastic container fleet management in the
United States and Canada utilizing inventory tracking technology. We believe
these businesses are among the fastest growing sectors of the U.S. rigid
industrial container market and that our acquisition of Container Management
Services positions us as the leader in these businesses in the United States
and Canada.
Hunter Drums Limited. We believe Hunter Drums Limited, acquired in October
1997, is a leading manufacturer and marketer of plastic and steel drums in
Canada. Our acquisition of Hunter Drums Limited, which included an exclusive
license to manufacture and sell the LR-1 drum in Canada, expands our geographic
reach for plastic and steel drums. Located near Toronto, Hunter Drums Limited
currently serves Ontario, Canada and parts of the Midwest and Northeast.
Plastics Division of Smurfit Packaging Corporation. Acquired in November
1997, the plastics division of Smurfit Packaging Corporation was one of the
leading manufacturers and marketers of plastic drums in the United States. The
acquisition of the plastics division of Smurfit Packaging Corporation broadens
our product line to include open-top drums as well as smaller (i.e., 5- to
20-gallon) plastic containers and enhances our geographic reach and market
position in the United States. The acquisition also provides meaningful
operating efficiency opportunities.
New England Container Co., Inc. We believe that New England Container,
acquired in July 1998, has the largest share of the steel drum reconditioning
market in the Northeast and provides our services division with entry into the
steel drum reconditioning market with a leader in terms of quality and service.
As a result of these acquisitions, since July 1997 we have overseen the
successful integration of more than 100 products and the addition of our
services division. In addition, we have increased the number of our facilities
from 8 to 21 and improved our operating efficiency and Adjusted EBITDA margin.
Industry Segment Overview
As reported by The Freedonia Group Incorporated, an international
study/database company, the rigid industrial container industry consists of new
plastic, steel and fiber drums, rigid intermediate bulk containers and pails as
well as bulk boxes and materials handling containers. According to The
Freedonia Group, the U.S. market had sales of approximately $3.7 billion in
1996, the most recent period for which The Freedonia Group reports relevant
industry data. This represents a compound annual growth rate of approximately
5.4% from 1987 sales of approximately $2.3 billion. Our container manufacturing
division competes in a sector of the rigid industrial container industry. We
define our sector as consisting of new and reconditioned plastic, steel and
fiber drums, rigid intermediate bulk containers and small containers/pails. Our
services division competes with other providers of similar services. We do not
know of any third-party source of market data for the industrial container
services industry.
Plastic drums are used primarily in the storage and transportation of
chemical products and are also increasingly being used for the storage and
transportation of petroleum and lubricants. Plastic drums are available in a
variety of capacities, ranging from 5 to 70 gallons, with the 55-gallon drum
being the most widely used. According to The Freedonia Group, there were $267
million of new plastic drums shipped from U.S. manufacturing establishments in
1996. Steel drums are used primarily for the transportation and storage of
liquids, semi-solids and dry products, particularly
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petroleum, lubricants and chemical products, and have been utilized in these
industries for more than 40 years. Steel drums typically range in capacities
from 13 to 85 gallons, with the 55-gallon drum being the most widely used.
According to The Freedonia Group, there were $692 million of new steel drums
shipped from U.S. manufacturing establishments in 1996.
Based on the changes we have experienced in our business and direct
discussions with our customers, we believe the following trends will continue
to play an important role in our industry's future:
o Larger competitors which offer broader product lines and have greater
manufacturing capacities, higher operating efficiencies and a greater
ability to invest in enhanced products and services will capture
increasing market share as smaller, regional companies find it more
difficult to compete, resulting in further consolidation of the industry;
o Customers are increasingly looking to fewer suppliers to provide an
increasing percentage of their industrial container supply and servicing
requirements;
o Customers are increasingly seeking broader product lines and global
service; consequently, our industry is becoming less regional, with
customers increasingly seeking national and international supply
arrangements; and
o Users of fiber drums are converting to the use of plastic drums in
response, in part, to the lower performance and re-use characteristics of
fiber drums and the higher cost of fiber drum disposal. We also believe
certain users of plastic drums are converting to rigid intermediate bulk
containers based, in part, upon the perceived economies of shipping and
handling.
Competitive Strengths
We believe the following competitive strengths are the primary factors
contributing to our leading position in the marketplace:
We Are a Leading Industry Player With Strong Market Positions. We believe
that we hold the largest share in the U.S. plastic drum manufacturing market,
one of the leading shares in the Canadian plastic drum manufacturing market and
one of the leading shares in the Northeast, Gulf Coast and Canadian steel drum
manufacturing markets. We also believe we are the leading provider of plastic
container leasing and fleet management services in the United States and Canada
and the leading steel drum reconditioner in the Northeast.
We Have a Broad Offering of Quality Products and Services. We offer a
broad line of 5- to 70-gallon plastic rigid industrial containers, anchored by
the 55-gallon plastic tight-head L-1 and Delcon drums. We believe that the
design of the L-1/LR-1 and Delcon drums is the industry standard for 55-gallon
plastic tight-head drums in the United States and Canada. We also offer a broad
line of the widely used 55-gallon steel drum. We believe that our integration
of industrial containers and related container services distinguishes us from
most of our competitors and enables us to serve a wide range of our customers'
evolving industrial container requirements.
We pride ourselves in the quality of our products and services. We have
received numerous quality awards from our customers, including a Supplier
Partnership Award from The Dow Chemical Company, three Distinguished Vendor
awards from Ecolab, Inc., a Supplier of the Year award from Novus
International, Inc., three Quality Supplier Q-1 awards from Parker-Amchem, a
division of Henkel Corporation, and a Supplier of the Year award from Union
Carbide Corporation.
We Focus on Maintaining a Competitive Cost Structure. We focus on
maintaining a competitive cost structure. Our cost structure benefits from: (i)
our attaining favorable prices for our most significant raw materials, HDPE
resin and cold-rolled steel, based on our high volume of raw material
purchases, (ii) the economies of scale provided by our high production volumes,
(iii) high plant utilization, (iv) manufacturing techniques that reduce raw
materials requirements, reduce scrap and enhance productivity and (v) low
transportation costs resulting from the proximity of our facilities to our
major customers. We also maintain an ongoing capital investment program
designed to achieve high levels of operating efficiency and productivity.
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We Have a High Quality and Diverse Customer Base. We have over 1,500
active customers at more than 10,000 locations in the United States and Canada.
No single customer accounts for more than 4% of our 1998 net sales, and our top
15 customers account for less than 25% of our 1998 net sales. Our customers
include major participants in the agricultural chemical, food product,
lubricant, pharmaceutical and specialty chemical industries. We have enjoyed
long-standing relationships with many of our key customers and have been
formally recognized on a number of occasions for outstanding product quality
and service. We have been doing business with 14 of our top 15 customers for
more than five years.
We Have an Experienced Management Team and Strong Sponsor. Our senior
managers have more than 100 years of combined experience in the rigid
industrial container industry. We have successfully retained key members of
management from all recently acquired companies. Our management team has
overseen the successful integration of four complementary businesses and
increased the number of our facilities from 8 to 21. Principally through our
acquisitions we completed in 1997 and 1998, our management team has increased
our Adjusted EBITDA margin from 14.0% for the year ended December 31, 1996 to
16.2% for the year ended December 31, 1998 on a pro forma basis. Our sponsor,
Vestar, led the acquisition of Russell-Stanley in June 1989. Since 1989, Vestar
has been our majority shareholder and has invested over $55 million of equity
in Russell-Stanley. Russell-Stanley currently represents one of Vestar's
largest investments.
Business Strategy
Our goal is to become the preeminent provider of rigid industrial
containers and related container services in the United States and Canada.
Continue to Broaden Our Product and Service Offering and Geographic
Reach. We intend to continue to enhance our existing product lines through the
introduction of new products and product enhancements and selectively expand
our geographic reach in the United States and Canada. Most recently, we
introduced a number of new drum designs for use in specific markets, including
plastic and steel export drums that significantly reduce freight costs for
exporters who use overseas shipping containers, an open-top plastic drum that
is designed for the leasing market served by our services division and a
returnable/reusable drum principally for use in the agricultural market. We
intend to aggressively market our plastic containers and container leasing
services to purchasers of fiber drums. We believe purchasers of fiber drums
represent a significant potential market for us due, in part, to the lower
performance and re-use characteristics of fiber drums and the higher cost of
fiber drum disposal. To expand our geographic reach, we have budgeted for the
addition of a new facility for our services division and we plan to selectively
review new geographic markets for the steel drum business of our container
manufacturing division.
Continue to Improve Our Cost Structure. We intend to continue to lower our
costs by reducing transportation costs, rationalizing manufacturing facilities,
manufacturing certain container parts in-house that we currently purchase from
third parties and reducing our overhead. We believe that we will also continue
to benefit from lower raw material costs based on our high volume of raw
material purchases. We also believe that opportunities exist for the sharing of
best practices of our most efficient manufacturing facilities which we believe
will lead to increased efficiencies and lower costs company-wide.
Pursue Selective Acquisitions. The rigid industrial container industry has
been undergoing consolidation for a number of years and remains fragmented. We
plan to pursue selected acquisition opportunities that complement and expand
our core businesses in terms of products, services and geographic reach. We
believe we can leverage our production, purchasing, distribution and management
strengths to improve the results of acquired operations.
Container Manufacturing Division
Our container manufacturing division manufactures and sells new plastic
and steel rigid industrial containers and generated revenues of $227.4 million
for the year ended December 31, 1998.
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Plastic Containers
We believe that we hold the largest share in the U.S. plastic drum
manufacturing market and one of the leading shares in the Canadian plastic drum
manufacturing market. We operate twelve plastic drum manufacturing facilities
serving most markets in the United States and most of the major industrial
regions in Canada.
We believe that we offer one of the broadest lines of plastic rigid
industrial containers in the United States and Canada. Our large containers
include full lines of both tight-head and open-top drums in sizes ranging from
30 to 70 gallons. We also produce a line of smaller plastic containers in sizes
ranging from 5 to 20 gallons.
We are the principal manufacturer in the United States and Canada of
55-gallon plastic tight-head drums, which we sell under the brand names L-1
(LR-1 in Canada) and Delcon. We believe that the design of the L-1 and Delcon
drums is the industry standard for 55-gallon plastic tight-head drums in the
United States and Canada, and we own and/or have a license to use important
proprietary technology relating to the manufacture and sale of these drums. See
"--Intellectual Property." We believe that the L-1 and Delcon drums offer
significant production cost advantages over earlier two-piece drum designs,
including higher manufacturing speeds and lower manufacturing costs. We also
believe that the L-1 and Delcon drums are superior to our competitors' similar
products because of their design features. We believe that the primary
advantages offered by the design features of the L-1 and Delcon drums are (i)
superior design which easily accommodates both new and old drum handling
equipment and which is available with an optimally drainable feature which we
were instrumental in pioneering and (ii) excellent performance with high
structural integrity.
A key component of our strategy has been to build on the acceptance of the
L-1 and Delcon drums by enhancing our broad product offering. We have
accomplished this by both the introduction of new products and selective
acquisitions. We have introduced several new products, including a 30-gallon
version of the L-1 and Delcon drums and a light-weight 15-gallon drum. Most
recently, we introduced a number of new drum designs for use in specific
markets, including a plastic export drum that significantly reduces freight
costs for exporters who use overseas shipping containers, an open-top plastic
drum that is designed for the leasing market served by our services division
and a returnable/reusable drum principally for use in the agricultural market.
On many of our drums over 15 gallons, we offer an industry leading optimally
drainable design feature which results in the drum retaining less residual
product than other designs. In addition, through the acquisition of the
plastics division of Smurfit Packaging Corporation, we broadened our product
line to include open-top drums as well as smaller (i.e., 5- to 20-gallon)
plastic containers, providing us with one of the broadest lines of plastic
containers in the industry.
We also manufacture several specialty tight-head drums, including a
high-purity "clean" drum for use in the electronic chemical market, drums for
the lubricant industry which use special replaceable closures and are capable
of four-high stacking, a "raised head" drum for end users with special stacking
requirements and a "heavy" drum that meets United Nations international
shipping standards for certain products. Other products include plastic liners
used for steel, fiber and composite drums.
Steel Containers
We believe that we have one of the leading shares in the Northeast, Gulf
Coast and Canadian steel drum manufacturing markets. We have three steel drum
facilities which serve the Northeast, the Gulf Coast, parts of the Midwest and
Ontario, Canada, regions where there is a high concentration of purchasers of
steel drums.
We produce a broad line of the widely used 55-gallon steel drum,
manufactured to customer specifications, including steel gauge, special
linings, custom painting and special closure systems. Our line of steel drum
products also includes lined and unlined tight-head and open-top drums and
tight-head drums that incorporate our optimally drainable design feature. In
addition, we also manufacture a steel export drum that significantly reduces
freight costs for exporters who use overseas shipping containers.
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We are actively pursuing new products and product enhancements for our
line of steel drums. For example, in the second quarter of 1997 we introduced
into our product line a drum with an innovative "W" shaped rolling hoop that
has better performance characteristics than steel drums with the standard
rolling hoop.
Services Division
Our services division (i) leases plastic rigid industrial containers, (ii)
provides plastic container fleet management services, (iii) reconditions and
sells steel drums and (iv) retrieves and recycles empty industrial containers
and generated revenues of $46.6 million for the year ended December 31, 1998.
The addition of these container services to our historical manufacturing
business enables us to serve a wider range of our customers' evolving
industrial container requirements and is an important aspect of our strategy to
retain and enhance a leading market position as our customers increasingly look
to maintain relationships with fewer suppliers.
Our services division pioneered the businesses of plastic container
leasing on a "per use" or "round-trip" basis and plastic container fleet
management in the United States and Canada utilizing inventory tracking
technology.
In our plastic container leasing business, our services division leases a
plastic container to a customer, who fills the container and ships the full
container to its customer, the end-user. The end-user then calls a toll-free
number, and we arrange to pick up the empty container directly from the
end-user. Upon its return, the container is thoroughly inspected, cleaned and
graded and either inventoried for re-use or, if below grade, recycled. We
charge our leasing customers a flat "per use" price. We believe that container
leasing on a "per use" or "round trip" basis is an attractive alternative to
purchasing as per use leasing may result in lower container costs for our
customers. Also, our retrieval of the empty container relieves the end-user of
container disposal.
In our plastic container fleet management business, our services division
provides the customer with the same services as described above, but using the
customer's fleet of containers purchased from our container manufacturing
division or from another manufacturer. We also charge our container fleet
management customers a flat "per use" price.
We began steel drum reconditioning in July 1998 with the acquisition of
New England Container, a leader in terms of quality and service. Our services
division arranges for the retrieval of empty industrial containers of all
types, including containers manufactured by other manufacturers. Larger
end-users of drums are provided with trailers to store their empty drums. When
the trailer is filled, we arrange for it to be returned to our service facility
and leave an empty trailer in its place. We also arrange to pick up empty drums
from smaller customers on request. Used drums are returned to our service
facility where they are thoroughly inspected, sorted and graded. The drums are
then cleaned and either processed for recycling or fully reconditioned. The
reconditioning process includes metal preparation (to prepare the steel for a
new coating), metalworkings (to remove all dents and insure the drum meets
dimensional specifications), leak testing, interior lining and exterior
painting to meet the filling customer's specifications. A reconditioned steel
drum sells for approximately 60% of the price of a new steel drum. We generally
charge our customers a fee to pick up and dispose of used drums. In some cases,
however, we will pay the customer a small fee for certain styles of drums which
are in high demand and are of reconditionable quality.
We provide for the environmentally sound destruction of plastic and fiber
containers and steel containers that are not suitable for reconditioning on a
contract basis. The empty containers are cleaned in an environmentally sound
fashion and are then processed for sale as recycled material.
Customers
Our container manufacturing and services divisions together have over
1,500 active customers at more than 10,000 locations in the United States and
Canada. No single customer accounted for more than 4% of our 1998 net sales,
and our top 15 customers accounted for less than 25% of our 1998 net sales.
Some of our major customers include A. Smith Bowman Distillery Incorporated,
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Ashland Chemical Co., BASF Corporation, CIBA-GEIGY Co., Clariant Corporation,
Crompton & Knowles Corporation, Diversey Lever, The Dow Chemical Company, E.I.
Du Pont De Nemours & Co., Ecolab, Inc., Equilon Enterprises LLC, Exxon
Corporation, Henkel Surface Technologies (Henkel Corporation), National
Packaging Services, Inc., and Rohm and Haas Company. We have been doing
business with 14 of our top 15 customers for more than five years. We have
received numerous quality awards from our customers, including a Supplier
Partnership Award from The Dow Chemical Company, three Distinguished Vendor
awards from Ecolab, Inc., a Supplier of the Year award from Novus
International, Inc., three Quality Supplier Q-1 awards from Parker-Amchem, a
division of Henkel Corporation and a Supplier of the Year award from Union
Carbide Corporation.
Raw Materials
The principal raw material and most significant cost component for our
plastic containers is HDPE resin. We generally maintain less than one month of
HDPE resin inventory at each plastic manufacturing facility. The principal raw
material and most significant cost component for our steel drums is cold-rolled
steel. We generally maintain one to two months of cold-rolled steel inventory
at each steel manufacturing facility.
Raw materials purchasing is centrally managed from our corporate
headquarters. We maintain relationships with various suppliers for HDPE resin,
cold-rolled steel and other raw materials. While we generally believe our
access to raw materials is good, we cannot assure you that we will have an
uninterrupted supply of raw materials at competitive prices. See "Risk
Factors--Cost and Availability of Raw Materials and Certain Products."
We do not manufacture rigid intermediate bulk containers. Our rigid
intermediate bulk containers purchases are effected through individual purchase
orders. For a discussion of related risks, see "Risk Factors--Changing Product
Requirements."
Competition
The markets for our products are competitive. We believe competition is
based primarily on price, service and quality. Price competition may require us
to match competitors' prices to retain business or market share. We believe
that our competitive cost structure, high quality products, broad geographic
coverage and high level of customer service enable us to compete effectively.
Our container manufacturing division competes primarily with Greif Brothers
Corporation, Hoover Materials Handling Group, Inc., Sch\)tz Container Systems,
Inc., and Van Leer Containers, Inc. in plastic drums and Evans Industries,
Inc., Greif Brothers Corporation and Van Leer Containers, Inc. for steel drums.
Our services division competes primarily with Greif Brothers Corporation,
Hoover Materials Handling Group, Inc. and PalEx, Inc. Both of our divisions
also compete with smaller industry participants. See "Risk
Factors--Competition."
Sales and Marketing
Our sales and marketing is conducted through a sales force of
approximately 50 people. While our sales force is generally divided along our
product and service lines, we have a group of four Strategic Account Managers
who sell and market all of our products and services to our large customers who
purchase across our product and services lines. Our Strategic Account Managers
promote us as a source for all of our customers' rigid industrial container
requirements.
Our Strategic Account Managers also coordinate our participation in the
Mauser International Packaging Institute and Drumnet associations of industrial
container suppliers. We and other participants in these organizations can offer
to supply and service a customer's industrial container requirements through
the network of participants in more than 30 countries, primarily in North
America, Europe and Asia. Our ability to provide for our customers' industrial
container requirements on an international basis results in strong customer
relationships in our U.S. and Canadian markets.
Our sales personnel work closely with our customers and business operators
to satisfy all of our customers' industrial container requirements. Our sales
personnel are trained to seek and recognize
48
<PAGE>
opportunities to cross-sell all of our products and services. In addition, we
have employees who are trained to provide extensive technical and regulatory
support to our customers.
Properties and Equipment
We own or lease twelve plastic and three steel drum manufacturing
facilities and six service facilities. The following table sets forth certain
information as of December 31, 1998 with respect to our facilities:
<TABLE>
<CAPTION>
Location Description Area (Square Feet) Leased or Owned
- ---------------------------------- ---------------------------- -------------------- ----------------
<S> <C> <C> <C>
Allentown, Pennsylvania .......... Plastic Manufacturing 140,000 Leased
Romeoville, Illinois ............. Plastic Manufacturing 70,000 Owned
Houston, Texas ................... Plastic Manufacturing 50,000 Owned
Rancho Cucamonga, California...... Plastic Manufacturing 73,500 Owned
Nitro, West Virginia ............. Plastic Manufacturing 58,000 Leased
Reserve, Louisiana ............... Plastic Manufacturing 72,000 Owned
The Woodlands, Texas ............. Plastic Manufacturing 90,000 Leased
Atlanta, Georgia ................. Plastic Manufacturing 95,000 Owned
South Brunswick, New Jersey ...... Plastic Manufacturing 110,000 Leased
Addison, Illinois ................ Plastic Manufacturing 135,000 Owned
Wilmington, Delaware(*) .......... Plastic Manufacturing 80,000 Leased
Bramalea, Ontario ................ Plastic Manufacturing 80,000 Leased
Woodbridge, New Jersey ........... Steel Manufacturing 120,000 Owned
Houston, Texas ................... Steel Manufacturing 106,500 Owned
Burlington, Ontario .............. Steel Manufacturing 60,000 Owned
Simpsonville, South Carolina
(two facilities) ................ Plastic Services 123,000/40,000 Leased
Allentown, Pennsylvania .......... Plastic Services 150,000 Leased
Smithfield, Rhode Island ......... Plastic and Steel Services 44,000 Owned
Baltimore, Maryland .............. Steel Services 39,000 Leased
Richmond, Virginia ............... Steel Services 16,500 Leased
</TABLE>
- ----------
(*) Scheduled to be closed in 1999.
We own and lease a fleet of more than 1,200 trailers to help ensure
on-time delivery of containers directly to our customers' facilities.
Our corporate and executive headquarters, located in Bridgewater, New
Jersey, provides administrative services to our facilities, including
accounting, accounts receivable, financial reporting, human resources,
information technology, insurance, taxes and treasury services.
Intellectual Property
We have the exclusive license from Mauser to manufacture the L-1 drum
throughout all of the United States (other than parts of the Southeast) and
Canada, we and one other manufacturer have the exclusive right to sell the L-1
throughout the United States and we have the exclusive right to sell the LR-1
in Canada. There are over 40 licensees worldwide for Mauser plastic drum
technology, which is generally acknowledged as one of the best large plastic
blow mold production technologies worldwide. Our rights to the Mauser
technology derive from a series of licenses. These licenses terminate on July
31, 2008, unless one or more improvement patents are issued, in which case they
terminate on the earlier of (i) the expiration of the latest to expire of such
improvement patents and (ii) July 31, 2015, unless extended by Mauser. See
"Risk Factors--Dependence on Licensing Partner."
We also have the non-exclusive license from Gallay S.A. to manufacture
steel containers using Gallay's patented production process at our steel drum
manufacturing facilities and the non-exclusive license to sell these steel
containers throughout the United States and Canada.
49
<PAGE>
Other than our licenses described above, we do not have any material
patents or other intellectual property.
Employees
As of January 31, 1999, we employed 1,544 persons, of whom 33 were
employed at corporate headquarters, 249 were regional or area managers and
support personnel and 1,262 were employed at our manufacturing and service
facilities. Approximately 29% of our employees are represented under collective
bargaining agreements which expire from May 1999 to June 2002 (including two
agreements pending execution which we believe have been fully negotiated). We
do not anticipate any difficulty in extending or renegotiating these agreements
as they expire. We believe that our labor relations are good. See "Risk
Factors--Labor Stoppage."
Environmental Matters
Our operations are subject to federal, state, local and Canadian
environmental laws that continue to be adopted and amended. These environmental
laws regulate, among other things, air and water emissions and discharges at
our manufacturing and service facilities; our generation, storage, treatment,
transportation and disposal of solid and hazardous waste; and the release of
toxic substances, pollutants and contaminants into the environment at
properties that we operate and at other sites. In some circumstances and
jurisdictions, these laws also impose requirements regarding the environmental
conditions at properties prior to a transfer or sale. These laws apply to
certain facilities that we previously owned or operated. Our business involves
the manufacture, lease and reconditioning of containers, which may be used for
chemical products. Risks of significant costs and liabilities are inherent in
our operations and facilities, as they are with other companies engaged in like
businesses. We believe, however, that our operations are in substantial
compliance with all applicable environmental laws.
In addition, under certain laws, a current or previous owner of real
property, and parties that generate or transport hazardous substances that are
disposed of at real property, may be liable for the costs of investigating and
remediating such substances on or under the property. The federal Comprehensive
Environmental Response, Compensation & Liability Act, as amended, and similar
laws, may impose such liability on a joint and several basis, regardless of
whether the liable party was at fault for the presence of such hazardous
substances. We have not incurred significant liability in several such cases
asserted against us and settled to date involving the cleanup of off-site
locations where we allegedly disposed of waste. However, we cannot assure that
a material claim under such laws will not arise in the future.
The U.S. Environmental Protection Agency has confirmed the presence of
certain contaminants, including dioxin, in and along the Woonasquatucket River
in Rhode Island. Prior to 1970, New England Container operated a facility in
North Providence, Rhode Island along the Woonasquatucket River at a site where
contaminants have been found. Recent press reports identify New England
Container as a business that may have contributed to the contamination. We are
not aware that any party has been formally identified by the EPA as a
potentially responsible party. Notwithstanding that New England Container no
longer operates the facility, and did not operate the facility at the time we
acquired the outstanding capital stock of New England Container in July 1998,
New England Container could incur liability under federal and state
environmental laws and/or as a result of civil litigation. We believe that any
resulting liability is subject to a contractual indemnity from Vincent J.
Buonanno, one of our directors and the former owner of New England Container.
However, such indemnity is subject to a $2.0 million limit. We currently are
unable to estimate the likelihood or extent of any liability; however, this
matter may result in liability to New England Container that could have a
material adverse effect on Russell-Stanley's financial condition and results of
operations. See "Risk Factors--Environmental Matters."
Legal Proceedings
As a result of a grand jury criminal investigation initiated by the
Antitrust Division of the Department of Justice into price fixing in the steel
drum industry prior to the acquisition of Russell-
50
<PAGE>
Stanley by Vestar, our former Director of National Sales was indicted in
October 1992 and convicted in February 1993 of conspiring to fix steel drum
prices with certain of our competitors in the Eastern United States during a
period preceding March 1990. As a result of the same investigation, William
Lima, who had been President of Russell-Stanley prior to his termination in
April 1993, was indicted in December 1994 and convicted in November 1995 of the
same offense. Mr. Lima was sentenced in December 1996. In December 1997, Mr.
Lima's conviction was affirmed on appeal by a three judge panel of the U.S.
Court of Appeals, Third Circuit. Mr. Lima's petition for a rehearing of that
decision was denied in January 1998. In June 1993, we negotiated a plea
agreement with the Antitrust Division of the Department of Justice pursuant to
which Russell-Stanley pled guilty to several counts relating to the price
fixing investigation and subsequent information gathering processes and paid
specified fines. In June 1992, we settled a private, class action lawsuit
arising out of the price fixing investigation pursuant to which we paid
monetary damages and attorneys' fees.
In May 1993, Mr. Lima sued Russell-Stanley, Vestar and certain principals
of Vestar who are directors of Russell-Stanley in New Jersey Superior Court for
monetary damages which Mr. Lima estimates to be approximately $7.5 million and
other specified relief. Mr. Lima alleges several causes of action arising out
of Russell-Stanley's decision to treat his termination of employment as being
for "cause" (as defined in a stock subscription agreement and a nonqualified
stock option agreement between Mr. Lima and Russell-Stanley), and therefore to
treat Mr. Lima's stock and options as being without value. Mr. Lima also
alleges a cause of action for breach of contract arising out of our decision to
cease paying Mr. Lima's legal fees in connection with the grand jury
investigation. The defendants counterclaimed against Mr. Lima alleging common
law fraudulent misrepresentation and common law fraudulent inducement in
connection with our acquisition by Vestar and our agreement to enter into the
aforementioned agreements with Mr. Lima. In March 1994, the New Jersey Superior
Court entered an order staying all proceedings in this action pending the
outcome of Mr. Lima's criminal proceeding. In June 1998, following the final
resolution of Mr. Lima's criminal case, defendants moved to lift the stay and
for partial summary judgment dismissing Mr. Lima's claims. On November 5, 1998,
the New Jersey Superior Court entered an order vacating the stay. The Superior
Court denied the partial summary judgment motion without prejudice subject to
being renewed following limited discovery on the issue of the reasons for Mr.
Lima's termination. After discovery was completed, defendants renewed their
partial summary judgment motion. The motion will be fully briefed by April 9,
1999. We believe that Mr. Lima's suit is without merit and intend to continue
to vigorously contest his suit.
In addition to the foregoing proceedings, we are 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 our results of operations
or financial condition.
51
<PAGE>
MANAGEMENT
Directors and Executive Officers
Our Directors and executive officers are as follows:
<TABLE>
<S> <C> <C>
Name Age Position
- -------------------------- -- ----------------------------------------------------
Robert L. Rosner 39 Chairman of the Board of Directors
Robert L. Singleton 50 President, Chief Executive Officer, Secretary and
Director
Daniel W. Miller 48 Executive Vice President, Chief Financial Officer,
Treasurer, Assistant Secretary and Director
Mark E. Daniels 39 Executive Vice President, President of Container
Management Services and Director
Michael W. Hunter 42 Executive Vice President, President of Hunter Drums
Limited and Director
Gerard C. DiSchino 42 President New England Container
Joseph P. Bevilaqua 43 Vice President, Container Manufacturing Division--
Plastic Products
John H. Hunter 52 Vice President, Operations and Engineering--
Container Manufacturing Division
David Garrison 59 Vice President, Container Manufacturing Division--
Steel Products
Kevin H. Kerchner 45 Vice President, Logistics and Planning
Ronald M. Litchkowski 41 Vice President, Controller
Norman W. Alpert 40 Director
Vincent J. Buonanno 55 Director
Todd N. Khoury 33 Director
Leonard Lieberman 70 Director
Kevin Mundt 45 Director
Arthur J. Nagle 60 Director
Vincent J. Naimoli 61 Director
Daniel S. O'Connell 45 Director
John W. Priesing 70 Director
</TABLE>
Robert L. Rosner is a Managing Director of Vestar and was a founding
partner of Vestar at its inception in 1988. Mr. Rosner is Chairman of
Russell-Stanley's Board of Directors. Mr. Rosner is also a director of
Remington Products Company, L.L.C. a company in which Vestar has a significant
equity interest. Mr. Rosner holds a B.A. from Trinity College and a M.B.A. from
the University of Pennsylvania.
Robert L. Singleton joined Russell-Stanley in 1996 as President and Chief
Executive Officer. Prior to joining Russell-Stanley, Mr. Singleton served as
Vice President-Materials and Vice President-Plastics Group of Rexam Inc., a
subsidiary of Rexam plc, since 1992. From 1983 to 1992, Mr. Singleton held
positions at GE Plastics, a division of General Electric Company, in global
business development, marketing and product management, most recently serving
as General Manager of General Electric's worldwide LEXAN business. Mr.
Singleton holds a B.S.E. from Princeton University, a S.M. from M.I.T. and a
M.B.A. from Harvard University.
Daniel W. Miller joined Russell-Stanley in March 1995 and was appointed
Senior Vice President and Chief Financial Officer in February 1996. Mr. Miller
was appointed Senior Vice President, Finance and Chief Financial Officer in
June 1996 and is currently Executive Vice President and Chief Financial
Officer. Prior to May 1998, Mr. Miller was also a Managing Director of Vestar
Resources, Inc., an affiliate of Vestar, which he joined in 1993. From 1990 to
1993, Mr. Miller held various executive positions and served as President of
Harding Service Corporation, an affiliate of Wesray Capital Corporation. He has
also held various executive financial positions with Forstmann Little & Co. and
Dresser Industries, Inc. Mr. Miller is a C.P.A. and holds a B.S. from Northern
Illinois University.
52
<PAGE>
Mark E. Daniels joined Russell-Stanley as Executive Vice President with
the acquisition of Container Management Services in 1997. Mr. Daniels founded
Container Management Services in 1991, and served as President of Container
Management Services since its inception. In 1983, Mr. Daniels founded and
managed LinTech, Inc. which provided ultra low temperature size reduction and
classification of specialty products such as thermoplastics, pharmaceuticals
and foodstuffs. LinTech was sold to Tanner Chemical/Chamberlain Phipps in 1986,
where Mr. Daniels served as Division Manager from 1986 to 1991. Mr. Daniels
holds a B.S. from Lehigh University.
Michael W. Hunter joined Russell-Stanley as Executive Vice President and
President of Hunter Drums Limited with the acquisition of Hunter Drums Limited
in 1997. Mr. Hunter joined Hunter Drums Limited in 1979 and became President in
1984. Mr. Hunter holds a B.A. from the University of Western Ontario.
Gerard C. DiSchino joined Russell-Stanley as President of New England
Container with the acquisition of New England Container in 1998, where he
became president in 1997. Prior to joining New England Container, Mr. DiSchino
spent over 15 years in various positions with Norton Company, a division of
Saint Gobain Corporation. Mr. DiSchino holds a B.A. from Boston College and a
M.B.A. from Babson College.
Joseph P. Bevilaqua joined Russell-Stanley as Vice President, Sales and
Market Development in 1998. Mr. Bevilaqua is currently Vice President,
Container Manufacturing Division--Plastic Products. Prior to joining
Russell-Stanley, Mr. Bevilaqua was Executive Director, Engineered Products and
Corporate Marketing of Woodbridge Foam Corporation. Mr. Bevilaqua has held a
variety of product management and market development positions at GE Plastics,
a division of General Electric Company. Mr. Bevilaqua holds a B.S. from the
University of Tennessee.
John H. Hunter joined Russell-Stanley in 1984 as a Vice President and was
appointed Vice President--Plastics Division in 1986. Mr. Hunter is currently
Vice President, Operations and Engineering--Container Manufacturing Division.
Prior to joining Russell-Stanley, Mr. Hunter was a Plant Manager for ACT. Mr.
Hunter holds a B.S. from the University of Strathclyde in Glasgow, Scotland.
David Garrison joined Russell-Stanley as Vice President, Operations in
1991. Mr. Garrison is currently Vice President, Container Manufacturing
Division--Steel Products. Prior to joining Russell-Stanley, Mr. Garrison was
Vice President and General Manager at Eastern Steel Barrel Corp. From 1962 to
1978 he was employed by American Thermo Plastics Corporation, a subsidiary of
Phillips Chemical Company. Mr. Garrison holds a B.S. from Lehigh University.
Kevin H. Kerchner joined Russell-Stanley as Vice President, Operations
with its acquisition of the plastics division of Smurfit Packaging Corporation
in 1997. Mr. Kerchner is currently Vice President, Logistics and Planning.
Prior to joining Russell-Stanley, Mr. Kerchner spent ten years with Smurfit
Packaging Corporation in operating assignments in both plastics and fiber
packaging. He has held various positions in finance and planning with Johnson
Matthey PLC and Container Corporation of America. Mr. Kerchner holds a B.A.
from Eastern Illinois University and a M.B.A. from Butler University.
Ronald M. Litchkowski joined Russell-Stanley as Vice President, Controller
in 1997. Prior to joining Russell-Stanley, Mr. Litchkowski was Vice President
of Finance and Administration for the Institutional Products Division of
Colgate-Palmolive Company, where he worked since 1989. Mr. Litchkowski is a
C.P.A. and holds a B.S. from King's College.
Norman W. Alpert is a Managing Director of Vestar and was a founding
partner of Vestar at its inception in 1988. Mr. Alpert is Chairman of the Board
of Directors of Advanced Organics, Inc., International AirParts Corporation and
Aearo Corporation, and a director of Cluett American Corp., Siegel & Gale
Holdings, Inc. and Remington Products Company L.L.C., all companies in which
Vestar has a significant equity interest. Mr. Alpert holds an A.B. from Brown
University.
Vincent J. Buonanno is the Chairman and Chief Executive Officer of Tempel
Steel Company of Chicago, a producer of magnetic steel laminations. Mr.
Buonanno was the principal stockholder and President of New England Container
from 1980 until 1997 and is a trustee of Brown University. Mr. Buonanno holds
an A.B. from Brown University.
53
<PAGE>
Todd N. Khoury is a Vice President of Vestar and joined Vestar in 1993.
Mr. Khoury is also a director of Siegel & Gale Holdings, Inc., a company in
which Vestar has a significant equity interest. Mr. Khoury holds a B.A. from
Yale University and a M.B.A. from Harvard University.
Leonard Lieberman is a retired Chief Executive Officer of Supermarkets
General Corporation and Outlet Communications Inc. Mr. Lieberman is also a
director of Advanced Organics, Inc. and Reid Plastics Holdings, Inc., companies
in which Vestar has a significant equity interest, Celestial Seasonings Inc.,
Republic New York Corporation, Republic National Bank of New York, Sonic Corp.,
and Nice-Pak Products, Inc. Mr. Lieberman holds a B.A. from Yale University, a
J.D. from Columbia University and participated in the Advanced Management
Program at Harvard University.
Kevin Mundt is a Vice President, member of the Board of Directors, and
head of the Retail, Consumer & Healthcare Group of Mercer Management
Consulting. Prior to that, Mr. Mundt was a founding partner of Corporate
Decisions, Inc., a Boston strategy consulting firm that focused on developing
growth strategies in changing markets that later merged with Mercer. Mr. Mundt
holds an A.B. from Brown University and holds a M.B.A. from Harvard University.
Arthur J. Nagle is a Managing Director of Vestar and was a founding
partner of Vestar at its inception in 1988. Mr. Nagle is a director of Aearo
Corporation and Remington Products Company, L.L.C., both companies in which
Vestar has a significant equity interest. Mr. Nagle holds a B.S. from
Pennsylvania State University and a M.B.A. from Columbia University.
Vincent J. Naimoli is the Chairman, President and Chief Executive Officer
of Anchor Industries International. Mr. Naimoli is also Managing General
Partner and Chief Executive Officer of the Tampa Bay Devil Rays, Ltd. Major
League Baseball Club and a director of Florida Progress and Players
International Inc. Mr. Naimoli holds a B.S.M.E. from the University of Notre
Dame, a M.S.M.E. from New Jersey Institute of Technology, a M.B.A. from
Fairleigh Dickinson University and participated in the Advanced Management
Program at Harvard University.
Daniel S. O'Connell is the founder and Chief Executive Officer of Vestar.
Mr. O'Connell is a director of Advanced Organics, Inc., Aearo Corporation,
Cluett American Corp., Insight Communications Company, L.P., Remington Products
Company L.L.C. and Siegel & Gale Holdings, Inc., all companies in which Vestar
has a significant equity interest. Mr. O'Connell holds an A.B. from Brown
University and a M.P.P.M. from Yale University.
John W. Priesing is the Chief Executive Officer of Advanced Organics,
Inc., a company in which Vestar has a significant equity interest. Mr. Priesing
was Russell-Stanley's Chairman from 1993 to 1997 and President and Chief
Executive Officer from 1993 to 1996. Prior to joining Russell-Stanley, Mr.
Priesing served as President and Chief Executive Officer of Axel Johnson Inc.
From 1973 to 1978, Mr. Priesing was group vice president and director of Phelps
Dodge Industries. Mr. Priesing holds a B.A. from Amherst College and a M.B.A.
from Harvard University.
Board Compensation
All directors are reimbursed for their usual and customary expenses
incurred in attending all Board and committee meetings. Except for Mark
Daniels, directors who are also employees of ours or Vestar do not receive
remuneration for serving as directors. Mr. Daniels receives $25,000 per year
for his service as a director. Each other director of the Board receives
$15,000 per year for his service as a director, $2,000 for each meeting of the
Board attended in person (or $1,000 for each meeting of the Board attended by
teleconference) and $1,000 for each committee meeting attended in person (or
$500 for each committee meeting attended by teleconference).
Executive Compensation
The following table sets forth certain summary information concerning
compensation for services in all capacities awarded to, earned by or paid to
our Chief Executive Officer and each of our other four most highly compensated
executive officers whose aggregate cash and cash equivalent compensation
exceeded $100,000 (collectively, the "Named Executive Officers"), with respect
to the year ended December 31, 1998.
54
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
------------------------
Annual Compensation Awards Payouts
-------------------------------- ------------ ---------
Securities All Other
Underlying LTIP Compen-
Name and Options Payouts sation
Principal Position Year Salary ($) Bonus ($) (#) ($) ($)(1)
- ------------------------- ------ ------------- ---------------- ------------ --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Singleton 1998 310,000 100,000 35,000 31,250 129,688(2)
President and Chief
Executive Officer
Daniel W. Miller 1998 247,308(3) 125,000(4) 15,000
Executive Vice
President and Chief
Financial Officer
Mark E. Daniels 1998 225,000 25,000 17,500 795,000(5)
Executive Vice
President and President
of Container
Management Services
Michael W. Hunter 1998 238,319(6) 94,470(7) 17,500 469,000(8)
Executive Vice
President and President
of Hunter Drums Limited
John H. Hunter 1998 166,000 60,000 3,000 41,667 3,760(9)
Vice President,
Operations and
Engineering--Container
Manufacturing Division
</TABLE>
- ----------
(1) Russell-Stanley maintains a group life insurance policy under which certain
employees, including all of the Named Executive Officers, receive life
insurance with a death benefit equal to the lesser of the employee's
salary and $300,000. The premiums paid in respect of any individual are
not significant.
During 1998, Russell-Stanley maintained a defined contribution plan under
which contributions are made annually in respect of certain employees,
including Mr. Singleton and John H. Hunter. The contributions under this
plan in respect of 1998 have not been determined.
(2) Represents payment of $124,688 by Russell-Stanley in reimbursement of
expenses incurred by Mr. Singleton in connection with his relocation to
New Jersey and a contribution of $5,000 by Russell-Stanley under
Russell-Stanley's 401(k) Savings Plan.
(3) Represents payment by Russell-Stanley of $75,000 to Vestar in consideration
for Mr. Miller's services as Russell-Stanley's Senior Vice President and
Chief Financial Officer from January through May 1998 and the payment by
Russell-Stanley of $172,308 to Mr. Miller as salary in respect of the
period from May through December 1998. Prior to May 1998, Russell-Stanley
made all payments in respect of Mr. Miller's services to Vestar. See
"Certain Relationships and Related Party Transactions."
(4) Represents a bonus of $100,000 paid by Russell-Stanley and a payment of
$25,000 from Vestar.
(5) Represents payment of $770,000 by Russell-Stanley pursuant to a stay/pay
agreement and payment of $25,000 by Russell-Stanley for Mr. Daniels'
service as a director. See "--Employment Contracts" and "--Board
Compensation."
(6) Mr. Hunter's salary is $355,700 (Canadian) per year. The amount reflected
in the table represents this amount converted at the rate of 0.67 U.S.
dollars per Canadian dollar.
55
<PAGE>
(7) Mr. Hunter's bonus for 1998 was $141,000 (Canadian). The amount reflected
in the table represents this amount converted at the rate of 0.67 U.S.
dollars per Canadian dollar.
(8) Represents payment by Russell-Stanley of $700,000 (Canadian) pursuant to a
stay/pay agreement. The amount reflected in the table represents this
amount converted at the rate of 0.67 U.S. dollars per Canadian dollar. See
"--Employment Contracts."
(9) Represents a contribution by Russell-Stanley under Russell-Stanley's 401(k)
Savings Plan.
Stock Option Grants
During the year ended December 31, 1998, Russell-Stanley granted a total
of 88,000 stock options to the Named Executive Officers. The following table
sets forth the grants for each Named Executive Officer during the year ended
December 31, 1998.
<TABLE>
<CAPTION>
Option Grants in 1998
Number
of Potential Realizable
Securities % of Total Value at Assumed
Underlying Options Exercise Annual Rates of
Options Granted to or Base Stock Price
Granted Employees Price Expiration Appreciation for
Name (#)(1) in Fiscal Year ($/Share) Date Option Term ($)
- ------------------------- ------------ ---------------- ----------- ------------------- ----------------------
5% 10%
<S> <C> <C> <C> <C> <C> <C>
Robert L. Singleton ..... 35,000 27.9 50.00 February 25, 2008 1,100,400 2,789,150
Daniel W. Miller ........ 15,000 11.9 50.00 May 17, 2008 471,600 1,195,350
Mark E. Daniels ......... 17,500 13.9 50.00 February 25, 2008 550,200 1,394,575
Michael W. Hunter ....... 17,500 13.9 50.00 February 25, 2008 550,200 1,394,575
John H. Hunter .......... 3,000 2.4 50.00 February 25, 2008 94,320 239,070
</TABLE>
- ----------
(1) Grants consist of stock options which become exercisable in five equal
annual installments commencing one year after the date of grant and become
immediately exerciseable in the event of a change in control or an initial
public offering of Russell-Stanley's Common Stock or other voting
securities. A change of control will occur on (i) the date Vestar ceases
to beneficially own a majority of the voting power of Russell-Stanley and
cannot elect a majority of our Board of Directors, (ii) subsequent to an
initial public offering, the date any person other than Vestar
beneficially owns more than 35% of the voting power of Russell-Stanley and
Vestar beneficially owns less voting power than such person or (iii) the
date that the continuing members of the Board of Directors cease to
constitute a majority of the Board of Directors during a two-year period.
Option Exercises and Year-End Holdings
During the year ended December 31, 1998, none of the Named Executive
Officers exercised their stock options. The following table sets forth certain
information with respect to unexercised stock options held by each Named
Executive Officer as of December 31, 1998.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-the-
Underlying Unexercised Money Options at
Options at Fiscal Fiscal Year-End
Year-End Unexercisable/Exercisable
Name Unexercisable/Exercisable (#) ($)(1)
- ----------------------------- ------------------------------- -----------------------------
<S> <C> <C>
Robert L. Singleton ......... 51,427/12,561 476,383/364,269
Daniel W. Miller ............ 18,650/8,000 0/296,000
Mark E. Daniels ............. 49,719/15,869 0/0
Michael W. Hunter ........... 17,500/0 0/0
John H. Hunter .............. 3,000/16,000 0/592,000
</TABLE>
- ----------
(1) Values have been determined assuming a fair market value of $45.00 per
share of Russell-Stanley's Common Stock based on the most recent
third-party valuation of Russell-Stanley's equity value.
56
<PAGE>
Long-Term Incentive Plan
We maintain a performance unit incentive plan for certain key employees,
including the Named Executive Officers. During the year ended December 31,
1998, Russell-Stanley awarded a total of 9,675 units to the Named Executive
Officers and established a target EBITDA for the three-year period from January
1, 1998 through December 31, 2000 pursuant to the plan. Each unit has a value
of $100.00 if the EBITDA target is achieved. This per unit value will be
prorated down to $25.00 if less than 100% but more than 85% of the EBITDA
target is achieved. The units will have no value if less than 85% of the EBITDA
target is achieved. The per unit value will be prorated up to $200.00 if the
EBITDA target is exceeded by up to 25%. There is no increase in the per unit
value for achieving EBITDA in excess of 125% of the target amount. The unit
payments will be made in three equal annual installments in 2001, 2002 and
2003, provided that the relevant Named Executive Officer is employed by
Russell-Stanley on the payment dates. The following table sets forth certain
information with respect to the units granted to each Named Executive Officer.
Long-Term Incentive Plan Awards in 1998
<TABLE>
<CAPTION>
Estimated Future Payouts
------------------------------
Number Performance
of Period Threshold Target Maximum
Name Units (#) Until Payout ($) ($) ($)
- ------------------------- ----------- ------------------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
January 1, 1998-
Robert L. Singleton ..... 2,325 December 31, 2000 197,625 232,500 465,000
January 1, 1998-
Daniel W. Miller ........ 2,100 December 31, 2000 178,500 210,000 420,000
January 1, 1998-
Mark E. Daniels ......... 1,875 December 31, 2000 159,375 187,500 375,000
January 1, 1998-
Michael W. Hunter ....... 1,875 December 31, 2000 159,375 187,500 375,000
January 1, 1998-
John H. Hunter .......... 1,500 December 31, 2000 127,500 150,000 300,000
</TABLE>
Employment Contracts
Robert L. Singleton entered into an employment agreement with
Russell-Stanley on September 20, 1996. Pursuant to the agreement, Mr. Singleton
received an initial annual base salary of $275,000, subject to discretionary
increases. Mr. Singleton is also entitled to annual incentive bonuses and is
eligible to participate in our long-term incentive program. The employment
agreement renews annually unless Russell-Stanley elects not to renew.
Mark E. Daniels entered into an employment agreement with Russell-Stanley
on July 23, 1997. Pursuant to the agreement, Mr. Daniels received an initial
annual base salary of $225,000, subject to discretionary increases. Mr. Daniels
is also entitled to annual incentive bonuses and is eligible to participate in
our long-term incentive program. The employment agreement has an initial term
of three years which is automatically renewed for one-year periods unless 60
days prior written notice is given by either Mr. Daniels or Russell-Stanley. In
the event Mr. Daniels' employment is terminated by Russell-Stanley without
cause, Mr. Daniels would be entitled to receive a cash lump sum payment in
respect of compensation earned but not yet paid, as well as a severance payment
in an amount equal to the sum of (x) one year's base salary and (y) the product
of (i) Mr. Daniels' bonus for the fiscal year ended prior to his termination of
employment and (ii) a fraction, the numerator of which is the number of days
passed in the current fiscal year prior to this termination and the denominator
of which is 365.
Mr. Daniels also entered into a separate agreement with Russell-Stanley on
July 23, 1997 providing him with additional monetary incentive to remain an
employee of Container Management Services through July 23, 2000. This agreement
provides for Mr. Daniels to receive $770,000 annually through July 23, 2000. In
addition, in the event Mr. Daniels' employment is terminated by Russell-Stanley
without cause, we would continue to make these payments.
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<PAGE>
Michael W. Hunter entered into an employment agreement with
Russell-Stanley on October 30, 1997. Pursuant to the agreement, Mr. Hunter
received an initial annual base salary of $345,000 (Canadian), subject to
discretionary increases. Mr. Hunter is also entitled to annual incentive
bonuses and is eligible to participate in our long-term incentive program. The
employment agreement has an initial term of five years which is automatically
renewed for one-year periods unless 60 days prior written notice is given by
either Mr. Hunter or Russell-Stanley. In the event Mr. Hunter's employment is
terminated by Russell-Stanley without cause, Mr. Hunter would be entitled to
receive a cash lump sum payment in respect of compensation earned but not yet
paid, as well as a severance payment in an amount equal to the sum of (x) a
multiple (ranging from 1 1/2 to 3) of one year's base salary and (y) the product
of (i) the target bonus in respect of the fiscal year in which Mr. Hunter's
termination of employment occurs and (ii) a fraction, the numerator of which is
the number of days lapsed in the current fiscal year prior to his termination
and the denominator of which is 365.
Mr. Hunter also entered into a separate agreement with Hunter Drums
Limited on October 30, 1997 providing him with additional monetary incentive to
remain an employee of Hunter Drums Limited through October 30, 2003. This
agreement provides for Mr. Hunter to receive monthly payments of $58,334
(Canadian) through October 30, 2001 and then $37,500 (Canadian) monthly
thereafter, through October 30, 2003. In addition, in the event Mr. Hunter's
employment is terminated by Russell-Stanley or Hunter Drums Limited without
cause, Mr. Hunter would be entitled to receive (i) 75% of the aggregate
payments remaining to be made pursuant to the previous sentence in equal
monthly installments during the first 50% of the remaining term of the
agreement and (ii) the remaining 25% of such aggregate payments on October 30,
2003. In the event of a change of control (as defined in the agreement), Mr.
Hunter would be entitled to receive a single lump sum payment equal to the
present value of the remaining payments due under the agreement.
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<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information concerning the
beneficial ownership shares of our Common Stock on March 23, 1999 by (i) each
person known by us to be the beneficial owner of more than 5% of any class of
our Common Stock, (ii) each director who is a shareholder, (iii) our Chief
Executive Officer and each of our Named Executive Officers, and (iv) all of our
executive officers and directors as a group:
<TABLE>
<CAPTION>
Number of Shares Percentage of Shares
Name of Beneficial Owner Beneficially Owned(a) Outstanding (a)
- -------------------------------------------- ----------------------- ---------------------
<S> <C> <C>
5% Stockholders
Vestar Capital Partners III, L.P. .......... 1,163,637 53.55 %
245 Park Avenue
New York, New York 10167
Vestar/R-S Investment, L.P. ................ 490,000 22.55 %
245 Park Avenue
New York, New York 10167
New York Life Insurance Company ............ 290,909 13.39 %
51 Madison Avenue
New York, New York 10010
Vestar Portfolio Investments, L.P. ......... 29,318 1.35 %
245 Park Avenue
New York, New York 10167
Officers and Directors
Robert L. Rosner(b) ........................ -- --
Robert L. Singleton ........................ 19,561(c) *
Daniel W. Miller ........................... 11,000(d) *
Mark E. Daniels ............................ 19,369(e) *
Michael W. Hunter .......................... 3,500(f) *
John H. Hunter ............................. 20,725(g) *
Norman W. Alpert(b) ........................ -- --
Vincent J. Buonanno ........................ 24,243 1.12 %
Leonard Lieberman .......................... 3,160 *
Arthur J. Nagle(b) ......................... -- --
Vincent J. Naimoli ......................... 3,160 *
Daniel S. O'Connell(b) ..................... -- --
John W. Priesing ........................... 22,000(h) 1.00 %
All officers and directors as a group
(20 persons) .............................. 130,128(i) 5.74 %
</TABLE>
- ----------
* Less than one percent.
(a) The amounts and percentage of Common Stock beneficially owned are reported
on the basis of regulations of the Securities and Exchange Commission
governing the determination of beneficial ownership of securities. Under
the regulations, 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
has no economic interest.
(b) Mr. O'Connell is the President and Chief Executive Officer and Messrs.
Rosner, Nagle and Alpert are Vice Presidents of Vestar Associates
Corporation III. Vestar Associates Corporation III is the sole general
partner of Vestar Associates III, L.P., and Vestar Associates III, L.P. is
the sole
59
<PAGE>
general partner of Vestar Capital Partners III, L.P., which owns 1,163,637
shares of our Common Stock. Messrs. O'Connell, Rosner, Nagle and Alpert, as
executive officers of Vestar Associates Corporation III, may be deemed to
share beneficial ownership of such shares. Each of these individuals
disclaims such beneficial ownership.
Messrs. Alpert, Nagle and O'Connell are general partners of Vestar/R-S
Investment, L.P. which owns 490,000 shares of our Common Stock. Messrs.
Alpert, Nagle and O'Connell, as general partners of Vestar/R-S Investment,
L.P., may be deemed to share beneficial ownership of such shares. Each of
these individuals disclaims such beneficial ownership.
Messrs. Alpert and O'Connell are general partners of Vestar/MAG Investment
L.P. Vestar/MAG Investment L.P. is the sole general partner of Vestar
Portfolio Investments, L.P., which owns 29,318 shares of our Common stock.
Messrs. Alpert and O'Connell, as general partners of Vestar/MAG Investment
L.P., may be deemed to share beneficial ownership of such shares. Each of
these individuals disclaims such beneficial ownership.
(c) Includes currently exercisable options to purchase 19,561 shares of
Common Stock.
(d) Includes currently exercisable options to purchase 11,000 shares of
Common Stock.
(e) Includes currently exercisable options to purchase 19,369 shares of
Common Stock.
(f) Includes currently exercisable options to purchase 3,500 shares of
Common Stock.
(g) Includes currently exercisable options to purchase 16,600 shares of
Common Stock.
(h) Includes currently exercisable options to purchase 22,000 shares of
Common Stock.
(i) Includes currently exercisable options to purchase 95,440 shares of
Common Stock.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On July 23, 1997, we entered into a management agreement with Vestar.
Pursuant to the management agreement, Vestar provides us with certain advisory
and consulting services for an annual fee equal to the greater of $225,000 or
0.25% of our net sales for such fiscal year, plus reimbursement of
out-of-pocket expenses. The management agreement terminates at such time as
Vestar and its affiliates hold, in the aggregate, less than 10% of the voting
power of our outstanding voting stock. See "Ownership of Common Stock." In
addition to the fees based on net sales for advisory and consulting services,
in 1998 we paid Vestar $160,000 for consulting services in connection with our
acquisition of New England Container and approximately $224,000 in
reimbursement of out-of-pocket expenses.
Prior to May 1998, Daniel W. Miller, our Executive Vice President and
Chief Financial Officer and one of our directors, was a Managing Director of
Vestar Resources, Inc., an affiliate of Vestar. Between February 1996 when Mr.
Miller became our Senior Vice President and Chief Financial Officer and May
1998 when Mr. Miller became a full-time employee of Russell-Stanley, we paid
Vestar at the rate of $150,000 per year for Mr. Miller's services as our Senior
Vice President and Chief Financial Officer. Pursuant to this arrangement, we
paid Vestar $75,000 in respect of Mr. Miller's services for the period from
January through May 1998.
Kevin Mundt, one of our directors, is a Vice President, member of the
Board of Directors and head of the Retail, Consumer & Healthcare Group of
Mercer Management Consulting ("Mercer"). In 1998, we engaged Mercer to provide
consulting services to Container Management Services, for which we paid Mercer
approximately $189,000. In 1998 we also engaged Mercer to provide consulting
services to Russell-Stanley, for which we paid Mercer approximately $272,000.
In June 1998, Russell-Stanley made an interest-free loan in the amount of
$77,000 to David Garrison, one of our executive officers, in connection with
Mr. Garrison's relocation to our headquarters in Bridgewater, New Jersey. Mr.
Garrison repaid the loan in full in August 1998.
In July 1998, Russell-Stanley acquired all of the capital stock of New
England Container from Vincent J. Buonanno, one of our directors, for $14
million in cash and 24,243 shares of our Common Stock. The consideration was
determined based on negotiations between Russell-Stanley and Mr. Buonanno and
was approved by Russell-Stanley's board of directors. Under the terms of the
transaction, Russell-Stanley and Mr. Buonanno have agreed to indemnify each
other for certain losses pursuant to customary indemnification provisions.
We have entered into a consulting agreement with Mr. Buonanno. In
consideration for his advising us on matters relating to the steel drum
reconditioning business, we will pay Mr. Buonanno four payments of $250,000
each prior to December 31, 2001.
New York Life Insurance Company, one of our 5% stockholders, and New York
Life Insurance and Annuity Corporation, an affiliate of New York Life Insurance
Company, were lenders under our former senior credit agreement, with an
aggregate term loan commitment of $20.0 million which bore interest at 9.48%
per annum. This term loan remains outstanding under our senior credit facility
bearing the same interest rate and will mature in two equal installments in
June 2006 and June 2007. We are required to offer to repay the term loan with
the proceeds from the sale of certain assets and with the proceeds from certain
issuances of our equity securities. We can also make optional prepayments.
Mandatory and optional prepayments are subject to certain prepayment premiums.
In connection with the execution of our senior credit facility, we paid fees of
approximately $100,000 to these lenders.
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<PAGE>
DESCRIPTION OF SENIOR CREDIT FACILITY
Our senior credit facility is provided by a syndicate of banks and other
financial institutions led by BankBoston N.A., as administrative agent, and
Goldman Sachs Credit Partners L.P., as syndication agent. Our senior credit
facility provides for a $25.0 million term loan and $75.0 million of revolving
credit availability. The equivalent of U.S. $15.0 million of such revolving
indebtedness is available for borrowings in Canadian dollars by our Canadian
subsidiary, Hunter Drums Limited. The term loan will mature in two equal
installments in June 2006 and June 2007. The outstanding revolving credit
indebtedness and the revolving credit commitment will mature in February 2004.
The term loan bears interest at 9.48% per annum. Revolving indebtedness
bears interest at a combination of domestic source and Eurodollar borrowing
rates which fluctuate based on our EBITDA and debt levels.
We pay a commitment fee at a rate equal to 0.50% per annum on the undrawn
portion of the revolving credit commitments. Following the first fiscal quarter
of 2000, the commitment fee adjusts quarterly depending on the undrawn portion
of the revolving credit commitments.
We must repay indebtedness under our senior credit facility with the
proceeds from the sale of certain assets and with the proceeds from certain
issuances of our equity securities. We can also make optional prepayments on
the term loan. Mandatory and optional prepayments are subject to certain
prepayment premiums.
Except for the obligations of Hunter Drums Limited, the obligations under
our senior credit facility are joint and several obligations of our material
domestic subsidiaries. The obligations of Hunter Drums Limited under our senior
credit facility are unconditionally and irrevocably guaranteed by us and our
material domestic subsidiaries. In addition, our senior credit facility is
secured by first priority or equivalent security interests in substantially all
of our assets, including all the capital stock of, or other equity interests
in, our domestic subsidiaries and 65% of the capital stock of, or other equity
interests in, our foreign subsidiaries (to the extent permitted by applicable
contractual and legal provisions). See "Description of the
Notes--Subordination" and "Risk Factors--Subordination."
Our senior credit facility contains a number of customary covenants and
restrictions that will restrict our ability to incur additional indebtedness,
incur liens, make capital expenditures, enter into certain related party
transactions, pay dividends, enter into mergers and consolidations, sell
assets, make acquisitions and otherwise restrict corporate activities. In
addition, under our senior credit facility we are required to comply with
specified financial ratios and tests, including minimum interest coverage
ratios and maximum senior leverage ratios.
We maintain an interest rate collar in an aggregate notional principal
amount of $45.0 million to hedge interest rate risk. Under this collar, if the
actual LIBOR rate at the specified measurement date is greater than a ceiling
rate stated in the collar agreement, the lender pays us the differential
interest expense. If the actual LIBOR rate is lower than the floor rate stated
in the collar agreement, we pay the lender the differential interest expense.
The interest rate collar terminates on November 30, 2000.
62
<PAGE>
THE EXCHANGE OFFER
General
We hereby offer, 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 $150.0 million aggregate
principal amount of exchange notes for a like aggregate principal amount of
outstanding 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 outstanding notes.
Purpose and Effect of the Exchange Offer
The outstanding notes were issued on February 10, 1999, in a transaction
exempt from the registration requirements of the Securities Act of 1933.
Accordingly, the outstanding 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 of 1933
is available.
In connection with the issuance and sale of the outstanding notes, we
entered into an exchange and registration rights agreement with the initial
purchasers of the outstanding notes, in which we and our subsidiaries
guaranteeing the outstanding notes agreed, among other things:
o to use our reasonable best efforts to file with the Securities and
Exchange Commission, within 75 days of February 10, 1999, a registration
statement under the Securities Act of 1933 relating to an exchange offer
of Notes whose terms are described immediately below;
The form and terms of the exchange notes will be substantially identical
to the form and terms of the outstanding notes, except that the exchange
notes:
o will be freely tradeable by virtue of their registration under the
Securities Act of 1933,
o will not bear legends restricting their transfer, will not be subject
to any additional obligations regarding registration under the
Securities Act of 1933 and
o will not be subject to the special interest payments described in
"Description of Notes--
Registration Covenant; Exchange Offer."
The exchange notes will be issued under and entitled to the benefits
of the same Indenture that authorized the issuance of the outstanding
notes. Consequently, both series will be treated as a single class of
debt securities under the Indenture;
o to use our reasonable best efforts to cause the registration statement
to become effective as soon as practicable, but no later than 225 days
after February 10, 1999; and
o to commence the exchange offer promptly after the Exchange Offer
Registration Statement has become effective, hold the offer open for at
least 30 days, and exchange the exchange notes for all outstanding notes
validly tendered and not withdrawn before the expiration of the offer.
We are making this exchange offer in order to satisfy our obligations with
respect to the exchange and registration rights agreement. A copy of the
exchange and registration rights agreement has been filed as an exhibit to the
registration statement.
The term "holder," with respect to the exchange offer, means any person in
whose name outstanding notes are registered on our books or any other person
who has obtained a properly completed bond power from the registered holder, or
any person whose outstanding notes are held of record by The Depository Trust
Company. Other than pursuant to the exchange and registration rights agreement,
we are not required to file any registration statement to register any
outstanding notes which remain outstanding. Holders of outstanding notes who do
not tender their outstanding notes or whose outstanding notes are tendered but
not accepted would have to rely on exemptions to registration requirements
under the securities laws, including the Securities Act of 1933, if they wish
to sell their outstanding notes.
63
<PAGE>
If we fail to comply with certain obligations under the exchange and
registration rights agreement, we will be required to pay additional interest
to holders of the outstanding notes. Please read the section captioned
"Description of Notes--Registration Covenant; Exchange Offer" for more details
regarding the exchange and registration rights agreement.
Each holder of outstanding notes that wishes to exchange such outstanding
notes for transferable exchange notes in the exchange offer will be required to
represent to us that, among other things:
o any exchange notes that the holder receives will be acquired in the
ordinary course of its business;
o such holder has no arrangement with any person to participate in, and
does not intend to engage in, the distribution of the exchange notes;
o if the holder is a broker-dealer that will receive exchange notes for
its own account in exchange for outstanding notes that were acquired as a
result of market-making or trading activities, that it will deliver a
prospectus, as required by law, in connection with any resale of such
exchange notes;
o such holder is not our "affiliate," as defined in Rule 405 of the
Securities Act of 1933, or if it is our affiliate, that it will comply
with applicable registration and prospectus delivery requirements of the
Securities Act of 1933; and
o if the holder is a person in the United Kingdom, that its ordinary
activities involve it in acquiring, holding, managing or disposing of
investments, as principal or agent, for the purposes of its business.
Resale of Exchange Notes
Based on interpretations of the staff of the Securities and Exchange
Commission set forth in no-action letters issued to unrelated third parties, we
believe that exchange notes issued under the exchange offer in exchange for
outstanding notes may be offered for resale, resold and otherwise transferred
by any exchange note holder without compliance with the registration and
prospectus delivery provisions of the Securities Act of 1933, if:
o any exchange notes that the holder receives will be acquired in the
ordinary course of its business;
o the holder has no arrangement to participate in the distribution of such
exchange notes; and
o such holder is not our "affiliate," as defined in Rule 405 of the
Securities Act of 1933, or if it is our affiliate, that it will comply
with applicable registration and prospectus delivery requirements of the
Securities Act of 1933.
See "K-III Communications Corporation," SEC No-Action Letter (available
May 14, 1993); "Mary Kay Cosmetics, Inc.," SEC No-Action Letter (available June
5, 1991); "Morgan Stanley & Co., Incorporated," SEC No-Action Letter (available
June 5, 1991); and "Exxon Capital Holdings Corporation," SEC No-Action Letter
(available May 13, 1988).
Any holder who tenders in the exchange offer with the intention of
participating in any manner in a distribution of the exchange notes
o cannot rely on the position of the staff of the Securities and Exchange
Commission enunciated in "Exxon Capital Holdings Corporation" or similar
interpretive letters; and
o must comply with the registration and prospectus delivery requirements
of the Securities Act of 1933 in connection with a secondary resale
transaction.
This prospectus may be used for an offer to resell, resale or other
retransfer of exchange notes only as specifically set forth in this prospectus.
With regard to broker-dealers, only broker-dealers that acquired the
outstanding notes as a result of market-making activities or other trading
activities may participate in the exchange offer. Each broker-dealer that
receives exchange notes for its own account in exchange for outstanding notes,
where such outstanding notes were acquired by such
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<PAGE>
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 the exchange notes. Please read the section captioned "Plan
of Distribution" for more details regarding the transfer of exchange notes.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept for exchange any outstanding
notes properly tendered and not withdrawn prior to the expiration date. We will
issue $1,000 principal amount of exchange notes in exchange for each $1,000
principal amount of outstanding notes surrendered under the exchange offer.
Outstanding notes may be tendered only in integral multiples of $1,000.
The form and terms of the exchange notes will be substantially identical
to the form and terms of the outstanding notes, except that the exchange notes:
o will be freely tradeable by virtue of their registration under the
Securities Act of 1933,
o will not bear legends restricting their transfer, will not be subject to
any additional obligations regarding registration under the Securities Act
of 1933 and
o will not be subject to the special interest payments described in
"Description of Notes--
Registration Covenant; Exchange Offer."
The exchange notes will be issued under and entitled to the benefits of
the same Indenture that authorized the issuance of the outstanding notes.
Consequently, both series will be treated as a single class of debt securities
under the Indenture.
The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding notes being tendered for exchange.
As of the date of this prospectus, $150.0 million aggregate principal
amount of the outstanding notes are outstanding. This prospectus and the letter
of transmittal are being sent to all registered holders of outstanding notes.
There will be no fixed record date for determining registered holders of
outstanding notes entitled to participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions
of the exchange and registration rights agreement, the applicable requirements
of the Securities Act of 1933 and the Securities Exchange Act of 1934 and the
rules and regulations of the Securities and Exchange Commission. Outstanding
notes that are not tendered for exchange in the exchange offer will remain
outstanding and continue to accrue interest and will be entitled to the rights
and benefits such holders have under the Indenture relating to the outstanding
notes and the exchange and registration rights agreement.
We will be deemed to have accepted for exchange properly tendered
outstanding notes when we have given oral or written notice of the acceptance
to the exchange agent. The exchange agent will act as agent for the tendering
holders for the purposes of receiving the exchange notes from us and delivering
exchange notes to such holders. Subject to the terms of the exchange and
registration rights agreement, we expressly reserve the right to amend or
terminate the exchange offer, and not to accept for exchange any outstanding
notes not previously accepted for exchange, upon the occurrence of any of the
conditions specified below under the caption "--Certain Conditions to the
Exchange Offer."
Holders who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes. We will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the exchange offer. It is
important that you read the section labeled "--Fees and Expenses" below for
more details regarding fees and expenses incurred in the exchange offer.
Expiration Date; Extensions; Amendments
The exchange offer will expire at 5:00 p.m., New York City time on
, 1999, unless in our sole discretion, we extend it.
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<PAGE>
In order to extend the exchange offer, we will notify the exchange agent
orally or in writing of any extension. We will notify the registered holders of
outstanding notes of the extension no later than 9:00 a.m., New York City time,
on the business day after the previously scheduled expiration date.
We reserve the right, in our sole discretion:
o to delay accepting for exchange any outstanding notes;
o to extend the exchange offer or to terminate the exchange offer and to
refuse to accept outstanding notes not previously accepted if any of the
conditions set forth below under "--Certain Conditions to the Exchange
Offer" have not been satisfied, by giving oral or written notice of such
delay, extension or termination to the exchange agent; or
o subject to the terms of the exchange and registration rights agreement,
to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice of such delay to
the registered holders of outstanding notes. If we amend the exchange offer in
a manner that we determine to constitute a material change, we will promptly
disclose such amendment in a manner reasonably calculated to inform the holders
of outstanding notes of such amendment.
Without limiting the manner in which the we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the exchange offer, we shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to a financial news service.
Certain Conditions to the Exchange Offer
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any exchange notes for, any outstanding notes,
and we may terminate the exchange offer as provided in this prospectus before
accepting any outstanding notes for exchange if in our reasonable judgment:
o 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 our sole judgment, might materially impair our ability to
proceed with the exchange offer or have a material adverse effect on the
contemplated benefits of the exchange offer to us; or
o any change (or any development involving a prospective change) shall
have occurred or been threatened in our business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects that is or may be adverse to us, or we shall have become aware
of facts that have or may have adverse significance with respect to the
value of the outstanding notes or the exchange notes or that may
materially impair the contemplated benefits of the exchange offer to us;
or
o any law, rule or regulation or applicable interpretations of the staff
of the Securities and Exchange Commission is issued or promulgated which,
in our good faith determination, do not permit us to effect the exchange
offer; or
o any governmental approval has not been obtained, which approval we, in
our sole discretion, deem necessary for the consummation of the exchange
offer; or
o 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 our sole judgment, might materially impair our
ability to proceed with the exchange offer or have a material adverse
effect on the contemplated benefits of the exchange offer to us; or
o there shall occur a change in the current interpretation by the staff of
the Securities and Exchange Commission which permits the exchange notes
issued pursuant to the exchange
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<PAGE>
offer in exchange for outstanding notes to be offered for resale, resold
and otherwise transferred by holders thereof (other than any such holder
that is an "affiliate" of ours 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.
In addition, we will not be obligated to accept for exchange the
outstanding notes of any holder that has not made to us (i) the representations
described under "--Purpose and Effect of the Exchange Offer," "--Procedures for
Tendering" and "Plan of Distribution" and (ii) such other representations as
may be reasonably necessary under applicable Securities and Exchange Commission
rules, regulations or interpretations to make available to us an appropriate
form for registration of the exchange notes under the Securities Act of 1933.
We expressly reserve the right, at any time or at various times, to extend
the period of time during which the exchange offer is open. Consequently, we
may delay acceptance of any outstanding notes by giving oral or written notice
of such extension to their holders. During any such extensions, all outstanding
notes previously tendered will remain subject to the exchange offer, and we may
accept them for exchange. We will return any outstanding notes that we do not
accept for exchange for any reason without expense to their tendering holder as
promptly as practicable after the expiration or termination of the exchange
offer.
We expressly reserve the right to amend or terminate the exchange offer,
and to reject for exchange any outstanding notes not previously accepted for
exchange, upon the occurrence of any of the conditions of the exchange offer
specified above. We will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the outstanding
notes as promptly as practicable. In the case of any extension, such notice
will be issued no later than 9:00 a.m., New York City time, on the business day
after the previously scheduled expiration date.
These conditions are for our sole benefit and we may assert them
regardless of the circumstances that may give rise to them or waive them in
whole or in part at any or at various times in our sole discretion. If we fail
at any time to exercise any of the rights above, this failure will not
constitute a waiver of such right. Each such right will be deemed an ongoing
right that we may assert at any time or at various times.
In addition, we will not accept for exchange any outstanding notes
tendered, and will not issue exchange notes in exchange for any such
outstanding notes, if at such time any stop order will 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.
Procedures for Tendering
Only a holder of outstanding notes may tender such outstanding notes in
the exchange offer. To tender in the exchange offer, a holder must:
o complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal; have the signature on the letter of transmittal
guaranteed if the letter of transmittal so requires; and mail or deliver
such letter of transmittal or facsimile to the exchange agent prior to the
expiration date; or
o comply with The Depository Trust Company's Automated Tender Offer
Program procedures described below.
In addition, either:
o the exchange agent must receive outstanding notes along with the letter
of transmittal; or
o the exchange agent must receive, prior to the expiration date, a timely
confirmation of book-entry transfer of such outstanding notes into the
exchange agent's account at The Depository
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Trust Company according to the procedure for book-entry transfer described
below or a properly transmitted agent's message; or
o the holder must comply with the guaranteed delivery procedures described
below.
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at the
address set forth below under "--Exchange Agent" prior to the expiration date.
The tender by a holder that is not withdrawn prior to the expiration date
will constitute an agreement between such holder and us in accordance with the
terms and subject to the conditions set forth in this prospectus and in the
letter of transmittal.
The method of delivery of outstanding notes, the letter of transmittal and
all other required documents to the exchange agent is at the holder's election
and risk. Rather than mail these items, we recommend that holders use an
overnight or hand delivery service. In all cases, holders should allow
sufficient time to assure delivery to the exchange agent before the expiration
date. Holders should not send the letter of transmittal or outstanding notes to
us. Holders may request their respective brokers, dealers, commercial banks,
trust companies or other nominees to effect the above transactions for them.
Any beneficial owner whose outstanding notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact the registered holder promptly and instruct it
to tender on the owner's behalf. If such beneficial owner wishes to tender on
its own behalf, it must, prior to completing and executing the letter of
transmittal and delivering its outstanding notes; either:
o make appropriate arrangements to register ownership of the outstanding
notes in such owner's name; or
o obtain a properly completed bond power from the registered holder of
outstanding notes.
The transfer of registered ownership may take considerable time and may
not be completed prior to the expiration date.
Signatures on a letter of transmittal or a notice of withdrawal described
below must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or another "eligible institution" within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, unless the outstanding notes
tendered pursuant thereto are tendered:
o by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter of
transmittal; or
o for the account of an eligible institution.
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding notes listed on the outstanding notes,
such outstanding notes must be endorsed or accompanied by a properly completed
bond power. The bond power must be signed by the registered holder as the
registered holder's name appears on the outstanding notes and an eligible
institution must guarantee the signature on the bond power.
If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing. Unless waived by us,
they should also submit evidence satisfactory to us of their authority to
deliver the letter of transmittal.
The exchange agent and The Depository Trust Company have confirmed that
any financial institution that is a participant in The Depository Trust
Company's system may use The Depository
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Trust Company's Automated Tender Offer Program to tender. Participants in the
program may, instead of physically completing and signing the letter of
transmittal and delivering it to the exchange agent, transmit their acceptance
of the exchange offer electronically. They may do so by causing The Depository
Trust Company to transfer the outstanding notes to the exchange agent in
accordance with its procedures for transfer. The Depository Trust Company will
then send an agent's message to the exchange agent. The term "agent's message"
means a message transmitted by The Depository Trust Company, received by the
exchange agent and forming part of the book-entry confirmation, to the effect
that:
o The Depository Trust Company has received an express acknowledgment from
a participant in its Automated Tender Offer Program that is tendering
outstanding notes that are the subject of such book-entry confirmation;
o such participant has received and agrees to be bound by the terms of the
letter of transmittal (or, in the case of an agent's message relating to
guaranteed delivery, that such participant has received and agrees to be
bound by the applicable notice of guaranteed delivery); and
o the agreement may be enforced against such participant.
We will determine in our sole discretion all questions as to the validity,
form, eligibility (including time of receipt), acceptance of tendered
outstanding notes and withdrawal of tendered outstanding notes. Our
determination will be final and binding. We reserve the absolute right to
reject any outstanding notes not properly tendered or any outstanding notes our
acceptance of which would, in the opinion of our counsel, be unlawful. We also
reserve the right to waive any defects, irregularities or conditions of tender
as to particular outstanding notes. Our interpretation of the terms and
conditions of the exchange offer (including the instructions in the letter of
transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of outstanding notes must
be cured within such time as we shall determine. Although we intend to notify
holders of defects or irregularities with respect to tenders of outstanding
notes, neither we, the exchange agent nor any other person will incur any
liability for failure to give such notification. Tenders of outstanding notes
will not be deemed made until such defects or irregularities have been cured or
waived. Any outstanding notes received by the exchange agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the exchange agent without cost to the
tendering holder, unless otherwise provided in the letter of transmittal, as
soon as practicable following the expiration date.
In all cases, we will issue exchange notes for outstanding notes that we
have accepted for exchange under the exchange offer only after the exchange
agent timely receives:
o outstanding notes or a timely book-entry confirmation of such
outstanding notes into the exchange agent's account at The Depository
Trust Company; and
o a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
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 outstanding notes for exchange (the "Transferor")
exchanges, assigns and transfers the outstanding notes to us and irrevocably
constitutes and appoints the exchange agent as the Transferor's agent and
attorney-in-fact to cause the outstanding 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 outstanding notes and to
acquire exchange notes issuable upon the exchange of such tendered outstanding
notes, and that, when the same are accepted for exchange, we will acquire good
and unencumbered title to the tendered outstanding 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 any additional documents
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deemed by the exchange agent or us to be necessary or desirable to complete the
exchange, assignment and transfer of tendered outstanding notes or transfer
ownership of such outstanding notes on the account books maintained by a
book-entry transfer facility. The Transferor further agrees that acceptance of
any tendered outstanding notes by us and the issuance of exchange notes in
exchange therefor shall constitute performance in full by us and our
subsidiaries guaranteeing the outstanding notes of certain obligations under
the exchange and 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.
By signing the letter of transmittal, each tendering holder of outstanding
notes will represent to us that, among other things:
o any exchange notes that the holder receives will be acquired in the
ordinary course of its business;
o the holder has no arrangement or understanding with any person or entity
to participate in the distribution of the exchange notes;
o if the holder is a broker-dealer that will receive exchange notes for
its own account in exchange for outstanding notes that were acquired as a
result of market-making or trading activities, that it will deliver a
prospectus, as required by law, in connection with any resale of such
exchange notes;
o such holder is not our "affiliate," as defined in Rule 405 of the
Securities Act of 1933, or if it is our affiliate, that it will comply
with applicable registration and prospectus delivery requirements of the
Securities Act of 1933; and
o if the holder is a person in the United Kingdom, that its ordinary
activities involve it in acquiring, holding, managing or disposing of
investments, as principal or agent, for the purposes of its business.
Book-Entry Transfer
The exchange agent will make a request to establish an account with
respect to the outstanding notes at The Depository Trust Company for purposes
of the exchange offer promptly after the date of this prospectus; and any
financial institution participating in The Depository Trust Company's system
may make book-entry delivery of outstanding notes by causing The Depository
Trust Company to transfer such outstanding notes into the exchange agent's
account at The Depository Trust Company in accordance with The Depository Trust
Company's procedures for transfer. Holders of outstanding notes who are unable
to deliver confirmation of the book-entry tender of their outstanding notes
into the exchange agent's account at The Depository Trust Company or all other
documents required by the letter of transmittal to the exchange agent on or
prior to the expiration date must tender their outstanding notes according to
the guaranteed delivery procedures described below.
Guaranteed Delivery Procedures
Holders wishing to tender their outstanding notes but whose outstanding
notes are not immediately available or who cannot deliver their outstanding
notes, the letter of transmittal or any other required documents to the
exchange agent or comply with the applicable procedures under The Depository
Trust Company's Automated Tender Offer Program prior to the expiration date may
tender if:
o the tender is made through an eligible institution;
o prior to the expiration date, the exchange agent receives from such
eligible institution either a properly completed and duly executed notice
of guaranteed delivery (by facsimile transmission, mail or hand delivery)
or a properly transmitted agent's message and notice of guaranteed
delivery setting forth the name and address of the holder, the registered
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number(s) of such outstanding notes, if applicable, and the principal
amount of outstanding notes tendered, stating that the tender is being
made thereby, and guaranteeing that, within three New York Stock Exchange
trading days after the expiration date, the letter of transmittal (or
facsimile thereof) together with the outstanding notes or a book-entry
confirmation, and any other documents required by the letter of
transmittal will be deposited by the eligible institution with the
exchange agent; and
o the exchange agent receives such properly completed and executed letter
of transmittal (or facsimile thereof), as well as all tendered outstanding
notes in proper form for transfer or a book-entry confirmation, and all
other documents required by the letter of transmittal, within three New
York Stock Exchange trading days after the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will
be sent to holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, holders of outstanding
notes may withdraw their tenders at any time prior to the expiration date.
For a withdrawal to be effective:
o the exchange agent must receive a written notice (which may be by
telegram, telex, facsimile transmission or letter) of withdrawal at one of
the addresses set forth below under "--
Exchange Agent", or
o holders must comply with the appropriate procedures of The Depository
Trust Company's Automated Tender Offer Program system.
Any such notice of withdrawal must:
o specify the name of the person who tendered the outstanding notes to be
withdrawn;
o identify the outstanding notes to be withdrawn (including the principal
amount of such outstanding notes); and
o where certificates for outstanding notes have been transmitted, specify
the name in which such outstanding notes were registered, if different
from that of the withdrawing holder.
If certificates for outstanding notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates, the withdrawing holder must also submit:
o the serial numbers of the particular certificates to be withdrawn; and
o a signed notice of withdrawal with signatures guaranteed by an eligible
institution unless such holder is an eligible institution.
If outstanding notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at The Depository Trust Company to be credited
with the withdrawn outstanding notes and otherwise comply with the procedures
of such facility. We will determine all questions as to the validity, form and
eligibility (including time of receipt) of such notices, and our determination
shall be final and binding on all parties. We will deem any outstanding notes
so withdrawn not to have validity tendered for exchange for purposes of the
exchange offer. Any outstanding notes that have been tendered for exchange but
that are not exchanged for any reason will be returned to their holder without
cost to the holder (or, in the case of outstanding notes tendered by book-entry
transfer into the exchange agent's account at The Depository Trust Company
according to the procedures described above, such outstanding notes will be
credited to an account maintained with The Depository Trust Company for
outstanding notes) as soon as practicable after withdrawal, rejection of tender
or termination of the exchange offer. Properly withdrawn outstanding notes may
be re-tendered by following one of the
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procedures described under "--Procedures for Tendering" above at any time on or
prior to the expiration date.
Exchange Agent
The Bank of New York has been appointed as exchange agent for the exchange
offer. You should direct questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for the notice of guaranteed delivery to the exchange agent addressed
as follows:
<TABLE>
<S> <C>
For Delivery by Registered or Certified Mail: For Overnight Delivery Only or by Hand:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
New York, New York 10286 New York, New York 10286
Attn: Reorganization Unit Attn: Reorganization Unit
By Facsimile Transmission (for eligible institutions only):
TheBank of New York
(212) 815-6339
Attn: Reorganization Unit
</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 of the letter of transmittal to an address other than as set forth
above or transmission via facsimile other than as set forth above does not
constitute a valid delivery of such letter of transmittal.
Fees and Expenses
We will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, we may make additional
solicitation by telegraph, telephone or in person by our officers and regular
employees and those of our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses.
We will pay the cash expenses to be incurred in connection with the
exchange offer. The expenses are estimated in the aggregate to be approximately
$450,000. They include:
o registration fees of the Securities and Exchange Commission;
o fees and expenses of the exchange agent and trustee;
o accounting and legal fees and printing costs; and
o related fees and expenses.
We will pay all transfer taxes, if any, applicable to the exchange of
outstanding notes under the exchange offer. The tendering holder, however, will
be required to pay any transfer taxes (whether imposed on the registered holder
or any other person) if:
o certificates representing outstanding 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
outstanding notes tendered;
o tendered outstanding notes are registered in the name of any person
other than the person signing the letter of transmittal; or
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o a transfer tax is imposed for any reason other than the exchange of
outstanding notes under the exchange offer, then the tendering holder will
be required to pay any such transfer taxes (whether imposed on the
registered holder or any other persons). If satisfactory evidence of
payment of such taxes is not submitted with the letter of transmittal, the
amount of such transfer taxes will be billed to that tendering holder.
Transfer Taxes
Holders who tender their outstanding notes for exchange will not be
required to pay any transfer taxes. However, holders who instruct us to
register exchange notes in the name of, or request that outstanding notes not
tendered or not accepted in the exchange offer be returned to, a person other
than the registered tendering holder will be required to pay any applicable
transfer tax.
Consequences of Failure to Exchange
Holders of outstanding notes who do not exchange their outstanding notes
for exchange notes under the exchange offer will remain subject to the
restrictions on transfer of such outstanding notes:
o as set forth in the legend printed on the outstanding notes as a
consequence of the issuance of the outstanding notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act of 1933 and applicable state securities
laws; and
o otherwise set forth in the offering memorandum distributed in connection
with the private offering of the outstanding notes.
In general, you may not offer or sell the outstanding notes unless they
are registered under the Securities Act of 1933, or if the offer or sale is
exempt from registration under the Securities Act of 1933 and applicable state
securities laws. Except as required by the exchange and registration rights
agreement, we do not intend to register resales of the outstanding notes under
the Securities Act of 1933. Based on interpretations of the staff of the
Securities and Exchange Commission, exchange notes issued pursuant to the
exchange offer may be offered for resale, resold or otherwise transferred by
their holders (other than any such holder that is our "affiliate" within the
meaning of Rule 405 under the Securities Act of 1933) without compliance with
the registration and prospectus delivery provisions of the Securities Act of
1933, provided that the holders acquired the exchange notes in the ordinary
course of the holders' business and the holders have no arrangement or
understanding with respect to the distribution of the exchange notes to be
acquired in the exchange offer. Any holder who tenders in the exchange offer
for the purpose of participating in a distribution of the exchange notes:
o could not rely on the applicable interpretations of the Securities and
Exchange Commission; and
o must comply with the registration and prospectus delivery requirements
of the Securities Act of 1933 in connection with a secondary resale
transaction.
Accounting Treatment
We will record the exchange notes in our accounting records at the same
carrying value as the outstanding notes, which is the aggregate principal
amount, as reflected in our accounting records on the date of exchange.
Accordingly, we will not recognize any gain or loss for accounting purposes in
connection with the exchange offer. We will capitalize the expenses of the
exchange offer and amortize them over the life of the related debt.
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Other
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your own decision on what action to take.
We may in the future seek to acquire untendered outstanding notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. We have no present plans to acquire any outstanding notes that
are not tendered in the exchange offer or to file a registration statement to
permit resales of any untendered outstanding notes.
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DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the word
"Holdings" refers only to Russell-Stanley Holdings, Inc. and not to any of its
subsidiaries.
The outstanding notes were issued and the exchange notes will be issued
under an Indenture (the "Indenture") among Holdings, the Guarantors and The
Bank of New York, as trustee (the "Trustee"). Upon the issuance of the exchange
notes, the Indenture will be subject to and governed by the Trust Indenture Act
of 1939. All references to the Notes are to the outstanding notes and the
exchange notes collectively. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939.
The following description is a summary of the material provisions of the
Indenture. It does not restate that agreement in its entirety. We urge you to
read the Indenture because it, and not this description, defines your rights as
holders of the Notes. The Indenture is an exhibit to the registration statement
of which this prospectus is a part.
Brief Description of the Notes and the Guarantees
The Notes
The Notes:
o are general unsecured obligations of Holdings;
o are subordinated in right of payment to all existing and future Senior
Debt of Holdings;
o are senior in right of payment to any future subordinated Indebtedness
of Holdings; and
o are unconditionally guaranteed by the Guarantors.
The Guarantees
The Notes are guaranteed by the following Subsidiaries of Holdings:
Russell-Stanley Corp., Container Management Services, New England
Container, Russell-Stanley, Inc., RSLPCO, Inc. and Russell-Stanley, L.P.
The Guarantees of the Notes:
o are general unsecured obligations of each Guarantor;
o are subordinated in right of payment to all existing and future Senior
Debt of each Guarantor; and
o are senior in right of payment to any future subordinated Indebtedness
of each Guarantor.
At February 10, 1999, Holdings and the Guarantors had total Senior Debt
outstanding of approximately $38.3 million. As indicated above and as discussed
in detail below under the subheading "Subordination," payments on the Notes and
under the Guarantees are subordinated to the payment of Senior Debt. The
Indenture permits us and the Guarantors to incur additional Senior Debt.
Currently, all of our subsidiaries are "Restricted Subsidiaries." However,
under the circumstances described below under the subheading "Certain
Covenants--Designation of Restricted and Unrestricted Subsidiaries," we will be
permitted to designate certain of our subsidiaries as "Unrestricted
Subsidiaries." Unrestricted Subsidiaries are not subject to many of the
restrictive covenants in the Indenture. Unrestricted Subsidiaries do not
guarantee the Notes.
Not all of our Subsidiaries guarantee the Notes. In the event of a
bankruptcy, liquidation or reorganization of any of these non-guarantor
Subsidiaries, these non-guarantor Subsidiaries will pay the holders of their
debt and their trade creditors before they will be able to distribute any of
their
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assets to us. At December 31, 1998, assuming that we completed the offering of
the outstanding notes and made the initial borrowings under our senior credit
facility and applied the net proceeds as intended, the total liabilities
(including trade payables) of our non-guarantor Subsidiary would have been
approximately $17.3 million. Our non-guarantor Subsidiary generated
approximately 13.1% of our consolidated revenues in the year ended December 31,
1998 and held approximately 11.7% of our consolidated assets as of December 31,
1998. See "Note 21--Guarantor Subsidiaries" to our consolidated financial
statements included at the back of this prospectus for more detail about the
division of our consolidated revenues and assets between our guarantor and
non-guarantor subsidiaries.
Principal, Maturity and Interest
Holdings may issue Notes with a maximum aggregate principal amount of
$225.0 million under the Indenture, of which $150.0 million aggregate principal
amount of outstanding notes were issued on the Issue Date. The form and terms
of the exchange notes will be substantially identical to the form and terms of
the outstanding notes, except that the exchange notes:
o will be freely tradeable by virtue of their registration under the
Securities Act of 1933,
o will not bear legends restricting their transfer, will not be subject to
any additional obligations regarding registration under the Securities Act
of 1933 and
o will not be subject to the special interest payments described in
"--Registration Covenant; Exchange Offer."
The exchange notes will be issued under and entitled to the benefits of
the same Indenture that authorized the issuance of the outstanding notes.
Consequently, both series will be treated as a single class of debt securities
under the Indenture. The Notes will mature on February 15, 2009.
Interest on the Notes will accrue at the rate of 10.875% per annum and
will be payable semi-annually in arrears on February 15 and August 15,
commencing on August 15, 1999. Holdings will make each interest payment to the
Holders of record of the Notes on the immediately preceding February 1 and
August 1.
Interest on the Notes will accrue from the date of original issuance or,
if interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to Holdings, Holdings
will make all principal, premium and interest payments on the Notes in
accordance with those instructions. All other payments on the Notes will be
made at the office or agency of the Paying Agent and Registrar within the City
and State of New York unless Holdings elects to make interest payments by check
mailed to the Holders at their address set forth in the register of Holders.
Paying Agent and Registrar for the Notes
The Trustee will initially act as Paying Agent and Registrar. Holdings may
change the Paying Agent or Registrar without prior notice to the Holders of the
Notes, and Holdings or any of its Subsidiaries may act as Paying Agent or
Registrar.
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 Holdings may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. Holdings is not required to transfer or exchange any Note selected
for redemption. Also, Holdings is not required to transfer or exchange any Note
for a period of 15 days
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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.
Form, Denomination and Book-Entry Procedures
Holdings will issue the exchange notes only in fully registered form,
without interest coupons, in denominations of $1,000 and integral multiples of
$1,000. Holdings will not issue Notes in bearer form. The exchange notes will
initially be represented by one or more global notes (the "Global Notes") that
will be deposited with, or on behalf of, The Depository Trust Company ("DTC")
and registered in the name of Cede & Co., as nominee of DTC, on behalf of the
acquirers of exchange notes represented thereby for credit to the respective
accounts of the acquirers (or to such other accounts as they may direct) at
DTC, or Morgan Guaranty Trust Company of New York, Brussels Office, as operator
of the Euroclear System ("Euroclear"), or Cedel Bank, societe anonyme
("Cedel"). See "The Exchange Offer--Book-Entry Transfer."
Transfers of beneficial interests in the Global Notes will be subject to
the applicable rules and procedures of DTC and its direct or indirect
participants (including, if applicable, those of Euroclear and CEDEL), which
may change from time to time. Except as set forth below, the Global Notes may
be transferred, in whole and not in part, only to another nominee of DTC or to
a successor of DTC or its nominee. You may not exchange your beneficial
interest in the Global Notes for Notes in certificated form except in the
limited circumstances described below under "--Exchanges of Global Notes for
Certificated Notes."
Exchanges of Global Notes for Certificated Notes
You may not exchange your beneficial interest in a Global Note for a Note
in certificated form unless:
(1) DTC (a) notifies Holdings that it is unwilling or unable to continue
as Depositary for the global note or (b) has ceased to be a clearing
agency registered under the Securities Exchange Act of 1934, and in
either case Holdings thereupon fails to appoint a successor Depositary;
or
(2) Holdings, at its option, notifies the Trustee in writing that it is
electing to issue the Notes in certificated form; or
(3) an Event of Default shall have occurred and be continuing with respect
to the Notes.
In all cases, certificated Notes delivered in exchange for any Global Note
or beneficial interests therein will be registered in the names, and issued in
any approved denominations, requested by or on behalf of the Depositary (in
accordance with its customary procedures). Any certificated Notes issued in
exchange for an interest in a Global Note will bear the legend restricting
transfers that is borne by such Global Note. Any such exchange will be effected
through Deposit/Withdraw at Custodian ("DWAC") system and an appropriate
adjustment will be made in the records of the Security Registrar to reflect a
decrease in the principal amount of the relevant Global Note.
Certain Book-Entry Procedures
The description of the operations and procedures of DTC, Euroclear and
CEDEL that follows is provided solely as a matter of convenience. These
operations and procedures are solely within their control and are subject to
changes by them from time to time. Holdings takes no responsibility for these
operations and procedures and urges you to contact the system or their
participants directly to discuss these matters.
DTC has advised Holdings as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants ("participants") and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities
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brokers and dealers, banks, trust companies and clearing corporations and may
include certain other organizations. Indirect access to the DTC system is
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly ("indirect participants").
DTC has advised Holdings that its current practice, upon the issuance of
the Global Notes, is to credit, on its internal system, the respective
principal amount of the individual beneficial interests represented by such
Global Notes to the accounts with DTC of the participants through which such
interests are to be held. Ownership of beneficial interests in the Global Notes
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominees (with respect to interests
of participants).
As long as DTC, or its nominee, is the registered Holder of a Global Note,
DTC or such nominee, as the case may be, will be considered the sole owner and
Holder of the Notes represented by such Global Note for all purposes under the
Indenture and the Notes. Except in the limited circumstances described above
under "--Exchanges of Global Notes for Certificated Notes," you will not be
entitled to have any portions of a Global Note registered in your names, will
not receive or be entitled to receive physical delivery of Notes in definitive
form and will not be considered the owner or Holder of a Global Note (or any
Note represented thereby) under the Indenture or the Notes.
You may hold your interests in the Global Notes directly through DTC, if
you are participants in such system, or indirectly through organizations
(including Euroclear and CEDEL) which are participants in such system. All
interests in a Global Note, including those held through Euroclear or CEDEL,
will be subject to the procedures and requirements of DTC. Those interests held
through Euroclear or CEDEL will also be subject to the procedures and
requirements of such system.
The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, your
ability to transfer your beneficial interests in a Global Note to such persons
may be limited to that extent. Because DTC can act only on behalf of its
participants, which in turn act on behalf of indirect participants and certain
banks, your ability to pledge your interests in a Global Note to persons or
entities that do not participate in the DTC system, or otherwise take actions
in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests.
Holdings will make payments of the principal of, premium, if any, and
interest on Global Notes to DTC or its nominee as the registered owner thereof.
Neither Holdings nor the Trustee nor any of their respective agents will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Holdings expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note representing any Notes held
by it or its nominee, will immediately credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Note for such Notes as shown on the records
of DTC or its nominee. Holdings also expects that payments by participants to
owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers
registered in "street name." Such payment will be the responsibility of such
participants.
Except for trades involving only Euroclear and CEDEL participants,
interests in a Global Note will trade in DTC's same day settlement system, and
secondary market trading activity in such interests will therefore settle in
immediately available funds, subject in all cases to the rules and procedures
of DTC and its participants. Transfers between participants in DTC will be
effected in accordance with DTC's procedures, and will be settled in same-day
funds. Transfers between participants in Euroclear and CEDEL will be effected
in the ordinary way in accordance with their respective rules and operating
procedures.
Subject to compliance with the transfer and exchange provisions applicable
to the Notes described elsewhere herein, cross-market transfers between DTC
participants, on the one hand, and
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Euroclear or CEDEL participants, on the other hand, will be effected by DTC in
accordance with DTC's rules on behalf of Euroclear or CEDEL, as the case may
be, by its respective depositary; however, such cross-market transactions will
require delivery of instructions to Euroclear or CEDEL, as the case may be, by
the counterparty in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
CEDEL, as the case may be, will, if the transaction meets it settlement
requirements, deliver instructions to its respective depository to take action
to effect final settlement on its behalf by delivering or receiving interests
in the relevant Global Note in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Euroclear participants and CEDEL participants may not deliver instructions
directly to the depositories for Euroclear or CEDEL.
Because of time zone differences, the securities account of Euroclear or
CEDEL participant purchasing an interest in a Global Note from a DTC
participant will be credited, and any such crediting will be reported to the
relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which much be a business day for Euroclear and CEDEL)
immediately following the DTC settlement date. Cash received in Euroclear or
CEDEL as a result of sales of interests in a Global Note by or through a
Euroclear or CEDEL participant to a DTC participant will be received with value
on the DTC settlement date but will be available in the relevant Euroclear or
CEDEL cash account only as of the business day for Euroclear or CEDEL following
the DTC settlement date.
DTC has advised Holdings that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below and the conversion of Notes) only at the direction of one or
more participants to whose account with DTC interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Notes as to which such participant or participants has or have given
such direction. However, if there is an Event of Default under the Notes, the
Global Notes will be exchanged for Notes in certificated form, and distributed
to DTC's participants.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
in order to facilitate transfers of beneficial ownership interests in the
Global Notes among participants of DTC, they are under no obligation to perform
or continue to perform such procedures, and such procedures may be discontinued
at any time. None of Holdings, the Trustee or any of their respective agents
will have any responsibility for the performance by DTC, Euroclear and CEDEL,
their participants or indirect participants of their respective obligations
under the rules and procedures governing their operations, including
maintaining, supervising or reviewing the records relating to, or payments made
on account of, beneficial ownership interests in Global Notes.
DTC management is aware that some computer applications, systems and the
like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed its Participants and other members of the financial
community (the "Industry") that it has developed and is implementing a program
so that its Systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries and settlement of trades within DTC ("DTC Services"), continue to
function appropriately. This program includes a technical assessment and a
remediation plan, each of which is complete. Additionally, DTC's plan includes
a testing phase, which is expected to be completed within appropriate time
frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the Industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services to:
(i) impress upon them the importance of such services being Year 2000 compliant
and (ii) determine the extent of their efforts for Year 2000 remediation (and,
as appropriate, testing) of their services. In addition, DTC is in the process
of developing such contingency plans as it deems appropriate.
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According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
Registration Covenant; Exchange Offer
Holdings has entered into an exchange and registration rights agreement
pursuant to which Holdings has agreed, for the benefit of the holders of
outstanding notes:
(1) to use its reasonable best efforts to file with the Securities and
Exchange Commission, within 75 days following the time of delivery of
the outstanding notes (the "Closing"), a registration statement (the
"Exchange Offer Registration Statement") under the Securities Act of
1933 relating to an exchange offer pursuant to which notes
substantially identical to the outstanding notes (except that such
notes will not contain terms with respect to the special interest
payments described below or transfer restrictions) would be offered in
exchange for the the outstanding notes tendered at the option of the
Holders thereof; and
(2) to use its reasonable best efforts to cause the Exchange Offer
Registration Statement to become effective as soon as practicable
thereafter.
Holdings has further agreed to commence the exchange offer promptly after the
Exchange Offer Registration Statement has become effective, hold the offer open
for at least 30 days, and exchange exchange notes for all outstanding notes
validly tendered and not withdrawn before the expiration of the offer.
The registration of which this prospectus is a part has been filed, and
the exchange offer being made by this prospectus, and the letter of transmittal
is being made, to satisfy these obligations.
Under existing Securities and Exchange Commission interpretations, the
exchange notes will in general be freely transferable after the exchange offer
without further registration under the Securities Act of 1933, except that
broker-dealers ("Participating Broker-Dealers") receiving exchange notes in the
exchange offer will be subject to a prospectus delivery requirement with
respect to resales of those exchange notes. The Securities and Exchange
Commission has taken the position that broker-dealers receiving exchange notes
may fulfill their prospectus delivery requirements with respect to the exchange
notes (other than a resale of an unsold allotment from the original sale of the
outstanding notes) by delivery of this prospectus. Under the exchange and
registration rights agreement, Holdings is required to allow broker-dealers
receiving exchange notes and other persons, if any, subject to similar
prospectus delivery requirements to use this prospectus in connection with the
resale of such exchange notes. The registration statement of which this
prospectus is a part will be kept effective for a period of 180 days after the
exchange offer has been consummated in order to permit resales of exchange
notes acquired by broker-dealers in after-market transactions. Each Holder of
outstanding notes (other than certain specified Holders) who wishes to exchange
such outstanding notes for exchange notes in the exchange offer will be
required to represent that any exchange notes to be received by it will be
acquired in the ordinary course of its business, that at the time of the
commencement of the exchange offer it has no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act of
1933) of the exchange notes and that it is not an Affiliate of Holdings.
However, if:
(1) on or before the date of consummation of the exchange offer, the
existing Securities and Exchange Commission interpretations are changed
such that the exchange notes would not in general be freely
transferable in such manner on such date; or
(2) the exchange offer has not been consummated within 255 days following
the time of delivery of the outstanding notes; or
(3) the exchange offer is not available by any holder of the outstanding
notes,
Holdings will, in lieu of (or, in the case of clause (3), in addition to)
effecting registration of exchange notes, use its reasonable best efforts to
cause a registration statement under the Securities Act of
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1933 relating to a shelf registration of the outstanding notes for resale by
holders or, in the case of clause (3), of the outstanding notes held by the
initial purchasers of the outstanding notes for resale by the initial
purchasers (the "Resale Registration") to become effective and to remain
effective until two years following the effective date of such registration
statement or such shorter period that will terminate when all the securities
covered by the shelf registration statement have been sold pursuant to the
shelf registration statement.
Holdings will, in the event of the Resale Registration, provide to the
Holder or Holders of the applicable outstanding notes copies of the prospectus
that is a part of the shelf registration statement filed in connection with the
Resale Registration, notify such Holder or Holders when such shelf registration
statement for the applicable outstanding notes has become effective and take
certain other actions as are required to permit unrestricted resales of the
applicable outstanding notes. A Holder of outstanding notes that sells such
outstanding notes pursuant to the Resale Registration generally would be
required to be named as a selling securityholder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act of 1933 in connection with such
sales and will be bound by the provisions of the exchange and registration
rights agreement that are applicable to such a Holder (including certain
indemnification obligations).
In the event that:
(1) the exchange offer has not been consummated within 30 Business Days
after the effective date of the registration statement of which this
prospectus is a part; or
(2) any registration statement required by the exchange and registration
rights agreement is filed and declared effective but shall thereafter
cease to be effective (except as specifically permitted therein)
without being succeeded immediately by an additional registration
statement filed and declared effective (any such event referred to in
clause (1) or (2), the "Registration Default"),
then the per annum interest rate on the applicable outstanding notes will
increase, for the period from the occurrence of the Registration Default until
such time as no Registration Default is in effect (at which time the interest
rate will be reduced to its initial rate) by 0.50% during the first 90-day
period following the occurrence of such Registration Default, which rate shall
increase by an additional 0.50% during each subsequent 90-day period, up to a
maximum increase of 1.0%.
The summary herein of certain provisions of the exchange and registration
rights agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the exchange
and registration rights agreement, a copy of which has been filed as an exhibit
to the registration statement of which this prospectus is a part.
Subsidiary Guarantees
The Guarantors will jointly and severally guarantee Holdings' obligations
under the Notes. Each Subsidiary Guarantee will be subordinated to the prior
payment in full of all Senior Debt of that Guarantor. The obligations of each
Guarantor under its Subsidiary Guarantee will be limited as necessary to
prevent that Subsidiary Guarantee from constituting a fraudulent conveyance
under applicable law.
A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person), another Person unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) either:
(a) the Person acquiring the property in any such sale or disposition or
the Person formed by or surviving any such consolidation or merger
(if other than the Guarantor) assumes
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all the obligations of that Guarantor pursuant to a supplemental
indenture reasonably satisfactory to the Trustee; or
(b) the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture.
The Subsidiary Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of such Guarantor (including by way of
merger or consolidation), if Holdings applies the Net Proceeds of that
sale or other disposition in accordance with the applicable provisions
of the Indenture; or
(2) in connection with any sale of all of the capital stock of a
Guarantor, if Holdings applies the Net Proceeds of that sale in
accordance with the applicable provisions of the Indenture; or
(3) if Holdings designates any Restricted Subsidiary that is a Guarantor
as an Unrestricted Subsidiary in accordance with the Indenture.
See "--Repurchase at the Option of Holders--Asset Sales."
Subordination
The payment of principal, premium and interest, if any, on the Notes will
be subordinated to the prior payment in full in cash of all Senior Debt of
Holdings.
The holders of Senior Debt will be entitled to receive payment in full in
cash of all Obligations due in respect of Senior Debt (including interest after
the commencement of any such proceeding at the rate specified in the applicable
Senior Debt) before the Holders of Notes will be entitled to receive any
payment with respect to the Notes (except that Holders of Notes may receive and
retain Permitted Junior Securities and payments made from the trust described
under "--Legal Defeasance and Covenant Defeasance"), in the event of any
distribution to creditors of Holdings:
(1) in a liquidation or dissolution of Holdings;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to Holdings or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of Holdings' assets and liabilities.
Holdings also may not make any payment in respect of the Notes (except in
Permitted Junior Securities or from the trust described under "--Legal
Defeasance and Covenant Defeasance") if:
(1) a payment default on Designated Senior Debt occurs and is continuing
beyond any applicable grace period; or
(2) any other default occurs and is continuing on Designated Senior Debt
that permits holders of the Designated Senior Debt to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment
Blockage Notice") from Holdings or the holders of any Designated Senior
Debt.
Payments on the Notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such default
is cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice.
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No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made,
the basis for a subsequent Payment Blockage Notice unless such default shall
have been cured or waived for a period of not less than 180 days.
Holdings must promptly notify holders of Senior Debt if payment of the
Notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of Holdings, Holders of the
Notes may recover less ratably than creditors of Holdings who are holders of
Senior Debt. See "Risk Factors--Subordination."
Optional Redemption
On or before February 15, 2002, Holdings may on any one or more occasions
redeem up to 35% of the aggregate principal amount of Notes originally issued
under the Indenture at a redemption price of 110.875% of the principal amount
thereof, plus accrued and unpaid interest to the redemption date, with the net
cash proceeds of one or more Public Equity Offerings; provided that
(1) at least 65% of the aggregate principal amount of Notes originally
issued remains outstanding immediately after the occurrence of such
redemption (excluding Notes held by Holdings and its Subsidiaries); and
(2) the redemption must occur within 90 days of the date of the closing of
such Public Equity Offering.
Except pursuant to the preceding paragraph, the Notes will not be
redeemable at Holdings' option prior to February 15, 2004.
On or after February 15, 2004, Holdings may redeem all or a part of the
Notes upon not less than 30 nor more than 90 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,
if redeemed during the twelve-month period beginning on February 15 of the
years indicated below:
<TABLE>
<CAPTION>
Year Percentage
- ------------------------------ -------------
<S> <C>
2004 ......................... 105.438%
2005 ......................... 103.625%
2006 ......................... 101.813%
2007 and thereafter .......... 100.000%
</TABLE>
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Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of Notes will have the right to
require Holdings to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of that Holder's Notes pursuant to the Change of Control
Offer. In the Change of Control Offer, Holdings will offer a Change of Control
Payment in cash equal to 101% of the aggregate principal amount of Notes
repurchased plus accrued and unpaid interest thereon, if any, to the date of
purchase. Within 30 days following any Change of Control, Holdings will mail a
notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the Change
of Control Payment Date specified in such notice, pursuant to the procedures
required by the Indenture and described in such notice. Holdings will comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
On the Change of Control Payment Date, Holdings will, to the extent
lawful:
(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Notes or portions thereof so tendered; and
(3) deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate stating the aggregate principal
amount of Notes or portions thereof being purchased by Holdings.
The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof.
Subject to the third succeeding paragraph, the provisions described above
that require Holdings to make a Change of Control Offer following a Change of
Control will be applicable regardless of whether or not any other provisions of
the Indenture are applicable. Except as described above with respect to a
Change of Control, the Indenture does not contain provisions that permit the
Holders of the Notes to require that Holdings repurchase or redeem the Notes in
the event of a takeover, recapitalization or similar transaction.
Holdings' outstanding Senior Debt currently prohibits Holdings from
purchasing any Notes, and also provides that certain change of control events
with respect to Holdings would constitute a default under the agreements
governing the Senior Debt. Any future credit agreements or other agreements
relating to Senior Debt to which Holdings becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when Holdings is prohibited from purchasing Notes, Holdings could seek the
consent of its senior lenders to the purchase of Notes or could attempt to
refinance the borrowings that contain such prohibition. If Holdings does not
obtain such a consent or repay such borrowings, Holdings will remain prohibited
from purchasing Notes. In such case, Holdings' failure to purchase tendered
Notes would constitute an Event of Default under the Indenture which would, in
turn, constitute a default under such Senior Debt. In such circumstances, the
subordination provisions in the Indenture would likely restrict payments to the
Holders of Notes.
Holdings will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer
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made by Holdings and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
Notwithstanding the foregoing, Holdings shall not be required to make a
Change of Control Offer, as provided above, if, in connection with or in
contemplation of any Change of Control, it has made an offer to purchase (an
"Alternate Offer") any and all Notes validly tendered at a cash price equal to
or higher than the Change of Control Payment and has purchased all Notes
properly tendered in accordance with the terms of such Alternate Offer.
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 Holdings and its Subsidiaries taken as a whole. Although
there is a limited 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 Holdings to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of Holdings and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
Asset Sales
Holdings will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless:
(1) Holdings (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(2) such fair market value is determined by Holdings' Board of Directors
and evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee; and
(3) at least 75% of the consideration therefor received by Holdings or
such Restricted Subsidiary is in the form of cash or Cash Equivalents.
For purposes of this provision, each of the following shall be deemed
to be cash:
(a) any liabilities (as shown on Holdings' or such Restricted
Subsidiary's most recent balance sheet), of Holdings or any
Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes
or any Subsidiary Guarantee) that are assumed by the
transferee of any such assets pursuant to a customary
novation agreement that releases Holdings or such Restricted
Subsidiary from further liability; and
(b) any securities, notes or other obligations received by
Holdings or any such Restricted Subsidiary from such
transferee that are contemporaneously (subject to ordinary
settlement periods) converted by Holdings or such Restricted
Subsidiary into cash (to the extent of the cash received in
that conversion).
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
Holdings may apply such Net Proceeds at its option:
(1) to repay Senior Debt;
(2) to acquire all or substantially all of the assets of, or a majority of
the Voting Stock of, another Permitted Business;
(3) to make a capital expenditure; or
(4) to acquire other long-term assets that are used or useful in a
Permitted Business.
Pending the final application of any such Net Proceeds, Holdings may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture.
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Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10.0 million, Holdings will make
an Asset Sale Offer to all Holders of Notes and all holders of other
Indebtedness that is pari passu with the Notes containing provisions similar to
those set forth in the Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets to purchase the maximum principal amount
of Notes and such other pari passu Indebtedness that may be purchased out of
the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to
100% of principal amount plus accrued and unpaid interest, if any, to the date
of purchase, and will be payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, Holdings may use such Excess Proceeds for
any purpose not otherwise prohibited by the Indenture. If the aggregate
principal amount of Notes and such other pari passu Indebtedness tendered into
such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall
select the Notes and such other pari passu Indebtedness to be purchased on a
pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
Notwithstanding the immediately preceding paragraphs, Holdings and its
Restricted Subsidiaries will be permitted to consummate an Asset Sale without
complying with such paragraphs to the extent that (i) at least 75% of the
consideration for such Asset Sale constitutes long-term assets that are used or
useful in a Permitted Business ("Qualified Proceeds") and/or Cash Equivalents
and (ii) such Asset Sale is for fair market value; provided that any
consideration not constituting long-term assets that are used or useful in a
Permitted Business received by Holdings or any of its Restricted Subsidiaries
in connection with any Asset Sale permitted to be consummated under this
paragraph shall constitute Excess Proceeds subject to the provisions of the
preceding paragraphs.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, the Trustee
will select Notes for redemption as follows:
(1) if the Notes are listed, in compliance with the requirements of the
principal national securities exchange on which the Notes are listed;
or
(2) if the Notes are not so listed, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate.
No Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at its
registered address. Notices of redemption may not be conditional.
If any Note is to be redeemed in part only, the notice of redemption that
relates to that Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion of
the original Note will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on
the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption.
Certain Covenants
Restricted Payments
Holdings will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution
on account of Holdings' or any of its Restricted Subsidiaries' Equity
Interests (including, without limitation, any payment in connection
with any merger or consolidation involving Holdings or any of its
Restricted Subsidiaries) or to the direct or indirect holders of
Holdings' or any of its Restricted Subsidiaries' Equity Interests in
their capacity as such (other than dividends or distributions payable
solely in Equity Interests (other than Disqualified Stock) of Holdings
or dividends or distributions payable to Holdings or a Restricted
Subsidiary of Holdings);
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(2) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation
involving Holdings) any Equity Interests of Holdings or any direct or
indirect parent of Holdings or any Restricted Subsidiary of Holdings
(other than any such Equity Interests owned by Holdings or any
Restricted Subsidiary of Holdings);
(3) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes (other than the Notes), except a payment of
interest or principal at the Stated Maturity thereof or as a mandatory
sinking fund payment; or
(4) make any Restricted Investment (all such payments and other actions
set forth in clauses (1) through (4) being collectively referred to as
"Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(2) Holdings would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described below under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Holdings and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted
Payments permitted by clauses (2), (3), (5), (7) and (8) of the next
succeeding paragraph), is less than the sum, without duplication, of
(a) 50% of the Consolidated Net Income of Holdings for the period
(taken as one accounting period) from January 1, 1999 to the
end of Holdings' most recently ended fiscal quarter for which
internal financial statements are available at the time of
such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit),
plus
(b) 100% of the aggregate net cash proceeds received by Holdings
since the date of the Indenture as a contribution to its
common equity capital or from the issue or sale of Equity
Interests of Holdings (other than Disqualified Stock) or from
the issue or sale of convertible or exchangeable Disqualified
Stock or convertible or exchangeable debt securities of
Holdings that have been converted into or exchanged for such
Equity Interests (other than Equity Interests (or
Disqualified Stock or debt securities) sold to a Subsidiary
of Holdings), plus
(c) to the extent that any Restricted Investment that was made
after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (without
duplication of amounts included in Consolidated Net Income at
any time after the Closing) (i) the cash return of capital
with respect to such Restricted Investment (less the cost of
disposition, if any) and (ii) the initial amount of such
Restricted Investment.
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the Indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness of Holdings
or any Guarantor or of any Equity Interests of Holdings or any
Restricted Subsidiary in exchange for, or out of the net cash proceeds
of
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the substantially concurrent sale (other than to a Restricted Subsidiary
of Holdings) of, Equity Interests of Holdings (other than Disqualified
Stock); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (3) (b) of the preceding
paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of Holdings or any Guarantor with the net
cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of Holdings to
the holders of all of its common Equity Interests on a pro rata basis;
(5) the repurchase of Equity Interests deemed to occur upon the exercise
of stock options if such Equity Interests represent a portion of the
exercise price thereof;
(6) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of Holdings or any Restricted Subsidiary
of Holdings held by (A) any director of Holdings or member of Holdings'
(or any of its Restricted Subsidiaries') management pursuant to any
management equity subscription agreement or stock option agreement in
effect as of the date of the Indenture or (B) any employee of Holdings
or any of its Subsidiaries upon the retirement of any such employee;
provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $2.5
million in any twelve-month period;
(7) the defeasance, redemption or repurchase of any Disqualified Stock of
Holdings or any Restricted Subsidiary in exchange for, or out of the
substantially concurrent sale (other than to Holdings or a Subsidiary
of Holdings) of Disqualified Stock of Holdings or such Restricted
Subsidiary, respectively; provided that: (A) the aggregate liquidation
preference of such Disqualified Stock does not exceed the aggregate
liquidation preference of the Disqualified Stock so extended,
refinance, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (B) such
Disqualified Stock has a final maturity date later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of the Notes; and
(C) such Disqualified Stock is incurred either by Holdings or by the
Restricted Subsidiary who is the obligor on the Disqualified Stock
being extended, refinanced, renewed, replaced, defeased or refunded;
(8) the making of loans by Holdings or any of its Restricted Subsidiaries
to officers or directors of Holdings; provided that the aggregate
outstanding amount of such loans shall not exceed, at any time, $2.0
million; and
(9) so long as no Default or Event of Default is continuing or would be
caused thereby, the defeasance, redemption or repurchase of any
preferred stock or Disqualified Stock issued in connection with the
acquisition of assets or a Permitted Business; provided that the
aggregate amount of such Defeasance, redemption or repurchase payments
shall not exceed $5.0 million.
The amount of all Restricted Payments (other than cash) and Qualified
Proceeds (other than cash) shall be the fair market value on the date of the
Restricted Payment or date of receipt of Qualified Proceeds of the asset(s) or
securities proposed to be transferred or issued by Holdings or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant shall be determined by the Board of Directors whose resolution with
respect thereto shall be delivered to the Trustee. The Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $5.0 million. Not later than the date of making any
Restricted Payment, Holdings shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the
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basis upon which the calculations required by this "Restricted Payments"
covenant were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture. Accrual of interest, accretion or
amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms and the
payment of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be deemed to be a Restricted
Payment for purposes of this covenant; provided in each such case, that the
amount thereof is included in Fixed Charges of Holdings as accrued.
Incurrence of Indebtedness and Issuance of Preferred Stock
Holdings 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
(collectively, "incur"), with respect to any Indebtedness (including Acquired
Debt), and Holdings will not issue any Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any shares of preferred stock;
provided that Holdings and any Restricted Subsidiary may incur Indebtedness
(including Acquired Debt), and Holdings may issue Disqualified Stock, if the
Fixed Charge Coverage Ratio for Holdings' most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.0 to 1, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of
such four-quarter period.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by Holdings and any Restricted Subsidiary of
Indebtedness and letters of credit under our senior credit facility
(with letters of credit being deemed to have a principal amount equal
to the maximum potential liability of Holdings and its Restricted
Subsidiaries thereunder) in an aggregate principal amount at any one
time not to exceed $100.0 million less the aggregate amount of all Net
Proceeds of Asset Sales applied by Holdings or any of its Subsidiaries
since the date of the Indenture to repay Indebtedness under our senior
credit facility pursuant to the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales";
(2) the incurrence by Holdings and the Restricted Subsidiaries of
Indebtedness represented by the Notes issued on the date of Closing,
Existing Indebtedness, the exchange notes and the Subsidiary Guarantees
thereof;
(3) the incurrence by Holdings or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case, incurred for
the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in
the business of Holdings or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $5.0 million at any time outstanding;
(4) the incurrence by Holdings or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace, Indebtedness (other
than intercompany Indebtedness) that was permitted by the Indenture to
be incurred under the first paragraph of this covenant or clause (2) of
this paragraph;
(5) the incurrence by Holdings or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among Holdings and any of its
Restricted Subsidiaries; provided that:
(a) if Holdings or any Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly
subordinated to the prior payment in full in cash of all
Obligations
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with respect to the Notes, in the case of Holdings, or the Subsidiary
Guarantee of such Guarantor, in the case of a Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person
other than Holdings or a Restricted Subsidiary thereof and
(ii) any sale or other transfer of any such Indebtedness to a
Person that is not either Holdings or a Restricted Subsidiary
thereof; shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by Holdings or such
Restricted Subsidiary, as the case may be, that was not
permitted by this clause (5);
(6) the incurrence by Holdings or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or
hedging (i) interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of the Indenture to be
outstanding or (ii) foreign currency exchange rate risk;
(7) the guarantee by Holdings or any of the Restricted Subsidiaries of
Indebtedness of Holdings or a Restricted Subsidiary of Holdings that
was permitted to be incurred by another provision of this covenant;
(8) indebtedness incurred in respect of workers' compensation claims,
self-insurance obligations, performance, surety and similar bonds and
completion guarantees provided by Holdings or a Guarantor in the
ordinary course of business;
(9) Indebtedness arising from guarantees of Indebtedness of Holdings or
any Subsidiary or the agreements of Holdings 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 Capital Stock of a Restricted
Subsidiary, or other guarantees of Indebtedness incurred by any person
acquiring all or any portion of such business, assets or Capital Stock
of a Restricted Subsidiary for the purpose of financing such
acquisition; provided that the maximum aggregate liability in respect
of all such Indebtedness shall at no time exceed the gross proceeds
actually received by Holdings and its Restricted Subsidiaries in
connection with such disposition;
(10) Indebtedness of a Receivables Subsidiary that is non-recourse to
Holdings or any other Restricted Subsidiary of Holdings (other than
Standard Securitization Undertakings) incurred in connection with a
Qualified Receivables Transaction;
(11) the incurrence by Holdings or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding not to exceed $20.0
million; and
(12) the accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of
dividends on Disqualified Stock in the form of additional shares of the
same class of Disqualified Stock; provided in each such case, that the
amount thereof is included in Fixed Charges of Holdings as accrued.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (12) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant,
Holdings will be permitted to classify such item of Indebtedness on the date of
its incurrence in any manner that complies with this covenant.
No Senior Subordinated Debt
Holdings will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt of Holdings and senior in any respect in right of
payment to the Notes. No Guarantor will incur, create, issue, assume,
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guarantee or otherwise become liable for any Indebtedness that is subordinate
or junior in right of payment to any Senior Debt of such Guarantor and senior
in any respect in right of payment to such Guarantor's Subsidiary Guarantee.
Liens
Holdings will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien
of any kind securing Indebtedness, Attributable Debt or trade payables on any
asset now owned or hereafter acquired, except (i) Liens solely on the assets of
Unrestricted Subsidiaries and (ii) Permitted Liens unless all payments due
under the Indenture and the Notes are secured on an equal and ratable basis
with the Indebtedness so secured until such time as such is no longer secured
by a Lien; provided that if such Indebtedness is by its terms expressly
subordinated to the Notes or any Subsidiary Guarantee, the Lien securing such
Indebtedness shall be subordinate and junior to the Lien securing the Notes and
the Subsidiary Guarantees with the same relative priority as such subordinate
or junior Indebtedness shall have with respect to the Notes and the Subsidiary
Guarantees.
Dividend and Other Payment Restrictions Affecting Subsidiaries
Holdings will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or permit to exist or become effective any
encumbrance or restriction on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock to
Holdings or any of Holdings' Restricted Subsidiaries, or with respect
to any other interest or participation in, or measured by, its profits,
or pay any indebtedness owed to Holdings or any of Holdings' Restricted
Subsidiaries;
(2) make loans or advances to Holdings or any of Holdings' Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to Holdings or any of
Holdings' Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) our senior credit facility and Existing Indebtedness, in each case, as
in effect on the date of the Indenture and any amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings are no more
restrictive, taken as a whole, with respect to such dividend and other
payment restrictions than those contained in our senior credit facility
or such Existing Indebtedness, as in effect on the date of the
Indenture;
(2) the Indenture, the Notes and the Exchange Notes;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by Holdings or any of its Restricted Subsidiaries as in effect
at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the
Person, or the property or assets of the Person, so acquired; provided
that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of the Indenture to be incurred;
(5) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired
of the nature described in clause (3) of the preceding paragraph;
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(7) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by such Restricted Subsidiary
pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness; provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being
refinanced;
(9) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under the
caption "--Liens" that limit the right of Holdings or any of its
Restricted Subsidiaries to dispose of the assets subject to such Lien;
(10) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business;
(12) any other security agreement, installment or document relating to
Senior Debt hereafter in effect; provided that such encumbrances or
restrictions are customary in connection with such documents and that
the terms and conditions of such encumbrances or restrictions are, in
the aggregate, no more restrictive or adverse to the holders of the
Notes than those encumbrances or restrictions imposed in connection
with our senior credit facility as in effect on the date of Closing;
and
(13) any agreement relating to a sale and leaseback transaction or Capital
Lease Obligation, in each case, otherwise permitted by the Indenture,
but only on the property subject to such transaction or lease and only
to the extent that such restrictions or encumbrances are customary with
respect to a sale and leaseback transaction or capital lease.
Merger, Consolidation, or Sale of Assets
Holdings may not, directly or indirectly: (1) consolidate or merge with or
into another Person (whether or not Holdings is the surviving corporation); or
(2) sell, assign, lease, transfer, convey or otherwise dispose of all or
substantially all of Holdings' properties or assets (determined on a
consolidated basis for Holdings and its Restricted Subsidiaries), in one or
more related transactions, to another Person; unless:
(1) either: (a) Holdings is the surviving corporation; or (b) the Person
formed by or surviving any such consolidation or merger (if other than
Holdings) or to which such sale, assignment, transfer, conveyance or
other disposition shall have been made is a corporation organized or
existing under the laws of the United States, any state thereof or the
District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger (if
other than Holdings) or the Person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes
all the obligations of Holdings under the Notes, the Indenture and the
exchange and registration rights agreement pursuant to agreements
reasonably satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of Default
exists (including, without limitation, after giving effect to any Liens
incurred, assumed or granted in connection with or in respect of such
transaction); and
(4) Holdings or the Person formed by or surviving any such consolidation
or merger (if other than Holdings):
(a) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net
Worth of Holdings immediately preceding the transaction; and
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(b) will, on the date of such transaction after giving pro forma
effect thereto and any related financing transactions as if
the same had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant
described above under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock."
This "Merger, Consolidation, or Sale of Assets" covenant will not apply to a
sale, assignment, transfer, conveyance or other disposition of assets between
or among Holdings and any of its Wholly Owned Subsidiaries, and Holdings may
merge with an Affiliate incorporated or organized solely for the purpose of
reincorporating or reorganizing Holdings in another jurisdiction to realize tax
or other benefits without complying with the provisions of clauses (3) or (4)
above.
Transactions with Affiliates
Holdings 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 (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
Holdings or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by Holdings or such
Restricted Subsidiary with an unrelated Person; and
(2) Holdings delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with this
covenant and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the
Board of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $5.0 million, an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment
banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement entered into by Holdings or any of its
Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of Holdings or such Restricted
Subsidiary;
(2) transactions between or among Holdings and/or its Restricted
Subsidiaries;
(3) any sale or other issuance of Equity Interests (other than
Disqualified Stock of Holdings)
(4) Restricted Payments and Permitted Investments that are permitted by
the provisions of the Indenture described above under the caption
"--Restricted Payments";
(5) the payment of fees and expenses to Vestar Capital Partners ("Vestar")
or any of its Affiliates (i) pursuant to the Management Agreement as in
effect on the date of Closing; (ii) pursuant to any amended,
supplemented or replacement management agreement; provided that the
terms of any such amended, supplemented or replacement management
agreement are not, with respect to the payment of fees and expenses to
Vestar and its Affiliates, more favorable to Vestar or any of its
Affiliates than the Management Agreement; and (iii) consisting of
advisory, investment banking or similar fees in connection with
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acquisitions or other corporate transactions in an amount not to exceed
1.0% of the value of any such transaction; and
(6) the payment by Holdings or any Restricted Subsidiary of amounts
pursuant to the Buonanno Agreement as in effect on the date of Closing.
Additional Subsidiary Guarantees
If Holdings or any of its Restricted Subsidiaries transfers or causes to
be transferred, in one transaction or a series of related transactions, any
property or assets in excess of $500,000 to any domestic Restricted Subsidiary
that is not a Guarantor, or if Holdings or any of its Restricted Subsidiaries
acquires or creates another domestic Restricted Subsidiary after the date of
the Indenture with a book value in excess of $500,000, then that newly acquired
or created domestic Restricted Subsidiary must become a Guarantor and shall (i)
execute and deliver to the Trustee a supplemental indenture in form reasonably
satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of Holdings' obligations under the Notes and the
Indenture on the terms set forth in the Indenture and (ii) deliver to the
Trustee an opinion of counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and
constitutes a legal, valid, binding and enforceable obligation of such
Restricted Subsidiary, subject to normal exceptions. Thereafter, such
Restricted Subsidiary shall be a Guarantor for all purposes of the Indenture.
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, all
outstanding Investments owned by Holdings and its Restricted Subsidiaries in
the Subsidiary so designated will be deemed to be an Investment made as of the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of the covenant described above under the
caption "--Restricted Payments" or Permitted Investments, as applicable. All
such outstanding Investments will be valued at the fair market value at the
time of such designation. That designation will only be permitted if such
Restricted Payment would be permitted at that time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The
Board of Directors may redesignate any Unrestricted Subsidiary to be a
Restricted Subsidiary if the redesignation would not cause a Default.
Sale and Leaseback Transactions
Holdings will not, and will not permit any of its Restricted Subsidiaries
to, enter into any sale and leaseback transaction; provided that Holdings or
any Restricted Subsidiary of Holdings that is a Guarantor may enter into a sale
and leaseback transaction if:
(1) Holdings or that Guarantor, as applicable, could have (a) incurred
Indebtedness in an amount equal to the Attributable Debt relating to
such sale and leaseback transaction under the Fixed Charge Coverage
Ratio test in the first paragraph of the covenant described above under
the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to
the covenant described above under the caption "--Liens";
(2) the gross cash proceeds of that sale and leaseback transaction are at
least equal to the fair market value, as determined in good faith by
the Board of Directors and set forth in an Officers' Certificate
delivered to the Trustee, of the property that is the subject of such
sale and leaseback transaction; and
(3) the transfer of assets in that sale and leaseback transaction is
permitted by, and Holdings applies the proceeds of such transaction in
compliance with, the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales."
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Issuances and Sales of Equity Interests in Wholly Owned Subsidiaries
Holdings will not, and will not permit any of its Restricted Subsidiaries
to, transfer, convey, sell, lease or otherwise dispose of any Equity Interests
in any Wholly Owned Restricted Subsidiary of Holdings to any Person (other than
Holdings or a Wholly Owned Restricted Subsidiary of Holdings), unless the cash
Net Proceeds from such transfer, conveyance, sale, lease or other disposition
are applied in accordance with the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales."
Issuances of Guarantees of Indebtedness
Holdings will not permit any of its Restricted Subsidiaries, directly or
indirectly, to Guarantee or pledge any assets to secure the payment of any
other Indebtedness of Holdings unless such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture providing for the Guarantee of
the payment of the Notes by such Restricted Subsidiary, which Guarantee shall
be senior to or pari passu with such Restricted Subsidiary's Guarantee of or
pledge to secure such other Indebtedness, unless such other Indebtedness is
Senior Debt, in which case the Guarantee of the Notes may be subordinated to
the Guarantee of such Senior Debt to the same extent as the Notes are
subordinated to such Senior Debt.
Notwithstanding the preceding paragraph, any Subsidiary Guarantee of the
Notes will provide by its terms that it will be automatically and
unconditionally released and discharged under the circumstances described above
under the caption "--Additional Subsidiary Guarantees." The form of the
Subsidiary Guarantee will be attached as an exhibit to the Indenture.
Business Activities
Holdings will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to the extent
that any such business would not be material to Holdings and its Subsidiaries,
taken as a whole.
Payments for Consent
Holdings will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Holder of Notes for or as an inducement to any consent, waiver
or amendment of any of the terms or provisions of the Indenture or the Notes
unless such consideration is offered to be paid and is paid to all Holders of
the Notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
Reports
Whether or not required by the Securities and Exchange Commission, so long
as any Notes are outstanding, Holdings will furnish to the Holders of Notes,
within the time periods specified in the Securities and Exchange Commission's
rules and regulations:
(1) all quarterly and annual financial information that would be required
to be contained in a filing with the Securities and Exchange Commission
on Forms 10-Q and 10-K if Holdings were required to file such Forms,
including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report on the annual financial statements by
Holdings' certified independent accountants; and
(2) all current reports that would be required to be filed with the
Securities and Exchange Commission on Form 8-K if Holdings were
required to file such reports.
In addition, whether or not required by the Securities and Exchange
Commission, Holdings will file a copy of all of the information and reports
referred to in clauses (1) and (2) above with the Securities and Exchange
Commission for public availability within the time periods specified in the
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Securities and Exchange Commission's rules and regulations (unless the
Securities and Exchange Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request.
Notwithstanding the foregoing, so long as Holdings is in compliance with
its obligations set forth under "--Registration Covenant; Exchange Offer," and
any such exchange offer registration statement contains all of the financial
and other information otherwise required by Forms 10-K and 10-Q for the year
ended December 31, 1998 and the three months ending March 31, 1999,
respectively, Holdings shall not be required to file with the Commission or
otherwise provide an annual report on Form 10-K or a quarterly report on Form
10-Q for the year ended December 31, 1998 or the quarter ending March 31, 1999,
respectively.
Events of Default and Remedies
Each of the following is an Event of Default:
(1) default for a continued period of 30 days in the payment when due of
interest on the Notes, whether or not prohibited by the subordination
provisions of the Indenture;
(2) default in payment when due of the principal of or premium, if any, on
the Notes, whether or not prohibited by the subordination provisions of
the Indenture;
(3) failure by Holdings or any of its Subsidiaries to comply with the
provisions described under the captions "--Repurchase at the Option of
Holders--Change of Control" or "--Asset Sales";
(4) failure by Holdings or any of its Restricted Subsidiaries for 30 days
after notice to comply with any of the other agreements in the
Indenture;
(5) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Holdings or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by Holdings or any
of its Restricted Subsidiaries) whether such Indebtedness or guarantee
now exists, or is created after the date of the Indenture, if that
default:
(a) is caused by a failure to pay principal of or premium, if
any, or interest on such Indebtedness at final maturity (a
"Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5.0 million or more;
(6) failure by Holdings or any of its Restricted Subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the Indenture, any Guarantor's Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or
shall cease for any reason to be in full force and effect or any
Guarantor, or any Person acting on behalf of any Guarantor, shall deny
or disaffirm its obligations under its Guarantee; and
(8) certain events of bankruptcy or insolvency with respect to Holdings or
any of its Restricted Subsidiaries.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to Holdings, any Restricted Subsidiary
that is a Significant Subsidiary or any group of Restricted Subsidiaries that,
taken together, would constitute a Significant Subsidiary, all outstanding
notes will become due and payable immediately without further action or notice.
If any other Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding notes may
declare all the Notes to be due and payable immediately.
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Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
Holdings is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture. Upon becoming aware of any Default or
Event of Default, Holdings is required 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 Holdings or
any Guarantor, as such, shall have any liability for any obligations of
Holdings or the Guarantors under the Notes, the Indenture, the Guarantors'
Guarantees or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
Holdings may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes and all
obligations of the Guarantors discharged with respect to their Guarantees
("Legal Defeasance") except for:
(1) the rights of Holders of outstanding notes to receive payments in
respect of the principal of, premium, if any, and interest on such
Notes when such payments are due from the trust referred to below;
(2) Holdings' obligations with respect to the Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee, and
Holdings' obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, Holdings may, at its option and at any time, elect to have
the obligations of Holdings and the Guarantors released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with those covenants shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Holdings 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 on the outstanding notes on the stated maturity or on
the applicable redemption date, as the case may be, and Holdings must
specify whether the Notes are being defeased to maturity or to a
particular redemption date;
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(2) in the case of Legal Defeasance, Holdings shall have delivered to the
Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that (a) Holdings has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the
date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Holdings shall have delivered to
the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that the Holders of the outstanding notes will not recognize
income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit);
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which Holdings or
any of its Restricted Subsidiaries is a party or by which Holdings or
any of its Restricted Subsidiaries is bound;
(6) Holdings must have delivered to the Trustee an opinion of counsel to
the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) Holdings must deliver to the Trustee an Officers' Certificate stating
that the deposit was not made by Holdings with the intent of preferring
the Holders of Notes over the other creditors of Holdings with the
intent of defeating, hindering, delaying or defrauding creditors of
Holdings or others; and
(8) Holdings must deliver to the Trustee an Officers' Certificate stating
that all conditions precedent relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
Amendment, Supplement and Waiver
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the principal of or change or have the effect of changing the
fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes (other than provisions relating to the
covenants described above under the caption "--Repurchase at the Option
of Holders");
(3) reduce the rate of or change the time for payment of interest on any
Note;
(4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
(5) make any Note payable in money other than that stated in the Notes;
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(6) make any change in the provisions of the Indenture relating to waivers
of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or interest on the Notes;
(7) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders");
(8) amend, change or modify in any material respect the obligation of
Holdings to make and consummate a Change of Control Offer in the event
of a Change of Control or make and consummate an Asset Sale Offer with
respect to any Asset Sale that has been consummated or modify any of
the provisions or definitions with respect thereto;
(9) release any Guarantor from any of its obligations under its Guarantee
or the Indenture otherwise than in accordance with the terms of the
Indenture; or
(10) make any change in the preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the
Indenture relating to subordination (including the related definitions) that
adversely affects the rights of the Holders of the Notes will require the
consent of the Holders of at least 75% in aggregate principal amount of Notes
then outstanding.
Notwithstanding the preceding, without the consent of any Holder of Notes,
Holdings and the Trustee may amend or supplement the Indenture or the Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to provide for the assumption of Holdings' obligations to Holders of
Notes in the case of a merger or consolidation or sale of all or
substantially all of Holdings' assets;
(4) to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder; or
(5) to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture
Act.
Governing Law
The Indenture, the Notes and the Guarantors' Guarantees will be governed
by the laws of the State of New York.
Concerning the Trustee
If the Trustee becomes a creditor of Holdings or any Guarantor, the
Indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security
or otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the Commission for permission to continue or
resign.
The Holders of a majority in principal amount of the then outstanding
notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur and be continuing, the Trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
Holder of Notes, unless such Holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
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Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) 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, whether or not such Indebtedness is 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
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of
the Voting Stock of a Person shall be deemed to be control. For purposes of
this definition, the terms "controlling," "controlled by" and "under common
control with" shall have correlative meanings.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any property,
assets or rights, other than sales or leases of inventory in the
ordinary course of business consistent with past practices; provided
that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of Holdings and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "--Repurchase at the Option
of Holders--Change of Control" and/or the provisions described above
under the caption "--Certain Covenants--Merger, Consolidation, or Sale
of Assets" and not by the provisions of the Asset Sale covenant; and
(2) the issuance of Equity Interests by any of Holdings' Restricted
Subsidiaries or the sale of Equity Interests in any of its
Subsidiaries,
Notwithstanding the preceding, the following items shall not be deemed to be
Asset Sales:
(1) any single transaction or series of related transactions that involves
assets having a fair market value of less than $2.0 million in any
consecutive 12-month period;
(2) a transfer of assets between or among Holdings and its Wholly Owned
Restricted Subsidiaries;
(3) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to Holdings or to another Wholly Owned Restricted
Subsidiary;
(4) disposals or replacements of obsolete equipment or Cash Equivalents in
the ordinary course of business;
(5) a Restricted Payment or a Permitted Investment that is permitted by
the covenant described above under the caption "--Certain
Covenants--Restricted Payments"; and
(6) any sale of accounts receivable, or participations therein, in
connection with any Qualified Receivables Transaction.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
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value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial
ownership of all securities that such "person" has the right to acquire,
whether such right is currently exercisable or is exercisable only upon the
occurrence of a subsequent condition.
"Buonanno Agreement" means a consulting, advisory or similar agreement to
be entered into between Holdings and Vincent J. Buonanno providing for payments
of fees in an aggregate amount not to exceed $1.0 million, plus expense
reimbursement.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at that time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, all corporate stock (however
designated);
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership
or membership interests (whether general or limited); and
(4) 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:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is
pledged in support thereof) having maturities of not more than twelve
months from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities
of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any domestic commercial bank having
capital and surplus in excess of $500 million and a Thompson Bank Watch
Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper and other securities having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation and in each case maturing within twelve months after the
date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of Holdings and
its Restricted Subsidiaries taken as a whole to any "person" (as such
term is used in Section 13(d)(3) of the Exchange Act) other than a
Principal;
(2) the adoption of a plan relating to the liquidation or dissolution of
Holdings;
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(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any "person"
(as defined above), other than the Principals, becomes the Beneficial
Owner, directly or indirectly, of more than (i) 50% of the Voting Stock
of Holdings or (ii) 35% of the Voting Stock of Holdings and such Person
Beneficially Owns a greater percentage of the Voting Stock of Holdings
than the Principals, in either case (i) or (ii), measured by voting
power rather than number of shares;
(4) the first day on which a majority of the members of the Board of
Directors of Holdings are not Continuing Directors; or
(5) Holdings consolidates with, or merges with or into, any Person, or any
Person consolidates with, or merges with or into, Holdings, in any such
event pursuant to a transaction in which any of the outstanding Voting
Stock of Holdings is converted into or exchanged for cash, securities
or other property, other than any such transaction where the Voting
Stock of Holdings outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified
Stock) of the surviving or transferee Person constituting a majority of
the outstanding shares of such Voting Stock of such surviving or
transferee Person immediately after giving effect to such issuance.
"Closing" means the original issuance of Notes on the date of the
Indenture.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss realized
in connection with an Asset Sale, to the extent such losses were
deducted in computing such Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net
Income; plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease
Obligations, interest on guaranteed indebtedness, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net payments, if any,
pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income; plus
(4) fees and expenses paid to Vestar or any of its Affiliates pursuant to
the Management Agreement during such period in an aggregate amount not
to exceed $1.0 million; plus
(5) charges classified and reflected as non-recurring on the date of
Closing and for any other such period, in each case, on Holdings'
consolidated financial statements prepared in accordance with GAAP;
plus
(6) amounts paid pursuant to the Buonanno Agreement (to the extent not
already included in (7) below) during such period; plus
(7) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash expenses
(excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period)
of such Person and its Restricted Subsidiaries for such period to the
extent that such depreciation, amortization and other non-cash expenses
were deducted in computing such Consolidated Net Income; minus
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(8) non-cash items increasing such Consolidated Net Income for such
period, other than items that were accrued in the ordinary course of
business, in each case, on a consolidated basis and determined in
accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income or
profits of, and the depreciation and amortization and other non-cash charges
of, a Restricted Subsidiary of Holdings shall be added to Consolidated Net
Income to compute Consolidated Cash Flow of Holdings only to the extent that a
corresponding amount would be permitted at the date of determination to be
dividended to Holdings by such Restricted Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or
distributions received in cash by the specified Person or a Restricted
Subsidiary thereof; provided that if such Restricted Subsidiary is not
a Guarantor, the amount of such dividends or distributions includable
in Consolidated Net Income shall be limited to Holdings' direct and
indirect pro rata portion of the outstanding Equity Interests in such
Restricted Subsidiary;
(2) the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall
be excluded;
(4) the cumulative effect of a change in accounting principles shall be
excluded;
(5) any restoration to income of any contingency reserve of an
extraordinary, non-recurring or unusual nature shall be excluded,
except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued in any period for which Consolidated
Net Income is required to be calculated for purposes of the Indenture;
and
(6) for purposes of the "Restricted Payments" covenant, in the case of a
successor to the specified Person by consolidation or merger or as a
transferee of the specified Person's assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer
of assets shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of:
(1) the consolidated equity of the common stockholders of such Person and
its consolidated Subsidiaries as of such date; plus
(2) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of
net earnings in respect of the year of such declaration and payment,
but only to the extent of any cash received by such Person upon
issuance of such preferred stock.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Holdings who:
(1) was a member of such Board of Directors on the date of the Indenture;
or
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(2) was nominated for election or elected to such Board of Directors with
the approval of a majority of the Continuing Directors who were members
of such Board at the time of such nomination or election.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means (1) the Obligations of Holdings under our
senior credit facility and (2) any other Senior Debt permitted under the
Indenture (a) the principal amount of which is $25.0 million or more and (b)
that has been designated by Holdings as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require Holdings to repurchase such Capital
Stock upon the occurrence of a change of control or an asset sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
Holdings may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means the Obligations of Holdings and its
Restricted Subsidiaries in existence on the date of the Indenture (including
amounts outstanding under our senior credit facility on such date), until such
amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of:
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, including,
without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments, if any, pursuant to Hedging
Obligations; plus
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period (other than
Capital Lease Obligations); plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries, whether or not such Guarantee or Lien is called upon;
plus
(4) the product of (a) all dividend payments, whether or not in cash, on
any series of Disqualified Stock of such Person and on any series of
preferred stock of any of its Restricted Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity
Interests of Holdings (other than Disqualified Stock) or payable to
Holdings or a Restricted Subsidiary of Holdings, times (b) a fraction,
the numerator of which is one and the denominator of which is one minus
the then current combined federal, state and local statutory tax rate
of such Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such
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Person for such period. In the event that the specified Person or any of its
Restricted Subsidiaries incurs, assumes, Guarantees, redeems or repays any
Indebtedness (other than revolving credit borrowings) or issues or redeems
preferred stock subsequent to the commencement of the period for which the
Fixed Charge Coverage Ratio is being calculated but prior to the date on which
the event for which the calculation of the Fixed Charge Coverage Ratio is made
(the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee,
redemption or repayment of Indebtedness, or such issuance or redemption of
preferred stock, as if the same had occurred at the beginning of the applicable
four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the specified Person or any of its
Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (3) of the proviso set forth in the
definition of Consolidated Net Income (including any pro forma expense
and cost reductions attributable to the assets acquired calculated on a
basis consistent with the standard set forth in Regulation S-X under
the Act as in effect on the date of Closing);
(2) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only
to the extent that the obligations giving rise to such Fixed Charges
will not be obligations of the specified Person or any of its
Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of Closing; provided that all
reports and other financial information provided by Holdings to the holders of
the Notes, the Trustee and/or the Commission shall be prepared in accordance
with GAAP, as in effect on the date of such report or other financial
information.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means each of:
(1) Russell-Stanley Corp., Container Management Services, Inc., New
England Container Co., Inc., Russell-Stanley, Inc., RSLPCO, Inc. and
Russell-Stanley, L.P.; and
(2) any other subsidiary that executes a Guarantee in accordance with the
provisions of the Indenture;
and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements;
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(2) and other agreements or arrangements designed to protect such Person
against fluctuations in interest rates or foreign currency exchange
rates.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations;
(5) representing the balance deferred and unpaid of the purchase price of
any property, except any such balance that constitutes an accrued
expense or trade payable;
(6) representing any Hedging Obligations; or
(7) representing any Disqualified Stock of such Person and any preferred
stock issued by a Restricted Subsidiary of such Person,
if and to the extent any of the preceding items (other than letters of credit,
Hedging Obligations, Disqualified Stock and preferred stock of a Restricted
Subsidiary) would appear as a liability upon a balance sheet of the specified
Person prepared in accordance with GAAP. In addition, the term "Indebtedness"
includes (a) all Indebtedness of others secured by a Lien on any asset of the
specified Person (whether or not such Indebtedness is assumed by the specified
Person), and (b) to the extent not otherwise included, the Guarantee by such
Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount;
(2) the maximum fixed redemption or repurchase price, in the case of
Disqualified Stock of such Person;
(3) the maximum voluntary or involuntary liquidation preferences plus
accrued and unpaid dividends, in the case of preferred stock of a
Restricted Subsidiary of such Person; and
(4) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions, purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP. If Holdings or any Restricted
Subsidiary of Holdings sells or otherwise disposes of any Equity Interests of
any direct or indirect Restricted Subsidiary of Holdings such that, after
giving effect to any such sale or disposition, such Person is no longer a
Restricted Subsidiary of Holdings, Holdings shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Restricted Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph of the
covenant described above under the caption "Certain Covenants--Restricted
Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and
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any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction.
"Management Agreement" means the management agreement dated July 23, 1997
between Holdings and Vestar, as amended, modified or supplemented from time to
time.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends and Disqualified Stock dividends,
excluding, however:
(1) any gain or loss, together with any related provision for taxes on
such gain or loss, realized in connection with: (a) any Asset Sale; or
(b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain.
"Net Proceeds" means the aggregate cash proceeds received by Holdings 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
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale, including, without limitation, legal, accounting
and investment banking fees, and sales commissions, and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof, in
each case after taking into account any available tax credits or deductions and
any tax sharing arrangements and amounts required to be applied to the
repayment of Indebtedness, other than Senior Debt, secured by a Lien on the
asset or assets that were the subject of such Asset Sale.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither Holdings nor any of its Restricted Subsidiaries
(a)provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time or
both any holder of any other Indebtedness (other than the Notes) of
Holdings or any of its Restricted Subsidiaries to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated
or payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of Holdings or any of its
Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means the business of Holdings and its Restricted
Subsidiaries conducted on the date of Closing and businesses ancillary or
reasonably related thereto.
"Permitted Investments" means:
(1) any Investment in Holdings or in a Restricted Subsidiary of Holdings;
(2) any Investment in Cash Equivalents;
(3) any Investment by Holdings or any Restricted Subsidiary of Holdings in
a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of Holdings; or
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(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets
to, or is liquidated into, Holdings or a Restricted
Subsidiary of Holdings;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales" or any transaction
not constituting an Asset Sale by reason of the $2.0 million threshold
contained in the definition thereof;
(5) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of Holdings;
(6) other Investments in any Person having an aggregate fair market value
(measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (6), not exceed $10.0
million at any one time outstanding;
(7) Investments in securities of trade creditors or customers received in
settlement of obligations or pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy of insolvency of such trade
creditors of customers; and
(8) Investments by Holdings or a Restricted Subsidiary in a Receivables
Subsidiary or any Investment by a Receivables subsidiary in any other
Person, in each case, in connection with a Qualified Receivables
Transaction.
"Permitted Junior Securities" means: (1) Equity Interests in Holdings or
any Guarantor; or (2) debt securities of Holdings or any Guarantor that (A) are
subordinated to all Senior Debt and any debt securities issued in exchange for
Senior Debt to substantially the same extent as, or to a greater extent than,
the Notes and the Subsidiary Guarantees are subordinated to Senior Debt
pursuant to of the Indenture and (B) have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the Notes.
"Permitted Liens" means:
(1) Liens on the assets of Holdings and any Restricted Subsidiary securing
Indebtedness and other Obligations under our senior credit facility
that were permitted by the terms of the Indenture to be incurred;
(2) Liens in favor of Holdings or any Restricted Subsidiary;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with Holdings or any Restricted
Subsidiary of Holdings; provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or
consolidated with Holdings;
(4) Liens on property existing at the time of acquisition thereof by
Holdings or any Restricted Subsidiary of Holdings; provided that such
Liens were in existence prior to the contemplation of such acquisition
and do not extend to any assets other than the property so acquired;
(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (3) of the second paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock"
covering only the assets acquired with such Indebtedness;
(7) Liens existing on the date of the Indenture;
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(8) Liens on Assets of Restricted Subsidiary to secure Senior Debt of such
Restricted Subsidiary that was permitted by the Indenture to be
incurred;
(9) judgment Liens not giving rise to an Event of Default so long as such
Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not
have been finally terminated or the period within which such
proceedings may be initiated shall not have expired;
(10) Liens securing Permitted Refinancing Indebtedness which is incurred to
refinance any Indebtedness which has been secured by a Lien permitted
under the Indenture and which has been incurred in accordance with the
provisions of the Indenture; provided that such Liens (A) are not
materially less favorable to the Holders and are not materially more
favorable to the lienholders with respect to such Liens that the Liens
in respect of the Indebtedness being refinanced and (B) do not extend
to or cover any property or assets of Holdings or any of its Restricted
Subsidiaries not securing the Indebtedness so refinanced;
(11) Liens upon specific items of inventory or other goods and proceeds of
any Person securing such Person's obligations in respect of bankers'
acceptance issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(12) Liens securing reimbursement obligations with respect to letters of
credit which encumber documents and other property relating to such
letters of credit and products and proceeds thereof;
(13) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(14) Liens on assets of a Receivables Subsidiary granted in connection with
a Qualified Receivables Transaction;
(15) Liens securing Hedging Obligations;
(16) any interest or title of a lessor under any lease, whether or not
characterized as capital or operating; provided that such Liens do not
extend to any property or assets which is not leased property subject
to such lease; and
(17) Liens incurred in the ordinary course of business of Holdings or any
Restricted Subsidiary of Holdings with respect to obligations that,
together with all other Liens incurred pursuant to this clause (17), do
not exceed $5.0 million at any one time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of Holdings or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of Holdings or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount
of (or accreted value, if applicable), plus accrued interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life
to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness
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has a final maturity date later than the final maturity date of, and is
subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by Holdings or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture or a governmental
agency or political subdivision thereof.
"Principals" means Vestar and its Affiliates.
"Public Equity Offering" means any underwritten public offering of common
stock of Holdings in which the gross proceeds to Holdings are at least $35.0
million.
"Purchase Money Note" means a promissory note evidencing a line of credit,
or evidencing other Indebtedness owed to Holdings or any Restricted Subsidiary
in connection with a Qualified Receivables Transaction, which note shall be
repaid from cash available to the maker of such note, other than amounts
required to be established as reserves pursuant to agreement, amount paid to
investors in respect of interest, principal and other amounts owing to such
investors and amounts paid in connection with the purchase of newly generated
receivables.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by Holdings or any Restricted Subsidiary
pursuant to which Holdings or any Restricted Subsidiary may sell, convey or
otherwise transfer to (a) a Receivables Subsidiary (in the case of a transfer
by Holdings or any Restricted Subsidiary) and (b) any other Person (in the case
of a transfer by a Receivables Subsidiary), or may grant a security interest
in, any accounts receivable (whether now existing or arising in the future) of
Holdings or any Restricted Subsidiary and any asset related thereto including,
without limitation, all collateral securing such accounts receivable and all
guarantees or other obligations in respect of such accounts receivable,
proceeds of such accounts receivable and other assets which are customarily
transferred, or in respect of which security interests are customarily granted,
in connection with asset securitization transactions involving accounts
receivable.
"Receivable Subsidiary" means a Wholly Owned Restricted Subsidiary (other
than a Guarantor) which engages in no activities other than in connection with
the financing of accounts receivables and which is designated by the Board of
Directors of Holdings (as provided below) as a Receivables Subsidiary (a) no
portion of the Indebtedness of any other Obligations (contingent or otherwise)
of which (i) is guaranteed by Holdings or any other Restricted Subsidiary
(excluding guarantees of Obligations (other than the principal of, and interest
on, Indebtedness) constituting Standard Securitization Undertakings), (ii) is
recourse to or obligates Holdings or any other Restricted Subsidiary in any way
other than pursuant to Standard Securitization Undertakings or (iii) subjects
any property or asset of Holdings or any other Restricted Subsidiary, directly
or indirectly, contingently or otherwise, to the satisfaction thereof, other
than pursuant to Standard Securitization Undertakings, (b) with which neither
Holdings nor any other Restricted Subsidiary has any material contract,
agreement, arrangement or understanding (except in connection with a Purchase
Money Note or Qualified Receivables Transaction) other than on terms no less
favorable to Holdings or such other Restricted Subsidiary than those that might
be obtained at the time from persons that are not Affiliates of Holdings, other
than fees payable in the ordinary course of business in connection with
servicing accounts receivable, and (c) to which neither Holdings nor any other
Restricted Subsidiary has any obligation to maintain or preserve such entity's
financial condition or cause such entity to achieve certain level of operating
result. Any such designation by the Board of Directors of Holdings shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
resolution of the Board of Directors of Holdings giving effect to such
designation and an Officers' Certificate certifying, to the best of such
officer's knowledge and belief after consulting with counsel, that such
designation complied with the foregoing conditions.
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"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Credit Facility" means the Fifth Amended and Restated Credit
Agreement, to be dated as of February 10, 1999, among Holdings and its
Subsidiaries, as borrowers, the lenders listed therein and BankBoston, N.A., as
administrative agent, and Goldman Sachs Credit Partners L.P., as syndication
agent, as amended, restated, modified, renewed, refunded, replaced or
refinanced in whole or in part from time to time.
"Senior Debt" means:
(1) all Indebtedness outstanding under our senior credit facility, and all
Hedging Obligations with respect thereto;
(2) any other Indebtedness permitted to be incurred by Holdings or a
Guarantor under the terms of the Indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a
parity with the Notes or subordinated in right of payment to the Notes
or any other Indebtedness of Holdings; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2)
Notwithstanding anything to the contrary in the preceding, Senior Debt will not
include:
(1) any liability for federal, state, local or other taxes owed or owing
by Holdings;
(2) any Indebtedness of Holdings to any of its Subsidiaries or other
Affiliates;
(3) any trade payables; or
(4) any Indebtedness that is incurred in violation of the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by Holdings or any Restricted Subsidiary
which are reasonably customary in an accounts receivable transaction.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of that Person (or a combination
thereof); and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Unrestricted Subsidiary" means any Subsidiary of Holdings that is
designated by the Board of Directors of Holdings as an Unrestricted Subsidiary
pursuant to a Board Resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
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(2) is not party to any agreement, contract, arrangement or understanding
with Holdings or any Restricted Subsidiary of Holdings unless the terms
of any such agreement, contract, arrangement or understanding are no
less favorable to Holdings or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates
of Holdings;
(3) is a Person with respect to which neither Holdings nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or
preserve such Person's financial condition or to cause such Person to
achieve any specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of Holdings or any of its Restricted
Subsidiaries.
Any designation of a Subsidiary of Holdings as an Unrestricted Subsidiary
shall be evidenced to the Trustee by filing with the Trustee a certified copy
of the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption
"Certain Covenants--Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of Holdings as of such date
and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under the caption "Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," Holdings shall be in default of
such covenant. The Board of Directors of Holdings may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of Holdings of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (1) such
Indebtedness is permitted under the covenant described under the caption
"Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period; and (2) no Default or Event
of Default would be in existence following such designation.
"Voting Stock" of any Person means the Capital Stock of such Person that
is entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Disqualified Stock at any date, the number of years obtained by
dividing:
(1) the sum of the products obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal or liquidation preference, including
payment at final maturity, in respect thereof, by (b) the number of
years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment; by
(2) the then outstanding principal amount or liquidation preference of
such Indebtedness or Disqualified Stock.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person and/or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
112
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
OF THE EXCHANGE OFFER
Exchange of Notes
The following summary describes the material United States federal income
tax consequences of the exchange offer. The exchange of outstanding notes for
exchange notes in the exchange offer will not constitute a taxable event to
holders. Consequently, no gain or loss will be recognized by a holder upon
receipt of an exchange note, the holding period of the exchange notes will
include the holding period of the outstanding note and the basis of the
exchange notes will be the same as the basis of the outstanding note
immediately before the exchange.
In any event, persons considering the exchange of outstanding notes for
exchange notes should consult their own tax advisors concerning the United
States federal income tax consequences in light of their particular situations
as well as any consequences arising under the laws of any other taxing
jurisdiction.
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 outstanding notes where such outstanding notes were acquired 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 us,
or causes us to be so notified in writing, we have agreed that for a period of
180 days after the date of this prospectus, we 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.
We 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 of 1933, 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 of 1933. 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 of 1933.
We have 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 outstanding notes
against certain liabilities, including certain liabilities that may arise under
the Securities Act of 1933.
By its acceptance of the exchange offer, any broker-dealer that receives
exchange notes pursuant to the exchange offer hereby agrees to notify us 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 us of the
happening of any event which makes any statement in this prospectus untrue in
any material respect or which requires the making of any changes in this
prospectus in order to
113
<PAGE>
make the statements herein not misleading or which may impose upon us
disclosure obligations that may have a material adverse effect on us (which
notice we agree to deliver promptly to such broker-dealer), such broker-dealer
will suspend use of this prospectus until we have notified such broker-dealer
that delivery of this prospectus may resume and has furnished copies of any
amendment or supplement to this prospectus to such broker-dealer.
LEGAL MATTERS
Certain legal matters will be passed upon for Russell-Stanley by Simpson
Thacher & Bartlett, New York, New York.
EXPERTS
The financial statements of Russell-Stanley Holdings, Inc. and
subsidiaries as of December 31, 1997 and 1998 and for each of the three years
in the period ended December 31, 1998, of Container Management Services, Inc.
as of July 23, 1997 and for the period January 1, 1997 through July 23, 1997,
of Hunter Drums Limited as of October 29, 1997, and for the period January 1,
1997 through October 29, 1997 and of Smurfit Plastic Packaging as of December
31, 1996 and November 7, 1997, for the year ended December 31, 1996 and for the
period January 1, 1997 through November 7, 1997, included in this prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports appearing herein and elsewhere in the registration statement, and
are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of Container Management Services, Inc. as and for
the year ended December 31, 1996 included in this prospectus have been audited
by Elliott, Davis & Company, LLP, independent auditors, as stated in their
report appearing herein and elsewhere in the registration statement, and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
114
<PAGE>
(This page intentionally left blank)
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Index to Consolidated Financial Statements of Russell-Stanley Holdings, Inc. and Subsidiaries
Independent Auditors' Report ......................................................... F-2
Financial Statements as of December 31, 1997 and 1998 and for each of the years
ended December 31, 1996, 1997 and 1998:
Consolidated Balance Sheets .......................................................... F-3
Consolidated Statements of Operations and Comprehensive Income (Loss) ................ F-5
Consolidated Statements of Redeemable Preferred Stock and Stockholders' Equity
(Deficit) ............................................................................ F-6
Consolidated Statements of Cash Flows ................................................ F-7
Notes to Consolidated Financial Statements ........................................... F-8
Index to Financial Statements of Container Management Services, Inc.
Independent Auditors' Report ......................................................... F-32
Report of Independent Certified Public Accountants ................................... F-33
Financial Statements as of December 31, 1996 and July 23, 1997 and for the year ended
December 31, 1996 and the period from January 1, 1997 through July 23, 1997:
Balance Sheets ....................................................................... F-34
Statements of Operations ............................................................. F-35
Statements of Stockholders' Equity ................................................... F-36
Statements of Cash Flows ............................................................. F-37
Notes to Financial Statements ........................................................ F-38
Index to Consolidated Financial Statements of Hunter Drums Limited
Independent Auditors' Report ......................................................... F-42
Financial Statements as of October 29, 1997 and for the period from January 1, 1997
through October 29, 1997:
Consolidated Balance Sheet ........................................................... F-43
Consolidated Statement of Operations and Retained Earnings ........................... F-44
Consolidated Statement of Cash Flows ................................................. F-45
Notes to Consolidated Financial Statements ........................................... F-46
Index to Financial Statements of Smurfit Plastic Packaging
Independent Auditors' Report ......................................................... F-50
Financial Statements as of December 31, 1996 and November 7, 1997 and
for the year ended December 31, 1996 and the period from January 1, 1997
to November 7, 1997:
Balance Sheets ....................................................................... F-51
Statements of Operations ............................................................. F-52
Statements of Cash Flows ............................................................. F-53
Notes to Financial Statements ........................................................ F-54
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Russell-Stanley Holdings, Inc.
Bridgewater, New Jersey
We have audited the accompanying consolidated balance sheets of
Russell-Stanley Holdings, Inc. and subsidiaries (the "Company") as of December
31, 1997 and 1998, and the related consolidated statements of operations and
comprehensive income (loss), redeemable preferred stock and stockholders'
equity (deficit), and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
1997 and 1998, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
February 22, 1999
F-2
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(In Thousands)
<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
ASSETS (NOTE 8)
CURRENT ASSETS:
Cash and cash equivalents ......................................... $ 1,051 $ 1,630
Accounts receivable, less allowances of $224 and $169,
respectively ..................................................... 29,641 29,408
Inventories (Note 3) .............................................. 19,004 18,761
Prepaid taxes and income taxes receivable -- net (Note 9) ......... 1,700 3,460
Prepaid and other current assets .................................. 2,512 2,132
Deferred tax benefit -- net (Note 9) .............................. 1,289 602
--------- ---------
Total current assets ............................................ 55,197 55,993
--------- ---------
PROPERTY, PLANT AND EQUIPMENT-- Net
(Notes 4 and 6) ................................................... 84,962 92,643
--------- ---------
OTHER ASSETS:
Goodwill and other intangibles -- net (Note 5) .................... 103,734 108,195
Deferred financing costs -- net (Note 15) ......................... 1,498 1,294
Other noncurrent assets ........................................... 139 129
--------- ---------
Total other assets .............................................. 105,371 109,618
--------- ---------
TOTAL ASSETS ....................................................... $ 245,530 $ 258,254
========= =========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(In Thousands)
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses (Notes 7 and 14) ......... $ 34,191 $ 42,230
Income taxes payable (Note 9) .................................. 47 849
Current maturities of long-term debt (Note 8) .................. 745 10
--------- ---------
Total current liabilities ................................... 34,983 43,089
LONG-TERM DEBT (Notes 8, 17 and 20) ............................. 160,617 171,592
DEFERRED TAXES--Net (Note 9) .................................... 5,819 4,662
OTHER NONCURRENT LIABILITIES (Note 14) .......................... 5,320 5,374
--------- ---------
Total liabilities ........................................... 206,739 224,717
--------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 14 and 20)
STOCKHOLDERS' EQUITY (Note 13)--At December 31, 1997
and 1998, 2,181 shares and 2,205 shares were issued and
outstanding .................................................... 38,791 33,537
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...................... $ 245,530 $ 258,254
========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(In Thousands)
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES
Containers ............................................. $ 141,925 $ 161,107 $ 227,392
Services ............................................... -- 15,206 46,650
--------- --------- ---------
Total net sales ...................................... 141,925 176,313 274,042
COST OF SALES
Containers ............................................. 103,636 121,576 171,851
Services ............................................... -- 12,027 41,356
--------- --------- ---------
Total cost of sales .................................. 103,636 133,603 213,207
--------- --------- ---------
Gross profit ......................................... 38,289 42,710 60,835
--------- --------- ---------
EXPENSES:
Selling ................................................ 11,268 12,254 17,532
General and administrative ............................. 11,976 12,862 21,911
Amortization of intangibles ............................ 1,070 1,726 3,487
Nonrecurring charges (Notes 7 and 18) .................. -- -- 6,167
--------- --------- ---------
Total expenses ....................................... 24,314 26,842 49,097
--------- --------- ---------
INCOME FROM OPERATIONS .................................. 13,975 15,868 11,738
INTEREST EXPENSE ........................................ 7,473 8,754 16,025
OTHER EXPENSE -- Net .................................... 268 197 550
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS .................................... 6,234 6,917 (4,837)
PROVISION (BENEFIT) FOR INCOME TAXES
(Note 9) ............................................... 2,559 2,925 (505)
--------- --------- ---------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS .................................... 3,675 3,992 (4,332)
EXTRAORDINARY ITEMS (less applicable
income tax benefit of $2,655 in 1997) (Note 15)......... -- 5,100 --
--------- --------- ---------
NET INCOME (LOSS) ....................................... 3,675 (1,108) (4,332)
OTHER COMPREHENSIVE
INCOME (LOSS) (Note 2) ................................. 7 (171) (2,012)
--------- --------- ---------
COMPREHENSIVE INCOME
(LOSS) ................................................. $ 3,682 $ (1,279) $ (6,344)
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996 AND 1997 AND 1998
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Redeemable
Preferred Common
Stock Stock Additional
------------------------- ---------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
------------- ----------- ------------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 ........... 236,498 $ 23,517 645,000 $ 7 $ 7,600 $ (21,067)
Net income ........................ -- -- -- -- -- 3,675
Issued as dividends ............... 39,094 3,910 -- -- -- --
Amortization of discount .......... -- 38 -- -- -- --
Preferred stock dividends ......... -- -- -- -- -- (3,913)
Minimum pension liability
adjustment ........................ -- -- -- -- -- --
------- --------- ------- ---- -------- ----------
BALANCE, DECEMBER 31, 1996 ......... 275,592 27,465 645,000 7 7,600 (21,305)
Net loss .......................... -- -- -- -- -- (1,108)
Issued as dividends ............... 22,149 2,214 -- -- -- --
Reacquired by purchase ............ (297,741) (29,774) (122,500) -- -- --
Amortization of discount .......... -- 95 -- -- -- --
Shares issued ..................... -- -- 1,627,778 16 71,984 --
Preferred stock dividends ......... -- -- -- -- -- (2,525)
Conversion of warrants ............ -- -- 30,243 -- (1,059) --
Premium paid on repurchase of
preferred stock ................... -- -- -- -- (7,529) --
Transaction fees .................. -- -- -- -- (1,907) --
Minimum pension liability
adjustment ........................ -- -- -- -- -- --
Translation adjustment ............ -- -- -- -- -- --
-------- --------- --------- ---- -------- ----------
BALANCE, DECEMBER 31, 1997 ......... -- -- 2,180,521 23 69,089 (24,938)
Net loss .......................... -- -- -- -- -- (4,332)
Shares issued ..................... -- -- 24,243 -- 1,090 --
Minimum pension liability
adjustment ........................ -- -- -- -- -- --
Translation adjustment ............ -- -- -- -- -- --
-------- --------- --------- ---- -------- ----------
BALANCE, DECEMBER 31, 1998 ......... $ -- $ -- 2,204,764 $ 23 $ 70,179 $ (29,270)
=========== ========= ========= ==== ======== ==========
<CAPTION>
Other Comprehensive
Income (Loss) (Note 2)
--------------------------
Minimum Notes Treasury Total
Cumulative Pension Receivable Stock Stockholders'
Translation Liability for Shares to ------------------------ Equity
Adjustments Adjustment Management Shares Amount (Deficit)
------------- ------------ --------------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 ........... $ -- $ (302) $ (64) 117,000 $ (402) $ (14,228)
Net income ........................ -- -- -- -- -- 3,675
Issued as dividends ............... -- -- -- -- -- --
Amortization of discount .......... -- -- -- -- -- --
Preferred stock dividends ......... -- -- -- -- -- (3,913)
Minimum pension liability
adjustment ........................ -- 7 -- -- -- 7
--------- ------- ------ ------- --------- ----------
BALANCE, DECEMBER 31, 1996 ......... -- (295) (64) 117,000 (402) (14,459)
Net loss .......................... -- -- -- -- -- (1,108)
Issued as dividends ............... -- -- -- -- -- --
Reacquired by purchase ............ -- -- -- 122,500 (4,451) (4,451)
Amortization of discount .......... -- -- -- -- -- --
Shares issued ..................... -- -- -- -- -- 72,000
Preferred stock dividends ......... -- -- -- -- -- (2,525)
Conversion of warrants ............ -- -- -- -- -- (1,059)
Premium paid on repurchase of
preferred stock ................... -- -- -- -- -- (7,529)
Transaction fees .................. -- -- -- -- -- (1,907)
Minimum pension liability
adjustment ........................ -- (68) -- -- -- (68)
Translation adjustment ............ (103) -- -- -- -- (103)
--------- ------- ------ ------- --------- ----------
BALANCE, DECEMBER 31, 1997 ......... (103) (363) (64) 239,500 (4,853) 38,791
Net loss .......................... -- -- -- -- -- (4,332)
Shares issued ..................... -- -- -- -- -- 1,090
Minimum pension liability
adjustment ........................ -- (381) -- -- -- (381)
Translation adjustment ............ (1,631) -- -- -- -- (1,631)
--------- ------- ------ ------- --------- ----------
BALANCE, DECEMBER 31, 1998 ......... $ (1,734) $ (744) $ (64) 239,500 $ (4,853) $ 33,537
========= ======= ====== ======= ========= ==========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(In Thousands)
<TABLE>
<CAPTION>
1996 1997 1998
------------- --------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................................ $ 3,675 $ (1,108) $ (4,332)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation .................................................... 4,799 8,475 23,479
Amortization .................................................... 1,069 1,613 3,127
Amortization of deferred financing costs ........................ 887 594 276
Extraordinary items, noncash (Note 15) .......................... -- 7,755 --
Other noncash items ............................................. 340 393 770
Changes in operating assets and liabilities,
excluding effects of acquisitions:
Decrease (increase) in accounts receivable ...................... 270 (135) 1,916
Decrease (increase) in inventories .............................. (4,252) 2,147 1,024
Decrease (increase) in prepaid and other current assets ......... (221) (1,085) 672
(Decrease) increase in accounts payable, accrued
expenses and income taxes payable .............................. (1,852) (1,763) 4,482
Decrease in deferred income taxes ............................... (489) (418) (848)
Increase in other -- net ........................................ 142 1,265 231
-------- --------- ---------
Net cash provided by operating activities ..................... 4,368 17,733 30,797
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions -- net of cash acquired (Note 16) ................... -- (130,249) (13,874)
Capital expenditures ............................................. (3,335) (9,949) (28,679)
Proceeds from sale of property, plant and equipment .............. 1,394
Other, net ....................................................... 4 (147) (74)
-------- --------- ---------
Net cash used in investing activities ......................... (3,331) (140,345) (41,233)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings ............................... 7,875 282,733 --
Repayments of long-term borrowings ............................... (3,924) (144,708) (429)
(Repayments of) borrowings under revolver credit -- net .......... (5,124) (8,515) 11,777
Dividends on redeemable preferred stock .......................... (4) (2) --
Increase in deferred financing costs ............................. (130) (6,877) (72)
Repurchase of senior subordinated notes .......................... -- (29,258) --
Capital restructuring ............................................ -- (42,880) --
Issuance of common stock ......................................... -- 72,000 --
Other, net........................................................ -- 21 (287)
-------- --------- ---------
Net cash (used in) provided by financing activities ........... (1,307) 122,514 10,989
-------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS ..................................... -- (103) 26
-------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS ........................... (270) (201) 579
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ...................... 1,522 1,252 1,051
-------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR ............................ $ 1,252 $ 1,051 $ 1,630
======== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest ......................................................... $ 6,541 $ 6,580 $ 12,883
======== ========= =========
Income taxes ..................................................... $ 3,668 $ 2,276 $ 209
======== ========= =========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization -- Through its direct operating subsidiaries, Russell-Stanley
Corp. ("RSC"), Container Management Services, Inc. ("CMS"), Hunter Drums
Limited ("Hunter"), and New England Container Co., Inc. ("NEC"),
Russell-Stanley Holdings, Inc. ("Holdings" or the "Company") is a leading
manufacturer and marketer of plastic and steel industrial containers and a
leading provider of related container services in the United States and Canada.
The Company's products are used in a broad range of industries such as
agricultural, chemical, food product, lubricant, pharmaceutical and specialty
chemicals. In July 1997, the Company restructured its capital structure through
the following transactions, i) issuance of 1,222,221 shares of common stock in
exchange for $54,999,940, resulting in additional paid-in capital of
$54,987,718, ii) repurchase of 122,500 shares of common stock for $4,450,500,
iii) repurchase of all outstanding senior subordinated notes for $29,257,638,
including make whole payments and accrued interest of $3,025,858 and $240,080,
respectively, iv) repurchase of $15.00/$17.50 Cumulative Exchangeable
Redeemable Preferred Stock (Series B) for $37,611,126, including make whole
payments and accrued interest of $7,529,123 and $302,745, respectively, and v)
conversion/repurchase of warrants for $1,059,190 (the "Capital Restructuring").
In addition, the Company restructured its debt through the following
transactions: i) repayment of existing bank debt of $25,924,331 and ii)
borrowing on a new credit facility of $46,102,987 (the "July Debt
Restructuring"). Immediately following the Capital Restructuring and the July
Debt Restructuring, Holdings was formed to serve as a holding company for RSC
and subsidiaries. The transaction was accounted for in a manner similar to a
pooling of interests, therefore, the financial statements as of and for the two
years in the period ended December 31, 1997 include the operations of Holdings
and RSC and subsidiaries as if Holdings and RSC had been combined for the
entire period. In connection with the transaction, all RSC shares and options
were exchanged for shares and options in Holdings with the same par value and
exercise price. In July 1997, CMS was acquired; CMS pioneered the businesses of
plastic container leasing on a "per use" or "round-trip" basis and plastic
container fleet management in the United States and Canada utilizing inventory
tracking technology. In October 1997, the Company acquired the stock of Hunter,
a leading Canadian manufacturer and marketer of steel and plastic drums. In
November 1997, Holdings issued 377,779 shares of common stock in exchange for
$17,000,055, resulting in additional paid-in capital of $16,996,277, and
acquired certain assets of Smurfit Plastic Packaging Corporation ("SPP" or "SPP
Assets"), a leading manufacturer and marketer of plastic drums in the United
States. In addition, the Company entered into an amended and restated revolving
credit and term loan agreement (Notes 8 and 15). In July 1998, NEC was
acquired; NEC has the largest share of the steel drum reconditioning market in
the Northeast and provides the Company with entry into the steel drum
reconditioning market, (with respect to the above acquisitions refer to Note
16).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Revenue Recognition -- Revenue is recognized when products are shipped or
services are provided to customers.
Use of Estimates -- The preparation of these financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
Estimates are used to a significant extent in determining the recoverability of
intangibles from future operations and in establishing other valuation
allowances.
F-8
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Cash Equivalents -- The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents and are valued at cost which approximates fair value.
Inventories -- Inventories are stated at the lower of cost or market
value. Cost is determined on the first-in, first-out (FIFO) method.
Property, Plant and Equipment -- Property, plant and equipment, stated at
cost, is being depreciated for financial reporting purposes on the
straight-line method over the estimated useful lives of the assets or the lease
term, whichever is shorter. The estimated useful lives for each class of
property, plant and equipment are as follows:
<TABLE>
<S> <C>
Buildings and improvements ......... 15-30 years
Furniture and fixtures ............. 3-7 years
Machinery and equipment ............ 3-10 years
Containers held for lease .......... 14-25 months
</TABLE>
Goodwill and Other Intangibles -- The excess of cost over the fair value
of net assets acquired ("goodwill") is being amortized on a straight-line basis
over its estimated useful life of 40 years. Other intangible assets, consisting
primarily of customer lists and patents, are recorded at cost and are being
amortized over the life of the related assets (up to 17 years), using the
straight-line method. Management periodically evaluates the recoverability of
long-term assets, including goodwill, based upon current and future anticipated
income and cash flows. For the three-year period ended December 31, 1998, there
were no adjustments to the carrying values of long-term assets resulting from
those evaluations.
Deferred Financing Costs -- Deferred financing costs incurred in
connection with the Company's debt restructurings are being amortized for
financial reporting purposes over the average life of the debt, using the
straight-line method.
Income Taxes -- Deferred tax assets and liabilities are recognized for the
expected future tax consequences attributable to the difference between the
financial statement carrying amounts of assets and liabilities and their
respective tax basis. Management periodically evaluates the available evidence
about future taxable income and other possible sources of realization of
deferred tax assets and establishes valuation allowances if necessary.
Translation of Foreign Currencies -- The assets and liabilities of Hunter
are translated into U.S. dollars at year-end exchange rates, with resulting
translation gains and losses accumulated in a separate component of
stockholders' equity. Income and expense items are converted into U.S. dollars
at average rates of exchange prevailing throughout the year.
Financial Instruments -- The Company utilizes financial instruments to
limit its exposure to interest rate fluctuations.
F-9
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Comprehensive Income (Loss) -- The Company has adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive
Income. Comprehensive income (loss) consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1996 1997 1998
---------- ------------- -------------
(In Thousands)
<S> <C> <C> <C>
Comprehensive income (loss):
Net income (loss) ................................ $ 3,675 $ (1,108) $ (4,332)
Other comprehensive income (loss):
Foreign currency translation adjustment ......... -- (103) (1,631)
Minimum pension liability adjustment ............ 7 (68) (381)
------- --------- ---------
Other comprehensive income (loss) ................ 7 (171) (2,012)
------- --------- ---------
Total ............................................. $ 3,682 $ (1,279) $ (6,344)
======= ========= =========
</TABLE>
Recently Issued Accounting Standard -- In June 1998, SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS 133") was
issued. SFAS 133 establishes new disclosure requirements which provide a
comprehensive standard for recognition and measurement of derivatives and
hedging activities. SFAS 133 will require new disclosures to be recorded on the
balance sheet at fair value and establishes special accounting for certain
types of hedging activities and will take effect in 2000. Based on the
Company's current derivatives, an interest rate collar and foreign currency
forward contracts, management does not believe that SFAS 133 will have a
material effect on the Company's financial condition or results of operations.
3. INVENTORIES
Inventory consists of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1998
----------- -----------
(In Thousands)
<S> <C> <C>
Raw materials ........... $ 12,003 $ 12,435
Work-in-process ......... 637 562
Finished goods .......... 6,364 5,764
-------- --------
Total ................... $ 19,004 $ 18,761
======== ========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1998
------------ ------------
(In Thousands)
<S> <C> <C>
Land .................................. $ 5,205 $ 5,518
Buildings and improvements ............ 16,518 15,418
Machinery and equipment ............... 107,605 138,049
--------- ---------
Total ................................. 129,328 158,985
Less accumulated depreciation ......... (44,366) (66,342)
--------- ---------
Total ................................. $ 84,962 $ 92,643
========= =========
</TABLE>
Included in machinery and equipment are containers held for lease,
consisting of plastic drums and intermediate bulk containers ("IBCs")
which are leased to customers.
F-10
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
5. GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1998
------------ ------------
(In Thousands)
<S> <C> <C>
Goodwill ..................................... $ 110,262 $ 117,840
Customer lists and other intangibles ......... 2,846 2,817
Patents ...................................... 206 245
--------- ---------
113,314 120,902
Less accumulated amortization ................ (9,580) (12,707)
--------- ---------
Total ........................................ $ 103,734 $ 108,195
========= =========
</TABLE>
6. LEASES
Capital Leases -- Leased equipment included in machinery and equipment
consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1998
-------- ----------
(In Thousands)
<S> <C> <C>
Leased equipment ...................... $ 850 $ 25
Less accumulated depreciation ......... (233) (7)
------ ------
Total ................................. $ 617 $ 18
====== =====
</TABLE>
Future minimum lease payments under the capital lease obligations at
December 31, 1998, are as follows:
<TABLE>
<CAPTION>
(In Thousands)
---------------
<S> <C>
1999 .......................................................... $ 9
2000 .......................................................... 4
---
Minimum lease payments ........................................ 13
Less amounts representing interest ............................ 2
---
Present value of net minimum lease payments (Note 8) .......... $11
===
</TABLE>
Operating Leases -- The Company has operating lease commitments expiring
at various dates, principally for real property, machinery and equipment, and
transportation equipment. Total lease expense amounted to $840,000, $1,456,000
and $4,416,000 in 1996, 1997 and 1998, respectively.
Future minimum lease payments under the terms of the noncancelable
operating leases with initial or remaining terms in excess of one year at
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
(In Thousands)
---------------
<S> <C>
1999 ...................... $ 4,365
2000 ...................... 3,568
2001 ...................... 3,190
2002 ...................... 2,433
2003 ...................... 2,159
Thereafter ................ 9,833
--------
Total ..................... $ 25,548
========
</TABLE>
F-11
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consists of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1998
----------- -----------
(In Thousands)
<S> <C> <C>
Accounts payable .................. $ 18,900 $ 19,873
Accrued payroll ................... 2,217 1,932
Accrued professional fees ......... 565 3,016
Accrued interest payable .......... 3,943 3,909
Other accrued expenses ............ 8,566 13,500
-------- --------
Total ............................. $ 34,191 $ 42,230
======== ========
</TABLE>
Included in accrued professional fees are $2.3 million of unpaid costs
incurred in 1998 associated with proposed transactions that were not
consummated. The total costs of $2.7 million are included in nonrecurring
expenses in the accompanying statement of operations and comprehensive income
(loss).
8. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1998
------------ ------------
(In Thousands)
<S> <C> <C>
Revolving credit loan and term loans ......... $ 161,034 $ 171,591
Capital lease obligations (Note 6) ........... 328 11
--------- ---------
161,362 171,602
Less current maturities ...................... 745 10
--------- ---------
Long-term debt ............................... $ 160,617 $ 171,592
========= =========
</TABLE>
In July and November 1997, the Company entered into amended and restated
revolving credit and term loan agreements (the "Agreements"). The Agreements
bear interest at a combination of domestic source and Eurodollar borrowing
rates which fluctuate based on earnings before interest, taxes, depreciation
and amortization ("EBITDA"). Up to $50 million can be borrowed on the revolving
credit loan. In addition, up to $5 million can be borrowed under a Swing Line,
as long as total borrowings under the revolving credit loan and Swing Line do
not exceed $50 million in the aggregate. The term loans consist of three
tranches A, B, and C (the "Term Loans"). Term Loan A is for an aggregate of $45
million and is payable in quarterly installments commencing March 31, 1999 in
increasing amounts through September 30, 2003. Term Loan B is for an aggregate
of $80 million and is payable in quarterly installments commencing June 30,
1998 in increasing amounts through September 30, 2005. Term Loan C is for an
aggregate of $25 million and is payable in two equal installments on June 30,
2006 and 2007. The Term Loans carry mandatory repayment terms based upon any of
the following i) the sale of certain assets, ii) the closing of any public
offering of equity securities or iii) 50% of excess cash flow, as defined, for
each fiscal year commencing with the year ending December 31, 1998. Optional
prepayments can also be made on the Term Loans, and are subject to prepayment
premiums as defined in the agreement. The Company is required to meet certain
financial covenants under the Agreements including fixed charge and leverage
ratios and capital expenditure spending limits. The Company was in compliance
with all such covenants as of December 31, 1998 and throughout the year. The
debt is secured by substantially all assets of the Company. In addition, the
Agreements restrict the payments of dividends by the Company. Subsequent to
year-end the Company refinanced its long-term debt (Note 20).
F-12
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
The revolving credit loans and term loans have the following provisions
(dollars in thousands):
<TABLE>
<CAPTION>
Interest Interest
Rate at Balance at Rate at Balance at
Domestic Eurodollar December 31, December 31, December 31, December 31,
Interest Rate Interest Rate 1997 1997 1998 1998
--------------------- --------------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revolving Prime plus margin LIBOR plus margin
credit loan ......... not less than 1.00% not less than 2.50% 9.50% $ 11,034 9.00% $ 22,837
Term Loan A-- Prime plus margin LIBOR plus margin
Domestic ............ not less than 1.00% not less than 2.50% 8.44 35,000 9.00 35,000
Term Loan A-- Prime plus margin LIBOR plus margin
Foreign ............. not less than 1.00% not less than 2.50% 8.44 10,000 9.00 9,182
Term Loan B .......... Prime plus margin LIBOR plus margin
not less than 1.50% not less than 3.00% 8.94 80,000 9.50 79,572
Term Loan C .......... Fixed rate Fixed rate 9.48 25,000 9.48 25,000
--------- ---------
Total ................ $ 161,034 $ 171,591
========= =========
</TABLE>
In addition to the interest rate provisions stated above, the Company
maintains an interest rate collar in an aggregate notional principal amount of
$45 million to hedge interest rate risk through November 2000. Under this
collar, if the actual LIBOR rate at the specified measurement date is greater
than a ceiling rate of 7.5%, the lender pays the Company the differential
interest expense. If the actual LIBOR rate is lower than the floor rate of
5.27%, the Company pays the lender the differential interest expense.
Senior Subordinated Notes -- In conjunction with the Capital Restructuring
and July Debt Restructuring, all senior subordinated notes were repurchased
(Note 1).
Maturities of Long-Term Debt -- As of December 31, 1998, taking into
account subsequent events, maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
(In Thousands)
---------------
<S> <C>
1999 ......................... $ 10
2004 and thereafter .......... 171,592
--------
Total ........................ $171,602
========
</TABLE>
(Maturities of long-term debt under the agreements entered into subsequent
to year-end are disclosed in Note 20.)
9. INCOME TAXES
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1996 1997 1998
---------- ---------- -------------
(In Thousands)
<S> <C> <C> <C>
Income (loss) before income taxes
and extraordinary items: .........
U.S. .............................. $ 6,234 $ 7,063 $ (7,538)
Foreign ........................... -- (146) 2,701
------- ------- ---------
Total .............................. $ 6,234 $ 6,917 $ (4,837)
======= ======= =========
</TABLE>
F-13
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1996 1997 1998
---------- --------- ----------
(In Thousands)
<S> <C> <C> <C>
Current:
Federal ............................... $ 2,688 $2,794 $ (261)
Foreign ............................... -- 79 461
State ................................. 161 219 (235)
------- ------ --------
Total current .......................... 2,849 3,092 (35)
------- ------ --------
Deferred: ..............................
Federal ............................... (290) (211) (1,963)
Foreign ............................... -- 44 1,493
------- ------ --------
Total deferred ......................... (290) (167) (470)
------- ------ --------
Net provision for income taxes ......... $ 2,559 $2,925 $ (505)
======= ====== ========
</TABLE>
The difference between the effective income tax and the statutory Federal
income tax rate is explained as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1996 1997 1998
---------- ---------- -------------
<S> <C> <C> <C>
Federal statutory tax rate ...................... 34.0 % 34.0 % (34.0)%
Goodwill amortization ........................... 4.1 3.6 9.7
State taxes, net of Federal tax benefit ......... 1.7 2.0 6.3
Travel and entertainment ........................ 0.9 0.6 2.2
Foreign tax rate differential ................... -- 2.1 2.5
Other ........................................... 0.3 -- 2.9
---- ---- -----
Effective tax rate .............................. 41.0 % 42.3 % (10.4)%
===== ==== =====
</TABLE>
The components of the net deferred tax liabilities as of December 31, 1997
and 1998 were as follows:
<TABLE>
<CAPTION>
1997 1998
-------------------------- ------------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilties
---------- ------------- ---------- -----------
(In Thousands)
<S> <C> <C> <C> <C>
Current:
Accounts receivable .................... $ 31 $ -- $ 76 $ --
Inventory .............................. -- 172 -- 335
Prepaid expenses ....................... -- 520 -- 520
Accrued expenses ....................... 1,879 -- 1,255 --
Other .................................. 71 -- 126 --
------ ------ ------ ------
Total current ........................... $1,981 $ 692 $1,457 $ 855
====== ====== ====== ======
Noncurrent:
Property, plant and equipment .......... $ -- $5,612 $ -- $6,747
Goodwill ............................... -- 244 -- 974
Accrued expenses ....................... -- -- 562 --
Alternative minimum tax credit ......... -- -- 180 --
Net operating loss ..................... -- -- 2,153 --
Other .................................. 37 -- 164 --
------ ------ ------ ------
Total noncurrent ........................ $ 37 $5,856 $3,059 $7,721
====== ====== ====== ======
</TABLE>
F-14
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
As of December 31, 1998, the Company had a net operating loss carryover
for Federal tax purposes of approximately $6,333,000. The carryover will expire
after December 31, 2018. The Company also had an alternative minimum tax credit
carryover of approximately $180,000. This credit does not expire, but can be
carried forward indefinitely.
10. RETIREMENT BENEFIT PLANS
RSC has a defined contribution plan which covers all eligible nonunion
employees. Contributions to the defined contribution plan are based on years of
service, age and salary. Total expense for such plan was approximately
$298,000, $418,000 and $515,000 for 1996, 1997 and 1998, respectively.
The Company also contributes to a defined benefit pension plan for certain
union employees. The defined benefit pension plan assets are comprised
primarily of mutual funds.
Net pension cost for this defined benefit pension plan is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- -------
(In Thousands)
<S> <C> <C> <C>
Service cost--benefits earned during the period ......... $ 76 $ 77 $ 141
Interest cost on projected benefit obligation ........... 88 89 119
Actual return on plan assets ............................ (49) (48) (48)
Net amortization and deferral ........................... 19 20 3
----- ----- -----
Net periodic pension cost ............................... $ 134 $ 138 $ 215
===== ===== =====
</TABLE>
Assumptions used in the accounting for the plans were:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Weighted-average discount rates ...................... 7.5 % 7.5 % 6.5 %
Expected long-term rate of return on assets .......... 9.5 10.5 10.5
</TABLE>
The following table sets forth the funded status and amounts recognized
for this defined benefit pension plan at December 31:
<TABLE>
<CAPTION>
1997 1998
------------ ------------
(In Thousands)
<S> <C> <C>
Accumulated benefit obligation--vested ............................ $ 1,575 $ 1,631
Accumulated benefit obligation--nonvested ......................... 115 220
-------- --------
Total accumulated benefit obligation .............................. $ 1,690 $ 1,851
-------- --------
Projected benefit obligation for service rendered to date ......... $ (1,690) $ (1,851)
Plan assets at fair value ......................................... 1,081 889
-------- --------
Projected benefit obligation in excess of plan assets ............. (609) (962)
Prior service cost not yet recognized
in net periodic pension cost ................................... 246 218
Unrecognized portion of net obligation
existing at date of adoption of FAS No. 87 ..................... 67 54
Unrecognized net loss ............................................. 310 591
Adjustment to recognize minimum liability ......................... (623) (863)
-------- --------
Accrued pension cost .............................................. $ (609) $ (962)
======== ========
</TABLE>
F-15
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
The following table sets forth the change in benefit obligation and plan
assets for this defined benefit pension plan at December 31:
<TABLE>
<CAPTION>
1997 1998
--------- ---------
(In Thousands)
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year ..................... $1,497 $1,690
Service cost ................................................ 77 141
Interest cost ............................................... 89 119
Actuarial gain .............................................. (58)
Actuarial assumptions ....................................... 118 300
Benefits paid ............................................... (91) (341)
------ ------
Benefit obligation at end of year ........................... 1,690 1,851
Change in plan assets:
Fair value of plan assets at beginning of plan year ......... 927 1,081
Actual return on plan assets ................................ 48 48
Employer contribution ....................................... 197 101
Benefits paid ............................................... (91) (341)
------ ------
Fair value of plan assets at end of year .................... 1,081 889
------ ------
Funded status ............................................... (609) (962)
Unrecognized actuarial loss ................................. 310 591
Unrecognized prior service cost ............................. 246 218
Unrecognized net obligation ................................. 67 54
------ ------
Net amount recognized ....................................... $ 14 $ (99)
====== ======
Amounts recognized in the balance sheet consist of:
Prepaid (accrued) pension cost .............................. $ 14 $ (99)
Accrued benefit liability ................................... (609) (962)
Intangible asset ............................................ 246 218
Accumulated other comprehensive income ...................... 363 744
------ ------
Net amount recognized ....................................... $ 14 $ (99)
====== ======
</TABLE>
The Company offers all eligible RSC nonunion and certain eligible union
employees a 401(k) tax deferred savings plan. Eligibility in the plan is
dependent upon the completion of one year of service. The Company matches 50%
of the employee's contribution, up to 4%. The Company's contribution for 1996,
1997 and 1998 was $177,000, $186,000 and $198,000, respectively.
The vesting period for the Company's 401(k) plan, defined contribution
plan, and defined benefit plan is 20% after the first three years and each year
thereafter, until the participant becomes fully vested after a seven-year
period.
Pursuant to the acquisition of the SPP Assets, formerly a division of
Jefferson Smurfit Corporation ("JSC") (Note 16), salaried, union and non-union
employees of SPP continued to be covered under defined benefit plans and 401(k)
plans maintained by JSC for the remainder of 1997. The Company paid JSC $70,000
for the expenses JSC incurred relating to the maintenance of these plans for
the period in 1997 subsequent to the acquisition. Effective January 1, 1998,
these employees were transferred to a retirement plan established by the
Company.
Effective January 1, 1999, the 401(k) plans for all non-union RSC, former
SPP and CMS employees were replaced with a new 401(k) savings and retirement
plan. Eligibility in the plan is
F-16
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
dependent upon the completion of one year of service and the attainment of age
21. Under the plan, the Company matches 100% of the employee's contribution, up
to 4%. In addition, at the discretion of the Board, the Company may contribute
an additional 1% to 4.75% of each employee's salary, as defined, depending upon
age.
Certain employees of Hunter (Note 16) are covered under a money purchase
pension plan. Eligibility in the plan is dependent upon the completion of one
year of service. Employees can contribute up to 3% of eligible income and
executives can contribute up to 9% of eligible income, with a maximum yearly
contribution of $6,750. Hunter matches 100% of employee and executive
contributions and such employer contributions vest after two full years as a
member of the plan. Company contributions for the periods ended December 31,
1997 and 1998, were $2,000 and $80,000, respectively.
Certain employees of NEC are covered under a 401(k) plan. Eligibility in
the plan is dependent upon the completion of one year of service. Participants
can defer up to 15% of eligible compensation. Matching contributions are
provided by the employer at the rate of 10% of the participant contributions,
up to a maximum of 5% of each participants compensation in any plan year.
Employer contributions made in 1998 were $21,000.
11. RELATED PARTIES
The Company has a management agreement with Vestar Capital Partners, Inc.,
together with its affiliates, ("Vestar"), a majority shareholder of the
Company, which provides the Company with certain management services for the
greater of $225,000 per year or .25% of the consolidated net sales of the
Company, plus out-of-pocket expenses. For the years ended December 31, 1996,
1997 and 1998, the Company paid $391,000, $561,000 and $952,000, respectively,
for these services. In conjunction with the 1997 acquisitions and
restructurings and the 1998 acquisition, Vestar was paid transaction fees of
approximately $2.4 million and $160,000, respectively. During 1996, the Company
also paid $213,000 to Vestar for outside consulting services.
12. LONG-TERM INCENTIVE PLAN
The Company currently provides a performance unit incentive plan for
certain key employees. Under this plan, approximately 10,000 units were awarded
to the participants of the plan in 1995. The value of each unit is dependent
upon the Company's achievement of certain operating cash flow levels, as
defined, for the three-year period ended December 31, 1997. The Company
recognizes expense in relation to this plan based on the estimate of the final
payout of the plan. Accordingly, the Company recognized expense of $411,000,
and $467,000 in 1996 and 1997, respectively. The total amount to be paid under
this plan is approximately $1,113,000, of which $609,000 was paid in 1998 and
$252,000, plus interest, will be paid in each of 1999 and 2000.
During 1998, the Company established a new performance unit incentive plan
for certain key employees to cover the three year period ended December 31,
2000. Under the new plan 27,925 units were awarded to the participants of the
plan in 1998. The value of each unit is dependent upon the Company's
achievement of certain operating cash flow levels, as defined, for the
three-year period ended December 31, 2000. The Company recognizes expense in
relation to this plan based on the estimate of the final payout of the plan.
Accordingly, the Company recognized expense of $233,000 in 1998.
13. REDEEMABLE PREFERRED STOCK AND COMMON STOCK
Redeemable Preferred Stock -- In conjunction with the Capital
Restructuring all redeemable preferred stock was repurchased and cancelled in
July 1997 (Note 1).
F-17
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Common Stock -- The par value of the Company's common stock is $0.01.
There were 3,000,000 shares of common stock authorized at December 31, 1997 and
1998. In 1989, common stock was issued to certain of the Company's management
in exchange for notes receivable totaling $64,000. Simple interest accrues at
9% per annum on the notes and the principal plus interest becomes due and
payable in full in June 1999. Total principal and interest due was $113,000 and
$119,000 at December 31, 1997 and 1998, respectively.
The shares of the Company's common stock issued to directors and
management investors are subject to various restrictions on transferability and
the Company has the right to repurchase such shares under certain
circumstances.
During 1997, the Company repurchased substantially all outstanding
warrants, originally issued in 1989, in conjunction with the Capital
Restructuring (Note 1).
The Company maintains a stock option plan which provides for the granting
of stock options to certain officers and key employees. Information relating to
the option plan is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
-------- ----------- ------------
<S> <C> <C> <C>
Options outstanding at January 1 ............ 30,000 92,988 174,679
Options cancelled ........................... -- (1,000) (46,953)
Options granted ............................. 62,988 82,691 125,550
------ ------ -------
Options outstanding at December 31 .......... 92,988 174,679 253,276
====== ======= =======
Options exercisable at December 31 .......... 57,012 65,669 75,430
====== ======= =======
</TABLE>
In 1996, the Company granted a total of 34,000 options at an exercise
price of $8 per share and 28,988 options at an exercise price of $16 per share
to purchase shares of the Company's common stock. In 1997, the Company granted
a total of 56,547 options at an exercise price of $45 per share and 26,144
options at an exercise price of $38.25 per share to purchase shares of the
Company's common stock. In 1998, the Company granted a total of 120,550 options
at an exercise price of $50 per share and 5,000 options at an exercise price of
$60 per share. All options granted prior to 1996 have an exercise price of
$8.00 per share. Common stock acquired in accordance with the stock option
agreement is not transferable except as provided in the Stockholders' Transfer
Rights Agreement or pursuant to an effective registration statement filed under
the provisions of the Securities Act of 1933.
The 177,846 nonvested options at December 31, 1998 will become vested over
the following periods: 105,550 vest evenly over five years commencing in
February 1999; 15,000 vest evenly over five years commencing in May 1999;
32,219 vest over two years commencing July 1999; 3,650 vest in July 1999; 5,000
vest evenly over five years commencing in August 1999; 4,831 vest in November
1999; and the remaining 11,596 fully vest if the Company achieves certain
performance objectives. All options must be exercised, or will expire, within
10 years of the date of the grant. In addition, in the event of a change in
control, all options vest.
The Company accounts for the stock option plan in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, under which no compensation cost has been recognized for stock
option awards. However, under Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation ("SFAS 123"), the Company must
disclose the pro forma net income as if the Company had adopted the accounting
requirements of SFAS 123. Based on the Minimum Value Method of SFAS 123, the
Company's pro forma net income (loss) for 1996, 1997 and 1998 would have been
$3,067,000, $(1,263,000), and $(4,588,000), respectively.
F-18
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
The weighted average exercise price for options at the beginning of year,
granted during the year and as of December 31, 1998 was $19.58, $50.20 and
$34.44 per share, respectively. The weighted average exercise price of options
exercisable as of December 31, 1998 was $12.15 per share. The weighted average
fair value of the stock options granted during 1998 was $7.49. This amount
represents the estimated fair market value of the Company's common stock
reduced by the present value of the exercise price of the options granted
during 1998. The fair value of each stock option grant is estimated on the date
of grant using the Minimum Value Method with the following weighted average
assumptions used for grants:
<TABLE>
<CAPTION>
1996 1997 1998
------------ ----------- -----------------
<S> <C> <C> <C>
Risk-free interest rate .................... 6.84 % 6.75 % 6.00 %
Expected dividend yield .................... 0 % 0 % 0 %
Expected life in years ..................... 5 5 5
Expected volatility ........................ 0 % 0 % 0 %
The following table summarizes options outstanding at December 31,
1998:
Exercise price range ....................... $ 8.00 $ 16.00 $ 45.00-$60.00
Options outstanding ........................ 47,000 28,988 177,288
Weighted average exercise price ............ $ 8.00 $ 16.00 $ 48.82
Weighted average remaining contractual life 6 years 8 years 9 y
ears
Options currently exercisable .............. 47,000 12,561 15,869
Weighted average exercise price of options
currently exercisable ................... $ 8.00 $ 16.00 $ 45.00
</TABLE>
14. COMMITMENTS AND CONTINGENCIES
The Company has entered into employment agreements with certain employees,
through its acquisitions, whereby the Company is committed to provide
employment and reimbursement for specified expenses providing the employees
comply with the provisions of said agreements. Future minimum payments under
these agreements as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
(In Thousands)
---------------
<S> <C>
1999 ................. $1,285
2000 ................. 1,285
2001 ................. 515
2002 ................. 330
2003 ................. 330
------
Total ................ $3,745
======
</TABLE>
The above future payments were recorded in conjunction with purchase
accounting; $1,285,000 is included in accounts payable and accrued expenses at
both December 31, 1997 and 1998, and $3,745,000 and $2,460,000 is included in
other noncurrent liabilities at December 31, 1997 and 1998, respectively.
The Company is party to various claims, legal actions, complaints and
union negotiations arising in the ordinary course of business. In management's
opinion, the ultimate resolution of these matters will not have a material
adverse effect on its financial condition or results of operations (Note 20).
F-19
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
15. EXTRAORDINARY ITEMS
The Company used a portion of the proceeds from the debt refinancings to
repay its pre-existing debt. As a result of this early extinguishment of debt,
the Company incurred extraordinary charges, in both July and November 1997,
totaling approximately $5.1 million, net of tax benefits of $2.7 million,
consisting of the write-off of unamortized deferred financing costs and premium
payments on the repurchase of senior subordinated notes.
16. ACQUISITIONS
In July 1997, the Company acquired CMS, which pioneered the businesses of
plastic container leasing on a "per use" or "round-trip" basis and plastic
container fleet management in the United States and Canada utilizing inventory
tracking technology. The purchase price of the stock acquisition was $32.5
million, plus transaction-related expenses.
In October 1997, the Company acquired Hunter, a leading manufacturer and
marketer of plastic and steel drums in Canada. The purchase price of the stock
acquisition was $23.7 million, plus transaction related expenses and 27,778
shares of nonvoting exchangeable stock, exchangeable into 27,778 shares of
Holdings common stock. The non-voting exchangeable stock is exchangeable upon
the occurrence of specific events, but in any event no later than October 2004.
Such shares have been treated as outstanding shares of Holdings in the
accompanying financial statements.
In November 1997, the Company acquired certain assets of SPP, formerly a
division of JSC, a leading manufacturer and marketer of plastic drums in the
United States. The assets were acquired for $70 million, plus
transaction-related expenses.
In July 1998, the Company acquired NEC. NEC has a large share of the steel
drum reconditioning market in the Northeast and provides the Company entry into
the steel drum reconditioning market. The purchase price of the stock
acquisition was $14.0 million, plus transaction-related expenses and 24,243
shares of common stock.
All of these transactions (collectively, the "Acquisitions"), have been
accounted for as purchases, and, accordingly, the purchase prices were
allocated to the net tangible and intangible assets acquired based on estimated
fair values at the respective dates of acquisition. The excess purchase price
over the net assets and liabilities acquired was allocated to goodwill which is
being amortized on a straight-line basis over its estimated useful life of 40
years. The results of operations of the Acquisitions have been included in the
consolidated financial statements since the respective dates of acquisition.
The following unaudited pro forma information assumes that the
Acquisitions occurred on January 1 of the year acquired for each year
presented, after giving effect to certain adjustments, including amortization
of goodwill, increased depreciation expense, increased interest expense on the
acquisition debt incurred, the elimination of pre-acquisition sales, the
elimination of certain shareholder expenses and the related income tax effects.
The pro forma results are not necessarily indicative of the results of
operations which would actually have occurred had the transaction taken place
on the dates indicated or of the results which may occur in the future:
<TABLE>
<CAPTION>
Year Ended December 31,
(In Thousands)
---------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net sales ........................... $284,666 $297,300 $284,510
Income (loss) before income taxes and
extraordinary items ............... 10,017 3,200 (5,428)
Net income (loss) ................... 5,879 (3,200) (4,623)
</TABLE>
F-20
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
The following represents the cash flow details of the Acquisitions:
<TABLE>
<CAPTION>
(In Thousands)
------------------------
1997 1998
----------- ----------
<S> <C> <C>
Fair value of assets acquired ......... $158,984 $18,329
Liabilities assumed ................... 27,874 3,264
Common stock issued ................... -- 1,091
-------- -------
Cash paid for acquisitions ............ 131,110 13,974
Less cash acquired .................... 861 100
-------- -------
$130,249 $13,874
======== =======
</TABLE>
17. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
Foreign Exchange Contracts -- The Company's Canadian subsidiary maintains
U.S. dollar denominated foreign currency exchange contracts which were in place
prior to the Company's acquisition of Hunter. At December 31, 1997 and 1998,
$15.8 million and $3.9 million, respectively, of forward contracts were held
with settlement rates ranging from $1.3821 to $1.4072, Canadian dollars to U.S.
dollars, and settlement dates from January 1998 to December 1999. The foreign
exchange contracts are recorded at fair value with the related unrealized gains
or losses included in other expense-net on the accompanying statement of
operations and comprehensive income (loss). Included in other expense-net for
the years ended December 31, 1997 and 1998, was $465,000 and $629,000,
respectively, of losses on foreign exchange contracts.
Fair Value of Financial Instruments -- The Company does not enter into
financial instruments for trading purposes. For cash and cash equivalents,
accounts receivable and payable and accrued expenses, the carrying amount
approximates fair value due to their short maturities. The fair values of
long-term debt are estimated based on the borrowing rates currently available
for borrowings with similar terms and maturities. At December 31, 1997, the
carrying amount approximates fair value due to the debt being restructured
during November 1997. At December 31, 1998, the carrying amount approximates
fair value based on current borrowing rates. The fair value of the interest
rate collar was not material at either December 31, 1997 or 1998. The foreign
exchange contracts are recorded at a fair value of $680,000 and $342,000 at
December 31, 1997 and 1998, respectively.
18. NON-RECURRING CHARGES
In conjunction with the integration of acquired entities and expansion of
the Company's operations, a plan was developed to rationalize the Company's
operations and sales forces and to consolidate and relocate the Company's
corporate headquarters in order to improve operating efficiencies and reduce
costs. This plan is expected to be substantially complete by the end of the
first quarter of 1999. As part of this plan, the Company recorded
restructuring, integration and other charges of approximately $3.5 million for
the year ended December 31, 1998. These charges primarily include costs related
to the closure of a container manufacturing facility, severance costs and other
personnel related costs and the relocation of corporate headquarters and other
miscellaneous costs.
F-21
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
The liabilities accrued for the restructuring, integration and other costs
are as follows (in thousands):
<TABLE>
<CAPTION>
Severance Plant and
and other Headquarters
Personnel Closure/
Related Relocation
Costs Costs Other Total
----------- ------------- ------- ---------
<S> <C> <C> <C> <C>
Initial liability assumed .......... $2,166 $1,239 $62 $3,467
Cash expenditures .................. 681 876 31 1,588
------ ------ --- ------
Balance, December 31, 1998 ......... $1,485 $ 363 $31 $1,879
====== ====== === ======
</TABLE>
In addition, professional fees of $2.7 million were incurred during 1998
associated with proposed acquisitions that were not consummated.
19. SEGMENT REPORTING
The Company adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, during the fourth quarter of 1998. SFAS 131
establishes standards for reporting information about operating segments in
annual financial statements. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
Operating segments are defined as components of an enterprise for which
separate, discrete financial information is available that is evaluated
regularly by the chief operating decision maker, to make decisions about
resources to be allocated and to assess its performance.
The Company has two reportable operating segments. Containers manufactures
and sells new plastic and steel rigid industrial containers. Services leases
plastic rigid industrial containers, provides plastic container fleet
management services, reconditions and sells steel drums and retrieves and
recycles empty industrial containers.
Information as to the operations of the Company's business segments is set
forth below based on the nature of the products and services offered. The
Company evaluates performance based on several factors, of which the primary
financial measure is business segment profit or loss from operations before
amortization of intangible assets, depreciation, interest, income taxes and
extraordinary items. The accounting policies of the segments are the same as
those described in the summary of significant accounting policies (Note 2).
Intersegment sales are recorded at cost plus applicable margin and are
eliminated upon consolidation.
F-22
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
(In Thousands)
<S> <C> <C> <C>
Sales:
Containers ................................................ $141,925 $164,407 $229,692
Services .................................................. -- 15,206 46,650
-------- -------- --------
141,925 179,613 276,342
Intersegment sales:
Containers ................................................ -- 3,300 2,300
Services .................................................. -- -- --
-------- -------- --------
-- 3,300 2,300
Net sales:
Containers ................................................ 141,925 161,107 227,392
Services .................................................. -- 15,206 46,650
-------- -------- --------
Consolidated net sales ..................................... $141,925 $176,313 $274,042
======== ======== ========
Earnings before amortization, depreciation, interest,
income taxes and extraordinary items:
Containers ................................................ $ 19,575 $ 20,654 $ 23,453
Services .................................................. -- 5,105 14,341
-------- -------- --------
19,575 25,759 37,794
Interest expense ........................................... 7,473 8,754 16,025
Depreciation and amortization expense ...................... 5,868 10,088 26,606
-------- -------- --------
Consolidated income (loss) before income taxes and
extraordinary items ...................................... $ 6,234 $ 6,917 $ (4,837)
======== ======== ========
Depreciation and amortization expense:
Containers ................................................ $ 5,868 $ 6,728 $ 11,617
Services .................................................. -- 3,360 14,989
-------- -------- --------
Consolidated depreciation and amortization expense ......... $ 5,868 $ 10,088 $ 26,606
======== ======== ========
Segment assets:
Containers ................................................ $ 88,844 $200,305 $188,376
Services .................................................. -- 43,727 64,902
Other ..................................................... -- 1,498 4,976
-------- -------- --------
Consolidated segment assets ................................ $ 88,844 $245,530 $258,254
======== ======== ========
Capital Expenditures:
Containers ................................................ $ 3,335 $ 5,655 $ 10,484
Services .................................................. -- 4,294 18,195
-------- -------- --------
Consolidated capital expenditures .......................... $ 3,335 $ 9,949 $ 28,679
======== ======== ========
</TABLE>
Net sales by geographic area, as determined by the location of customer,
are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
(In Thousands)
<S> <C> <C> <C>
Net sales by geographic area:
United States .............. $141,925 $172,310 $257,150
Canada ..................... -- 4,003 15,490
Other countries ............ -- -- 1,402
-------- -------- --------
Total ....................... $141,925 $176,313 $274,042
======== ======== ========
</TABLE>
F-23
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Long-lived assets by geographic area, consisting of property, plant and
equipment -- net and goodwill and other intangibles -- net, as determined by
location of the asset, is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ------------ ------------
(In Thousands)
<S> <C> <C> <C>
Long-lived assets -- net by geographic area:
United States ............................. $ 56,689 $ 162,044 $ 177,345
Canada .................................... -- 26,652 23,493
-------- --------- ---------
Total ...................................... $ 56,689 $ 188,696 $ 200,838
======== ========= =========
</TABLE>
The Company does not have a single customer which represents 10 percent or
more of consolidated revenues.
20. SUBSEQUENT EVENTS
On February 10, 1999, the Company refinanced its revolving credit loan and
term loans by entering into a new senior credit facility consisting of a $75.0
million revolving credit facility ($13.3 million was drawn on February 10,
1999), bearing interest at LIBOR plus 2.75%, and a $25.0 million term loan,
bearing interest at 9.48% (collectively, the "Senior Credit Facility'). The
revolving credit facility matures in February 2004 and the term loan matures in
two equal installments in June 2006 and 2007. In addition, the Company issued
$150 million of 10 7/8% Senior Subordinated Notes (the "Notes") due February 15,
2009, issued at 99.248%, resulting in an effective yield of 11.0%. The Senior
Credit Facility contains certain covenants and restrictions and is guaranteed
by substantially all assets of the Company. The Notes require semiannual
interest payments commencing August 15, 1999 and mature February 2009. The
Notes are subordinate to all current and future debt of the Company and are
unconditionally guaranteed by the guarantor subsidiaries, (Note 21). Deferred
financing charges of approximately $7.0 million were incurred in connection
with the refinancing.
In January 1999, the U.S. Environmental Protection Agency (the "EPA")
confirmed the presence of certain contaminants, including dioxin, in and along
the Woonasquatucket River in Rhode Island. Prior to 1970, NEC operated a
facility in North Providence, Rhode Island along the Woonasquatucket River at a
site where contaminants have been found. Recent press reports identify NEC as a
business that may have contributed to the contamination. The Company is not
aware that any party has been formally identified by the EPA as a potentially
responsible party. Notwithstanding that NEC no longer operates the facility,
and did not operate the facility at the time the Company acquired the
outstanding capital stock of NEC in July 1998, NEC could incur liability under
Federal and state environmental laws and/or as a result of civil litigation.
The Company believes that any resulting liability is subject to a contractual
indemnity from Vincent J. Buonanno, one of its directors and the former owner
of NEC. However, such indemnity is subject to a $2.0 million limit. The Company
is currently unable to estimate the likelihood or extent of any liability;
however, this matter may result in liability to NEC that could have a material
adverse effect on the Company's financial condition and results of operations.
21. GUARANTOR SUBSIDIARIES
The Company's payment obligations under the Notes will be fully and
unconditionally guaranteed on a joint and several basis by its current domestic
subsidiaries, principally: RSC, CMS, and NEC (collectively, the "Guarantor
Subsidiaries"). Each of the Guarantor Subsidiaries is a direct or indirect
wholly-owned subsidiary of the Company. The Company's payment obligations under
the Notes will not be guaranteed by the remaining subsidiary, Hunter (the
"Non-Guarantor Subsidiary"). The obligations of each Guarantor Subsidiary under
their guarantee of the Notes are subordinated to each subsidiary's obligations
under their guarantee of the Senior Credit Facility.
F-24
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Presented below is condensed combining financial information for the
Parent Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiary. In
the Company's opinion, separate financial statements and other disclosures
concerning each of the Guarantor Subsidiaries would not provide additional
information that is material to investors. Therefore, the Guarantor
Subsidiaries are combined in the presentation below.
Investments in subsidiaries are accounted for by the Company on the equity
method of accounting. Earnings of subsidiaries are, therefore, reflected in the
Company's investments in and advances to/from subsidiaries account and earnings
(losses). The elimination entries eliminate investments in subsidiaries,
related stockholders' equity and other intercompany balances and transactions.
F-25
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
(In Thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiary Eliminations Consolidated
------------ -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................ $ -- $ 1,246 $ 384 $ -- $ 1,630
Accounts receivable -- net ............... -- 26,263 3,226 (81) 29,408
Inventories .............................. -- 16,354 2,407 -- 18,761
Prepaid and other current
assets -- net .......................... -- 2,412 398 3,384 6,194
-------- -------- ------- ---------- --------
Total current assets ................... -- 46,275 6,415 3,303 55,993
-------- -------- ------- ---------- --------
PROPERTY, PLANT AND
EQUIPMENT -- Net ........................ -- 86,720 5,923 -- 92,643
-------- -------- ------- ---------- --------
OTHER ASSETS:
Goodwill and other intangibles -- net..... -- 91,869 17,570 (1,244) 108,195
Deferred financing costs -- net .......... 1,294 -- -- -- 1,294
Other noncurrent assets .................. -- 129 -- -- 129
Intercompany advances .................... 21,434 76,033 390 (97,857) --
Investment in subsidiaries ............... 37,788 -- -- (37,788) --
-------- -------- ------- ---------- --------
TOTAL ASSETS .............................. $ 60,516 $301,026 $30,298 $ (133,586) $258,254
======== ======== ======= ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and
accrued expenses ......................... $ (2,149) $ 37,767 $ 4,336 $ 3,125 $ 43,079
Current maturities of long-term debt ..... -- 10 -- -- 10
-------- -------- ------- ---------- --------
Total current liabilities ................ (2,149) 37,777 4,336 3,125 43,089
LONG-TERM DEBT ............................ 19,997 142,413 9,182 -- 171,592
DEFERRED TAXES -- Net ..................... -- 2,331 2,331 -- 4,662
OTHER NONCURRENT LIABILITIES .............. -- 4,714 1,410 (750) 5,374
-------- -------- ------- ---------- --------
Total liabilities ........................ 17,848 187,235 17,259 2,375 224,717
INTERCOMPANY ADVANCES ..................... -- 90,252 6,790 (97,042) --
TOTAL STOCKHOLDERS' EQUITY ................ 42,668 23,539 6,249 (38,919) 33,537
-------- -------- ------- ---------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY .................... $ 60,516 $301,026 $30,298 $ (133,586) $258,254
======== ======== ======= ========== ========
</TABLE>
F-26
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(In Thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor Elimination
Company Subsidiaries Subsidiary Adjustments Consolidated
----------- -------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NET SALES ............................. $ -- $ 238,292 $ 35,750 $ -- $274,042
COST OF SALES ......................... -- 187,550 25,657 -- 213,207
-------- --------- -------- ------ --------
GROSS PROFIT .......................... -- 50,742 10,093 -- 60,835
TOTAL EXPENSES ........................ -- 43,670 5,427 -- 49,097
-------- --------- -------- ------ --------
INCOME FROM OPERATIONS ................ -- 7,072 4,666 -- 11,738
EQUITY LOSS ........................... (2,876) -- -- 2,876 --
INTEREST EXPENSE ...................... 2,185 12,505 1,335 -- 16,025
OTHER (INCOME) EXPENSE -- Net ......... -- (79) 629 -- 550
-------- --------- -------- ------ --------
INCOME (LOSS) BEFORE
INCOME TAXES ......................... (5,061) (5,354) 2,702 2,876 (4,837)
PROVISION (BENEFIT) FOR
INCOME TAXES ......................... (729) (1,034) 1,258 -- (505)
-------- --------- -------- ------ --------
NET INCOME (LOSS) ..................... $ (4,332) $ (4,320) $ 1,444 $2,876 $ (4,332)
======== ========= ======== ====== ========
</TABLE>
F-27
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
(In Thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor Elimination
Company Subsidiaries Subsidiary Adjustment Consolidated
------------- -------------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES:
Net (loss) income ...................... $ (4,332) $ (4,320) $ 1,444 $ 2,876 $ (4,332)
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Equity loss ........................... 2,876 -- -- (2,876) --
Depreciation and amortization ......... -- 25,301 1,305 -- 26,606
Amortization of deferred
financing costs ..................... 276 -- -- -- 276
Other noncash items ................... -- 770 -- -- 770
Changes in operating assets
and liabilities ..................... 1,252 8,288 (2,063) -- 7,477
--------- --------- ------- -------- ---------
Net cash provided by
operating activities .............. 72 30,039 686 -- 30,797
--------- --------- ------- -------- ---------
CASH FLOWS USED IN INVESTING
ACTIVITIES ............................. -- (40,690) (543) -- (41,233)
--------- --------- ------- -------- ---------
CASH FLOWS (USED IN) PROVIDED
BY FINANCING ACTIVITIES ................ (72) 11,067 (6) -- 10,989
--------- --------- ---------- -------- ---------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH AND
CASH EQUIVALENTS ....................... -- -- 26 -- 26
--------- --------- --------- -------- ---------
NET CHANGE IN CASH AND
CASH EQUIVALENTS ....................... -- 416 163 -- 579
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD .................... -- 829 222 -- 1,051
--------- --------- --------- -------- ---------
CASH AND CASH EQUIVALENTS,
END OF PERIOD .......................... $ -- $ 1,245 $ 385 $ -- $ 1,630
========= ========= ========= ======== =========
</TABLE>
F-28
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
(In Thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiary Eliminations Consolidated
------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................ $ -- $ 829 $ 222 $ -- $ 1,051
Accounts receivable -- net ............... -- 25,739 4,029 (127) 29,641
Inventories .............................. -- 17,022 1,982 -- 19,004
Prepaid and other current
assets -- net .......................... 1,082 2,633 229 1,557 5,501
--------- -------- ------- ---------- --------
Total current assets ................... 1,082 46,223 6,462 1,430 55,197
--------- -------- ------- ---------- --------
PROPERTY, PLANT AND
EQUIPMENT -- Net ........................ -- 78,481 6,481 -- 84,962
--------- -------- ------- ---------- --------
OTHER ASSETS:
Goodwill and other intangibles -- net..... -- 83,563 20,171 -- 103,734
Deferred financing costs -- net .......... 1,498 ---- -- -- 1,498
Other noncurrent assets .................. -- 139 -- -- 139
Intercompany advances .................... 21,418 73,560 -- (94,978) --
Investment in subsidiaries ............... 42,453 -- -- (42,453) --
--------- -------- ------- ---------- --------
TOTAL ASSETS .............................. $ 66,451 $281,966 $33,114 $ (136,001) $245,530
========= ======== ======= ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and
accrued expenses ....................... $ (1,643) $ 28,510 $ 5,941 $ 1,430 $ 34,238
Current maturities of long-term debt ..... -- 745 -- -- 745
--------- -------- ------- ---------- --------
Total current liabilities .............. (1,643) 29,255 5,941 1,430 34,983
========= ======== ======= ========== ========
LONG-TERM DEBT ............................ 19,997 130,620 10,000 -- 160,617
DEFERRED TAXES -- Net ..................... 1,306 3,971 542 -- 5,819
OTHER NONCURRENT LIABILITIES .............. -- 3,011 2,309 -- 5,320
--------- -------- ------- ---------- --------
Total liabilities ...................... 19,660 166,857 18,792 1,430 206,739
INTERCOMPANY ADVANCES ..................... -- 87,284 7,694 (94,978) --
TOTAL STOCKHOLDERS' EQUITY ................ 46,791 27,825 6,628 (42,453) 38,791
--------- -------- ------- ---------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS'EQUITY ..................... $ 66,451 $281,966 $33,114 $ (136,001) $245,530
========= ======== ======= ========== ========
</TABLE>
F-29
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(In Thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor Elinination
Company Subsidiaries Subsidiary Adjustments Consolidated
------------ -------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NET SALES ............................. $ -- $170,673 $5,640 $ -- $176,313
COST OF SALES ......................... -- 129,267 4,336 -- 133,603
-------- -------- ------ -------- --------
GROSS PROFIT .......................... -- 41,406 1,304 -- 42,710
TOTAL EXPENSES ........................ -- 25,924 918 -- 26,842
-------- -------- ------ -------- --------
INCOME FROM OPERATIONS ................ -- 15,482 386 -- 15,868
EQUITY INCOME ......................... 1,648 -- -- (1,648) --
INTEREST EXPENSE ...................... 898 7,625 231 -- 8,754
OTHER (INCOME) EXPENSE -- Net ......... -- (104) 301 -- 197
-------- -------- ------ -------- --------
INCOME (LOSS) BEFORE
INCOME TAXES AND
EXTRAORDINARY ITEMS .................. 750 7,961 (146) (1,648) 6,917
PROVISION (BENEFIT) FOR
INCOME TAXES ......................... (305) 3,107 123 -- 2,925
-------- -------- ------ -------- --------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS .................. 1,055 4,854 (269) (1,648) 3,992
EXTRAORDINARY ITEMS ................... 2,163 2,937 -- -- 5,100
-------- -------- ------ -------- --------
NET INCOME (LOSS) ..................... $ (1,108) $ 1,917 $ (269) $ (1,648) $ (1,108)
======== ======== ====== ======== ========
</TABLE>
F-30
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
(In Thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor Elimination
Company Subsidiaries Subsidiary Adjustments Consolidated
------------ -------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES:
Net (loss) income ...................... $ (1,108) $ 1,917 $ (269) $ (1,648) $ (1,108)
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Equity income ......................... (1,648) -- -- 1,648 --
Depreciation and amortization ......... 196 10,222 264 -- 10,682
Extraordinary items ................... 3,277 4,478 -- -- 7,755
Other noncash items-- ................. -- 200 193 -- 393
Changes in operating assets
and liabilities ..................... (1,419) 1,465 (35) -- 11
-------- ---------- --------- -------- ----------
Net cash provided by
operating activities .............. (702) 18,282 153 -- 17,733
-------- ---------- --------- -------- ----------
CASH FLOWS USED IN INVESTING
ACTIVITIES ............................. (7,000) (115,823) (17,522) -- (140,345)
-------- ---------- --------- -------- ----------
CASH FLOWS (USED IN)
PROVIDED BY FINANCING
ACTIVITIES ............................. 7,702 97,118 17,694 -- 122,514
-------- ---------- --------- -------- ----------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH AND
CASH EQUIVALENTS ....................... -- -- (103) -- (103)
-------- ---------- --------- -------- ----------
NET CHANGE IN CASH AND CASH
EQUIVALENTS ............................ -- (423) 222 -- (201)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD .................... -- 1,252 -- -- 1,252
-------- ---------- --------- -------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD .......................... $ -- $ 829 $ 222 $ -- $ 1,051
======== ========== ========= ======== ==========
</TABLE>
F-31
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Container Management Services, Inc.
Simpsonville, South Carolina
We have audited the accompanying balance sheet of Container Management
Services, Inc. (the "Company") as of July 23, 1997, and the related statements
of operations, stockholders' equity and cash flows for the period from January
1, 1997 through July 23, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The financial
statements of the Company for the year ended December 31, 1996 were audited by
other auditors whose report, dated February 28, 1997, expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial 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 audit provides a reasonable basis
for our opinion.
In our opinion, such 1997 financial statements present fairly, in all
material respects, the financial position of Container Management Services,
Inc. as of July 23, 1997, and the results of its operations and its cash flows
for the period from January 1, 1997 through July 23, 1997, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
January 29, 1998
F-32
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Container Management Services, Inc.
Simpsonville, South Carolina
We have audited the accompanying balance sheet of Container Management
Services, Inc. as of December 31, 1996, and the related statements of
operations, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Container Management
Services, Inc. as of December 31, 1996, and the results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles.
Elliott, Davis & Company, LLP
Greenville, South Carolina
February 28, 1997, excepting Note 2 which is
as of May 23, 1997
F-33
<PAGE>
CONTAINER MANAGEMENT SERVICES, INC.
BALANCE SHEET
DECEMBER 31, 1996 AND JULY 23, 1997
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ......................................... $1,173,716 $ 583,932
Accounts receivable -- net of allowance for doubtful accounts
of $30,000 at December 31, 1996 and July 23, 1997................ 3,206,013 3,519,337
Prepaid expenses and other assets ................................. 32,360 278,365
---------- ----------
Total current assets ........................................... 4,412,089 4,381,634
PROPERTY, PLANT AND EQUIPMENT -- At cost, less
accumulated depreciation and amortization
(Notes 2 and 5) ................................................. 3,012,753 3,746,394
INTANGIBLE ASSETS -- Net of accumulated amortization of
$6,402 at December 31, 1996 and $6,734 at July 23, 1997.......... 8,237 7,905
---------- ----------
TOTAL ASSETS ....................................................... $7,433,079 $8,135,933
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable .................................................. $2,376,068 $3,240,720
Current portion of long-term debt (Note 4) ........................ 206,064 --
Obligations under capital lease (Note 5) .......................... 13,975 13,975
Accrued expenses and other liabilities (Note 3) ................... 277,517 181,702
---------- ----------
Total current liabilities ...................................... 2,873,624 3,436,397
---------- ----------
LONG-TERM LIABILITIES:
Long-term debt (Note 4) ........................................... 49,869 --
Obligations under capital lease (Note 5) .......................... 7,254 9,217
---------- ----------
TOTAL LIABILITIES .................................................. 57,123 9,217
Commitments and contingencies (Note 5) ............................. -- --
---------- ----------
STOCKHOLDERS' EQUITY:
Class A voting common stock -- No par value; 240,000
shares authorized; 90,000 shares issued and outstanding ......... 90,000 90,000
Class B nonvoting common stock -- $1 par value; 10,000
shares authorized, issued and outstanding ....................... 10,000 10,000
Retained earnings ................................................. 4,402,332 4,590,319
---------- ----------
4,502,332 4,690,319
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......................... $7,433,079 $8,135,933
========== ==========
</TABLE>
See notes to financial statements.
F-34
<PAGE>
CONTAINER MANAGEMENT SERVICES, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
AND THE PERIOD FROM JANUARY 1, 1997 THROUGH JULY 23, 1997
<TABLE>
<CAPTION>
Period from
January 1,
Year Ended through
December 31, July 23,
1996 1997
-------------- --------------
<S> <C> <C>
NET SALES ........................... $28,266,486 $17,805,750
COST OF SALES ....................... 22,952,361 14,527,511
----------- -----------
Gross profit ...................... 5,314,125 3,278,239
----------- -----------
EXPENSES:
Selling ............................ 107,427 154,266
General and administrative ......... 2,566,249 919,153
Amortization ....................... 1,157 332
----------- -----------
Total expenses .................... 2,674,833 1,073,751
----------- -----------
INCOME FROM OPERATIONS .............. 2,639,292 2,204,488
INTEREST EXPENSE .................... 38,989 34,142
OTHER INCOME ........................ 7,596 51,576
----------- -----------
NET INCOME .......................... $ 2,607,899 $ 2,221,922
=========== ===========
</TABLE>
See notes to financial statements.
F-35
<PAGE>
CONTAINER MANAGEMENT SERVICES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1996
AND THE PERIOD FROM JANUARY 1, 1997
THROUGH JULY 23, 1997
<TABLE>
<CAPTION>
Class A, Voting Class B, Nonvoting
Common Stock Common Stock Total
------------------- ------------------- Retained Stockholders'
Shares Amount Shares Amount Earnings Equity
-------- ---------- -------- ---------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 ...... 90,000 $90,000 10,000 $10,000 $ 3,557,177 $ 3,657,177
Net income ................... -- -- -- -- 2,607,899 2,607,899
Distributions to stockholders -- -- -- -- (1,762,744) (1,762,744)
------ ------- ------ ------- ------------ ------------
BALANCE, DECEMBER 31,
1996 ......................... 90,000 90,000 10,000 10,000 4,402,332 4,502,332
Net income ................... -- -- -- -- 2,221,922 2,221,922
Distributions to stockholders -- -- -- -- (2,033,935) (2,033,935)
------ ------- ------ ------- ------------ ------------
BALANCE, JULY 23, 1997 ........ 90,000 $90,000 10,000 $10,000 $ 4,590,319 $ 4,690,319
====== ======= ====== ======= ============ ============
</TABLE>
See notes to financial statements.
F-36
<PAGE>
CONTAINER MANAGEMENT SERVICES, INC.
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
AND THE PERIOD FROM JANUARY 1, 1997
THROUGH JULY 23, 1997
<TABLE>
<CAPTION>
Period from
January 1,
Year Ended through
December 31, July 23,
1996 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................... $2,607,899 $2,221,922
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization .................................. 6,543,563 4,543,009
Loss on disposal of equipment .................................. 18,514 --
Changes in assets and liabilities which provided (used)
cash:
Accounts and other receivables ................................ (353,901) (544,452)
Prepaid expenses and other assets ............................. (21,112) (14,877)
Accounts payable .............................................. (35,112) 864,652
Accrued expenses and other liabilities ........................ 169,300 (95,815)
---------- ----------
Net cash provided by operating activities .................... 8,929,151 6,974,439
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES:
Purchase of equipment ......................................... (6,550,411) (5,263,365)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable and capital lease obligations ......... (61,526) (266,923)
Distributions to stockholders ................................... (1,762,744) (2,033,935)
---------- ----------
Net cash used in financing activities ........................ (1,824,270) (2,300,858)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 554,470 (589,784)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ..................... 619,246 1,173,716
---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR ........................... $1,173,716 $ 583,932
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest .......................................... $ 38,989 $ 34,142
========== ==========
Noncash activities:
Capital lease of equipment .................................... $ -- $ 12,953
========== ==========
</TABLE>
See notes to financial statements.
F-37
<PAGE>
CONTAINER MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 1996 and the
Period from January 1, 1997 through July 23, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES
Description of Business -- Container Management Services, Inc. (the
"Company") provides the chemical, textile and other industries with a closed
loop container return/reuse program. CMS purchases, leases and reconditions
containers, drums and intermediate bulk containers and manages the logistics
(i.e., warehousing, transportation and disposal) of containers; it also grinds
worn drums and IBC's into resin for resale into the recycling market. CMS was
the first industrial container company to combine these services into an
integrated container management program. The Company is located in
Simpsonville, South Carolina, and extends credit to customers primarily in the
eastern United States.
On July 23, 1997, 100% of the Company's common stock was purchased by
Russell-Stanley Corp. for $33,900,000. The accompanying financial statements
represent the historical financial statements of the Company prior to the
acquisition.
Cash and Cash Equivalents -- The Company considers all highly liquid
investments with original maturities of three months or less to be cash
equivalents.
Property, Plant and Equipment -- Equipment is stated at cost. Containers,
which include containers, rings and lids, are depreciated using an accelerated
method over their estimated useful lives. The cost and related accumulated
depreciation of containers is removed from the books when fully depreciated.
All other equipment is depreciated using accelerated methods based on the
estimated useful lives of the respective assets. Maintenance, repairs and other
expenses not resulting in betterments are charged to expense as incurred.
Intangible Assets -- Organization costs and other intangible assets are
stated at cost and are amortized using the straight-line method over a period
of 5 to 19 years.
Income Taxes -- The Company, with the consent of its stockholders, has
elected to be taxed as an S corporation for Federal and state income tax
purposes. Under this election, the Company's income, deductions and credits are
reported by its stockholders on their individual income tax returns. Therefore,
no provision for income taxes is recorded by the Company.
The Company maintains a policy of making distributions to its stockholders
in amounts at least sufficient to pay individual income taxes resulting from
reporting the Company's income on the stockholders' individual income tax
returns.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Advertising -- The Company's policy is to expense advertising costs as
incurred. Such costs were approximately $34,000 and $68,000 for the year ended
December 31, 1996 and for the period January 1, 1997 through July 23, 1997,
respectively.
F-38
<PAGE>
CONTAINER MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
Year Ended December 31, 1996 and the
Period from January 1, 1997 through July 23, 1997
2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1996 and July 23, 1997
consists of the following:
<TABLE>
<CAPTION>
December 31, July 23,
Useful Lives 1996 1997
--------------- ---------------- ----------------
<S> <C> <C> <C>
Furniture and fixtures ........... 5-7 years $ 209,761 $ 232,407
Plant equipment .................. 5-7 years 2,716,691 2,833,766
Containers ....................... 16-36 months 11,495,183 16,562,421
Vehicles ......................... 5 years 27,035 27,035
Leasehold improvements ........... 31.5-39 years 54,933 66,656
Construction in progress ......... -- 37,920 95,556
------------- -----------
14,541,523 19,817,841
Less accumulated depreciation and
amortization ................... (11,528,770) (16,071,447)
------------- -----------
Total ............................ $ 3,012,753 $ 3,746,394
============= ===========
</TABLE>
The Company began capitalizing costs associated with rings and lids in
1997 as a result of a modernization of plant equipment which enables the
Company to recycle the rings and lids. Amounts capitalized for rings and lids
as of July 23, 1997 totaled approximately $669,000 which is included in
"containers." The rings and lids are being depreciated over a three-year period
using an accelerated method; accumulated depreciation of the rings and lids
totaled $167,000 at July 23, 1997.
3. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities at December 31, 1996 and July 23,
1997 consists of the following:
<TABLE>
<CAPTION>
December 31, July 23,
1996 1997
-------------- -----------
<S> <C> <C>
Salaries and wages ......................... $ 75,841 $ 79,836
Accrued and withheld payroll taxes ......... 10,288 24,681
Insurance .................................. 5,390 2,164
Sales tax -- NC ............................ 111,000 6,365
Real estate taxes .......................... 33,288 21,509
Personal property taxes .................... -- 47,052
Other ...................................... 41,710 95
-------- --------
Total ...................................... $277,517 $181,702
======== ========
</TABLE>
4. NOTES PAYABLE
The note payable to a bank in monthly installments of $5,148, including
interest at 7% through September 1998, was paid in full in July 1997. Payments
for the period from January 1, 1997 through July 23, 1997 totaled $109,741,
including $3,808 of interest expense.
The demand note payable to a stockholder in monthly payments of interest
only at prime plus two percent was paid in full in July 1997. Payments for the
period from January 1, 1997 through July 23, 1997 totaled $150,000 of principal
and $8,208 of interest expense.
F-39
<PAGE>
CONTAINER MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
Year Ended December 31, 1996 and the
Period from January 1, 1997 through July 23, 1997
5. LEASE COMMITMENTS
Capital Leases -- Obligations under capital leases have been discounted to
present value by use of the Company's incremental borrowing rate for such funds
at the inception of the lease. Assets under capital leases totaled $42,009 at
December 31, 1996 and $54,962 at July 23, 1997 and are included in property,
plant and equipment. Amortization of capitalized leases for the year ended
December 31, 1996 totaled $9,982 and for the period from January 1, 1997
through July 23, 1997 totaled $12,241 and is included in depreciation and
amortization expense. The future minimum lease payments under capital leases,
together with the discount to arrive at present value, are as follows:
<TABLE>
<CAPTION>
Period Ending
July 23,
<S> <C>
1998 ................................................... $ 18,249
1999 ................................................... 7,703
2000 ................................................... 2,274
---------
Total minimum lease payments ........................... 28,226
Less portion of payments representing interest ......... (5,034)
---------
Present value of net minimum lease payments ............ 23,192
Current portion ........................................ (13,975)
---------
Long-term portion ...................................... $ 9,217
=========
</TABLE>
Operating Leases -- The Company rents buildings and various equipment
under the terms of noncancelable operating leases. The Company is responsible
for property taxes, insurance and nonstructural maintenance costs. Aggregate
rentals for the year ended December 31, 1996 totaled $435,887 and for the
period from January 1, 1997 through July 23, 1997 totaled $257,318.
The following is a summary of future minimum lease payments under
operating leases that have initial or remaining noncancelable terms in excess
of one year as of July 23, 1997:
<TABLE>
<CAPTION>
Period Ending
July 23,
<S> <C>
1998 ..................... $ 423,830
1999 ..................... 398,274
2000 ..................... 398,274
2001 ..................... 398,274
2002 ..................... 349,228
Thereafter ............... 792,097
----------
Total .................... $2,759,977
==========
</TABLE>
The Company also has a month-to-month operating lease for a building with
monthly payments of $5,348.
During the period ended July 23, 1997, the Company entered into an
agreement with a bank for the purchase of equipment, not to exceed $550,000, to
be accounted for as operating leases. Under the agreement, the Company uses its
funds to purchase the equipment and is then reimbursed by the bank. All amounts
associated with the agreement were paid in full to the Company in January 1998.
6. RELATED PARTY TRANSACTIONS
As described in Note 4, the Company paid in full during July 1997 the note
payable to one of its stockholders.
F-40
<PAGE>
CONTAINER MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
Year Ended December 31, 1996 and the
Period from January 1, 1997 through July 23, 1997
7. CONCENTRATION OF RISK
Sales to two customers represented 11.2% and 10.0% of revenues for the
year ended December 31, 1996 and 12.8% and 10.6% of revenues for the period
January 1, 1997 through July 23, 1997. Accounts receivable from those customers
totaled 6.9% and 8.4% at December 31, 1996 and 11.1% and 8.3% of accounts
receivable at July 23, 1997. The Company performs ongoing credit evaluations of
its customers' financial condition but does not require collateral to support
customer receivables.
Purchases of drum containers from two vendors represented 65.7% and 34.3%
of purchases for the year ended December 31, 1996 and 47.9% and 45.3% of
purchases for the period January 1, 1997 through July 23, 1997. Accounts
payable to those customers totaled 39.9% and 11.1% at December 31, 1996 and
29.9% and 27.7% at July 23, 1997.
Purchases of industrial bulk containers from two vendors represented 78.2%
and 21.8% for the year ended December 31, 1996 and 71.7% and 28.3% of purchases
for the period January 1, 1997 through July 23, 1997. Accounts payable to those
customers totaled 7.9% and 5.6% at December 31, 1996 and 6.0% and 2.1% at July
23, 1997.
F-41
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Hunter Drums Limited:
We have audited the accompanying consolidated balance sheet of Hunter
Drums Limited, a Canadian company, (the "Company") as of October 29, 1997 and
the consolidated statements of operations and retained earnings and cash flows
for the period from January 1, 1997 through October 29, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated 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 audit provides 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 October 29,
1997 and the results of its operations and its cash flows for the period from
January 1, 1997 through October 29, 1997 in accordance with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
January 29, 1998
F-42
<PAGE>
HUNTER DRUMS LIMITED
CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 29, 1997
(Amounts in United States Dollars)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash .................................................................. $ 28,540
Accounts receivable, net of allowance for doubtful accounts of $ 98,284 4,200,958
Inventories (Note 3) .................................................. 2,040,185
Prepaid expenses ...................................................... 357,669
Deferred income taxes (Note 5) ........................................ 136,400
----------
Total current assets .................................................. 6,763,752
PROPERTY, PLANT AND EQUIPMENT -- NET (Note 4) .......................... 2,495,460
----------
TOTAL ASSETS ........................................................... $9,259,212
==========
LIABILITIES
CURRENT LIABILITIES:
Accounts payable and accrued liabilities .............................. $4,742,738
Income taxes payable .................................................. 422,487
----------
Total current liabilities ............................................ 5,165,225
----------
DEFERRED INCOME TAXES (Note 5) ......................................... 252,402
----------
Total liabilities .................................................... 5,417,627
----------
COMMITMENTS (Note 9) ...................................................
SHAREHOLDERS' EQUITY ...................................................
Common stock (Note 7) ................................................. 928
Retained earnings ..................................................... 3,939,108
Cumulative translation adjustment ..................................... (98,452)
----------
Total shareholders' equity ........................................... 3,841,585
----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................. $9,259,212
==========
</TABLE>
See notes to consolidated financial statements.
F-43
<PAGE>
HUNTER DRUMS LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH OCTOBER 29, 1997
(Amounts in United States Dollars)
<TABLE>
<S> <C>
SALES .......................................... $30,503,187
COST OF SALES .................................. 22,524,685
-----------
GROSS PROFIT ................................... 7,978,502
-----------
OPERATING EXPENSES:
Selling ....................................... 3,339,609
General and administration .................... 2,001,662
-----------
Total Expenses ............................... 5,341,271
-----------
INCOME FROM OPERATIONS ......................... 2,637,231
INTEREST EXPENSE ............................... 61,791
OTHER (INCOME) EXPENSE -- Net .................. 249,140
-----------
EARNINGS BEFORE INCOME TAXES ................... 2,326,300
PROVISION FOR INCOME TAXES ..................... 990,623
-----------
NET INCOME ..................................... 1,335,677
RETAINED EARNINGS, BEGINNING OF PERIOD ......... 4,313,874
DIVIDENDS ...................................... (1,710,443)
-----------
RETAINED EARNINGS, END OF PERIOD ............... $ 3,939,108
===========
</TABLE>
See notes to consolidated financial statements.
F-44
<PAGE>
HUNTER DRUMS LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1997 THROUGH OCTOBER 29, 1997
(Amounts in United States Dollars)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................................... $1,335,677
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization .................................................. 397,438
Loss on sale of assets ......................................................... 6,539
Deferred income taxes .......................................................... (136,400)
Changes in operating assets and liabilities: ....................................
(Increase) decrease in accounts receivable ..................................... (1,210,237)
(Increase) decrease in inventories ............................................. (106,858)
(Increase) decrease in prepaid expenses ........................................ 1,112,215
Increase (decrease) in accounts payable ........................................ 441,118
Increase (decrease) in income taxes payable .................................... 130,211
-----------
Net cash provided by operating activities ..................................... 1,969,703
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in investments .............................................. 1,710,443
Purchase of property, plant & equipment ......................................... (500,970)
Disposal of property, plant & equipment ......................................... 194,419
-----------
Net cash provided by investing activities ..................................... 1,403,892
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt ..................................................... (187,040)
Repayment of notes payable to shareholders ...................................... (221,656)
Dividends ....................................................................... (1,710,443)
-----------
Net cash used for financing activities ........................................ (2,119,139)
-----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH .......................................... 9,716
-----------
NET CHANGE IN CASH ............................................................... 1,264,172
CASH, BEGINNING OF YEAR .......................................................... (1,235,632)
-----------
CASH, END OF YEAR ................................................................ $ 28,540
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest ...................................................................... $ 61,791
===========
Taxes ......................................................................... $ 878,275
===========
</TABLE>
See notes to consolidated financial statements.
F-45
<PAGE>
HUNTER DRUMS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIOD ENDED OCTOBER 29, 1997
1. DESCRIPTION OF BUSINESS
Hunter Drums Limited (the "Company") is incorporated under the Ontario
Business Corporations Act and is engaged in the manufacturing of steel and
plastic drums and laminated and plastic products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America and include the
operations of Hunter Drums Limited and two inactive subsidiaries which have
been subsequently dissolved.
On October 29, 1997, the Company's common stock was purchased by
Russell-Stanley Holdings, Inc. ("RSH"). The Company's financial statements
represent the historical financial statements of the Company prior to
acquisition.
Inventories -- Inventories are valued at the lower of cost or net
realizable value, with cost being determined on a first-in, first-out basis.
Revenue Recognition -- Revenue is recognized when products are shipped or
services are provided to customers.
Use of Estimates -- The preparation of these financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
Property, Plant & Equipment -- Property, plant and equipment, stated at
cost, is being depreciated for financial reporting purposes on the
straight-line method over the estimated useful lives of the assets or the lease
term, whichever is shorter. The estimated useful lives for each class of
capital assets are as follows:
<TABLE>
<S> <C>
Building ......................... 15-30 years
Machinery and equipment .......... 3-10 years
Furniture and fixtures ........... 3-7 years
Transportation equipment ......... 3-10 years
Leasehold improvements ........... Lesser of useful life or the life of the lease
</TABLE>
Translation of Foreign Currencies -- The Canadian dollar is the
functional currency in which the Company operates. The assets and liabilities
of the Company are translated into U.S. dollars at period-end exchange rates,
with resulting translation gains and losses accumulated in a separate component
of shareholders' equity. Income and expense items are converted into U.S.
dollars at average rates of exchange prevailing throughout the year.
Financial Instruments -- The Company utilizes financial instruments to
limit its exposure to foreign currency exchange rate fluctuations.
Income Taxes -- The Company follows the tax allocation method of
accounting for income taxes whereby provisions for income taxes are based on
reported income. Deferred income taxes arise from claiming amortization for
income tax purposes at different rates than amounts recorded for accounting
purposes.
F-46
<PAGE>
HUNTER DRUMS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
PERIOD ENDED OCTOBER 29, 1997
Molds and Dies -- Expenditures on molds and dies are amortized on a
straight-line basis over two years commencing upon productive use. At October
29, 1997, prepaid expenses include $281,187 of moulds and dies, net of
accumulated amortization.
3. INVENTORIES
Inventory consists of the following:
<TABLE>
<CAPTION>
As of
October 29,
1997
------------
<S> <C>
Raw Materials ................. $ 858,828
Work-in-process ............... 700,552
Finished goods ................ 480,805
----------
Total ......................... $2,040,185
==========
</TABLE>
4. PROPERTY, PLANT & EQUIPMENT
<TABLE>
<CAPTION>
Net Book Value
As of
Accumulated October 29,
Cost Amortization 1997
-------------- -------------- ---------------
<S> <C> <C> <C>
Land ............................. $ 78,918 $ -- $ 78,918
Building ......................... 936,207 580,250 355,957
Machinery and equipment .......... 8,192,510 6,275,333 1,917,177
Furniture & fixtures ............. 575,165 455,243 119,922
Transportation equipment ......... 214,343 199,440 14,903
Leasehold improvements ........... 23,423 14,840 8,583
----------- ----------- -----------
$10,020,566 $ 7,525,106 $ 2,495,460
=========== =========== ===========
</TABLE>
5. INCOME TAXES
The provision (benefit) for income taxes for the period ended October 29,
1997 consists of the following:
<TABLE>
<CAPTION>
Period Ended
October 29,
1997
-------------
<S> <C>
Current:
Federal ............................... $ 717,000
Provincial ............................ 410,023
---------
Total Current .......................... 1,127,023
---------
Deferred:
Federal ............................... (87,000)
Provincial ............................ (49,400)
---------
Total Deferred ......................... (136,400)
---------
Net provision for income taxes ......... $ 990,623
=========
</TABLE>
The difference between the effective income tax rate and the statutory
federal income tax rate is due to permanent differences related to travel and
entertainment and life insurance premiums.
F-47
<PAGE>
HUNTER DRUMS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
PERIOD ENDED OCTOBER 29, 1997
The components of the net deferred taxes as of October 29, 1997 were as
follows:
<TABLE>
<CAPTION>
For the Period Ended
October 29, 1997
--------------------------------------------
Deferred Tax Asset Deferred Tax Liability
<S> <C> <C>
Current:
Other Assets ...................... $136,400 $ --
-------- --------
Total current ........................ 136,400 --
-------- --------
Noncurrent: ..........................
Property, plant & equipment ......... -- 252,402
-------- --------
Total noncurrent ..................... -- 252,402
-------- --------
Total deferred tax ................... $136,400 $252,402
======== ========
</TABLE>
6. LONG TERM DEBT AND SHAREHOLDER NOTES PAYABLE
At October 29, 1997, the Company had no outstanding balances for long term
debt or shareholder notes payable. The long term debt consisted of a
non-revolving loan with interest at the bank's prime rate plus 1/2%. The
balance of $187,040 was paid in full in October 1997. The shareholder notes
were non-interest bearing notes payable to Hunter Holdings, Inc. and Ontario
Ltd. The balance of $221,656 were paid in full in October 1997.
7. COMMON STOCK
Authorized:
Unlimited number of voting Class A common shares
Unlimited number of voting Class B common shares
Unlimited number of nonvoting, noncumulative, redeemable and retractable
Class A special shares, issuable in series
200 voting Class B special shares, noncumulative, redeemable and
retractable
Unlimited number of voting, redeemable and retractable Class C special
shares
Issued and outstanding:
<TABLE>
<CAPTION>
As of
October 29,
1997
------------
<S> <C>
90,000 Class A common shares ........................ $ 6
900,000 Class B common shares ........................ 63
880,000 Class A special shares, first series ......... 630
20,000 Class B special shares ....................... 143
120,000 Class C special shares ....................... 86
-----
$ 928
=====
</TABLE>
The Class A common shares rank equally in priority to Class B common
shares. Both classes are entitled to a noncumulative dividend. The holders of
Class A common shares are entitled to two votes in respect of each Class A
common share held by them at all meetings of shareholders. The holders of Class
B common shares are entitled to one vote in respect of each Class B common
share held by them at all meetings of shareholders.
The Class A special shares rank equally with the Class C special shares in
priority to all other classes of shares, and may be redeemed, purchased or
acquired by the Company or put to the Company by the holder, in whole or in
part, for an amount determined in accordance with the Articles of Amendment
dated June 26, 1997. These shares are entitled to a noncumulative cash
dividend.
F-48
<PAGE>
HUNTER DRUMS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
PERIOD ENDED OCTOBER 29, 1997
The Class B special shares rank in priority to the common shares, and may
be redeemed, purchased or acquired by the Company for an amount not exceeding
$1 per share together with all declared and unpaid noncumulative cash dividends
thereon.
On July 26, 1997, the Company amended its Articles of Incorporation by
creating an unlimited number of Class C special shares.
On September 29, 1997, the Company amended its Articles of Incorporation
to change each issued and outstanding:
i) Class A common share into 100 issued and outstanding Class A common
shares, and
ii) Class B common share into 100 issued and outstanding Class B common
shares.
8. SUBSEQUENT EVENT
In connection with the acquisition of the Company by RSH, the Company
amended its Articles of Incorporation and merged into HDL Acquisition, Inc. The
merged company will continue operations under the name Hunter Drums Limited.
The authorized capital of the merged company is an unlimited number of Class A
voting shares and an unlimited number of Class B nonvoting shares.
The 8,800 Class A special shares, the 200 Class B special shares, the
1,200 Class C special shares, the 9,000 Class B common shares and 330 Class A
common shares were canceled. The remaining 570 Class A common shares were
converted to 27,778 nonvoting shares.
9. COMMITMENTS
The future minimum lease payments under the terms of the noncancelable
operating leases for certain facilities and equipment are as follows:
<TABLE>
<S> <C>
1998 ............ $872,569
1999 ............ 665,799
2000 ............ 485,910
2001 ............ 347,445
2002 ............ 117,075
</TABLE>
10. FINANCIAL INSTRUMENTS
Foreign Exchange Contracts -- The Company utilizes U.S. dollar denominated
foreign exchange contracts to limit its exposure to foreign currency exchange
rate fluctuations. At October 29, 1997, $13,750,000 of forward contracts were
held with settlement rates ranging from $1.353 to $1.407, Canadian dollars to
U.S. dollars, and settlement dates from January 1998 to December 1999. The
foreign exchange contracts are recorded at fair value with related unrealized
gains or losses included in other (income) expense. For the period ended
October 29, 1997, the Company recorded $378,619 of losses on foreign exchange
contracts.
11. RETIREMENT BENEFIT PLAN
Certain employees of the Company are covered under a money purchase
pension plan. Eligibility in the plan is dependent upon one year of service.
Employees can contribute up to 3% of eligible income, executives can contribute
up to 9% of eligible income, with a maximum yearly contribution of $6,750.
Hunter matches 100% of employee and executive contributions and such employer
contributions vest after two full years as a member of the plan.
F-49
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Smurfit Plastic Packaging
Wilmington, Delaware
We have audited the accompanying balance sheets of Smurfit Plastic
Packaging (the "Company") as of December 31, 1996 and November 7, 1997 and the
related statements of operations and cash flows for the year ended December 31,
1996 and the period from January 1, 1997 to November 7, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1996 and
November 7, 1997 and the results of its operations and its cash flows for the
year ended December 31, 1996 and for the period from January 1, 1997 to
November 7, 1997, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
June 8, 1998
F-50
<PAGE>
SMURFIT PLASTIC PACKAGING
BALANCE SHEETS
DECEMBER 31, 1996
AND NOVEMBER 7, 1997
(In Thousands)
<TABLE>
<CAPTION>
December 31, November 7,
1996 1997
-------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ...................................................... $ 2 $ 2
Accounts receivable, less allowances of $89 in 1996 and $94
in 1997 ................................................. 8,425 8,331
Inventories (Note 3) ...................................... 4,847 4,925
Prepaid expenses and other current assets ................. 144 185
------- -------
Total current assets ...................................... 13,418 13,443
PROPERTY, PLANT AND EQUIPMENT --
Net (Note 4) ............................................ 19,558 19,461
------- -------
TOTAL ASSETS ............................................... $32,976 $32,904
======= =======
LIABILITIES AND DIVISIONAL EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses ..................... $ 7,726 $ 7,250
Income taxes payable (Note 6) ............................. 2,850 1,275
------- -------
Total current liabilities ................................ 10,576 8,525
DEFERRED TAXES -- Net (Note 6) ............................. 2,467 2,544
------- -------
Total liabilities ........................................ 13,043 11,069
COMMITMENTS AND CONTINGENCIES (Note 5) .....................
DIVISIONAL EQUITY .......................................... 19,933 21,835
------- -------
TOTAL LIABILITIES AND DIVISIONAL EQUITY ................... $32,976 $32,904
======= =======
</TABLE>
See notes to financial statements.
F-51
<PAGE>
SMURFIT PLASTIC PACKAGING
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
AND FOR THE PERIOD FROM
JANUARY 1, 1997 TO NOVEMBER 7, 1997
(In Thousands)
<TABLE>
<CAPTION>
Period from
January 1,
Year Ended 1997 to
December 31, November 7,
1996 1997
-------------- ------------
<S> <C> <C>
NET SALES (Note 8) .......................... $ 64,492 $57,679
COST OF SALES (Note 8) ...................... 50,294 48,283
-------- -------
Gross profit .............................. 14,198 9,396
-------- -------
EXPENSES:
Selling .................................... 2,426 2,005
General and administrative ................. 3,927 3,333
-------- -------
Total expenses ............................ 6,353 5,338
-------- -------
INCOME FROM OPERATIONS ...................... 7,845 4,058
INTEREST EXPENSE ............................ 531 480
-------- -------
INCOME BEFORE INCOME TAXES .................. 7,314 3,578
PROVISION FOR INCOME TAXES (Note 6) ......... 2,756 1,352
-------- -------
NET INCOME .................................. $ 4,558 $ 2,226
======== =======
</TABLE>
See notes to financial statements.
F-52
<PAGE>
SMURFIT PLASTIC PACKAGING
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 AND FOR THE
PERIOD FROM JANUARY 1, 1997 TO NOVEMBER 7, 1997
(In Thousands)
<TABLE>
<CAPTION>
Period from
January 1,
Year Ended 1997 to
December 31, November 7,
1996 1997
-------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................ $ 4,558 $ 2,226
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ........................ 1,924 1,976
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable ........... (881) 94
Increase in inventories .............................. (49) (78)
Increase in prepaid and other current assets ......... (29) (41)
Increase (decrease) in accounts payable, accrued
expenses and income taxs payable ................... 2,004 (2,051)
Increase (decrease) in deferred income taxes ......... (94) 77
-------- --------
Net cash provided by operating activities .......... 7,433 2,203
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES --
Capital expenditures .................................. (2,657) (1,502)
-------- --------
Net cash used in investing activities .............. (2,657) (1,502)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES --
Intercompany cash settlements and transfers ........... (4,776) (701)
-------- --------
Net cash used in financing activities .............. (4,776) (701)
-------- --------
NET CHANGE IN CASH ..................................... -- --
CASH, BEGINNING OF PERIOD .............................. 2 2
-------- --------
CASH, END OF PERIOD .................................... $ 2 $ 2
======== ========
</TABLE>
See notes to financial statements.
F-53
<PAGE>
SMURFIT PLASTIC PACKAGING
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 1996, and the
Period from January 1, 1997 to November 7, 1997
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization -- Smurfit Plastic Packaging ("SPP" or the "Company") is a
leading U.S. producer of plastic industrial drums and is also a manufacturer of
liners for use in steel and fiber drum composites.
The Company was acquired by Smurfit Packaging Corporation ("SPC"), a
subsidiary of the Jefferson Smurfit Group (the "Parent Company") as part of
their acquisition of Container Corporation of America in 1986. Effective
November 8, 1997, the assets of the Company were acquired by Russell-Stanley
Holdings, Inc. ("RSH").
Basis of Presentation -- The accompanying financial statements have been
prepared from the separate accounting records maintained by SPP, a division of
SPC. The results of these financials may not necessarily be indicative of the
conditions that would have existed if the Division had been operated as an
unaffiliated company. Amounts collected from the related parties and amounts
distributed to the Parent Company are reflected as cash settlements and
transfers in the accompanying financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash -- As a subsidiary of the Parent Company, SPP was a participant in
the Parent Company's cash management system. All of the cash receipt and
disbursement activities of SPP were performed by the Parent Company on behalf
of SPP. The cash presented on the financial statements represents petty cash
maintained at each of the SPP plants.
Inventories -- Inventories are stated at the lower of cost or market
value. Cost is determined on the first-in, first-out (FIFO) method.
Property, Plant and Equipment -- Property, plant and equipment, stated at
cost, is being depreciated for financial reporting purposes on the
straight-line method over the estimated useful lives of the assets or the lease
term, whichever is shorter. The estimated useful lives for each class of
property, plant and equipment are as follows:
<TABLE>
<S> <C>
Buildings and improvements ......... 40 years
Furniture and fixtures ............. 5 years
Machinery and equipment ............ 15 years
Transportation equipment ........... 5 years
</TABLE>
Revenue Recognition -- Revenue is recognized when products are shipped to
customers.
Income Taxes -- Deferred tax assets and liabilities are recognized for the
expected future tax consequences attributable to the difference between the
financial statement carrying amounts of assets and liabilities and their
respective tax basis, as if the division had been operated as an unaffiliated
company.
Interest Expense -- Under the Parent Company's corporate policies, SPP was
charged an amount of interest each month based upon the balance of SPP's
working capital during the month calculated using the London Interbank Offered
Rate ("LIBOR") in effect at the end of that month. SPP carried no separate
outstanding debt during 1996 or 1997.
Use of Estimates -- The preparation of these financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
F-54
<PAGE>
SMURFIT PLASTIC PACKAGING
NOTES TO FINANCIAL STATEMENTS -- (Continued)
Year Ended December 31, 1996, and the
Period from January 1, 1997 to November 7, 1997
3. INVENTORIES
At December 31, 1996 and November 7, 1997, inventory consists of:
<TABLE>
<CAPTION>
December 31, November 7,
1996 1997
-------------- ------------
(In thousands)
<S> <C> <C>
Raw materials .......... $ 1,859 $ 1,892
Finished goods ......... 2,988 3,033
------- -------
TOTAL .................. $ 4,847 $ 4,925
======= =======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
At December 31, 1996 and November 7, 1997, property, plant and equipment
consists of:
<TABLE>
<CAPTION>
December 31, November 7,
1996 1997
-------------- ------------
(In thousands)
<S> <C> <C>
Land ...................................... $ 606 $ 606
Buildings and improvements ................ 4,193 4,208
Machinery and equipment ................... 25,746 29,685
Furniture and fixtures .................... 13 13
Transportation equipment .................. 24 23
Construction in progress .................. 3,480 895
-------- --------
Total ..................................... 34,062 35,430
Less accumulated depreciation ............. 14,504 15,969
-------- --------
Property, plant and equipment-net ......... $ 19,558 $ 19,461
======== ========
</TABLE>
5. COMMITMENTS
Operating Leases -- The Company has operating lease commitments expiring
at various dates, principally for real property, machinery and equipment, and
transportation equipment leases. Total rent expense amounted to $1,184,000 and
$1,036,000 in 1996 and 1997, respectively.
Future minimum commitments under these leases are as follows:
<TABLE>
<S> <C>
(In thousands)
1998 ..................... $1,040
1999 ..................... 945
2000 ..................... 937
2001 ..................... 896
2002 ..................... 509
Thereafter ............... 1,689
------
Total .................... $6,016
======
</TABLE>
F-55
<PAGE>
SMURFIT PLASTIC PACKAGING
NOTES TO FINANCIAL STATEMENTS -- (Continued)
Year Ended December 31, 1996, and the
Period from January 1, 1997 to November 7, 1997
6. INCOME TAXES
The provision (benefit) for income taxes for the year ended December 31,
1996, and the period ended November 7, 1997 consists of the following:
<TABLE>
<CAPTION>
December 31, November 7,
1996 1997
-------------- ------------
(In thousands)
<S> <C> <C>
Current:
Federal ............................... $2,429 $1,081
State ................................. 421 194
------ ------
Total current .......................... 2,850 1,275
------ ------
Deferred:
Federal ............................... (80) 65
State ................................. (14) 12
------ ------
Total deferred ......................... (94) 77
------ ------
Net provision for income taxes ......... $2,756 $1,352
====== ======
</TABLE>
The difference between the effective income tax rate and the statutory
Federal income tax rate is due to state taxes.
The components of net deferred tax liabilities as of December 31, 1996 and
November 7, 1997 were as follows:
<TABLE>
<CAPTION>
December 31, November 7,
1996 1997
-------------- ------------
(In thousands)
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment ......... $2,467 $2,544
------ ------
Total deferred tax liabilities ......... $2,467 $2,544
====== ======
</TABLE>
7. PENSION AND POSTRETIREMENT HEALTH CARE BENEFITS
Substantially all employees of the Company participate in a
noncontributory defined benefit pension plan sponsored by the Parent Company.
The Company's portion of the present value of accumulated plan benefits and the
net assets available for the payment of such benefits are not presented because
such information is not determined for each participating company. For the year
ended December 31, 1996, and the period ended November 7, 1997, pension expense
allocated to the Company was approximately $314,000 and $412,000, respectively.
The Company has a savings and investment plan which allows employees to
defer up to 15% of their salary, with the Company matching 60% of each
employee's contribution not exceeding 6% of the employee's salary. The
Company's contributions charged to operations for the year ended December 31,
1996, and the period ended November 7, 1997 were approximately , $129,000 and
$120,000, respectively.
In addition, the Company provides certain health care and life insurance
benefits for all salaried and certain hourly employees. The Company has various
plans under which the cost may be borne either by the Company, the employee or
partially by each party. The Company does not currently
F-56
<PAGE>
SMURFIT PLASTIC PACKAGING
NOTES TO FINANCIAL STATEMENTS -- (Continued)
Year Ended December 31, 1996, and the
Period from January 1, 1997 to November 7, 1997
fund these plans. These benefits are discretionary and are not a commitment to
long-term benefit payments.
8. TRANSACTIONS WITH AFFILIATES
The Company is a member of a group of companies affiliated through common
ownership and management.
The net intercompany cash settlements and transfers resulted in the Parent
Company contributing a loan payable to the Company in the amount of $4,776,000,
and $547,000 for 1996 and 1997, respectively. Also the Company was subject to a
charge from the Parent Company based upon the monthly balance of the Company's
working capital (Note 2), which amounted to approximately $530,000 and $480,000
for 1996 and 1997, respectively.
9. SUPPLEMENTAL CASH FLOWS INFORMATION
There were no interest or income tax payments for the year ended December
31, 1996, and the period ended November 7, 1997.
10. MATAWAN FACILITY
During a portion of 1996, the Company operated a fiber drum manufacturing
facility in Matawan, NJ. During October 1996, SPC ceased operations at this
facility and leased the space to a third party. The Company received the rental
income from this property for the remainder of 1996 and for part of 1997.
Beginning in September 1997, SPC received the rental income from this property.
Rental income received by the Company was $60,000. The rental income, as well
as all other balances and transactions relating to the Matawan facility for
1996 and 1997 have not been included in the accompanying financial statements
due to the facility not being part of the assets sold (Note 1).
F-57
<PAGE>
(This page intentionally left blank)
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information or
to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
exchange the exchange notes for outstanding notes only under circumstances and
in jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
--------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
-------
Where You Can Find More Information ........... i
Prospectus Summary ............................ 1
Risk Factors .................................. 13
Use of Proceeds ............................... 22
Capitalization ................................ 23
Unaudited Pro Forma Consolidated
Financial Data ............................... 24
Selected Historical Consolidated
Financial and Other Data ..................... 31
Management's Discussion and Analysis
of Financial Condition and
Results of Operations ........................ 34
Business ...................................... 42
Management .................................... 52
Ownership of Common Stock ..................... 59
Certain Relationships and Related
Party Transactions ........................... 61
Description of Senior Credit Facility ......... 62
The Exchange Offer ............................ 63
Description of Notes .......................... 75
Certain U.S. Federal Income Tax
Consequences of the
Exchange Offer ............................ 113
Plan of Distribution .......................... 113
Legal Matters ................................. 114
Experts ....................................... 114
Index to Financial Statements ................. F-1
</TABLE>
Russell-Stanley
Holdings, Inc.
Offer to Exchange All Outstanding
10 7/8% Senior Subordinated Notes
due 2009
for 10 7/8% Senior Subordinated
Notes due 2009
Which Have Been Registered
Under the Securities Act of 1933
--------------------------------
[Russell-Stanley Holdings, Inc. Logo]
--------------------------------
--------------------------------------
PROSPECTUS
--------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE 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, disinterested director vote, stockholder vote,
agreement or otherwise. The Registrant's by-laws provide that the Registrant
will indemnify any person to the fullest extent permitted by Delaware law who
is or was made, or threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, including, without limitation, an action by or in the right
of the Registrant to procure a judgment in its favor, by reason of the fact
that such person, or a person of whom such person is the legal representative,
is or was a director or officer of the Registrant, or is or was serving in any
capacity at the request of the Registrant for any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against judgments, fines, penalties, excise taxes, amounts paid in settlement
and costs, charges and expenses (including attorneys' fees and disbursements).
Persons who are not directors or officers of the Registrant may be similarly
indemnified in respect of service to the Registrant or to any of the above
other entities at the request of the Registrant to the extent the board of
directors at any time specifies that such persons are entitled to the benefits
of such indemnification. Pursuant to the by-laws, the Registrant also has the
power to purchase 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 Seventh of the Registrant's
certificate of incorporation includes such a provision.
Item 21. Exhibits and Financial Statement Schedules
The following exhibits are filed pursuant to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ------------- -----------------------------------------------------------------
<S> <C>
3.1 Certificate of Incorporation of Russell-Stanley Holdings, Inc.
3.2 By-Laws of Russell-Stanley Holdings, Inc.
3.3 Amended and Restated Certificate of Incorporation of Russell-Stanley Corp.
3.4 By-Laws of Russell-Stanley Corp.
3.5 Articles of Incorporation of Container Management Services, Inc.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ------------- --------------------------------------------------------------------------------------
<S> <C>
3.6 By-Laws of Container Management Services, Inc.
3.7 Restated Articles of Incorporation of New England Container Co., Inc.
3.8 Amended and Restated By-Laws of New England Container Co., Inc.
3.9 Articles of Incorporation of Russell-Stanley, Inc.
3.10 By-Laws of Russell-Stanley, Inc.
3.11 Certificate of Incorporation of RSLPCO, Inc.
3.12 By-Laws of RSLPCO, Inc.
3.13 Certificate of Limited Partnership of Russell-Stanley, L.P.
3.14 Agreement of Limited Partnership of Russell-Stanley, L.P.
4.1 Indenture, dated as of February 10, 1999, by and among Russell-Stanley Holdings,
Inc., the guarantors named therein and The Bank of New York, as the Trustee
4.2 Form of 10 7/8% Senior Subordinated Notes due 2009 (included as part of the
Indenture filed as Exhibit 4.1 hereto)
5 Opinion of Simpson Thacher & Bartlett
10.1 Fifth Amended and Restated Revolving Credit Agreement and Term Loan Agreement,
dated as of February 10, 1999, among Russell-Stanley Holdings, Inc. and its
subsidiaries, as borrowers, the lenders listed therein and BankBoston, N.A., as
administrative agent, and Goldman Sachs Credit Partners, L.P., as syndication agent
10.2 Stock Purchase Agreement dated as of July 21, 1998, among Vincent J. Buonanno, New
England Container Co., Inc. and Russell-Stanley Holdings, Inc.
10.3 Stock Purchase Agreement dated as of July 1, 1997, among Mark E. Daniels, Robert
E. Daniels, Mark E. Daniels Irrevocable Family Trust, R.E. Daniels Irrevocable Family
Trust, Container Management Services, Inc. and Russell-Stanley Corp.
10.4 Share Purchase Agreement dated as of October 24, 1997, among Michael W.
Hunter, John D. Hunter, Michael W. Hunter Holdings Inc., John D. Hunter Holdings
Inc., Hunter Holdings Inc., 373062 Ontario Limited, Hunter Drums Limited, Russell-
Stanley Holdings, Inc. and HDL Acquisition, Inc.
10.5 Purchase and Sale Agreement dated as of October 23, 1997, among Smurfit
Packaging Corporation, Russell-Stanley Holdings, Inc. and Russell-Stanley Corp.
10.6 Vestar Management Agreement, dated as of July 23, 1997, among Russell-Stanley
Holdings, Inc., Russell-Stanley Corp., Container Management Services, Inc. and
Vestar Capital Partners
*10.7 Know How and Patent Licensing Agreement between Mauser-Werke GmbH and
Russell-Stanley Corp., dated June 26, 1995
*10.8 Licensing Agreement between Mauser-Werke GmbH and Russell-Stanley Corp.,
dated June 26, 1995
*10.9 Know How and Patent Licensing Agreement between Mauser-Werke GmbH and
Russell-Stanley Corp., dated June 26, 1995
*10.10 Know How and Patent Licensing Agreement between Mauser-Werke GmbH and
Hunter Drums Limited, dated July 31, 1996
*10.11 Know How and Patent Licensing Agreement between Mauser-Werke GmbH and
Hunter Drums Limited, dated July 31, 1996
*10.12 Consent and Agreement between Hunter Drums Limited and Mauser-Werke GmbH,
dated September 29, 1997
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------------- ----------------------------------------------------------------------------------------
<S> <C>
10.13 1998 Stock Option Plan
10.14 Russell-Stanley Holdings, Inc. Management Annual Incentive Compensation Plan
1998
10.15 Employment Agreement, dated October 30, 1997, among Russell-Stanley Holdings,
Inc., Hunter Drums Limited and Michael W. Hunter
10.16 Stay Pay Agreement, dated October 30, 1997, among Russell-Stanley Holdings, Inc.,
Hunter Drums Limited and Michael W. Hunter
10.17 Employment Agreement, dated as of July 23, 1997, between Russell-Stanley
Holdings, Inc. and Mark E. Daniels
10.18 Stay Pay Agreement, dated as of July 23, 1997, between Russell-Stanley Holdings,
Inc. and Mark Daniels
10.19 Employment Agreement, dated as of July 23, 1998, between Russell-Stanley
Holdings, Inc. and Gerard C. DiSchino
*10.20 Employment Agreement, dated September 20, 1996, between Russell-Stanley Corp.
and Robert Singleton
10.21 Services Agreement, dated as of February 10, 1999, between Russell-Stanley
Holdings, Inc. and Vincent J. Buonanno
*10.22 License Agreement between Gallay SA and Hunter Drums Limited, dated February 7,
1997
*10.23 License Agreement between Gallay SA and Hunter Drums Limited, dated April 16,
1987
12 Computation of Earnings to Fixed Charges
21 Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP, Independent Auditors
23.2 Consent of Elliott, Davis & Company, L.L.P., Independent Certified Public
Accountants, with respect to Container Management Services, Inc. as of and for the year
ended December 31, 1996
23.3 Consent of Simpson Thacher & Bartlett (included as part of its opinion filed as Exhibit
5 hereto).
24 Power of Attorney
25 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of
New York, as Trustee
27 Financial Data Schedule for the year ended December 31, 1998
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
- ----------------
* To be filed by amendment.
II-3
<PAGE>
Item 22. Undertakings
(a) Insofar as indemnification for liabilities arising under 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.
(b) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more that a 20
percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; and
(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; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE>
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 March 31, 1999.
RUSSELL-STANLEY HOLDINGS, INC.
By: /s/ Daniel W. Miller
-------------------------------------
Daniel W. Miller
Executive Vice President,
Chief Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act, the Registration
Statement has been signed on the 31st day of March, 1999 by the following
persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Title
- --------------------------- ---------------------------------------
<S> <C>
* President, Chief Executive Officer,
- ------------------------- Secretary and Director (principal
Robert L. Singleton executive officer)
/s/ Daniel W. Miller Executive Vice President, Chief
- ------------------------- Financial Officer, Treasurer and
Daniel W. Miller Director (principal financial officer)
* Vice President, Controller
- ------------------------- (principal accounting officer)
Ronald M. Litchkowski
* Executive Vice President and
- ------------------------- Director
Mark E. Daniels
* Executive Vice President and
- ------------------------- Director
Michael W. Hunter
* Chairman of the Board of
- ------------------------- Directors
Robert L. Rosner
* Director
- -------------------------
Norman W. Alpert
* Director
- -------------------------
Vincent J. Buonanno
* Director
- -------------------------
Todd N. Khoury
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
* Director
- -------------------------
Leonard Lieberman
* Director
- -------------------------
Kevin Mundt
* Director
- -------------------------
Arthur J. Nagle
* Director
- -------------------------
Vincent J. Naimoli
* Director
- -------------------------
Daniel S. O'Connell
* Director
- -------------------------
John W. Priesing
</TABLE>
* By: /s/ Daniel W. Miller
---------------------
Daniel W. Miller,
Attorney-in-fact
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on March 31, 1999.
RUSSELL-STANLEY CORP.
By: /s/ Daniel W. Miller
-------------------------------------
Daniel W. Miller
Executive Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act, the Registration
Statement has been signed on the 31st day of March, 1999 by the following
persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Title
- --------------------------- ---------------------------------------
<S> <C>
* President, Chief Executive Officer
- ------------------------- and Director (principal executive
Robert L. Singleton officer)
Executive Vice President, Chief
- ------------------------- Financial Officer, Treasurer and
Daniel W. Miller Director (principal financial officer)
* Vice President, Controller and
- ------------------------- Secretary (principal accounting
Ronald M. Litchkowski officer)
* Director
- -------------------------
Robert L. Rosner
</TABLE>
* By: /s/ Daniel W. Miller
---------------------
Daniel W. Miller,
Attorney-in-fact
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on March 31, 1999.
RUSSELL-STANLEY, INC.
By: /s/ Daniel W. Miller
-------------------------------------
Daniel W. Miller
Executive Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act, the Registration
Statement has been signed on the 31st day of March, 1999 by the following
persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Title
- --------------------------- ---------------------------------------
<S> <C>
* President, Chief Executive Officer
- ------------------------- and Director (principal executive
Robert L. Singleton officer)
/s/ Daniel W. Miller Executive Vice President, Chief
- ------------------------- Financial Officer, Treasurer and
Daniel W. Miller Director (principal financial officer)
* Vice President, Controller and
- ------------------------- Secretary (principal accounting
Ronald M. Litchkowski officer)
* Director
- -------------------------
Robert L. Rosner
</TABLE>
* By: /s/ Daniel W. Miller
---------------------
Daniel W. Miller,
Attorney-in-fact
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on March 31, 1999.
RSLPCO, INC.
By: /s/ Daniel W. Miller
-------------------------------------
Daniel W. Miller
Executive Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act, the Registration
Statement has been signed on the 31st day of March, 1999 by the following
persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Title
- --------------------------- ------------------------------------
<S> <C>
* President, Chief Executive Officer,
- ------------------------- Secretary and Director (principal
Robert L. Singleton executive officer)
/s/ Daniel W. Miller Executive Vice President, Chief
- ------------------------- Financial Officer, Treasurer and
Daniel W. Miller Director (principal financial and
accounting officer)
* Director
- -------------------------
Robert L. Rosner
</TABLE>
* By: /s/ Daniel W. Miller
---------------------
Daniel W. Miller,
Attorney-in-fact
II-9
<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 March 31, 1999.
RUSSELL-STANLEY, L.P.
By: Russell-Stanley, Inc., its General
Partner
By: /s/ Daniel W. Miller
-------------------------------------
Daniel W. Miller
Executive Vice President, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act, the Registration
Statement has been signed on the 31st day of March, 1999 by the following
persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Title
- --------------------------- ------------------------------------
<S> <C>
* Director, Russell-Stanley, Inc., as
- ------------------------- General Partner
Robert L. Singleton
/s/ Daniel W. Miller Director, Russell-Stanley, Inc., as
- ------------------------- General Partner
Daniel W. Miller
* Director, Russell-Stanley, Inc., as
- ------------------------- General Partner
Robert L. Rosner
</TABLE>
* By: /s/ Daniel W. Miller
---------------------
Daniel W. Miller,
Attorney-in-fact
II-10
<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 March 31, 1999.
CONTAINER MANAGEMENT SERVICES, INC.
By: /s/ Daniel W. Miller
-------------------------------------
Daniel W. Miller
Executive Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act, the Registration
Statement has been signed on the 31st day of March, 1999 by the following
persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Title
- --------------------------- ----------------------------------
<S> <C>
* President and Director (principal
- ------------------------- executive officer)
Mark E. Daniels
/s/ Daniel W. Miller Executive Vice President, Chief
- ------------------------- Financial Officer and Director
Daniel W. Miller (principal financial officer)
* Director
- -------------------------
Robert L. Singleton
</TABLE>
* By: /s/ Daniel W. Miller
---------------------
Daniel W. Miller,
Attorney-in-fact
II-11
<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 March 31, 1999.
NEW ENGLAND CONTAINER CO., INC.
By: /s/ Daniel W. Miller
-------------------------------------
Daniel W. Miller
Executive Vice President, Chief
Financial Officer and Secretary
Pursuant to the requirements of the Securities Act, the Registration
Statement has been signed on the 31st day of March, 1999 by the following
persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Title
- --------------------------- ---------------------------------------
<S> <C>
* President and Director (principal
- ------------------------- executive officer)
Gerard C. DiSchino
/s/ Daniel W. Miller Executive Vice President, Chief
- ------------------------- Financial Officer, Secretary and
Daniel W. Miller Director (principal financial officer)
* Vice President, Controller and
- ------------------------- Treasurer (principal accounting
Eugene D. Onofrio officer)
* Director
- -------------------------
Robert L. Singleton
</TABLE>
* By: /s/ Daniel W. Miller
---------------------
Daniel W. Miller,
Attorney-in-fact
II-12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
<S> <C>
3.1 Certificate of Incorporation of Russell-Stanley Holdings, Inc.
3.2 By-Laws of Russell-Stanley Holdings, Inc.
3.3 Amended and Restated Certificate of Incorporation of Russell-Stanley Corp.
3.4 By-Laws of Russell-Stanley Corp.
3.5 Articles of Incorporation of Container Management Services, Inc.
3.6 By-Laws of Container Management Services, Inc.
3.7 Restated Articles of Incorporation of New England Container Co., Inc.
3.8 Amended and Restated By-Laws of New England Container Co., Inc.
3.9 Articles of Incorporation of Russell-Stanley, Inc.
3.10 By-Laws of Russell-Stanley, Inc.
3.11 Certificate of Incorporation of RSLPCO, Inc.
3.12 By-Laws of RSLPCO, Inc.
3.13 Certificate of Limited Partnership of Russell-Stanley, L.P.
3.14 Agreement of Limited Partnership of Russell-Stanley, L.P.
4.1 Indenture, dated as of February 10, 1999, by and among Russell-Stanley Holdings,
Inc., the guarantors named therein and The Bank of New York, as the Trustee
4.2 Form of 10 7/8% Senior Subordinated Notes due 2009 (included as part of the
Indenture filed as Exhibit 4.1 hereto)
5 Opinion of Simpson Thacher & Bartlett
10.1 Fifth Amended and Restated Revolving Credit Agreement and Term Loan Agreement,
dated as of February 10, 1999, among Russell-Stanley Holdings, Inc. and its
subsidiaries, as borrowers, the lenders listed therein and BankBoston, N.A., as
administrative agent, and Goldman Sachs Credit Partners, L.P., as syndication
agent
10.2 Stock Purchase Agreement dated as of July 21, 1998, among Vincent J.
Buonanno, New England Container Co., Inc. and Russell-Stanley Holdings,
Inc.
10.3 Stock Purchase Agreement dated as of July 1, 1997, among Mark E.
Daniels, Robert E. Daniels, Mark E. Daniels Irrevocable Family Trust, R.E.
Daniels Irrevocable Family Trust, Container Management Services, Inc. and
Russell-Stanley Corp.
10.4 Share Purchase Agreement dated as of October 24, 1997, among Michael
W. Hunter, John D. Hunter, Michael W. Hunter Holdings Inc., John D.
Hunter Holdings Inc., Hunter Holdings Inc., 373062 Ontario Limited,
Hunter Drums Limited, Russell-Stanley Holdings, Inc. and HDL
Acquisition, Inc.
10.5 Purchase and Sale Agreement dated as of October 23, 1997, among Smurfit
Packaging Corporation, Russell-Stanley Holdings, Inc. and Russell-Stanley
Corp.
10.6 Vestar Management Agreement, dated as of July 23, 1997, among Russell-
Stanley Holdings, Inc., Russell-Stanley Corp., Container Management
Services, Inc. and Vestar Capital Partners
*10.7 Know How and Patent Licensing Agreement between Mauser-Werke
GmbH and Russell-Stanley Corp., dated June 26, 1995
*10.8 Licensing Agreement between Mauser-Werke GmbH and Russell-Stanley
Corp., dated June 26, 1995
*10.9 Know How and Patent Licensing Agreement between Mauser-Werke
GmbH and Russell-Stanley Corp., dated June 26, 1995
*10.10 Know How and Patent Licensing Agreement between Mauser-Werke
GmbH and Hunter Drums Limited, dated July 31, 1996
*10.11 Know How and Patent Licensing Agreement between Mauser-Werke
GmbH and Hunter Drums Limited, dated July 31, 1996
*10.12 Consent and Agreement between Hunter Drums Limited and Mauser-Werke GmbH, dated
September 29, 1997
10.13 1998 Stock Option Plan
10.14 Russell-Stanley Holdings, Inc. Management Annual Incentive Compensation
Plan 1998
10.15 Employment Agreement, dated October 30, 1997, among Russell-Stanley
Holdings, Inc., Hunter Drums Limited and Michael W. Hunter
10.16 Stay Pay Agreement, dated October 30, 1997, among Russell-Stanley
Holdings, Inc., Hunter Drums Limited and Michael W. Hunter
10.17 Employment Agreement, dated as of July 23, 1997, between Russell-Stanley
Holdings, Inc. and Mark E. Daniels
10.18 Stay Pay Agreement, dated as of July 23, 1997, between Russell-Stanley
Holdings, Inc. and Mark Daniels
10.19 Employment Agreement, dated as of July 23, 1998, between Russell-Stanley
Holdings, Inc. and Gerard C. DiSchino
*10.20 Employment Agreement, dated September 20, 1996, between Russell-Stanley
Corp. and Robert Singleton
10.21 Services Agreement, dated as of February 10, 1999, between Russell-Stanley
Holdings, Inc. and Vincent J. Buonanno
*10.22 License Agreement between Gallay SA and Hunter Drums Limited, dated February 7, 1997
*10.23 License Agreement between Gallay SA and Hunter Drums Limited, dated April 16, 1987
12 Computation of Earnings to Fixed Charges
21 Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP, Independent Auditors
23.2 Consent of Elliot, Davis & Company, L.L.P., Independent Certified Public Accountants,
with respect to Container Management Services, Inc. as of and for the year ended
December 31, 1996
23.3 Consent of Simpson Thacher & Bartlett (included as part of its opinion filed as
Exhibit 5 hereto).
24 Power of Attorney
25 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of
The Bank of New York, as Trustee
27 Financial Data Schedule for the year ended December 31, 1998
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
* To be filed by amendment.
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
RUSSELL-STANLEY HOLDINGS, INC.
The undersigned, in order to form a corporation for the
purpose hereinafter stated, under and pursuant to the provisions of the Delaware
General Corporation Law, hereby certifies that:
FIRST: The name of the Corporation is Russell-Stanley
Holdings, Inc.
SECOND: The registered office and registered agent of the
Corporation is The Corporation Trust Company, Corporation Trust Center, 1209
Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
Delaware General Corporation Law.
FOURTH: The total number of shares of stock that the
Corporation is authorized to issue is 3,000,000 shares of Common Stock, par
value $0.01 per share.
FIFTH: The name of the sole incorporator is Nicole M.
Lassiter, and her address is 425 Lexington Avenue, New York City, New York
10017-3954.
SIXTH: The Board of Directors of the Corporation, acting by
majority vote, may adopt, amend or repeal the By-Laws of the Corporation.
SEVENTH: Except as otherwise provided by the Delaware General
Corporation Law as the same exists or may hereafter be amended, no director of
the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of this Article SEVENTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate of Incorporation on July 2, 1997.
/S/ NICOLE M. LASSITER
Nicole M. Lassiter
Incorporator
EXHIBIT 3.2
RUSSELL-STANLEY HOLDINGS, INC.
BY-LAWS
ADOPTED JULY 2, 1997
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETING AND NOTICE. Meetings of the
stockholders of 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 AND SPECIAL MEETINGS. Annual meetings of
stockholders shall be held, at a date, time and place fixed by the Board of
Directors and stated in the notice of meeting, to elect a Board of Directors and
to transact such other business as may properly come before the meeting. Special
meetings of the stockholders may be called by the President for any purpose and
shall be called by the President or Secretary if directed by the Board of
Directors or requested in writing by the holders of not less than 25% of the
common stock of the Corporation. Each such stockholder request shall state the
purpose of the proposed meeting.
Section 3. NOTICE. Except as otherwise provided by law, at
least 10 and not more than 60 days before each meeting of stockholders, written
notice of the time, date and place of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be given
to each stockholder.
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 not be
less than one or more than fifteen. The first Board of Directors shall consist
of nine Directors. Thereafter, within the limits specified above, the number of
Directors shall be determined by the Board of Directors or the stockholders. The
Directors shall be elected by stockholders at their annual meeting. Vacancies
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2
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. MEETINGS. Regular meetings of the Board of
Directors shall be held at such times and places as may from time to time be
fixed by the Board of Directors or as may be specified in a notice of meeting.
Section 3. QUORUM. One-third of the total number of Directors
shall constitute a quorum for the transaction of business. If a quorum is not
present at any meeting of the Board of Directors, the Directors present may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until such a quorum is present. Except as otherwise provided by
law, the Certificate of Incorporation of the Corporation or these By-Laws, the
act of a majority of the Directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors.
Section 4. COMMITTEES. 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 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 or they constitute a quorum, may unanimously appoint another Director
to act as the absent or disqualified member.
ARTICLE III
OFFICERS
The officers of the Corporation shall consist of a President,
a Vice President, a Secretary, a Treasurer, and such other additional officers
with such titles as the Board of Directors shall determine, all of which 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.
ARTICLE IV
INDEMNIFICATION
Section 1. INDEMNITY UNDERTAKING. To the fullest extent
permitted by law (including, without limitation, Section 145 of the General
Corporation Law of the State of Delaware (as amended from time to time, the
"GENERAL CORPORATION LAW")), the Corporation shall
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3
indemnify any person who is or was made, or threatened to be made, a party to
any threatened, pending or completed action, suit or proceeding (a
"PROCEEDING"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Corporation
to procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a Director or
officer of the Corporation, or is or was serving in any capacity at the request
of the Corporation for any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise (an "OTHER ENTITY"), against
judgments, fines, penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees and disbursements). Persons who
are not Directors or officers of the Corporation may be similarly indemnified in
respect of service to the Corporation or to an Other Entity at the request of
the Corporation to the extent the Board of Directors at any time specifies that
such persons are entitled to the benefits of this Article IV.
Section 2. ADVANCEMENT OF EXPENSES. The Corporation shall,
from time to time, reimburse or advance to any Director or officer or other
person entitled to indemnification hereunder the funds necessary for payment of
expenses, including attorneys' fees and disbursements, incurred in connection
with any Proceeding, in advance of the final disposition of such Proceeding;
PROVIDED, HOWEVER, that, if required by the General Corporation Law, such
expenses incurred by or on behalf of any such Director, officer or other person
may be paid in advance of the final disposition of a Proceeding only upon
receipt by the Corporation of an undertaking, by or on behalf of such Director,
officer or other person indemnified hereunder, to repay any such amount so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right of appeal that such Director, officer or other
person is not entitled to be indemnified for such expenses.
Section 3. RIGHTS NOT EXCLUSIVE. The rights to indemnification
and reimbursement or advancement of expenses provided by, or granted pursuant
to, this Article IV shall not be deemed exclusive of any other rights which a
person seeking indemnification or reimbursement or advancement of expenses may
have or to which such person hereafter may be entitled under any statute, the
Certificate of Incorporation, these By-Laws, any agreement, any vote of
stockholders or disinterested Directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office.
Section 4. CONTINUATION OF BENEFITS. The rights to
indemnification and reimbursement or advancement of expenses provided by, or
granted pursuant to, this Article IV shall continue as to a person who has
ceased to be a Director or officer (or other person indemnified hereunder) and
shall inure to the benefit of the executors, administrators, legatees and
distributees of any such person.
Section 5. INSURANCE. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
Director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a Director, officer, employee or agent of an
Other Entity, against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such person's status as
such, whether or not the Corporation would have the power to indemnify such
<PAGE>
4
person against such liability under the provisions of this Article IV or the
Certificate of Incorporation or under Section 145 of the General Corporation Law
or any other provision of law.
Section 6. BINDING EFFECT. The provisions of this Article IV
shall be a contract between the Corporation, on the one hand, and each Director
and officer who serves in such capacity at any time while this Article IV is in
effect and/or any other person indemnified hereunder, on the other hand,
pursuant to which the Corporation and each such Director, officer or other
person intend to be legally bound. No repeal or modification of this Article IV
shall affect any rights or obligations with respect to any state of facts then
or theretofore existing or thereafter arising or any proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state
of facts.
Section 7. PROCEDURAL RIGHTS. The rights to indemnification
and reimbursement or advancement of expenses provided by, or granted pursuant
to, this Article IV shall be enforceable by any person entitled to such
indemnification or reimbursement or advancement of expenses in any court of
competent jurisdiction. The burden of proving that such indemnification or
reimbursement or advancement of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such action that such indemnification
or reimbursement or advancement of expenses is proper in the circumstances nor
an actual determination by the Corporation (including its Board of Directors,
its independent legal counsel and its stockholders) that such person is not
entitled to such indemnification or reimbursement or advancement of expenses
shall constitute a defense to the action or create a presumption that such
person is not so entitled. Such a person shall also be indemnified for any
expenses incurred in connection with successfully establishing his or her right
to such indemnification or reimbursement or advancement of expenses, in whole or
in part, in any such proceeding.
Section 8. SERVICE DEEMED AT CORPORATION'S REQUEST. Any
Director or officer of the Corporation serving in any capacity (a) another
corporation of which a majority of the shares entitled to vote in the election
of its directors is held, directly or indirectly, by the Corporation or (b) any
employee benefit plan of the Corporation or any corporation referred to in
clause (a) shall be deemed, in each case, to be doing so at the request of the
Corporation.
Section 9. ELECTION OF APPLICABLE LAW. Any person entitled to
be indemnified or to receive reimbursement or advancement of expenses as a
matter of right pursuant to this Article IV may elect to have the right to
indemnification or reimbursement or advancement of expenses interpreted on the
basis of the applicable law in effect at the time of the occurrence of the event
or events giving rise to the applicable Proceeding, to the extent permitted by
law, or on the basis of the applicable law in effect at the time such
indemnification or reimbursement or advancement of expenses is sought. Such
election shall be made, by a notice in writing to the Corporation, at the time
indemnification or reimbursement or advancement of expenses is sought; PROVIDED,
however, that if no such notice is given, the right to indemnification or
reimbursement or advancement of expenses shall be determined by the law in
effect at the time indemnification or reimbursement or advancement of expenses
is sought.
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5
ARTICLE V
GENERAL PROVISIONS
Section 1. NOTICES. Whenever any statute, the Certificate of
Incorporation or these By-Laws require notice to be given to any Director or
stockholder, such notice may be given in writing by mail, addressed to such
Director or stockholder at his address as it appears in the records of the
Corporation, with postage thereon prepaid. Such notice shall be deemed to have
been given when it is deposited in the United States mail.
Notice to Directors may also be given by telegram.
Section 2. FISCAL YEAR. The fiscal year of the Corporation
shall be fixed by the Board of Directors.
EXHIBIT 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RUSSELL-STANLEY CORP.
* * * * * * * * * * * * * * * * *
Pursuant to Provisions of the
New Jersey Business Corporation Act
* * * * * * * * * * * * * * * * *
The undersigned officer of Russell-Stanley Corp. (the
"Corporation"), acting pursuant to the New Jersey Business Corporation Act, does
hereby certify that the Corporation's Certificate of Incorporation shall be
amended and restated as set forth below:
FIRST: The name of the Corporation (hereinafter called the
"Corporation") is
RUSSELL-STANLEY CORP.
SECOND: The address, including street, number, city, and
county, of the registered office of the Corporation in the State of New Jersey
is Greenbaum, Rowe, Smith, Ravin, Davis & Bergstein, 99 Wood Avenue South,
Woodbridge, New Jersey 07095 and the name of the registered agent of the
Corporation in the State of New Jersey is W. Raymond Felton.
The seven members of the Board of Directors of the Corporation
are Daniel S. O'Connell, Norman W. Alpert, Daniel W. Miller, Arthur J. Nagle,
Leonard Lieberman, John W. Priesing and Vincent J. Naimoli and their addresses
are c/o Russell-Stanley Corp., 230 Half Mile Road, Red Bank, New Jersey 07701.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the New
Jersey Business Corporation Act.
FOURTH: The total number of shares of all classes of stock
which the Corporation shall have the authority to issue is 1,924,208, of which
1,524,208 shares shall be shares of Common Stock, par value $0.01 per share,
400,000 shares shall be shares of Preferred Stock, par value $0.01 per share
(the "Preferred Stock").
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2
The relative rights, preferences and limitations of the shares
of Preferred Stock shall be as follows:
A. SERIES A PREFERRED STOCK
1. DESIGNATION OF SERIES A PREFERRED STOCK. The distinctive
designation of a series of Preferred Stock shall be the "$15.00 Cumulative
Exchangeable Redeemable Series A Preferred Stock" (the "Series A Preferred
Stock"). The maximum number of authorized shares of Series A Preferred Stock
shall be 200,000 provided that the maximum number of shares which may be issued
shall be the 90,000 shares initially issued upon conversion of the shares of
preferred stock of Vestar/R-S Holdings Corporation, a Delaware corporation
("Holdings") pursuant to the Agreement and Plan of Merger dated as of October
13, 1989 by and between Holdings and the Corporation (the "Agreement and Plan of
Merger") plus such additional number of shares as are issued as stock dividends
pursuant to Section A.2 of this Article Fourth.
2. DIVIDENDS. (a) The holders of the Series A Preferred Stock
shall be entitled to receive dividends at the annual rate of $15.00 per share,
when, as and if declared by the Board of Directors of the Corporation out of
funds legally available therefor after taking into account any permitted
revaluation of the assets of the Corporation (the "Legally Available Funds"),
payable quarterly on March 31, June 30, September 30 and December 31 in each
year (each a "Series A Dividend Payment Date"), commencing on September 30,
1989. The dividends payable on the Series A Preferred Stock shall be paid to the
holders of shares (whether whole or fractional) of the Series A Preferred Stock
as they appear on the stock records of the Corporation at the close of business
on such date (the "Series A Record Date") as shall be fixed by the Board of
Directors, which Series A Record Date shall not be more than 60 nor less than 10
days prior the Series A Dividend Payment Date and shall not precede the date
upon which the resolution fixing such Series A Record Date is adopted. Dividends
in arrears may be declared and paid at any time, without reference to any
regular Series A Dividend Payment Date, to holders of shares (whether whole or
fractional) of the Series A Preferred Stock as they appear on the stock records
of the Corporation on such date as shall be fixed by the Board of Directors,
which record date shall not be more than 60 nor less than 10 days prior to the
payment date thereof and shall not precede the date upon which the resolution
fixing such record date is adopted. Any dividend accruing in respect of the
first 20 Series A Dividend Payment Dates may, in the sole discretion of the
Corporation, be paid in cash or by issuing additional shares (whether whole or
fractional) of the Series A Preferred Stock; PROVIDED, HOWEVER, that any
dividend paid in connection with a redemption pursuant to Section A.3.2 or A.3.3
of this Article Fourth shall be paid in cash. For purposes of calculating any
dividend to be paid in shares of Series A Preferred Stock, each whole share of
the Series A Preferred Stock paid as a dividend hereunder shall be deemed to
have a value equal to $100 and each fractional share of the Series A Preferred
Stock paid as a dividend hereunder shall be deemed to have a value equal to the
product obtained by multiplying such fraction by $100. The issuance of such
additional shares of the Series A Preferred Stock shall constitute full payment
of the dividend otherwise payable in cash. The Corporation may, at its option,
pay in cash the liquidation value of fractional shares of the Series A Preferred
Stock in lieu of issuing fractional shares thereof as a dividend.
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3
(b) In the case of shares or fractions thereof of the Series A
Preferred Stock issued as dividends on shares of the Series A Preferred Stock,
such dividends shall be cumulative from the Series A Dividend Payment Date in
respect of which such shares were deemed to have been issued as a dividend. Such
shares shall be deemed to have been issued on the Series A Dividend Payment Date
on which they accrue. In all other cases, dividends shall be cumulative on each
share of Series A Preferred Stock from June 12, 1989 (regardless of the fact
that such shares were not outstanding on such date).
(c) Dividends payable on the Series A Preferred Stock for any
period more or less than a full quarterly dividend period shall be computed on
the basis of a 360 day year of twelve 30 day months.
(d) All dividends paid with respect to shares of Series A
Preferred Stock pursuant to Section A.2(a) of this Article Fourth shall be paid
PRO RATA to the holders of the Series A Preferred Stock based upon the
liquidation preference of the shares of Series A Preferred Stock held by each
holder.
3. REDEMPTION OF SERIES A PREFERRED STOCK
3.1 MANDATORY REDEMPTION. On June 30, 2001, the Corporation
will, to the extent it has Legally Available Funds therefor, redeem all of the
shares of Series A Preferred Stock then outstanding; PROVIDED, HOWEVER, that if
the Corporation's 14.5% Series A Senior Subordinated Notes due 1999 (the "Series
A Senior Subordinated Notes") and 14.5% Series B Senior Subordinated Notes due
1999 (the "Series B Senior Subordinated Notes" and, together with the Series A
Senior Subordinated Notes, the "Senior Subordinated Notes") and all monetary
obligations under the Revolving Credit Agreement dated as of June 12, 1989 among
Holdings, the banks party thereto and The First National Bank of Boston, as
agent, as amended, supplemented or otherwise modified from time to time (the
"Credit Agreement") have been repaid on or prior to June 30, 1999, then, in such
case, the Series A Preferred Stock will be redeemed on June 30, 1999. Redemption
pursuant to this Section A.3.1 shall be made at a cash redemption price of $100
per share, plus an amount in cash equal to all accrued but unpaid dividends to
the date of redemption (including, without limitation, the dividend due, if any,
on the date of redemption, whether or not declared).
3.2 OPTIONAL REDEMPTION. The Series A Preferred Stock is not
redeemable at the option of the Corporation prior to June 30, 1992. On or after
June 30, 1992, the Series A Preferred Stock shall be redeemable at the option of
the Corporation by resolution of its Board of Directors, on thirty days' notice,
at any time in whole, or from time to time in part, at a cash redemption price
equal to $100 per share plus the Yield-Maintenance Premium (as defined below)
plus an amount in cash equal to all dividends accrued but unpaid to the date
fixed for redemption (including, without limitation, the dividend due, if any,
on the date of redemption, whether or not declared). The redemption price,
including any accrued and unpaid dividends and the Yield Maintenance Premium,
shall be payable out of Legally Available Funds.
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4
For purposes of this Section 3.2, the following definitions
shall apply:
"Called Liquidation Preference Value" means, with
respect to any share of Series A Preferred Stock, the
liquidation preference value of such share of Series A
Preferred Stock that is to be redeemed pursuant to Section
A.3.2 or A.3.3 of this Article Fourth.
"Net Present Value" means, with respect to the Called
Liquidation Preference Value of any share of Series A
Preferred Stock, the amount calculated by discounting all
Remaining Scheduled Payments with respect to such Called
Liquidation Preference Value from their respective scheduled
due dates to the Settlement Date with respect to such Called
Liquidation Preference Value, in accordance with accepted
financial practice and at a discount factor (applied on a
quarterly basis) equal to the Reinvestment Yield with respect
to such Called Liquidation Preference Value.
"Reinvestment Yield" means, with respect to the Called
Liquidation Preference Value of any share of Series A
Preferred Stock, the yield equal to the sum of (a) the yield
to maturity implied by the Treasury Constant Maturity Series
yield reported in Federal Reserve Statistical Release H.15
(519) (or if such publication is not available, the yield
quotations for U.S. Treasury Notes (having yields reasonably
representative of then current yields) received from three New
York dealers of U.S. Treasury Notes of recognized standing)
for actively traded U.S. Treasury securities having a constant
maturity equal to the remaining Weighted Average Life to
Maturity of such Called Liquidation Preference Value as of
such Settlement Date and (b) either 1% during the period from
July 1, 1992 through June 30, 1994 or 2.5% during the period
from July 1, 1994 through June 30, 1999. Such implied yield
shall be determined (a) by calculating the remaining Weighted
Average Life to Maturity of such Called Liquidation Preference
Value rounded to the nearest quarter-year and (b) if
necessary, by interpolating linearly between such Weighted
Average Life to Maturity using the latest one week moving
average ending on the Settlement Date.
"Remaining Scheduled Payments" means, with respect
to the Called Liquidation Preference Value of any share of
Series A Preferred Stock, all payments of such Called
Liquidation Preference Value and dividends thereon that would
be due on or after the Settlement Date with respect to such
Called Liquidation Preference Value if no payment of such
Called Liquidation Preference Value were made prior to its
scheduled due date.
"Settlement Date" means, with respect to the Called
Liquidation Preference Value of any share of Series A
Preferred Stock, the date on which such Called Liquidation
Preference Value is to be redeemed pursuant to Section A.3.2
or A.3.3 of this Article Fourth.
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5
"Weighted Average Life to Maturity" of any redemption
payment means as at the time of the determination thereof the
number of years obtained by dividing the then Remaining
Dollar-years of such payment by the then amount of such
payment. The term "Remaining Dollar-years" of any redemption
payment means the amount obtained by (1) multiplying the
amount of each repayment or redemption, including repayment or
redemption at final maturity or other retirement, by the
number of years (calculated at the nearest one-twelfth) which
will elapse between the date as of which the calculation is
made and the date of that required repayment or redemption and
(2) totaling all the products obtained in (1).
"Yield-Maintenance Premium" shall mean, with respect to
any share of Series A Preferred Stock, a premium equal to the
excess, if any, of the Net Present Value of the Called
Liquidation Preference Value of such share of Series A
Preferred Stock over such Called Liquidation Preference Value.
The Yield-Maintenance Premium shall in no event be less than
zero.
3.3 REDEMPTION UPON OCCURRENCE OF TRIGGERING EVENT. (a) On or
prior to the occurrence of a Triggering Event (as defined below), the
Corporation shall redeem the Series A Preferred Stock at the following cash
redemption prices (expressed as percentages of Called Liquidation Preference
Value) if redeemed during the periods set forth below:
PERIOD PERCENTAGES
Prior to July 1, 1994 103.5%
July 1, 1994 and thereafter 100%
together with all accrued but unpaid dividends in cash to the date of the
redemption (including, without limitation, the dividend due, if any, on the date
of redemption, whether or not declared).
(b) Notwithstanding the provisions of Section A.3.3(a) of this
Article Fourth, if the sum of (i) the amount payable to (A) holders of the
Series A Senior Subordinated Notes under Section 3.7(a) of the Indenture dated
as of June 12, 1989 between the Corporation and United States Trust Company of
New York, as Trustee, as amended, supplemented or otherwise modified from time
to time (the "1989 Indenture") and (B) holders of the Series B Senior
Subordinated Notes under Section 3.7(a) of the Indenture dated as of June 23,
1994 between the Corporation and United States Trust Company of New York, as
Trustee, as amended, supplemented or otherwise modified from time to time (the
"1994 Indenture" and, together with the 1989 Indenture, the "Senior
Indentures"), (ii) the amount payable to holders of the Preferred Stock under
Sections A.3.3(a) and B.3.3(a) of this Article Fourth and/or holders of the
Debentures (as defined in Section B.6(a) of this Article Fourth) under Section
3.7 of each of the Indentures (as defined in Section B.6(a) of this Article
Fourth); and (iii) the amount of the cash and fair market value of all
securities or other property deliverable to a holder of the
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6
number of shares of Common Stock receivable upon exercise of (A) the
Corporation's Common Stock Warrants, originally issued by the
Corporation pursuant to the Securities Purchase Agreement (the
"Securities Purchase Agreement") dated as of June 12, 1989 originally
entered into between Holdings and the Purchasers named therein and
assumed by the Corporation pursuant to the Agreement and Plan of Merger
and (B) the Corporation's Common Stock Warrants issued in exchange
therefor (collectively with such Common Stock Warrants originally
issued pursuant to the Securities Purchase Agreement, the "Warrants")
and/or exchange of the Warrant Stock (as defined in the Warrants)
outstanding on the date of the Triggering Event or (if no cash,
securities or property is so deliverable) the value of the Warrant
Stock (as hereinafter determined) plus, if any portion of Warrants have
been repurchased prior to the Triggering Event, the price paid for such
Warrants pursuant to the Repurchase Offer (as defined in the Warrants)
for such Warrants, would be less than the sum of (x) the amount which
would be payable to (A) holders of the Series A Senior Subordinated
Notes if the Series A Senior Subordinated Notes were redeemed at the
redemption price applicable under Paragraph 5 of the Series A Senior
Subordinated Notes and (B) holders of the Series B Senior Subordinated
Notes if the Series B Senior Subordinated Notes were redeemed at the
redemption price applicable under Paragraph 5 of the Series B Senior
Subordinated Notes and (y) the amount which would be payable to holders
of the Preferred Stock if the Preferred Stock were redeemed under
Section A.3.2 and B.3.2 of this Article Fourth and/or holders of the
Debentures under Section 3.7 of the Indentures, then the Series A
Preferred Stock shall be redeemed at the redemption price determined in
accordance with Section A.3.2 of this Article Fourth together with all
accrued and unpaid dividends to the date of redemption (including,
without limitation, the dividend due, if any, on the date of
redemption, whether or not declared). For purposes of this Section
A.3.3(b) the value of the Warrant Stock (in circumstances where no cash
and/or securities or other property are deliverable to a holder of the
Common Stock receivable on exercise of the Warrants and/or exchange of
the Warrant Stock) and the fair market value of any securities
receivable by a holder of shares of Common Stock upon a Triggering
Event for which there exists a public market shall be the average of
the daily market prices for 30 consecutive Business Days (as defined in
the Senior Indentures) commencing 45 days before such date. The daily
market price for each such Business Day shall be (i) the last sale
price on such day on the principal stock exchange on which such Common
Stock is then listed or admitted to trading, (ii) if no sale takes
place on such day on any such exchange, the average of the last
reported closing bid and asked prices on such day as officially quoted
on any such exchange, (iii) if the Common Stock is not listed or
admitted to trading on any stock exchange, the average of the last
reported closing bid and asked prices of such day in the
over-the-counter market, as furnished by the National Association of
Securities Dealers ("NASD") Automatic Quotation System or the National
Quotation Bureau, Inc., (iv) if neither such corporation at the time is
engaged in the business of reporting such prices, as furnished by any
similar firm then engaged in business, or (v) if there is no such firm,
as furnished by any member of the NASD selected mutually by the
Majority Holders (as defined in the Warrants, subject to the
qualification below) and the Corporation or, if they cannot agree upon
such selection, as selected by two such members of the NASD, one of
which shall be selected by the Majority Holders and one of which shall
be selected by the Corporation. In the case the Warrant Stock is not
then publicly traded or such consideration includes any
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7
securities for which there exists no public market or other property,
the value shall be the appraised value of such securities or properties
as determined by an independent investment banking firm of nationally
recognized standing mutually agreed upon by the Corporation and the
Majority Holders or, if they cannot agree upon such selection, as
selected by two such independent investment banking firms of nationally
recognized standing, one of which shall be selected by the Majority
Holders and one of which shall be selected by the Corporation. For
purposes of this provision, Majority Holders (as defined in the
Warrants) shall be determined solely with reference to those holders of
Warrants immediately prior to the commencement of Exercise Period (as
defined in the Warrants).
(c) The redemption price, including any accrued and unpaid
dividends and any applicable premium, shall be payable out of the
Legally Available Funds.
For purposes of this Section A.3.3, the following
definitions shall apply:
"Triggering Event" means (a) a sale or exchange of
all or part of any class of securities issued by the
Corporation pursuant to an effective registration statement
(other than a sale or exchange covered by one or more
registration statements relating to shares of Common Stock
issuable upon exercise of employee stock options or in
connection with any employee benefit plan to purchase an
aggregate of no more than 7% of the Common Stock of the
Corporation on a fully diluted basis) or a distribution of
such securities to the public in a transaction exempt from
registration under the Securities Act (as defined in the
Senior Indentures) including, without limitation, Rule 144
thereunder (provided that immediately following such
distribution the Corporation is subject to the reporting
obligations of Section 13 of the Securities Exchange Act of
1934, as amended), which results in 25% or more of the Common
Stock of the Corporation determined on a fully diluted basis
having been sold in one or more such sales, exchanges or
distributions, (b) a Disposition, (c) a Surviving Combination,
(d) a Non-Surviving Combination and (e) a Sale of Control.
"Disposition" means a sale, lease, exchange, conveyance
or other disposition of all or substantially all of the
Corporation's assets in one transaction or a series of
transactions to another Person (as defined in the Senior
Indentures).
"Surviving Combination" means any merger, consolidation,
or other business combination of the Corporation (other than a
Permitted Merger) pursuant to which the Corporation is the
surviving corporation.
"Non-Surviving Combination" means any merger,
consolidation or other business combination of the Corporation
(other than any Permitted Merger), pursuant to which the
Corporation is not the surviving corporation.
"Permitted Merger" means any merger of the Corporation
into a wholly-owned Subsidiary of the Corporation, any merger
of a wholly-owned Subsidiary of the Corporation into the
Corporation or any wholly- owned Subsidiary of the
<PAGE>
8
Corporation, provided each such merger complies with Article 5
of each of the Senior Indentures, Article IV of the Senior
Subordinated Note Guaranty Agreement dated June 12, 1989 made
by the guarantors thereunder and Article IV of the Senior
Subordinated Note Guaranty Agreement dated as of June 23, 1994
made by the guarantors thereunder.
"Sale of Control" means (i) the transfer in one
transaction or in a series of transactions of more than 50% of
any class of Voting Securities issued by the Corporation then
outstanding to a person or a group which, in connection with
all of such transactions, would be deemed a "person" under
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, or (ii) any sale or other disposition by the
Corporation or Vestar/R-S Investment Limited Partnership of
any class of Voting Securities of the Corporation which
results in Vestar/R-S Investment Limited Partnership owning
less than 40% of the voting securities of the Corporation then
outstanding on a fully-diluted basis.
"Voting Securities" of any corporation means any shares
of capital stock of such corporation having general voting
power under ordinary circumstances, when voting (together with
one or more other classes, if any) as a class, to elect a
majority of the board of directors of such corporation
irrespective of whether or not at the time securities of any
other class or classes shall have, or might have, voting power
by reason of the happening of any contingency.
"Subsidiary" means (i) any corporation of which the
outstanding stock having at least a majority of the votes
entitled to be cast in the election of directors under
ordinary circumstances shall at the time be owned, directly or
indirectly, by the Corporation or by the Corporation and one
or more Subsidiaries or by one or more Subsidiaries, (ii) any
other Person (as defined in the Senior Indentures) of which at
least a majority of voting interest, under ordinary
circumstances, is at the time, directly or indirectly, owned
or controlled by the Corporation or by the Corporation and one
or more Subsidiaries or by one or more Subsidiaries or (iii)
any partnership or joint venture in which the Corporation or a
Subsidiary is a general partner or joint venturer.
3.4 REDEMPTION PROCEDURES. (a) If less than all of the
outstanding shares of the Series A Preferred Stock are to be redeemed, the
shares to be redeemed shall be redeemed pro rata based upon the aggregate shares
held by each holder of Series A Preferred Stock.
(b) At least 30 days but not more than 60 days prior to the
date fixed for the redemption (the "Series A Redemption Date") of shares of the
Series A Preferred Stock, a written notice (the "Series A Redemption Notice")
shall be mailed to each holder of record of shares of the Series A Preferred
Stock to be redeemed in a postage-prepaid envelope addressed to such holder at
the last address of such holder shown on the records of the Corporation;
PROVIDED, HOWEVER, that no failure to give such notice nor any defect
<PAGE>
9
therein shall affect the validity of the proceeding for the
redemption of any shares of Series A Preferred Stock to be redeemed, except as
to a holder to whom the Corporation has failed to give such notice or except as
to a holder whose notice was defective. Such notice shall specify (i) the number
of shares being redeemed, (ii) the Series A Redemption Date and (iii) the
redemption price and an amount equal to all dividends accrued and unpaid thereon
to and including the Series A Redemption Date. In the case of a redemption
pursuant to Section A.3.2 or A.3.3 of this Article Fourth, payment shall be
accompanied by a notice setting forth a calculation of the redemption price. The
Series A Redemption Notice shall call upon such holder to surrender to the
Corporation on the Series A Redemption Date, at the place or places designated
in the Series A Redemption Notice, the certificate or certificates representing
the number of shares of the Series A Preferred Stock specified in the Series A
Redemption Notice to be redeemed. On and after the Series A Redemption Date,
each holder of shares of the Series A Preferred Stock to be redeemed shall be
entitled to receive the redemption price for such shares upon the presentation
and surrender of the certificate or certificates representing such shares at one
of the places designated in the Series A Redemption Notice. Each surrendered
certificate shall be cancelled. If less than all of the shares represented by
any certificate are redeemed, a new certificate shall be issued representing the
shares not redeemed. From and after the Series A Redemption Date (unless default
shall be made by the Corporation in payment of the redemption price), or from
and after the date the Series A Redemption Notice has been sent as aforesaid and
a sum sufficient to redeem the shares of the Series A Preferred Stock called for
redemption together with all dividends accrued thereon to the Series A
Redemption Date, shall have been irrevocably deposited or set aside, all
dividends on the shares of the Series A Preferred Stock designated for
redemption in the Series A Redemption Notice shall cease to accrue, all rights
of the holders thereof as stockholders of the Corporation, except the right to
receive the redemption price thereof plus dividends thereon to the Series A
Redemption Date, upon the surrender of certificates representing such shares,
shall cease and terminate, such shares shall not thereafter be transferred on
the books of the Corporation, and such shares shall not be deemed to be
outstanding for any purpose whatsoever.
Shares of Series A Preferred Stock redeemed pursuant
to this Section A.3 shall not be reissued.
4. VOTING RIGHTS. (a) The holders of the Series A Preferred
Stock shall not, except as otherwise required by law or as set forth herein,
have any right or power to vote on any matter or in any proceeding or to be
represented on any matter or in any proceeding or to be represented at, or to
receive notice of, any meeting of stockholders. The holders of the Series A
Preferred Stock shall be entitled to one vote for each share held on any matter
as to which they shall be entitled to vote.
(b) If, at any time (i) the equivalent of four or more full
quarterly dividend payments on the Series A Preferred Stock shall be in arrears
or (ii) the Corporation fails to make the mandatory redemption payment required
by Section A.3.1 of this Article Fourth or the redemption payment upon the
occurrence of triggering events required by Section A.3.3 of this Article
Fourth, then, during the period (the "Series A Class Voting
<PAGE>
10
Period") commencing with such time and ending, with respect to
clause (i) above, at the time when all arrears in dividends on the Series A
Preferred Stock shall have been paid and the full dividend on the Series A
Preferred Stock for the then current dividend period shall have been paid or
declared and set apart for payment and, with respect to clause (ii) above, at
the time when such mandatory redemption payment shall have been made, the number
of directors constituting the Board of Directors shall, without further action,
be increased by the greater of (i) two directors or (ii) 25% (rounded to the
nearest whole number) and the holders of a majority of the outstanding shares of
the Series A Preferred Stock shall be entitled, as a class, to the exclusion of
the holders of all other classes or series of stock of the Corporation, to
nominate and elect directors of the Corporation to fill such newly created
directorships, the remaining directors to be nominated and elected as otherwise
provided in this Restated Certificate of Incorporation.
(c) During the Series A Class Voting Period, the right of the
holders of the Series A Preferred Stock to elect directors may be exercised
initially either at a special meeting of the holders of the Series A Preferred
Stock, called as hereinafter provided, or at any annual meeting of stockholders
held for the purpose of nominating the electing directors and thereafter at such
annual meetings or by the written consent of the holders of the Series A
Preferred Stock pursuant to the New Jersey Business Corporation Act.
(d) At any time after the Series A Class Voting Period shall
have commenced, and if the voting rights of the holders of the Series A
Preferred Stock shall not already have been initially exercised, a proper
officer of the Corporation shall, upon the written requests of holders of record
of 25% of the shares of the Series A Preferred Stock then outstanding, addressed
to the Secretary of the Corporation, call a special meeting of the holders of
the Series A Preferred Stock for the purpose of nominating and electing
directors to fill the directorships created by the commencement of the Series A
Class Voting Period. Such meeting shall be held at the earliest practicable date
upon the notice required for annual meetings of stockholders at the place for
holding annual meetings of stockholders of the Corporation or, if none, at a
place designated by the Secretary of the Corporation. If such meeting shall not
be called by the proper officers of the Corporation within 30 days after the
personal service of such written request upon the Secretary of the Corporation,
or within 30 days after mailing the same within the United States, by registered
mail, addressed to the Secretary of the Corporation at its principal office
(such mailing to be evidenced by the registry receipt issued by the postal
authorities), then the holders of record of 25% of the shares of the Series A
Preferred Stock then outstanding may designate in writing a holder of the Series
A Preferred Stock to call such meeting at the expense of the Corporation, and
such meeting may be called by such person so designated upon the notice required
for annual meetings of stockholders and shall be held at the same place as is
elsewhere provided in this Section A.4(d). Notwithstanding the provisions of
this Section A.4(d), however, no such special meeting shall be called during a
period within 90 days immediately preceding the date fixed for the next annual
meeting of stockholders.
(e) At any meeting held for the purpose of nominating and
electing directors at which the holders of the Series A Preferred Stock shall
have the right
<PAGE>
11
to nominate and elect directors as provided herein, the
presence in person or by proxy of the holders of a majority of the then
outstanding shares of the Series A Preferred Stock shall be required and be
sufficient to constitute a quorum of such class for the election of directors by
such class. At any such meeting of adjournment thereof (i) the absence of a
quorum of the holders of the Series A Preferred Stock having such right shall
not prevent the election of directors other than those to be elected by the
holders of the Series A Preferred Stock and the absence of a quorum or quorums
of the holders of capital stock entitled to elect such other directors shall not
prevent the election of directors to be nominated and elected by the holders of
the Series A Preferred Stock entitled to nominate and elect such directors and
(ii) in the absence of a quorum of the holders of any class stock entitled to
vote for the election of directors, a majority of the holders of such class
present in person or by proxy shall have the power to adjourn the meeting for
the election of directors which the holders of such class are entitled to elect,
from time to time, without notice (except as required by law) other than
announcement at the meeting, until a quorum shall be present.
(f) Any director who shall have been elected by holders of the
Series A Preferred Stock, or appointed by any director or directors so elected
as herein contemplated, may be removed at any time during a Series A Class
Voting Period, either with or without cause, by, and only by, the affirmative
vote of the holders of a majority of the outstanding shares of the Series A
Preferred Stock given at a special meeting of such stockholders called for such
purpose, and any vacancy thereby created may be filled during such Series A
Class Voting Period by the holders of the Series A Preferred Stock, present in
person or represented by proxy at such meeting. If any director elected by the
Board of Directors of the Corporation to replace a director elected by holders
of the Series A Preferred Stock, or appointed by a director or directors in the
manner provided in this sentence, dies, resigns, or otherwise ceases to be a
director, the resulting vacancy shall, except as otherwise provided in the
preceding sentence, be filled by the remaining director(s) theretofore elected
by the holders of the Series A Preferred Stock. At the end of the Series A Class
Voting Period, (i) the holders of the Series A Preferred Stock shall be
automatically divested of all voting power vested in them hereunder, subject
always to the subsequent vesting hereunder of voting rights in the holders of
the Series A Preferred Stock, as provided in Section A.4(b) of this Article
Fourth, (ii) the term of all directors elected by the holders of the Series A
Preferred Stock pursuant to the provisions hereof shall expire and (iii) the
number of directors constituting the Board of Directors shall, without further
action, be decreased by the number of directors whose terms shall have so
expired.
(g) The Corporation shall indemnify and hold harmless each
director elected by the holders of Series A Preferred Stock or appointed by the
director so elected pursuant to the provisions of this Section A.4 against any
expenses, including attorneys' fees, fines, losses, claims, damages,
liabilities, costs, judgments, and amounts paid in settlement in connection with
any threatened, pending, or completed claim, action, suit, proceeding or
investigation arising out of or pertaining to his service as a director of the
Corporation to the fullest extent permitted by law; each such director shall be
entitled to advancement of expenses prior to a final disposition of such claim,
action, suit,
<PAGE>
12
proceeding or investigation upon receipt of an undertaking by
such director to repay such amount if it shall ultimately be determined that he
is not entitled to be indemnified by the Corporation in accordance with
applicable law. The provisions hereof regarding indemnification and advancement
of expenses shall not be deemed exclusive of any other rights which such
director seeking indemnification or advancement of expenses may be entitled to
under the provisions of this Restated Certificate of Incorporation or by-laws of
the Corporation or any agreement with the Corporation to which he is a party.
(h) For the purposes of this Section A.4, no shares of Series
A Preferred Stock held by the Corporation or any of its affiliates shall be
deemed to be outstanding shares of Series A Preferred Stock.
5. LIQUIDATION. In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the affairs of the Corporation, after
payment or provision for payment of the debts and other liabilities of the
Corporation available for distribution to stockholders, and after payment of the
Series B Preferred Stock pursuant to Section B.5 below, the holders of the
Series A Preferred Stock shall be entitled to receive, out of the remaining
assets of the Corporation available for such distribution, the amount of $100 in
cash for each share of the Series A Preferred Stock, plus an amount in cash
equal to all dividends (whether or not declared) accrued and unpaid on each such
share up to the date fixed for distribution, before any distribution shall be
made to the holders of the Common Stock or any other capital stock of the
Corporation (other than the Series B Preferred Stock). After payment shall have
been made to the holders of shares of the Series A Preferred Stock and the
Series B Preferred Stock of the full amount to which they shall be entitled as
aforesaid, holders of any class or classes or series of stock ranking on
liquidation junior to the Series A Preferred Stock shall be entitled, to the
exclusion of the holders of shares of the Series A Preferred Stock and Series B
Preferred Stock, to share, according to their respective rights and preferences,
in all remaining assets of the Corporation available for distribution to its
stockholders. If the assets of the Corporation are not sufficient to pay in full
the liquidation payments payable to holders of the Series A Preferred Stock, the
holders of such shares shall share ratably in such distribution of assets based
upon the shares held by such holders of Series A Preferred Stock.
For purposes hereof, a liquidation, dissolution or
winding up shall not include (i) any consolidation or merger of the
Corporation with or into any other corporation or (ii) a sale, lease or
exchange of all or substantially all of the Corporation's assets.
6. EXCHANGE. (a) The shares of the Series A Preferred Stock
are exchangeable, in whole but not in part, at the option of the Corporation at
any time on any Series A Dividend Payment Date, subject to certain restrictions
in the Credit Agreement, for the Corporation's 15% Series A Junior Subordinated
Debentures Due 2001 (the "Series A Debentures"), which Series A Debentures shall
be issued pursuant to an indenture (the "Series A Indenture") and guarantied
pursuant to a guaranty (the "Series A Guaranty"), which Series A Indenture and
Series A Guaranty shall be in substantially the
<PAGE>
13
forms of the indenture and the guaranty, respectively,
attached as Exhibits F and G, respectively, of the Securities Purchase Agreement
with such changes therein as may be approved by the Company and the holders of a
majority of the outstanding shares of Series A Preferred Stock (a copy of each
of the Series A Indenture and the Series A Guaranty will be made available for
inspection at the Corporation's principal place of business by any holder of
shares of the Series A Preferred Stock; with the aggregate amount of Series A
Debentures and Series A Guaranties issuable thereunder, the name of the trustee
and related provisions completed where applicable); PROVIDED, HOWEVER, that on
the date of exchange (i) if the shares of the Series A Preferred Stock are
registered under the Securities Act, the Series A Indenture shall have been
qualified under the Trust Indenture Act of 1939, as amended, (ii) there shall be
no dividend arrearages (including the dividend payable on the date of exchange)
on the shares of the Series A Preferred Stock, (iii) the Corporation shall not
be in default in its obligations under Section A.3 of this Article Fourth, (iv)
an "Event of Default" (as such term is defined in the Series A Indenture and the
Series A Guaranty) shall not have occurred and be continuing (after giving
effect to the exchange of the Series A Preferred Stock for the Series A
Debentures as contemplated herein), (v) all of the conditions for the
authentication of the Series A Debentures and the Series A Guaranties shall have
been satisfied; and (vi) an opinion of counsel to the Corporation as to the due
authorization, execution, delivery and validity of the Series A Indenture and
the Series A Debentures, the exchange of Series A Preferred Stock therefor and
any qualification of the Series A Indenture under the Trust Indenture Act of
1939, as amended, shall have been delivered to the trustee under the Series A
Indenture. Holders of outstanding shares of the Series A Preferred Stock will be
entitled to receive $100 principal amount of Series A Debentures in exchange for
each share of the Series A Preferred Stock held by them at the time of exchange.
In the event that such exchange would result in the issuance of a Series A
Debenture to a holder of the Series A Preferred Stock in a principal amount
which is not a multiple of $1,000, at the option of the Corporation, the
difference between such principal amount and the highest multiple of $1,000
which is less than such principal amount shall be paid to such holder in cash.
(b) The Corporation will mail to each holder of record of
shares of the Series A Preferred Stock written notice (the "Series A Exchange
Notice") of its intention to exchange not less than 30 nor more than 60 days
prior to the date fixed for the exchange (the "Series A Exchange Date"). Each
Series A Exchange Notice shall state (i) the Series A Exchange Date, (ii) the
place or places where certificates for such shares of the Series A Preferred
Stock are to be surrendered for exchange into Series A Debentures and (iii) a
statement that dividends will cease to accrue on the Series A Exchange Date.
Neither the form of Series A Indenture nor the form of Series A Guaranty may be
amended or supplemented before the Series A Exchange Date without the
affirmative vote or written consent of the holders of a majority in outstanding
liquidation preference of the then outstanding shares of the Series A Preferred
Stock, except for such changes as would not adversely affect the rights of the
holders of the Series A Preferred Stock. The Corporation will cause the Series A
Debentures to be authenticated on the Series A Exchange Date and the Corporation
will pay interest on the Series A Debentures at the rate and on the dates
specified in the Series A Indenture from the Series A Exchange Date.
(c) The shares of the Series A Preferred Stock are
exchangeable, in whole or in part, at the option of the holders thereof at any
time or from time to time on any Series A Dividend Payment Date on or after June
30, 1997, for the Series A Debentures, which Series A Debentures shall be issued
pursuant to the Series A Indenture and Series A Guaranty referred to in Section
A.6(a) of this Article Fourth, and the Corporation shall take all action
necessary to fulfill the requirements set forth in the proviso in Section A.6(a)
of this Article Fourth. Holders of outstanding shares of the Series A Preferred
Stock who exercise their option to exchange such shares for Series A Debentures
will be entitled to receive $100 principal amount of Series A Debentures plus
cash equal to all accrued and unpaid dividends through the Series A Exchange
Date in exchange for each share of the Series A Preferred Stock so exchanged.
Such holder may, at its option by prompt written notice to the Corporation,
elect to receive additional Series A Debentures in the principal amount equal to
such accrued but unpaid dividends together with the Series A Debentures
exchanged for Series A Preferred Stock. In the event that accrued and unpaid
dividends on such holder's shares of Series A Preferred Stock are not paid in
cash or, at such holder's option, received as additional Series A Debentures in
lieu of cash, such accrued and unpaid dividends shall remain outstanding and
such holder's rights thereto shall not be impaired by such exchange. The
Corporation shall not be obligated to issue Series A Debentures in exchange for
shares of Series A Preferred Stock in accordance with this provision unless the
aggregate liquidation preference value of the Series A Preferred Stock to be
exchanged for Series A Debentures is equal to or greater than $1,000.
(d) In the case of an exchange pursuant to Section A.6(c) of
this Article Fourth, each of the holders of record of shares of the Series A
Preferred Stock may mail, telecopy or personally deliver to the Corporation a
written request (the "Series A Holder Exchange Request") stating such holder's
intention to exchange shares of Series A Preferred Stock for Series A Debentures
on a date which shall be not more than 15 nor less than 3 days after the date of
such Series A Holder Exchange Request (the "Series A Holder Exchange Date") and
the number of shares to be exchanged. If the accrued dividends on any shares to
be exchanged for the Series A Debentures are not $1,000 or a multiple thereof,
the difference between the principal amount of Series A Debentures receivable in
exchange therefor and the highest multiple of $1,000 which is less than such
<PAGE>
14
principal amount shall be paid to such holder in cash on the Series A Holder
Exchange Date. The Corporation shall, upon receipt of any Series A Holder
Exchange Request, mail to the holder requesting an exchange a written notice
(the "Series A Holder Exchange Notice") stating (i) the place or places where
certificates for such shares of the Series A Preferred Stock are to be
surrendered for exchange into Series A Debentures and the payment of any accrued
dividend, and (ii) a statement that dividends will cease to accrue on the Series
A Holder Exchange Date; PROVIDED, HOWEVER, that no failure to give such notice
nor any defect therein shall affect the validity of the proceeding for the
exchange of any shares of Series A Preferred Stock to be exchanged, except as to
a holder to whom the Corporation has failed to give such notice or except as to
the holder whose notice was defective.
<PAGE>
15
(e) If the Series A Exchange Notice or the Series A Holder
Exchange Notice, as the case may be, has been mailed as aforesaid, and if the
Corporation has satisfied all of the terms and conditions of this Section A.6
and issued the Series A Debentures in accordance with the terms hereof on the
Series A Exchange Date or the Series A Holder Exchange Date, as the case may be,
from and after the Series A Exchange Date or the Series A Holder Exchange Date,
as the case may be (unless default shall be made by the Corporation in issuing
Series A Debentures in exchange for, or in making the final dividend payment on,
the outstanding shares of the Series A Preferred Stock on the Series A Exchange
Date or the Series A Holder Exchange Date, as the case may be), dividends on the
shares of the Series A Preferred Stock shall cease to accrue, such shares shall
no longer be deemed to be issued and outstanding for any purpose, and all rights
of the holders of shares of the Series A Preferred Stock (except the right to
receive from the Corporation the Series A Debentures and cash for any accrued
and unpaid dividends payable on the Series A Exchange Date or the Series A
Holder Exchange Date, as the case may be, including dividends accruing to and
including the Series A Exchange Date or the Series A Holder Exchange Date, as
the case may be) shall cease and terminate. Upon surrender in accordance with
the Series A Exchange Notice or the Series A Holder Exchange Notice, as the case
may be, of the certificates for any shares of the Series A Preferred Stock
(properly endorsed or assigned for transfer, if the Corporation shall so require
and the Series A Exchange Notice or the Series A Holder Exchange Notice, as the
case may be, shall so state), such shares shall be exchanged by the Corporation
into Series A Debentures as aforesaid. In the event that the Corporation
defaults in issuing Series A Debentures in exchange for any of the Series A
Preferred Stock, from and after the Series A Exchange Date or the Series A
Holder Exchange Date, as the case may be, the holder of such shares shall be
entitled to receive the Series A Debentures and all payments thereon (including
interest and redemption payments) as if the Series A Debentures had actually
been issued on the Series A Exchange Date or the Series A Holder Exchange Date,
as the case may be. In such event, the holders of Series A Preferred Stock shall
retain the right to receive any accrued and unpaid dividends on such shares
(including dividends accruing to and including the Series A Exchange Date or the
Series A Holder Exchange Date, as the case may be).
7. LIMITATIONS. So long as any shares of the Series A
Preferred Stock are outstanding, the Corporation shall not, without the
affirmative vote, or the written consent as provided by law, of the holders of
at least two-thirds of the shares of the Series A Preferred Stock then
outstanding, voting as a class, authorize, create or issue any (A) equity
securities of the Corporation having rights, preferences or priorities
(including dividend and liquidation preferences) on a parity with or superior to
the Series A Preferred Stock or (B) any bonds, debentures, notes or other
obligations convertible into or exchangeable for, or having option rights to
purchase, any shares of stock of the Corporation having rights, preferences or
priorities (including dividend and liquidation preferences) on a parity with or
superior to the Series A Preferred Stock.
8. AMENDMENTS. So long as any shares of the Series A Preferred
Stock are outstanding, the Corporation shall not, without the affirmative vote,
or the written consent as provided by law, of the holders of at least 80% of the
shares of the
<PAGE>
16
Series A Preferred Stock then outstanding, voting as a class,
alter, amend, modify or supplement this Section A of Article Fourth or change
the preferences, rights or powers with respect to the Series A Preferred Stock
so as to affect such stock adversely, except that no such alteration, amendment,
modification or supplement of the payment terms, voting rights or exchange
rights of the Series A Preferred Stock shall be made without the affirmative
vote or the written consent of the holders of 100% of the Series A Preferred
Stock then outstanding.
9. NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of shares of the Series A Preferred Stock at least 20
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
10. NOTICES. Any notice required by the provisions of this
Article Fourth to be given to the holders of shares of the Series A Preferred
Stock shall be deemed given if deposited in the United States mail, first class
mail, postage prepaid, and addressed to each holder of record at his address
appearing on the books of the Corporation.
B. SERIES B PREFERRED STOCK
1. DESIGNATION OF SERIES B PREFERRED STOCK. The
distinctive designation of a series of Preferred Stock shall be the
"$15.00/$17.50 Cumulative Exchangeable Redeemable Series B Preferred
Stock" (the "Series B Preferred Stock"). The maximum number of
authorized shares of Series B Preferred Stock shall be 200,000 provided
that the maximum number of shares which may be issued shall be the
number of shares initially issued upon exchange of the Series B
Preferred Stock for the Series A Preferred Stock, plus such additional
number of shares as are issued as stock dividends pursuant to Section
B.2 of this Article Fourth. The Series B Preferred Stock shall, with
respect to dividend rights and rights on any liquidation, winding up or
dissolution of the Corporation, rank prior to the Series A Preferred
Stock and the Common Stock.
2. DIVIDENDS.
(a) The holders of the Series B Preferred Stock shall be entitled to
receive dividends, except as otherwise provided in this Section B.2
below, at the annual rate of $15.00 per share, when, as and if declared
by the Board of Directors of the Corporation out of Legally Available
Funds, payable quarterly on March 31, June 30, September 30 and
December 31 in each year (each a "Series B Dividend Payment Date"),
commencing on September 30, 1994. The dividends payable on the Series B
Preferred Stock shall be paid to the holders of shares (whether whole
or fractional) of
<PAGE>
17
the Series B Preferred Stock as they appear on the stock
records of the Corporation at the close of business on such date (the "Series B
Record Date") as shall be fixed by the Board of Directors, which Record Date
shall not be more than 60 nor less than 10 days prior to the Series B Dividend
Payment Date and shall not precede the date upon which the resolution fixing
such Series B Record Date is adopted. Dividends in arrears may be declared and
paid at any time, without reference to any regular Series B Dividend Payment
Date, to holders of shares (whether whole or fractional) of the Series B
Preferred Stock as they appear on the stock records of the Corporation on such
date as shall be fixed by the Board of Directors, which record date shall not be
more than 60 nor less than 10 days prior to the payment date thereof and shall
not precede the date upon which the resolution fixing such record date is
adopted. Any dividend accruing on or prior to June 30, 1999 may, in the sole
discretion of the Corporation, be paid (A) in cash at the annual rate set forth
above or (B) by issuing additional shares (whether whole or fractional) of the
Series B Preferred Stock at the annual rate of $17.50 per share; PROVIDED,
HOWEVER, that any dividend paid in connection with a redemption pursuant to
Section B.3.2 or B.3.3 of this Article Fourth shall be paid in cash and
PROVIDED, FURTHER, that the Company shall pay on a PRO RATA basis pursuant to
the aggregate of the cash redemption price (based on a cash redemption price
equal to $100 per share) on the Series B Preferred Stock and the outstanding
principal amount of the Series B Debentures (as hereinafter defined) (i)
dividends in cash on account of the Series B Preferred Stock and (ii) interest
in cash on account of the Series B Debentures (as hereinafter defined) in an
aggregate amount equal to one-third (1/3) of Consolidated Excess Cash Flow (as
defined in the Credit Agreement) to the extent permitted by the Credit Agreement
and otherwise permitted herein; PROVIDED, FURTHER, that to the extent any funds
remain after payment pursuant to the foregoing proviso, the Company shall use
such funds to redeem on a PRO RATA basis pursuant to the aggregate of the cash
redemption price (based on a cash redemption price equal to $100 per share) on
the Series B Preferred Stock and the outstanding principal amount of the Series
B Debentures (as hereinafter defined) (i) the Series B Preferred Stock issued in
lieu of cash dividends on account of the Series B Preferred Stock from and after
the date of this Amended and Restated Certificate of Incorporation at a price
equal to $100 per share and (ii) the Series B Debentures issued in lieu of cash
interest payments on account of the Series B Debentures from and after the date
of this Amended and Restated Certificate of Incorporation at a price equal to
$100 per share. Each such payment from Consolidated Excess Cash Flow shall be
accompanied by a certificate of the chief financial officer of the Company
showing in reasonable detail the calculation of Excess Cash Flow and any amount
to be applied in redemption of Series B Preferred Stock pursuant to Section
B.3.2(b) of this Article Fourth. For purposes of calculating any dividend to be
paid in shares of Series B Preferred Stock, each whole share of the Series B
Preferred Stock paid as a dividend hereunder shall be deemed to have a value
equal to $100 and each fractional share of the Series B Preferred Stock paid as
a dividend hereunder shall be deemed to have a value equal to the product
obtained by multiplying such fraction by $100. The issuance of such additional
shares of the Series B Preferred Stock shall constitute full payment of the
dividend otherwise payable in cash. The Corporation may, at its option, pay in
cash the liquidation value of fractional shares of the Series B Preferred Stock
in lieu of issuing fractional shares thereof as a dividend.
(b) In the case of shares or fractions thereof of the Series B
Preferred Stock issued as dividends on shares of the Series B Preferred Stock,
such dividends shall be cumulative from the Series B Dividend Payment Date in
respect of which such shares were deemed to have been issued as a dividend. Such
<PAGE>
18
shares shall be deemed to have been issued on the Series B Dividend Payment Date
on which they accrue. In all other cases, dividends shall be cumulative on each
share of Series B Preferred Stock from June 30, 1994 (regardless of the fact
that such shares were not outstanding on such date).
(c) So long as any shares of the Series B Preferred Stock are
outstanding, the Corporation shall not declare, pay or set apart for payment any
dividends or make any other distribution on the Series A Preferred Stock, the
Common Stock or any class or series of stock of the Corporation ranking junior
to the Series B Preferred Stock in respect of dividends or upon liquidation,
unless the Corporation has paid, or at the same time pays or provides for the
payment of, all accrued but unpaid (i) dividends on the Series B Preferred Stock
and (ii) mandatory redemption payments required by Section B.3.1 of this Article
Fourth or redemption payments on the occurrence of certain events required by
Section B.3.3 of this Article Fourth on the Series B Preferred Stock.
(d) So long as any shares of the Series B Preferred Stock are
outstanding, the Corporation shall not repurchase any of its other capital
stock, except as permitted under the Senior Indentures.
(e) Dividends payable on the Series B Preferred Stock for any
period more or less than a full quarterly dividend period shall be computed on
the basis of a 360 day year of twelve 30 day months.
(f) All dividends paid with respect to shares of Series B
Preferred Stock pursuant to Section B.2(a) of this Article Fourth shall be paid
PRO RATA to the holders of the Series B Preferred Stock based upon the
liquidation preference of the shares of Series B Preferred Stock held by each
holder.
3. REDEMPTION OF SERIES B PREFERRED STOCK
3.1 MANDATORY REDEMPTION. (a) On June 30, 2001, the
Corporation will, to the extent it has Legally Available Funds therefor, redeem
all of the shares of Series B Preferred Stock then outstanding; PROVIDED,
HOWEVER, that if the Corporation's Senior Subordinated Notes and all monetary
obligations under the Credit Agreement have been repaid on or prior to June 30,
1999, then, in such case, the Series B Preferred Stock will be redeemed on June
30, 1999. Redemption pursuant to this Section B.3.1 shall be made at a cash
redemption price of $100 per share, plus an amount in cash equal to all accrued
but unpaid dividends to the date of redemption (including, without limitation,
the dividend due, if any, on the date of redemption, whether or not declared).
(b) If, on any Series B Dividend Payment Date, one-third of
Consolidated Excess Cash Flow exceeds the amount of dividends payable on the
Series B Preferred Stock on such date, then the Company shall apply such excess
to redeem shares of Series B Preferred Stock issued as dividends pursuant to
Section B.2 at a cash redemption price of $100 per share, plus an amount in cash
equal to all accrued but unpaid dividends to the date of redemption (including,
without limitation, the dividend due, if any, on the date of redemption, whether
or not declared).
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19
3.2 OPTIONAL REDEMPTION. The Series B Preferred Stock shall
be redeemable at the option of the Corporation by resolution of its Board of
Directors, on thirty days' notice, at any time in whole, or from time to time in
part, at a cash redemption price equal to $100 per share plus the
Yield-Maintenance Premium (as defined below) plus an amount in cash equal to all
dividends accrued but unpaid to the date fixed for redemption (including,
without limitation, the dividend due, if any, on the date of redemption, whether
or not declared). The redemption price, including any accrued and unpaid
dividends and the Yield Maintenance Premium, shall be payable out of Legally
Available Funds.
For purposes of this Section B.3.2, the following
definitions shall apply:
"Called Liquidation Preference Value" means, with
respect to any share of Series B Preferred Stock, the
liquidation preference value of such share of Series B
Preferred Stock that is to be redeemed pursuant to Section
B.3.2 or B.3.3 of this Article Fourth.
"Net Present Value" means, with respect to the Called
Liquidation Preference Value of any share of Series B
Preferred Stock, the amount calculated by discounting all
Remaining Scheduled Payments with respect to such Called
Liquidation Preference Value from their respective scheduled
due dates to the Settlement Date with respect to such Called
Liquidation Preference Value, in accordance with accepted
financial practice and at a discount factor (applied on a
quarterly basis) equal to the Reinvestment Yield with respect
to such Called Liquidation Preference Value.
"Reinvestment Yield" means, with respect to the Called
Liquidation Preference Value of any share of Series B
Preferred Stock, the yield equal to the sum of (a) the yield
to maturity implied by the Treasury Constant Maturity Series
yield reported in Federal Reserve Statistical Release H.15
(519) (or if such publication is not available, the yield
quotations for U.S. Treasury Notes (having yields reasonably
representative of then current yields) received from three New
York dealers of U.S. Treasury Notes of recognized standing)
for actively traded U.S. Treasury securities having a constant
maturity equal to the remaining Weighted Average Life to
Maturity of such Called Liquidation Preference Value as of
such Settlement Date and (b) either 1% during the period prior
to July 1, 1994 or 2.5% during the period from July 1, 1994
through June 30, 1999. Such implied yield shall be determined
(a) by calculating the remaining Weighted Average Life to
Maturity of such Called Liquidation Preference Value rounded
to the nearest quarter-year and (b) if necessary, by
interpolating linearly between such Weighted Average Life to
Maturity using the latest one week moving average ending on
the Settlement Date.
<PAGE>
20
"Remaining Scheduled Payments" means, with respect
to the Called Liquidation Preference Value of any share of
Series B Preferred Stock, all payments of such Called
Liquidation Preference Value and dividends thereon that
would be due on or after the Settlement Date with respect to
such Called Liquidation Preference Value if no payment of such
Called Liquidation Preference Value were made prior to its
scheduled due date; PROVIDED, that it shall be presumed that
all Remaining Scheduled Payments which are dividends shall be
paid in cash.
"Settlement Date" means, with respect to the Called
Liquidation Preference Value of any share of Series B
Preferred Stock, the date on which such Called Liquidation
Preference Value is to be redeemed pursuant to Section B.3.2
or B.3.3 of this Article Fourth.
"Weighted Average Life to Maturity" of any redemption
payment means as at the time of the determination thereof the
number of years obtained by dividing the then Remaining
Dollar-years of such payment by the then amount of such
payment. The term "Remaining Dollar-years" of any redemption
payment means the amount obtained by (1) multiplying the
amount of each repayment or redemption, including repayment or
redemption at final maturity or other retirement, by the
number of years (calculated at the nearest one-twelfth) which
will elapse between the date as of which the calculation is
made and the date of that required repayment or redemption and
(2) totaling all the products obtained in (1).
"Yield-Maintenance Premium" shall mean, with respect to
any share of Series B Preferred Stock, a premium equal to the
excess, if any, of the Net Present Value of the Called
Liquidation Preference Value of such share of Series B
Preferred Stock over such Called Liquidation Preference Value.
The Yield-Maintenance Premium shall in no event be less than
zero.
3.3 REDEMPTION UPON OCCURRENCE OF TRIGGERING EVENT. (a) On or
prior to the occurrence of a Triggering Event (as defined below), the
Corporation shall redeem the Series B Preferred Stock at the following cash
redemption prices (expressed as percentages of Called Liquidation Preference
Value) if redeemed during the periods set forth below:
PERIOD PERCENTAGES
Prior to July 1, 1994 103.5%
July 1, 1994 and thereafter 100%
together with all accrued but unpaid dividends in cash to the date of
the redemption (including, without limitation, the dividend due, if
any, on the date of redemption, whether or not declared).
<PAGE>
21
(b) Notwithstanding the provisions of Section B.3.3(a) of this
Article Fourth, if the sum of (i) the amount payable to (A) holders of the
Series A Senior Subordinated Notes under Section 3.7(a) of the 1989 Indenture
and (B) holders of the Series B Senior Subordinated Notes under Section 3.7(a)
of the 1994 Indenture, (ii) the amount payable to holders of the Preferred Stock
under Sections A.3.3(a) and B.3.3(a) of this Article Fourth and/or holders of
the Debentures (as defined below) under Section 3.7 of each of the Indentures
(as defined below); and (iii) the amount of the cash and fair market value of
all securities or other property deliverable to a holder of the number of shares
of Common Stock receivable upon exercise of the Warrants and/or exchange of the
Warrant Stock (as defined in the Warrants) outstanding on the date of the
Triggering Event or (if no cash, securities or property is so deliverable) the
value of the Warrant Stock (as hereinafter determined) plus, if any portion of
Warrants originally issued in accordance with the Securities Purchase Agreement
or the Exchange Offer have been repurchased prior to the Triggering Event, the
price paid for such Warrants pursuant to the Repurchase Offer (as defined in the
Warrants) for such Warrants, would be less than the sum of (x) the amount which
would be payable to (A) holders of the Series A Senior Subordinated Notes if the
Series A Senior Subordinated Notes were redeemed at the redemption price
applicable under Paragraph 5 of the Series A Senior Subordinated Notes and (B)
holders of the Series B Senior Subordinated Notes if the Series B Senior
Subordinated Notes were redeemed at the redemption price applicable under
Paragraph 5 of the Series B Senior Subordinated Notes and (y) the amount which
would be payable to holders of the Preferred Stock if the Preferred Stock were
redeemed under Sections A.3.2 and B.3.2 of this Article Fourth and/or holders of
the Debentures (as defined below) under Section 3.7 of the Indentures, then the
Series B Preferred Stock shall be redeemed at the redemption price determined in
accordance with Section B.3.2 of this Article Fourth together with all accrued
and unpaid dividends to the date of redemption (including, without limitation,
the dividend due, if any, on the date of redemption, whether or not declared).
For purposes of this Section B.3.3(b) the value of the Warrant Stock (in
circumstances where no cash and/or securities or other property are deliverable
to a holder of the Common Stock receivable on exercise of the Warrants and/or
exchange of the Warrant Stock) and the fair market value of any securities
receivable by a holder of shares of Common Stock upon a Triggering Event for
which there exists a public market shall be the average of the daily market
prices for 30 consecutive Business Days (as defined in Senior Indentures)
commencing 45 days before such date. The daily market price for each such
Business Day shall be (i) the last sale price on such day on the principal stock
exchange on which such Common Stock is then listed or admitted to trading, (ii)
if no sale takes place on such day on any such exchange, the average of the last
reported closing bid and asked prices on such day as officially quoted on any
such exchange, (iii) if the Common Stock is not listed or admitted to trading on
any stock exchange, the average of the last reported closing bid and asked
prices of such day in the over-the-counter market, as furnished by the NASD
Automatic Quotation System or the National Quotation Bureau, Inc., (iv) if
neither such corporation at the time is engaged in the business of reporting
such prices, as furnished by any similar firm then engaged in business, or (v)
if there is no such firm, as furnished by any member of the NASD selected
mutually by the Majority Holders (as defined in the Warrants, subject to the
qualification below) and the Corporation or, if they cannot agree upon such
selection, as selected by two such members of the NASD, one of which shall be
selected by the Majority Holders and one of which shall be selected by the
Corporation. In the case the Warrant Stock is not then publicly traded or such
consideration includes any securities for which there exists no public market or
other property, the value shall be the appraised value of such securities or
properties as determined by an independent investment banking firm of nationally
recognized standing mutually agreed upon by the Corporation and the Majority
Holders or, if they cannot agree upon such selection, as selected by two such
independent investment banking firms of nationally recognized standing, one of
which shall be selected by the Majority Holders and one of which shall be
selected by the Corporation. For purposes of this provision, Majority Holders
(as defined in the Warrants) shall be determined solely with reference to those
holders of Warrants immediately prior to the commencement of Exercise Period (as
defined in the Warrants).
<PAGE>
22
(c) The redemption price, including any accrued and unpaid
dividends and any applicable premium, shall be payable out of the Legally
Available Funds.
For purposes of this Section B.3.3, the following
definitions shall apply:
"Triggering Event" means (a) a sale or exchange of
all or part of any class of securities issued by the
Corporation pursuant to an effective registration statement
(other than a sale or exchange covered by one or more
registration statements relating to shares of Common Stock
issuable upon exercise of employee stock options or in
connection with any employee benefit plan to purchase an
aggregate of no more than 7% of the Common Stock of the
Corporation on a fully diluted basis) or a distribution of
such securities to the public in a transaction exempt from
registration under the Securities Act (as defined in the
Senior Indentures) including, without limitation, Rule 144
thereunder (provided that immediately following such
distribution the Corporation is subject to the reporting
obligations of Section 13 of the Securities Exchange Act of
1934, as amended), which results in 25% or more of the Common
Stock of the Corporation determined on a fully diluted basis
having been sold in one or more such sales, exchanges or
distributions, (b) a Disposition, (c) a Surviving Combination,
(d) a Non-Surviving Combination and (e) a Sale of Control.
"Disposition" means a sale, lease, exchange, conveyance
or other disposition of all or substantially all of the
Corporation's assets in one transaction or a series of
transactions to another Person (as defined in the Senior
Indentures).
"Surviving Combination" means any merger, consolidation,
or other business combination of the Corporation (other than a
Permitted Merger) pursuant to which the Corporation is the
surviving corporation.
"Non-Surviving Combination" means any merger,
consolidation or other business combination of the Corporation
(other than any Permitted Merger), pursuant to which the
Corporation is not the surviving corporation.
<PAGE>
23
"Permitted Merger" means any merger of the Corporation
into a wholly-owned Subsidiary of the Corporation, any merger
of a wholly-owned Subsidiary of the Corporation into the
Corporation or any wholly- owned Subsidiary of the
Corporation, provided each such merger complies with Article 5
of each of the Senior Indentures, Article IV of the Senior
Subordinated Note Guaranty Agreement dated June 12, 1989 made
by the guarantors thereunder and Article IV of the Senior
Subordinated Note Guaranty Agreement dated as of June 23, 1994
made by the guarantors thereunder.
"Sale of Control" means (i) the transfer in one
transaction or in a series of transactions of more than 50% of
any class of Voting Securities issued by the Corporation then
outstanding to a person or a group which, in connection with
all of such transactions, would be deemed a "person" under
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, or (ii) any sale or other disposition by the
Corporation or Vestar/R-S Investment Limited Partnership of
any class of Voting Securities of the Corporation which
results in Vestar/R-S Investment Limited Partnership owning
less than 40% of the voting securities of the Corporation then
outstanding on a fully-diluted basis.
"Voting Securities" of any corporation means any shares
of capital stock of such corporation having general voting
power under ordinary circumstances, when voting (together with
one or more other classes, if any) as a class, to elect a
majority of the board of directors of such corporation
irrespective of whether or not at the time securities of any
other class or classes shall have, or might have, voting power
by reason of the happening of any contingency.
"Subsidiary" means (i) any corporation of which the
outstanding stock having at least a majority of the votes
entitled to be cast in the election of directors under
ordinary circumstances shall at the time be owned, directly or
indirectly, by the Corporation or by the Corporation and one
or more Subsidiaries or by one or more Subsidiaries, (ii) any
other Person (as defined in the Senior Indentures) of which at
least a majority of voting interest, under ordinary
circumstances, is at the time, directly or indirectly, owned
or controlled by the Corporation or by the Corporation and one
or more Subsidiaries or by one or more Subsidiaries or (iii)
any partnership or joint venture in which the Corporation or a
Subsidiary is a general partner or joint venturer.
3.4 REDEMPTION PROCEDURES. (a) If less than all of the
outstanding shares of the Series B Preferred Stock are to be redeemed, the
shares to be redeemed shall be redeemed pro rata based upon the aggregate shares
held by each holder of Series B Preferred Stock. At the time of any redemption
hereunder, the Company shall redeem all outstanding shares of Series B Preferred
Stock then required to be redeemed before redeeming any shares of Series A
Preferred Stock then required to be redeemed.
(b) At least 30 days but not more than 60 days prior to the
date fixed for the redemption (the "Series B Redemption Date") of shares of the
Series B Preferred Stock, a written notice (the "Series B Redemption Notice")
shall be mailed to each holder of record of shares of the Series B Preferred
<PAGE>
24
Stock to be redeemed in a postage-prepaid envelope addressed
to such holder at the last address of such holder shown on the records of the
Corporation; PROVIDED, HOWEVER, that no failure to give such notice nor any
defect therein shall affect the validity of the proceeding for the redemption of
any shares of Series B Preferred Stock to be redeemed, except as to a holder to
whom the Corporation has failed to give such notice or except as to a holder
whose notice was defective. Such notice shall specify (i) the number of shares
being redeemed, (ii) the Series B Redemption Date and (iii) the redemption price
and an amount equal to all dividends accrued and unpaid thereon to and including
the Series B Redemption Date. In the case of a redemption pursuant to Section
B.3.2 or B.3.3 of this Article Fourth, payment shall be accompanied by a notice
setting forth a calculation of the redemption price. The Series B Redemption
Notice shall call upon such holder to surrender to the Corporation on the Series
B Redemption Date, at the place or places designated in the Series B Redemption
Notice, the certificate or certificates representing the number of shares of the
Series B Preferred Stock specified in the Series B Redemption Notice to be
redeemed. On and after the Series B Redemption Date, each holder of shares of
the Series B Preferred Stock to be redeemed shall be entitled to receive the
redemption price for such shares upon the presentation and surrender of the
certificate or certificates representing such shares at one of the places
designated in the Series B Redemption Notice. Each surrendered certificate shall
be cancelled. If less than all of the shares represented by any certificate are
redeemed, a new certificate shall be issued representing the shares not
redeemed. From and after the Series B Redemption Date (unless default shall be
made by the Corporation in payment of the redemption price), or from and after
the date the Series B Redemption Notice has been sent as aforesaid and a sum
sufficient to redeem the shares of the Series B Preferred Stock called for
redemption together with all dividends accrued thereon to the Series B
Redemption Date, shall have been irrevocably deposited or set aside, all
dividends on the shares of the Series B Preferred Stock designated for
redemption in the Series B Redemption Notice shall cease to accrue, all rights
of the holders thereof as stockholders of the Corporation, except the right to
receive the redemption price thereof plus dividends thereon to the Series B
Redemption Date, upon the surrender of certificates representing such shares,
shall cease and terminate, such shares shall not thereafter be transferred on
the books of the Corporation, and such shares shall not be deemed to be
outstanding for any purpose whatsoever.
Shares of Series B Preferred Stock redeemed pursuant
to this Section B.3 shall not be reissued.
4. VOTING RIGHTS. (a) The holders of the Series B Preferred
Stock shall not, except as otherwise required by law or as set forth herein,
have any right or power to vote on any matter or in any proceeding or to be
represented on any matter or in any proceeding or to be represented at, or to
receive notice of, any meeting of stockholders. The holders of the Series B
Preferred Stock shall be entitled to one vote for each share held on any matter
as to which they shall be entitled to vote.
<PAGE>
25
(b) If, at any time (i) the equivalent of four or more full
quarterly dividend payments on the Series B Preferred Stock shall be in arrears
or (ii) the Corporation fails to make the mandatory redemption payment required
by Section B.3.1 of this Article Fourth or the redemption payment upon the
occurrence of triggering events required by Section B.3.3 of this Article
Fourth, then, during the period (the "Series B Class Voting Period") commencing
with such time and ending, with respect to clause (i) above, at the time when
all arrears in dividends on the Series B Preferred Stock shall have been paid
and the full dividend on the Series B Preferred Stock for the then current
dividend period shall have been paid or declared and set apart for payment and,
with respect to clause (ii) above, at the time when such mandatory redemption
payment shall have been made, the number of directors constituting the Board of
Directors shall, without further action, be increased by the greater of (i) two
directors or (ii) 25% (rounded to the nearest whole number) and the holders of a
majority of the outstanding shares of the Series B Preferred Stock shall be
entitled, as a class, to the exclusion of the holders of all other classes or
series of stock of the Corporation, to nominate and elect directors of the
Corporation to fill such newly created directorships, the remaining directors to
be nominated and elected as otherwise provided in this Restated Certificate of
Incorporation.
(c) During the Series B Class Voting Period, the right of the
holders of the Series B Preferred Stock to elect directors may be exercised
initially either at a special meeting of the holders of the Series B Preferred
Stock, called as hereinafter provided, or at any annual meeting of stockholders
held for the purpose of nominating the electing directors and thereafter at such
annual meetings or by the written consent of the holders of the Series B
Preferred Stock pursuant to the New Jersey Business Corporation Act.
(d) At any time after the Series B Class Voting Period shall
have commenced, and if the voting rights of the holders of the Series B
Preferred Stock shall not already have been initially exercised, a proper
officer of the Corporation shall, upon the written requests of holders of record
of 25% of the shares of the Series B Preferred Stock then outstanding, addressed
to the Secretary of the Corporation, call a special meeting of the holders of
the Series B Preferred Stock for the purpose of nominating and electing
directors to fill the directorships created by the commencement of the Series B
Class Voting Period. Such meeting shall be held at the earliest practicable date
upon the notice required for annual meetings of stockholders at the place for
holding annual meetings of stockholders of the Corporation or, if none, at a
place designated by the Secretary of the Corporation. If such meeting shall not
be called by the proper officers of the Corporation within 30 days after the
personal service of such written request upon the Secretary of the Corporation,
or within 30 days after mailing the same within the United States, by registered
mail, addressed to the Secretary of the Corporation at its principal office
(such mailing to be evidenced by the registry receipt issued by the postal
authorities), then the holders of record of 25% of the shares of the Series B
Preferred Stock then outstanding may designate in writing a holder of the Series
B Preferred Stock to call such meeting at the expense of the Corporation, and
such meeting may be called by such person so designated upon the notice required
for annual meetings of stockholders and shall be held at the same place as is
elsewhere provided in this Section B.4(d). Notwithstanding the provisions of
this Section B.4(d), however, no such special meeting shall be called during a
period within 90 days immediately preceding the date fixed for the next annual
meeting of stockholders.
<PAGE>
26
(e) At any meeting held for the purpose of nominating and
electing directors at which the holders of the Series B Preferred Stock shall
have the right to nominate and elect directors as provided herein, the presence
in person or by proxy of the holders of a majority of the then outstanding
shares of the Series B Preferred Stock shall be required and be sufficient to
constitute a quorum of such class for the election of directors by such class.
At any such meeting of adjournment thereof (i) the absence of a quorum of the
holders of the Series B Preferred Stock having such right shall not prevent the
election of directors other than those to be elected by the holders of the
Series B Preferred Stock and the absence of a quorum or quorums of the holders
of capital stock entitled to elect such other directors shall not prevent the
election of directors to be nominated and elected by the holders of the Series B
Preferred Stock entitled to nominate and elect such directors and (ii) in the
absence of a quorum of the holders of any class stock entitled to vote for the
election of directors, a majority of the holders of such class present in person
or by proxy shall have the power to adjourn the meeting for the election of
directors which the holders of such class are entitled to elect, from time to
time, without notice (except as required by law) other than announcement at the
meeting, until a quorum shall be present.
(f) Any director who shall have been elected by holders of the
Series B Preferred Stock, or appointed by any director or directors so elected
as herein contemplated, may be removed at any time during a Series B Class
Voting Period, either with or without cause, by, and only by, the affirmative
vote of the holders of a majority of the outstanding shares of the Series B
Preferred Stock given at a special meeting of such stockholders called for such
purpose, and any vacancy thereby created may be filled during such Series B
Class Voting Period by the holders of the Series B Preferred Stock, present in
person or represented by proxy at such meeting. If any director elected by the
Board of Directors of the Corporation to replace a director elected by holders
of the Series B Preferred Stock, or appointed by a director or directors in the
manner provided in this sentence, dies, resigns, or otherwise ceases to be a
director, the resulting vacancy shall, except as otherwise provided in the
preceding sentence, be filled by the remaining director(s) theretofore elected
by the holders of the Series B Preferred Stock. At the end of the Series B Class
Voting Period, (i) the holders of the Series B Preferred Stock shall be
automatically divested of all voting power vested in them hereunder, subject
always to the subsequent vesting hereunder of voting rights in the holders of
the Series B Preferred Stock, as provided in Section B.4(b) of this Article
Fourth, (ii) the term of all directors elected by the holders of the Series B
Preferred Stock pursuant to the provisions hereof shall expire and (iii) the
number of directors constituting the Board of Directors shall, without further
action, be decreased by the number of directors whose terms shall have so
expired.
(g) The Corporation shall indemnify and hold harmless each
director elected by the holders of Series B Preferred Stock or appointed by the
director so elected pursuant to the provisions of this Section B.4 against any
expenses, including attorneys' fees, fines, losses, claims, damages,
<PAGE>
27
liabilities, costs, judgments, and amounts paid in settlement
in connection with any threatened, pending, or completed claim, action, suit,
proceeding or investigation arising out of or pertaining to his service as a
director of the Corporation to the fullest extent permitted by law; each such
director shall be entitled to advancement of expenses prior to a final
disposition of such claim, action, suit, proceeding or investigation upon
receipt of an undertaking by such director to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation in accordance with applicable law. The provisions hereof regarding
indemnification and advancement of expenses shall not be deemed exclusive of any
other rights which such director seeking indemnification or advancement of
expenses may be entitled to under the provisions of this Restated Certificate of
Incorporation or by-laws of the Corporation or any agreement with the
Corporation to which he is a party.
(h) For the purposes of this Section B.4, no shares of Series
B Preferred Stock held by the Corporation or any of its affiliates shall be
deemed to be outstanding shares of Series B Preferred Stock.
5. LIQUIDATION. In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the affairs of the Corporation, after
payment or provision for payment of the debts and other liabilities of the
Corporation available for distribution to stockholders, the holders of the
Series B Preferred Stock shall be entitled to receive, out of the remaining
assets of the Corporation available for such distribution, the amount of $100 in
cash for each share of the Series B Preferred Stock, plus an amount in cash
equal to all dividends (whether or not declared) accrued and unpaid on each such
share up to the date fixed for distribution, before any distribution shall be
made to the holders of the Series A Preferred Stock, the Common Stock or any
other capital stock of the Corporation. After payment shall have been made to
the holders of shares of the Series B Preferred Stock of the full amount to
which they shall be entitled as aforesaid, holders of any class or classes or
series of stock ranking on liquidation junior to the Series B Preferred Stock
shall be entitled, to the exclusion of the holders of shares of the Series B
Preferred Stock, to share, according to their respective rights and preferences,
in all remaining assets of the Corporation available for distribution to its
stockholders. If the assets of the Corporation are not sufficient to pay in full
the liquidation payments payable to holders of the Series B Preferred Stock, the
holders of such shares shall share ratably in such distribution of assets based
upon the shares held by such holders of Series B Preferred Stock.
For purposes hereof, a liquidation, dissolution or
winding up shall not include (i) any consolidation or merger of the
Corporation with or into any other corporation or (ii) a sale, lease or
exchange of all or substantially all of the Corporation's assets.
6. EXCHANGE. (a) The shares of the Series B Preferred Stock
are exchangeable, in whole but not in part, at the option of the Corporation at
any time on any Series B Dividend Payment Date, subject to certain restrictions
in the Credit Agreement, for the Corporation's 15% Series B Junior Subordinated
Debentures Due 2001 (the "Series B Debentures" and, together with the Series A
Debentures, the "Debentures"), which Series B Debentures shall be issued
pursuant to an indenture (the "Series B Indenture" and, together with the Series
A Indenture, the "Indentures") and guarantied
<PAGE>
28
pursuant to a guaranty (the "Series B Guaranty"), (copies of
the forms of which Series B Indenture and Series B Guaranty will be made
available for inspection at the Corporation's principal place of business by any
holder of shares of the Series B Preferred Stock and the forms of which may be
amended prior to the first such exchange with the approval of the Company and
the holders of a majority of the outstanding shares of Series B Preferred
Stock); PROVIDED, HOWEVER, that on the date of exchange (i) if the shares of the
Series B Preferred Stock are registered under the Securities Act, the Series B
Indenture shall have been qualified under the Trust Indenture Act of 1939, as
amended, (ii) there shall be no dividend arrearages (including the dividend
payable on the date of exchange) on the shares of the Series B Preferred Stock,
(iii) the Corporation shall not be in default in its obligations under Section
B.3 of this Article Fourth, (iv) an "Event of Default" (as such term is defined
in the Series B Indenture and the Series B Guaranty) shall not have occurred and
be continuing (after giving effect to the exchange of the Series B Preferred
Stock for the Series B Debentures as contemplated herein), (v) all of the
conditions for the authentication of the Series B Debentures and the Series B
Guaranties shall have been satisfied; and (vi) an opinion of counsel to the
Corporation as to the due authorization, execution, delivery and validity of the
Series B Indenture and the Series B Debentures, the exchange of Series B
Preferred Stock therefor and any qualification of the Series B Indenture under
the Trust Indenture Act of 1939, as amended, shall have been delivered to the
trustee under the Series B Indenture. Holders of outstanding shares of the
Series B Preferred Stock will be entitled to receive $100 principal amount of
Series B Debentures in exchange for each share of the Series B Preferred Stock
held by them at the time of exchange. In the event that such exchange would
result in the issuance of a Series B Debenture to a holder of the Series B
Preferred Stock in a principal amount which is not a multiple of $1,000, at the
option of the Corporation, the difference between such principal amount and the
highest multiple of $1,000 which is less than such principal amount shall be
paid to such holder in cash.
(b) The Corporation will mail to each holder of record of
shares of the Series B Preferred Stock written notice (the "Series B Exchange
Notice") of its intention to exchange not less than 30 nor more than 60 days
prior to the date fixed for the exchange (the "Series B Exchange Date"). Each
Series B Exchange Notice shall state (i) the Series B Exchange Date, (ii) the
place or places where certificates for such shares of the Series B Preferred
Stock are to be surrendered for exchange into Series B Debentures and (iii) a
statement that dividends will cease to accrue on the Series B Exchange Date.
Neither the form of Series B Indenture nor the form of Series B Guaranty may be
amended or supplemented before the Series B Exchange Date without the
affirmative vote or written consent of the holders of a majority in outstanding
liquidation preference of the then outstanding shares of the Series B Preferred
Stock, except for such changes as would not adversely affect the rights of the
holders of the Series B Preferred Stock. The Corporation will cause the Series B
Debentures to be authenticated on the Series B Exchange Date and the Corporation
will pay interest on the Series B Debentures at the rate and on the dates
specified in the Series B Indenture from the Series B Exchange Date.
<PAGE>
29
(c) The shares of the Series B Preferred Stock are
exchangeable, in whole or in part, at the option of the holders thereof at any
time or from time to time on any Series B Dividend Payment Date on or after June
30, 1999, for the Series B Debentures, which Series B Debentures shall be issued
pursuant to the Series B Indenture and Series B Guaranty referred to in Section
B.6(a) of this Article Fourth, and the Corporation shall take all action
necessary to fulfill the requirements set forth in the proviso in Section B.6(a)
of this Article Fourth. Holders of outstanding shares of the Series B Preferred
Stock who exercise their option to exchange such shares for Series B Debentures
will be entitled to receive $100 principal amount of Series B Debentures plus
cash equal to all accrued and unpaid dividends through the Series B Exchange
Date in exchange for each share of the Series B Preferred Stock so exchanged.
Such holder may, at its option by prompt written notice to the Corporation,
elect to receive additional Series B Debentures in the principal amount equal to
such accrued but unpaid dividends together with the Series B Debentures
exchanged for Series B Preferred Stock. In the event that accrued and unpaid
dividends on such holder's shares of Series B Preferred Stock are not paid in
cash or, at such holder's option, received as additional Series B Debentures in
lieu of cash, such accrued and unpaid dividends shall remain outstanding and
such holder's rights thereto shall not be impaired by such exchange. The
Corporation shall not be obligated to issue Series B Debentures in exchange for
shares of Series B Preferred Stock in accordance with this provision unless the
aggregate liquidation preference value of the Series B Preferred Stock to be
exchanged for Series B Debentures is equal to or greater than $1,000.
(d) In the case of an exchange pursuant to Section B.6(c) of
this Article Fourth, each of the holders of record of shares of the Series B
Preferred Stock may mail, telecopy or personally deliver to the Corporation a
written request (the "Series B Holder Exchange Request") stating such holder's
intention to exchange shares of Series B Preferred Stock for Series B Debentures
on a date which shall be not more than 15 nor less than 3 days after the date of
such Series B Holder Exchange Request (the "Series B Holder Exchange Date") and
the number of shares to be exchanged. If the accrued dividends on any shares to
be exchanged for the Series B Debentures are not $1,000 or a multiple thereof,
the difference between the principal amount of Series B Debentures receivable in
exchange therefor and the highest multiple of $1,000 which is less than such
principal amount shall be paid to such holder in cash on the Series B Holder
Exchange Date. The Corporation shall, upon receipt of any Series B Holder
Exchange Request, mail to the holder requesting an exchange a written notice
(the "Series B Holder Exchange Notice") stating (i) the place or places where
certificates for such shares of the Series B Preferred Stock are to be
surrendered for exchange into Series B Debentures and the payment of any accrued
dividend, and (ii) a statement that dividends will cease to accrue on the Series
<PAGE>
30
B Holder Exchange Date; PROVIDED, HOWEVER, that no failure to give such notice
nor any defect therein shall affect the validity of the proceeding for the
exchange of any shares of Series B Preferred Stock to be exchanged, except as to
a holder to whom the Corporation has failed to give such notice or except as to
the holder whose notice was defective.
(e) If the Series B Exchange Notice or the Series B Holder
Exchange Notice, as the case may be, has been mailed as aforesaid, and if the
Corporation has satisfied all of the terms and conditions of this Section B.6
and issued the Series B Debentures in accordance with the terms hereof on the
Series B Exchange Date or the Series B Holder Exchange Date, as the case may be,
from and after the Series B Exchange Date or the Series B Holder Exchange Date,
as the case may be (unless default shall be made by the Corporation in issuing
Series B Debentures in exchange for, or in making the final dividend payment on,
the outstanding shares of the Series B Preferred Stock on the Series B Exchange
Date or the Series B Holder Exchange Date, as the case may be), dividends on the
shares of the Series B Preferred Stock shall cease to accrue, such shares shall
no longer be deemed to be issued and outstanding for any purpose, and all rights
of the holders of shares of the Series B Preferred Stock (except the right to
receive from the Corporation the Series B Debentures and cash for any accrued
and unpaid dividends payable on the Series B Exchange Date or the Series B
Holder Exchange Date, as the case may be, including dividends accruing to and
including the Series B Exchange Date or the Series B Holder Exchange Date, as
the case may be) shall cease and terminate. Upon surrender in accordance with
the Series B Exchange Notice or the Series B Holder Exchange Notice, as the case
may be, of the certificates for any shares of the Series B Preferred Stock
(properly endorsed or assigned for transfer, if the Corporation shall so require
and the Series B Exchange Notice or the Series B Holder Exchange Notice, as the
case may be, shall so state), such shares shall be exchanged by the Corporation
into Series B Debentures as aforesaid. In the event that the Corporation
defaults in issuing Series B Debentures in exchange for any of the Series B
Preferred Stock, from and after the Series B Exchange Date or the Series B
Holder Exchange Date, as the case may be, the holder of such shares shall be
entitled to receive the Series B Debentures and all payments thereon (including
interest and redemption payments) as if the Series B Debentures had actually
been issued on the Series B Exchange Date or the Series B Holder Exchange Date,
as the case may be. In such event, the holders of Series B Preferred Stock shall
retain the right to receive any accrued and unpaid dividends on such shares
(including dividends accruing to and including the Series B Exchange Date or the
Series B Holder Exchange Date, as the case may be).
7. LIMITATIONS. So long as any shares of the Series B
Preferred Stock are outstanding, the Corporation shall not, without the
affirmative vote, or the written consent as provided by law, of the holders of
at least two-thirds of the shares of the Series B Preferred Stock then
outstanding, voting as a class, authorize, create or issue any (A) equity
securities of the Corporation having rights, preferences or priorities
(including dividend and liquidation preferences) on a parity with or superior to
the Series B Preferred Stock or (B) any bonds, debentures, notes or other
obligations convertible into or exchangeable for, or having option rights to
purchase, any shares of stock of the Corporation having rights, preferences or
priorities (including dividend and liquidation preferences) on a parity with or
superior to the Series B Preferred Stock.
<PAGE>
31
8. AMENDMENTS. So long as any shares of the Series B
Preferred Stock are outstanding, the Corporation shall not, without the
affirmative vote, or the written consent as provided by law, of the holders of
at least 80% of the shares of the Series B Preferred Stock then outstanding,
voting as a class, alter, amend, modify or supplement this Article Fourth or
change the preferences, rights or powers with respect to the Series B Preferred
Stock so as to affect such stock adversely, except that no such alteration,
amendment, modification or supplement of the payment terms, voting rights or
exchange rights of the Series B Preferred Stock shall be made without the
affirmative vote, or the written consent of the holders of 100% of the Series B
Preferred Stock then outstanding.
9. NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of shares of the Series B Preferred Stock at least 20
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
10. NOTICES. Any notice required by the provisions of this
Article Fourth to be given to the holders of shares of the Series B Preferred
Stock shall be deemed given if deposited in the United States mail, first class
mail, postage prepaid, and addressed to each holder of record at his address
appearing on the books of the Corporation.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: For the management of the business and for the conduct
of the affairs of the Corporation, and in further definition, limitation and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the
affairs of the Corporation shall be vested in its Board of Directors. The number
of directors which shall constitute the whole Board of Directors shall be fixed
by, or in the manner provided in, the By-Laws. The phrase "whole Board" and the
phrase "total number of directors" shall be deemed to have the same meaning, to
wit, the total number of directors which the Corporation would have if there
were no vacancies. No election of directors need be by written ballot.
2. After the original or other By-Laws of the Corporation have
been adopted, amended, or repealed, as the case may be, in accordance with the
provisions of the New Jersey Business Corporation Act and, after the Corporation
has received any payment for any of its stock, the power to adopt, amend, or
repeal the By-Laws of the Corporation may be exercised by the Board of Directors
of the Corporation; provided, however, that any provision for the classification
of directors of the Corporation for staggered terms pursuant to the provisions
of the New Jersey Business Corporation Act shall be set forth in an initial
By-Law or in a By-Law adopted by the stockholders of the Corporation entitled to
vote unless provisions for such classification shall be set forth in this
Restated Certificate of Incorporation.
<PAGE>
32
3. Whenever the Corporation shall be authorized to issue only
one class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever the
Corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under the
provisions of this Restated Certificate of Incorporation shall entitle the
holder thereof to the right to vote at any meeting of stockholders except as the
provisions of the New Jersey Business Corporation Act or other applicable law
shall otherwise require.
SEVENTH: The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent permitted by the New
Jersey Business Corporation Act as the same may be amended and supplemented. Any
repeal or modification of this Article Seventh by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
EIGHTH: The Corporation shall, to the fullest extent permitted
by the New Jersey Business Corporation Act as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-Law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
NINTH: From time to time any of the provisions of this
Restated Certificate of Incorporation may be amended, altered or repealed, and
other provisions authorized by the laws of the State of New Jersey at the time
in force may be added or inserted in the manner and at the time prescribed by
said laws, and all rights at any time conferred upon the stockholders of the
Corporation by this Restated Certificate of Incorporation are granted subject to
the provisions of this Article Ninth.
TENTH: This Restated Certificate of Incorporation was approved
and adopted in accordance with the New Jersey Business Corporation Act on June
22, 1994. The total number of shares entitled to vote on the adoption of this
Restated Certificate of Incorporation was 649,000 shares of Common Stock, and
total number of shares entitled to vote on the amendments to Article Fourth
hereof which were effected by the adoption of this Restated Certificate of
Incorporation was 182,242 shares of Series A Preferred Stock voting as a group.
<PAGE>
33
ELEVENTH: The number of shares of Common Stock voting for and
against the adoption of this Restated Certificate of Incorporation is 649,000
and 0, respectively, and the number of shares of Series A Preferred Stock voting
for and against the adoption of the amendments to Article Fourth hereof is
179,548 and 0, respectively.
TWELFTH: This Amended and Restated Certificate of
Incorporation shall become effective on July 4, 1994.
Signed on June 23, 1994
RUSSELL-STANLEY CORP.
By:/S/ JOHN W. PRIESING
Name: John Priesing
Title: Chairman and CEO
<PAGE>
CERTIFICATE OF AMENDMENT
TO
THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RUSSELL-STANLEY CORP.
TO: Secretary of State
State of New Jersey
Pursuant to the provisions of Section 14A:9-2(4) and Section
14A:9-4(3), of the New Jersey Business Corporation Act, the undersigned
corporation (the "Corporation") executes the following Certificate of Amendment
to its Amended and Restated Certificate of Incorporation:
1. The name of the Corporation is Russell-Stanley Corp.
2. The Amended and Restated Certificate of Incorporation of the
Corporation is hereby amended by inserting a new paragraph THIRTEENTH which
shall provide as follows:
"THIRTEENTH: The shares of Common Stock of the Corporation
shall have no preemptive rights whether pursuant to Section 14A:5-29, pursuant
to common law or otherwise."
3. This Amendment was approved and adopted by the Board of Directors of
the Corporation on June 10, 1997 and was approved and adopted by the
shareholders of the Corporation on June 10, 1997.
4. The total number of shares entitled to vote on this Amendment was
645,000.
5. Pursuant to Section 14A:5-6(2), 500,000 shares of common stock of
the Corporation, being in excess of two-thirds (2/3) of the issued and
outstanding shares of common stock of the Corporation, voted in favor of this
Amendment and notice of such vote was provided to the common shareholders of the
Corporation who did not participate in such vote in accordance with Section
14A:5-6(2)(b).
6. This Certificate of Amendment shall be effective as of the date of
filing.
RUSSELL-STANLEY CORP.
Dated: June 10, 1997 By: /S/ ROBERT L. SINGLETON
--------------------------------------
Robert L. Singleton
President
EXHIBIT 3.4
RUSSELL-STANLEY CORP.
BY-LAWS
ARTICLE I
MEETING OF STOCKHOLDERS
Section 1. PLACE OF MEETING AND NOTICE. Meetings of the
stockholders of the Corporation shall be held at such place either within or
without the State of New Jersey as the Board of Directors may determine.
Section 2. ANNUAL AND SPECIAL MEETINGS. Annual meetings of
stockholders shall be held, at a date, time and place fixed by the Board of
Directors and stated in the notice of meeting, to elect a Board of Directors and
to transact such other business as may properly come before the meeting. Special
meetings of the stockholders may be called by the President for any purpose and
shall be called by the President or Secretary if directed by the Board of
Directors or requested in writing by the holders of not less than 20% of the
capital stock of the Corporation. Each such stockholder request shall state the
purpose of the proposed meeting.
Section 3. NOTICE. Except as otherwise provided by law, at
least 10 and not more than 60 days before each meeting of stockholders, written
notice of the time, date and place of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be given
to each stockholder.
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
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.
<PAGE>
2
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 fifteen. Within the limits specified above, the
number of Directors shall be determined by the Board of Directors or by the
stockholders. The Directors shall be elected by the stockholders at their annual
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. MEETINGS. Regular meetings of the Board of
Directors shall be held at such times and placed as may from time to time be
fixed by the Board of Directors or as may be specified in a notice of meeting.
Special meetings of the Board of Directors may be held at any time upon the call
of the President and shall be called by the President or Secretary if directed
by the Board of Directors. Telegraphic or written notice of each special meeting
of the Board of Directors shall be sent to each Director not less than two days
before such meeting. A meeting of the Board of Directors may be held without
notice immediately after the annual meeting of the stockholders. Notice need not
be given of regular meetings of the Board of Directors.
Section 3. QUORUM. One-third of the total number of Directors
shall constitute a quorum for the transaction of business. If a quorum is not
present at any meeting of the Board of Directors, the Directors present may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until such a quorum is present. Except as otherwise provided by
law, the Certificate of Incorporation of the Corporation, these By-Laws or any
contract or agreement to which the Corporation is a party, the act of a majority
of the Directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors.
Section 4. COMMITTEE 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 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 or they constitute a quorum, may unanimously appoint another director
to act at the meeting in place of any such absent or disqualified member.
III ARTICLE
OFFICERS
The officers of the Corporation shall consist of a President,
a Secretary, a Treasurer and such other additional officers with such titles as
the Board of Directors shall
<PAGE>
3
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.
IV ARTICLE
INDEMNIFICATION
The Corporation shall, to the fullest extent permitted by
Section 14A:2-7 of the New Jersey Business Corporation Act, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-Law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
V ARTICLE
GENERAL PROVISIONS
Section 1. NOTICES. Whenever any statute, the Certificate of
Incorporation or these By-Laws require notice to be given to any Director or
stockholder, such notice may be given in writing by mail, addressed to such
Director of stockholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid. Such notice shall be deemed to have
been give when it is deposited in the United States mail. Notice to Directors
may also be given by telegram.
Section 2. FISCAL YEAR. The fiscal year of the Corporation
shall be fixed by the Board of Directors.
EXHIBIT 3.5
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF MERGER
OR SHARE EXCHANGE
Pursuant to ss.33-11-105 of the 1976 South Carolina Code, as
amended, the undersigned as the surviving corporation in a merger or the
acquiring corporation in a share exchange, as the case may be, hereby submits
the following information:
1. The name of the surviving or acquiring corporation is
Container Management Services, Inc.
2. Attached hereto and made a part hereof is a copy of the
Plan or Merger or Share Exchange (see ss.ss.33-11-101
(merger), 33-11-104 (merger of subsidiary into parent),
33-11-107 (mergEr or share exchange with a foreign
corporation), and 33-11-108 (merger of a parent corporation
into one of its subsidiaries)).
3. Complete the following information to the extent it is
relevant with respect to each corporation which is a party to
the transaction:
(a) Name of the corporation: Container Management Services,
Inc. Complete either (1) or (2), whichever is applicable:
(1) [x] Shareholder approval of the merger or stock exchange
was not required (See ss.ss.33-11-103(h), 33-11-104(a), and
33-11-108(a)).
(2) [ ] The Plan of Merger or Share Exchange was duly
approved by shareholders of the corporation as follows:
Number
of Out- Number of Votes Number of Votes Number of
standing Entitled Represented Undisputed* Shares
Voting Group Shares to be Cast at the meeting Voted For Against
- ------------ -------- ---------- -------------- --------- -------
(b) Name of the corporation: CMS Acquisition, Inc. Complete
either (1) or (2), whichever is applicable:
<PAGE>
(1) [ ] Shareholder approval of the merger or stock exchange
was not required (See ss.ss.33-11-103(h), 33-11-104(a), and
33-11-108(a)).
(2) [x] The Plan of Merger or Share Exchange was duly
approved by shareholders of the corporation as follows:
Number
of Out- Number of Votes Number of Votes Number of
standing Entitled Represented Undisputed* Shares
Voting Group Shares to be Cast at the meeting Voted For Against
- ------------ -------- ---------- -------------- --------- -------
common 100 100 100 100 0
*NOTE: Pursuant to the Section 33-11-105(a)(3)(ii), the corporation
can alternatively state the total number of undisputed shares
cast for the amendment by each voting group together with a
statement that the number cast for the amendment by each
voting group was sufficient for approval by the voting group.
4. Unless a delayed date is specified, the effective date of
this document shall be the date it is accepted for filing by
the Secretary of State (See
ss.ss.33-1-230(b)):________________.
DATE: July 23, 1997 CONTAINER MANAGEMENT
SERVICES, INC.
By:/s/ Mark E. Daniels
----------------------
Mark E. Daniels,
President
*NOTE: Pursuant to the Section 33-11-105(a)(3)(ii), the corporation
can alternatively state the total number of undisputed shares
cast for the amendment by each voting group together with a
statement that the number cast for the amendment by each
voting group was sufficient for approval by the voting group.
2
<PAGE>
PLAN OF MERGER
-----------------------------
CMS ACQUISITION, INC.
A DELAWARE CORPORATION
INTO ITS WHOLLY OWNED SUBSIDIARY,
CONTAINER MANAGEMENT SERVICES, INC.,
A SOUTH CAROLINA CORPORATION
-------------------------------
THIS PLAN OF MERGER (hereinafter called the "Plan"), is hereby
adopted and approved as of this 23rd day of July, 1997, by CMS Acquisition, a
Delaware corporation ("Parent"), in order to provide for the merger of Parent
into its wholly owned subsidiary, Container Management Services, Inc., a South
Carolina corporation ("Subsidiary").
WHEREAS, Parent is a corporation duly organized and existing
under the laws of the State of Delaware, having been incorporated on July 2,
1997;
WHEREAS, Subsidiary is a corporation duly organized and
existing under the laws of the State of South Carolina, having been incorporated
on July 15, 1991;
WHEREAS, the authorized capital stock of Parent consists of
One Thousand (1,000) shares of common stock, $0.01 par value, of which 100
shares are outstanding;
WHEREAS, the authorized capital stock of Subsidiary consists
of Two Hundred Twenty Five Thousand (225,000) shares of Class A common stock, no
par value, and Twenty Five Thousand (25,000) shares of Class B common stock, no
par value, of which 90,000 shares of Class A common stock and 10,000 shares of
Class B common stock are outstanding, all of which are owned by Parent;
<PAGE>
WHEREAS, the board of directors of Parent deems it advisable
for the general welfare and advantage of the corporations and the respective
shareholders that the corporations merge into a single corporation pursuant to
this Plan and pursuant to Section 33-11-108 of the South Carolina Code of Laws
of 1976, as amended, and the other applicable provisions of the laws of the
State of South Carolina and pursuant to Section 253(a) of the General
Corporation Law of Delaware and the other applicable provisions of the laws of
the State of Delaware.
NOW, THEREFORE, the board of directors of Parent, in
accordance with the applicable provisions of the laws of the State of South
Carolina and the State of Delaware hereby approve and adopt the merger of Parent
with and into Subsidiary, which shall continue its corporate existence and shall
be the corporation surviving the merger (hereinafter sometimes the "Surviving
Corporation"), upon the terms and conditions of the merger hereby adopted and
the mode of carrying the same into effect, are and shall be as hereafter set
forth:
ARTICLE ONE. Effective Time and Effect of Merger. Consummation
of this Plan shall be effected on the date on which this Plan of Merger and the
Articles of Merger are filed in the Office of the Secretary of State of South
Carolina and a Certificate of Ownership and Merger is filed in the office of the
Secretary of the State of Delaware (hereinafter the "effective time" of the
merger or sometimes the "closing" date), all after satisfaction of the
respective requirements of the applicable laws of the State of South Carolina
and the State of Delaware prerequisite to such filing. At the effective time of
the merger, the separate existence of Parent shall cease and it shall be merged
with and into the Subsidiary.
ARTICLE TWO. Governing Law. The laws which are to govern the
Surviving Corporation are the laws of the State of South Carolina.
2
<PAGE>
ARTICLE THREE. Articles of Incorporation. The Articles of
Incorporation of Subsidiary shall remain in effect subsequent to the effective
time of the merger and shall remain unchanged until the same may be amended or
altered at some future time in accordance with applicable laws.
ARTICLE FOUR. By-Laws. The By-Laws of Subsidiary at the
effective time of the merger shall be the By-Laws of the Surviving Corporation
and shall remain in effect subsequent to the effective time of the merger and
shall be unchanged until the same may be amended or altered at some future time
in accordance with the provisions thereof.
ARTICLE FIVE. Officers and Directors. Subject to the authority
of the shareholders and the board of directors as provided by law and the
By-Laws of the Surviving Corporation, the officers and directors of Subsidiary
at the effective time of the merger shall be the officers and directors of the
Surviving Corporation immediately following the effective time of the merger.
ARTICLE SIX. Conversion of Shares. The method of carrying
into effect the merger provided in this Plan, and the manner and basis of
converting the shares of Parent and of Subsidiary into shares of the Surviving
Corporation are as follows:
1. Parent: Conversion of Shares. At the effective time of the
merger, each shareholder of Parent shall receive one (1) share of Class A
(voting) common stock, no par value, of the Surviving Corporation for each share
of common stock of Parent which such shareholder owned prior to such effective
time.
2. Subsidiary: Cancellation of Shares. At the effective time
of the merger, the outstanding shares of common stock of Subsidiary shall be
canceled.
3
<PAGE>
3. Surrender of Certificates. No later than such date as is
reasonably selected by the corporate secretary of the Surviving Corporation,
each holder of stock certificates representing shares of common stock of
Subsidiary and of Parent issued and outstanding at the time the merger becomes
effective shall surrender such shares for exchange to the Surviving Corporation,
as provided above, and shall then be entitled to receive certificates for the
full number of shares of the Surviving Corporation as set forth above.
ARTICLE SEVEN. Rights and Privileges of Surviving Corporation.
At the effective time of the merger, the Surviving Corporation shall succeed to,
without other transfer, and shall possess and enjoy, all the rights, privileges,
immunities, powers and franchises both of a public and a private nature, and
shall be subject to all the restrictions, disabilities, and duties, of each of
the corporations; and all the rights, privileges, immunities, powers and
franchises of each of the corporations and all property, real, personal or
mixed; and all debts due to either of said corporations on whatever account, for
stock subscriptions as well as for all other things in action or belonging to
each of the corporations, shall be vested in the Surviving Corporation; and all
property, rights, privileges, immunities, powers and franchises, and all and
every other interest shall be thereafter as effectively the property of the
Surviving Corporation as they were of the respective corporations, and the title
to any real estate vested by deed or otherwise in either of said corporations
shall not revert or be in any way impaired by reason of the merger; provided,
however that all rights of creditors and all liens upon any property of either
of the corporations shall be preserved unimpaired, limited in lien to the
property affected by such liens at the effective time of the merger, and all
debts, liabilities and duties of the corporations, respectively, shall
thenceforth attach to the Surviving Corporation and may be enforced against it
to the same
4
<PAGE>
extent as if its debts, liabilities and duties had been incurred or contracted
by the Surviving Corporation.
ARTICLE EIGHT. Assets and Liabilities. The assets and
liabilities of the corporations as of the effective time of the merger shall be
taken up on the books of the Surviving Corporation at the amounts at which they
shall be carried at the time on the books of the respective corporations.
ARTICLE NINE. Shareholder Approval. This Plan of Merger shall
be submitted to the shareholders of Parent for approval as provided by law.
ARTICLE TEN. Further Assurances. If at any time the Surviving
Corporation shall conclude or be advised that any further assignment or
assurance in law or other action is necessary or desirable to vest, perfect, or
confirm, of record or otherwise, in the Surviving Corporation, the title to any
property or rights of Parent acquired or to be acquired by or as a result of the
merger, the presidents and secretaries, together, of the corporations shall be
and they hereby are severally and fully authorized to execute and deliver such
properties, assignments and assurances in law and to take such other action as
may be necessary or proper to vest, perfect or confirm title to such property or
rights in the Surviving Corporation and otherwise carry out the purposes of this
Plan.
ARTICLE ELEVEN. Termination. Anything herein or elsewhere to
the contrary notwithstanding, this Plan may be withdrawn in the event and at any
time before the effective time of the merger, upon direction of the board of
directors of Parent. It is anticipated that this Plan may be terminated and
abandoned in the event circumstances arise prior to the effective time of the
merger which would indicate that the transactions contemplated hereby are not in
compliance with applicable federal and state securities laws, or that the merger
would not be
5
<PAGE>
deemed a tax-free transaction for United States income tax purposes
as described more fully hereafter, or if any action or proceeding before any
court or other governmental body or agency shall have been instituted or
threatened to restrain or prohibit the merger and it is deemed advisable not to
proceed with the merger. Upon any such termination and abandonment, neither
party shall have any liability or obligation hereunder to the other party.
ARTICLE TWELVE. Tax Free Exchange. It is the intent of this
Plan that this Plan of Merger shall be considered a statutory merger and shall
be undertaken, as contemplated by Section 368(a)(1)(A) of the Internal Revenue
Code (the "Code"); that this Plan of Merger shall be considered a "plan of
reorganization" for such purposes; and that the exchange of shares of stock of
Parent for shares of stock of the Surviving Corporation shall be considered a
non-taxable exchange pursuant to Section 354 of the Code.
ARTICLE THIRTEEN. Nonsubstantive Amendment by President. If
prior to the effective time of the merger, the president of Parent determines
that some nonsubstantive amendment or alteration to this Plan is needed solely
for the purpose of complying with the applicable corporate laws of the State of
South Carolina, or the applicable income tax laws of the United States, or the
applicable federal or state securities laws, then the president of Parent shall
be, and hereby is, authorized to make such amendment to this Plan as shall be
deemed necessary by them to satisfy such applicable requirements; and in this
regard the said president shall be protected from liability so long as their
actions and decisions are made by them in good faith.
6
<PAGE>
IN WITNESS WHEREOF, this Plan has been signed by all of the
directors of Parent in accordance with the provisions of S.C. Code Ann.
ss.33-11-108 (Law. Co-op. 1976, as amended) and Delaware General Corporation Law
ss. 253 and as of the day, month and year first above written.
/s/ ROBERT SINGLETON
--------------------
Robert Singleton, Director
/s/ ROBERT ROSNER
--------------------
Robert Rosner, Director
/s/ DANIEL W. MILLER
--------------------
Daniel Miller, Director
Attest:
/s/ ROBERT ROSNER
- --------------------
Robert Rosner, Secretary
<PAGE>
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF INCORPORATION
OF
CONTAINER MANAGEMENT SERVICES, INC.
1. The name of the proposed corporation is Container Management Services,
Inc.
2. The initial registered office of the corporation is 346 Riverside
Drive, Greenville, South Carolina 29605 and the name of its initial
registered agent at such address is Mark E. Daniels.
3. The corporation is authorized to issue more than one class of shares:
Class of Shares Authorized No. of Each Class
--------------- ----------------------------
Class A (Voting Common) 225,000
Class B (Non-Voting Common) 25,000
The relative rights, preferences, and limitations of the shares of each
class, and of each series within a class, are as follows: Class A shall
be voting, common stock; Class B shall be non-voting, common stock.
4. The existence of this corporation shall begin when these articles are
filed with the Secretary of State.
5. The corporation elects to include no optional provisions in the articles
of incorporation.
6. The name and address of each incorporator is as follows:
Name Address Signature
Mark E. Daniels 346 Riverside Drive /s/ MARK E. DANIELS
Greenville, SC 29605
7. I, Robert D. Inglis, an attorney licensed to practice in the State of
South Carolina, certify that the corporation, to whose articles of
incorporation this certificate is attached, has complied with the
requirements of Chapter 2, Title 33 of the 1976 South Carolina Code
relating to the articles of incorporation.
Date: July 12, 1991 /s/ ROBERT D. INGLIS
------------- Robert D. Inglis
Leatherwood Walker Todd & Mann, P.C.
100 East Coffee Street
Post Office Box 87
Greenville, South Carolina 29602
Exhibit 3.6
BYLAWS
OF
CONTAINER MANAGEMENT SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I. OFFICES ................................................ 1
ss.1.1 Business Office ........................................ 1
ss.1.2 Registered office ...................................... 1
ARTICLE II. SHAREHOLDERS ........................................... 1
ss.2.1 Annual Meeting ......................................... 1
ss.2.2 Special Meetings ....................................... 1
ss.2.3 Place of Meeting ....................................... 2
ss.2.4 Notice of Meeting ...................................... 2
(a) Required notice ........................................ 2
(b) Adjourned Meeting ...................................... 2
(c) Waiver of Notice ....................................... 3
(d) Contents of Notice ..................................... 3
ss.2.5 Fixing of Record Date .................................. 4
ss.2.6 Shareholder List ....................................... 5
ss.2.7 Quorum and Voting Requirements ......................... 5
ss.2.8 Increasing Either Quorum or Voting Requirements ........ 6
ss.2.9 Proxies ................................................ 7
ss.2.10 Voting of Shares ....................................... 7
ss.2.11 Corporation's Acceptance of Votes ...................... 7
ss.2.12 Informal Action by Shareholders ........................ 9
ss.2.13 Voting for Directors ................................... 9
(a) General Provision ...................................... 9
(b) Notice of Cumulative Voting ............................ 9
(c) Recess ................................................. 10
(d) Plurality Requirement .................................. 10
ss.2.14 Shareholder's Rights to Inspect Corporate
Records .............................................. 10
(a) Minutes and Accounting Records ......................... 10
(b) Absolute Inspection Rights of Records
Required at Principal office ......................... 10
(c) Conditional Inspection Right ........................... 11
(d) Copy Costs ............................................. 12
ss.2.15 Financial Statements Shall be Furnished
to the Shareholders ................................. 12
ss.2.16 Dissenter's Rights ..................................... 13
ARTICLE III. BOARD OF DIRECTORS ..................................... 13
ss.3.1 General Powers ......................................... 13
ss.3.2 Number, Tenure and Qualifications of Directors ......... 13
ss.3.3 Regular Meetings ....................................... 13
ss.3.4 Special Meetings ....................................... 13
ss.3.5 Notice of Special Meeting .............................. 14
ss.3.6 Director Quorum ........................................ 14
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PAGE
ss.3.7 Manner of Acting ....................................... 14
(a) Required Vote .......................................... 14
(b) Telephone Meeting ...................................... 15
(c) Failure To Object To Action ............................ 15
ss.3.8 Establishing a "Supermajority" Quorum or
Voting Requirement ................................... 15
ss.3.9 Action Without a Meeting ............................... 16
ss.3.10 Removal of a Director .................................. 16
ss.3.11 Vacancies .............................................. 16
ss.3.12 Compensation ........................................... 17
ss.3.13 Committees ............................................. 17
(a) Creation of Committees ................................. 17
(b) Selection of Members ................................... 17
(c) Required Procedures .................................... 18
(d) Authority .............................................. 18
ARTICLE IV. OFFICERS ............................................... 19
ss.4.1 Number ................................................. 19
ss.4.2 Appointment and Term of Office ......................... 19
ss.4.3 Removal ................................................ 19
ss.4.4 President .............................................. 19
ss.4.5 The Vice-Presidents .................................... 20
ss.4.6 The Secretary .......................................... 20
ss.4.7 The Treasurer .......................................... 21
ss.4.8. Assistant Secretaries and Assistant Treasurers ......... 21
ss.4.9 Salaries ............................................... 21
ARTICLE V. INDEMNIFICATION OF DIRECTORS, OFFICERS,
AGENTS, AND EMPLOYEES ................................ 22
ss.5.1 Indemnification of Directors ........................... 22
(a) Determination and Authorization ........................ 22
(b) Standard of Conduct .................................... 22
(c) Indemnification in Derivative Actions Limited .......... 23
ss.5.2 Advance Expenses for Directors ......................... 23
ss.5.3 Indemnification of Officers, Agents, and
Employees Who Are Not Directors ...................... 24
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER ............. 24
ss.6.1 Certificates for Shares ................................ 24
(a) Content ................................................ 24
(b) Legend as to Class or Series ........................... 24
(c) Shareholder List ....................................... 25
(d) Transferring Shares .................................... 25
ss.6.2 [Reserved] ............................................. 25
ss.6.3 Registration of the Transfer of Shares ................. 25
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<PAGE>
ss.6.4 Restrictions on Transfer of Shares Permitted ........... 25
ss.6.5 Acquisition of Shares .................................. 26
ARTICLE VII. DISTRIBUTIONS .......................................... 27
ss.7.1 Distributions .......................................... 27
ARTICLE VIII. CORPORATE SEAL ......................................... 27
ss.8.1 Corporate Seal ......................................... 27
ARTICLE IX. EMERGENCY BYLAWS ....................................... 27
ss.9.1 Emergency Bylaws ....................................... 27
(a) Notice of Board Meetings ............................... 27
(b) Temporary Directors and Quorum ......................... 28
(c) Actions Permitted to be taken .......................... 28
ARTICLE X. AMENDMENTS ............................................. 29
ss.10.1 Amendments ............................................. 29
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<PAGE>
BY-LAWS OF CONTAINER MANAGEMENT SERVICES, INC.
ARTICLE I. OFFICES
SS. 1.1 BUSINESS OFFICE.
The original principal office of the corporation shall be within in the
State of South Carolina and shall be located at 346 Riverside Drive,
Greenville, South Carolina 29605. The board of directors may change the
location of the principal office. The corporation shall maintain at its
principal office a copy of certain records, as specified in ss. 2.14 of
Article II. The corporation may have such other offices, either within
or without the State of South Carolina, as the board of directors may
designate or as the business of the corporation may require from time
to time.
SS. 1.2 REGISTERED OFFICE .
The registered office of the corporation, required by ss. 33-5-101,
S.C. Revised Code may be, but need not be, identical with the principal
office in the state of South Carolina, and the address of the
registered office may be changed from time to time.
ARTICLE II. SHAREHOLDERS
SS. 2.1 ANNUAL MEETING .
The annual meeting of the shareholders shall be held each year on the
31st day of January at 10:00 a.m. or at such other time on such other
day within such month as shall be fixed by the board of directors, for
the purpose of electing directors and for the transaction of such other
business as may come before the meeting. If the day fixed for the
annual meeting shall be a Saturday, Sunday or legal holiday in the
State of South Carolina, such meeting shall be held on the next
succeeding business day.
If the election of directors shall not be hold on the day designated
herein for any annual meeting of the shareholders, or at any subsequent
continuation after adjournment thereof, the board of directors shall
cause the election to be held at a special meeting of the shareholders
as soon thereafter as convenient.
SS. 2.2 SPECIAL MEETINGS .
Special meetings of the shareholders, for any purpose or purposes,
described in the meeting notice, may be called by
<PAGE>
2
the president, or by the board of directors, and shall be called by the
president at the request of the holders of not less than one-tenth of
all outstanding votes of the corporation entitled to be cast on any
issue at the meeting.
SS. 2.3 PLACE OF MEETING .
The board of directors may designate any place within the county in
South Carolina where the company has its principal office as the place
of meeting for any annual or special meeting of the shareholders,
unless all the shareholders entitled to vote at the meeting agree by
written consents (which may be in the form of waiver of notice or
otherwise) to another location, which may be either within or without
the state of South Carolina. If no designation is made, the place of
meeting shall be the principal office of the corporation in the state
of South Carolina.
SS. 2.4 NOTICE OF MEETING .
(a) REQUIRED NOTICE .
Written notice stating the place, day and hour of any annual
or special shareholder meeting shall be delivered not less
than ton nor more than sixty days before the date of the
meeting, either personally or by mail, by or at the direction
of the president, the board of directors or other persons
calling the meeting, to each shareholder of record entitled to
vote at such meeting and to any other shareholder entitled by
the South Carolina Business Corporation Act of 1988 or the
articles of incorporation to receive notice of the meeting.
Notice shall be deemed to be effective at the earlier of: (1)
when deposited in the United States mail, addressed to the
shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid, (2) on
the date shown on the return receipt if sent by registered or
certified mail, return receipt requested, and the receipt is
signed by or on behalf of the addresses, (3) when received, or
(4) 5 days after deposit in the United States mail, if mailed
postpaid and correctly addressed to an address other than that
shown in the corporations current record of shareholders.
(b) ADJOURNED MEETING .
If any shareholder meeting is adjourned to a different date,
time, or place, notice need not be given of the new date, time
or place, if the new date, time and place is announced at the
meeting before adjournment. If a new record date for the
adjourned meeting is, or
<PAGE>
3
must be, fixed (see ss. 2.5 of this Article II) then notice
must be given pursuant to the requirements of paragraph (a) of
this ss. 2.4, to those persons who are shareholders as of the
new record date.
(c) WAIVER OF NOTICE .
The shareholder may waive notice of the meeting (or any notice
required by the Act, articles of incorporation, or bylaws), by
a writing signed by the shareholder entitled to the notice,
which is delivered to the corporation (either before or after
the date and time stated in the notice) for inclusion in the
minutes or filing with the corporate records.
A shareholder's attendance at a meeting:
(1) waives objection to lack of notice or defective
notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the
meeting or transacting business at the meeting;
(2) 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 shareholder objects to considering the matter
when it is presented.
(d) CONTENTS OF NOTICE .
The notice of each special shareholder meeting shall include a
description of the purpose or purposes for which the meeting
is called. Except as provided in this ss. 2.4(d), or as
provided in the corporation's articles, or otherwise in the
South Carolina Business corporation Act, the notice of an
annual shareholder meeting need not include a description of
the purpose or purposes for which the meeting is called.
If a purpose of any shareholder meeting is to consider either:
(1) a proposed amendment to the articles of incorporation
(including any restated articles requiring shareholder
approval); (2) a plan of merger or share exchange; (3) the
sale, lease, exchange or other disposition of all, or
substantially all of the corporation's property; (4) the
adoption, amendment or repeal of a bylaw; (5) dissolution of
the corporation; or, (6) removal of a director, the notice
must so state and be accompanied by respectively a copy or
summary of the: (1) articles of amendment; (2) plan of merger
or share exchange; (3) transaction for disposition of all
<PAGE>
4
the corporation's property; or (4) bylaw proposal. If the
proposed corporation action creates dissenter's rights, the
notice must state that shareholders are, or may be entitled to
assert dissenter's rights, and must be accompanied by a copy
of Chapter 13 of the South Carolina Business Corporation Act.
If the corporation issues, or authorizes the issuance of
shares for promissory notes or for promises to render services
in the future, the corporation shall report in writing to all
the shareholders the number of shares authorized or issued,
and the consideration received with or before the notice of
the next shareholder meeting. Likewise, if the corporation
indemnifies or advances expenses to a director (as defined in
ss. 33-16-210 South Carolina Revised Code Ann.), this shall be
reported to all the shareholders with or before notice of the
next shareholder's meeting.
SS. 2.5 FIXING OF RECORD DATE .
For the purpose of determining shareholders of any voting group
entitled to notice of or to vote at any meeting of shareholders, or
shareholders entitled to receive payment of any distribution or
dividend, or in order to make a determination of shareholders for any
other proper purpose, the board of directors may f ix in advance a date
as the record date. Such record date shall not be more than seventy
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If no record date is so
fixed by the board for the determination of shareholders entitled to
notice of, or to vote at a meeting of shareholders, or shareholders
entitled to receive a share dividend or distribution, the record date
for determination of such shareholders shall be at the close of
business on:
(a) With respect to an annual shareholder meeting or any
special shareholder meeting called by the board or
any person specifically authorized by the board or
these bylaws to call a meeting, the day before the
first notice is delivered to shareholders;
(b) with respect to a special shareholder's meeting
demanded by the shareholders, the date the first
shareholder signs the demand;
(c) With respect to the payment of a share dividend, the
date the board authorizes the share dividend;
<PAGE>
5
(d) With respect to actions taken in writing without a
meeting (pursuant to Article II ss. 2.12), the date
the first shareholder signs a consent;
(e) And with respect to a distribution to shareholders,
(other than one involving a repurchase or
reacquisition of shares), the date the board
authorizes the distribution.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof unless the board
of directors fixes a now record date which it must do if the meeting is
adjourned to a date more than 120 days after the date fixed for the
original meeting.
SS. 2.6 SHAREHOLDER LIST .
The officer or agent having charge of the stock transfer books for
shares of the corporation shall make a complete record of the
shareholders entitled to vote at each meeting of shareholders thereof,
arranged in alphabetical order, with the address of and the number of
shares held by each. The list must be arranged by voting group (if such
exists, see Art. II, ss. 2.7) and within each voting group by class or
series of shares. The shareholder's list must be available for
inspection by any shareholder, beginning on the date on which notice of
the meeting is given for which the list was prepared and continuing
through the meeting. The list shall be available at the corporation's
principal office or at a place identified in the meeting notice in the
city where the meeting is to be held. A shareholder, his agent or
attorney is entitled on written demand to inspect, and subject to the
requirements of ss. 2.14 of this Article II, to copy the list at his
expense during regular business hours, and during the period it is
available for inspection. The corporation shall maintain the
shareholder list in written form or in another form capable of
conversion into written form within a reasonable time.
SS. 2.7 QUORUM AND VOTING REQUIREMENTS .
If the articles of incorporation or the South Carolina Business
Corporation Act of 1988 provides for voting by a single voting group on
a matter, action on that matter is taken when voted upon by that voting
group.
Shares entitled to vote as a separate voting group may take action on a
matter at a meeting only if a quorum of those shares exists with
respect to that matter. Unless the articles of incorporation, a bylaw
adopted pursuant to ss. 2.8
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6
of this Article II, or the South Carolina Business Corporation Act of
1988 provide otherwise, a majority of the votes entitled to be cast on
the matter by the voting group constitutes a quorum of that voting
group for action on that matter.
If the articles of incorporation or the South Carolina Business
Corporation Act provide for voting by two or more voting groups on a
matter, action on that matter is taken only when voted upon by each of
those voting groups counted separately. Action may be taken by one
voting group on a matter even though no action is taken by another
voting group entitled to vote on the matter.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes. If a quorum exists, action on a matter
(other than the election of directors) by a voting group is approved if
the votes cast within the voting group favoring the action exceed the
votes cast opposing the action, unless the articles of incorporation, a
bylaw adopted pursuant to ss. 2.8 of this Article II, or the South
Carolina Business Corporation Act of 1988 require a greater number of
affirmative votes.
SS. 2.8 INCREASING EITHER QUORUM OR VOTING REQUIREMENTS .
For purposes of this ss. 2.8 a "supermajority" quorum is a requirement
that more than a majority of the votes of the voting group be present
to constitute a quorum; and a "supermajority" voting requirement is any
requirement that requires the vote of more than a majority of the
affirmative votes of a voting group at a meeting.
The shareholders, but only if specifically authorized to do so by the
articles of incorporation, may adopt, amend or delete a bylaw which
fixes a "supermajority" quorum or "supermajority" voting requirement.
The adoption or amendment of a bylaw that adds, changes, or deletes a
"supermajority" quorum or voting requirement for shareholders must meet
the same quorum requirement and be adopted by the same vote and voting
groups required to take action under the quorum and voting requirement
then in effect or proposed to be adopted, whichever is greater.
A bylaw that fixes a supermajority quorum or voting requirement for
shareholders may not be adopted, amended, or repealed by the board of
directors.
<PAGE>
7
SS. 2.9 PROXIES .
At all meetings of shareholders, a shareholder may vote in person, or
vote by proxy which is executed in writing by the shareholder or which
is executed by his duly authorized attorney-in-fact. Such proxy shall
be dated and filed with the secretary of the corporation or other
person authorized to tabulate votes before or at the time of the
meeting. Unless a time of expiration is otherwise specified, a proxy is
valid for eleven months. A proxy is revocable unless executed in
compliance with S.C. Code Ann. ss. 33-7-220(d), or any succeeding
statute of like tenor and effect.
SS. 2.10 VOTING OF SHARES .
Unless otherwise provided in the articles, and subject to the
cumulative voting provisions of ss. 2.13 of this Article II, each
outstanding share entitled to vote shall be entitled to one vote upon
each matter submitted to a vote at a meeting of shareholders.
Except as provided by specific court order, no shares held by another
corporation, if a majority of the shares entitled to vote for the
election of directors of such other corporation are held by the
corporation, shall be voted at any meeting or counted in determining
the total number of outstanding shares at any given time for purposes
of any meeting. Provided, however, the prior sentence shall not limit
the power of the corporation to vote any shares, including its own
shares, held by it in a fiduciary capacity.
Redeemable shares are not entitled to vote after notice of redemption
is mailed to the holders and a sum sufficient to redeem the shares has
been deposited with a bank, trust company, or other financial
institution under an irrevocable obligation to pay the holders the
redemption price on surrender of the shares.
SS. 2.11 CORPORATION'S ACCEPTANCE OF VOTES .
(a) If the name signed on a vote, consent, waiver, or proxy
appointment corresponds to the name of a shareholder, the
corporation if acting in good faith is entitled to accept the
vote, consent, waiver, or proxy appointment and give it effect
as the act of the shareholders.
(b) If the name signed on a vote, consent, waiver, or proxy
appointment does not correspond to the name of its
shareholder, the corporation if acting in good faith is
nevertheless entitled to accept the vote, consent,
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8
waiver, or proxy appointment and give it effect as the act of
the shareholder if:
(1) the shareholder is an entity as defined in the South
Carolina Business Corporation Act of 1988 and the
name signed purports to be that of an officer or
agent of the entity;
(2) the name signed purports to be that of an
administrator, executor, guardian, or conservator
representing the shareholder and, if the corporation
requests, evidence of fiduciary status acceptable to
the corporation has been presented with respect to
the vote, consent, waiver, or proxy appointment;
(3) the name signed purports to be that of a receiver or,
trustee in bankruptcy of the shareholder and, if the
corporation requests, evidence of this status
acceptable to the corporation has been presented with
respect to the vote, consent, waiver, or proxy
appointment;
(4) the name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the
shareholder and, if the corporation requests,
evidence acceptable to the corporation of the
signatory's authority to sign for the shareholder has
been presented with respect to the vote, consent,
waiver, or proxy appointment;
(5) two or more persons are the shareholder as co-tenants
or fiduciaries and the name signed purports to be the
name of at least one of the co-owners and the person
signing appears to be acting on behalf of all the
co-owners.
(c) The corporation is entitled to reject a vote, consent, waiver,
or proxy appointment if the secretary or other officer or
agent authorized to tabulate votes, acting in good faith, has
reasonable basis for doubt about the validity of the signature
on it or about the signatory's authority to sign for the
shareholder.
(d) The corporation and its officer or agent who accepts or
rejects a vote, consent, waiver, or proxy appointment in good
faith and in accordance with the standards of this section are
not liable in damages to the shareholder for the consequences
of the acceptance or rejection.
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9
(e) Corporate action based on the acceptance or rejection of a
vote, consent, waiver, or proxy appointment under this section
is valid unless a court of competent jurisdiction determines
otherwise.
SS. 2.12 INFORMAL ACTION BY SHAREHOLDERS .
Any action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting if one or more consents in
writing, setting forth the action so taken, shall be signed by all of
the shareholders entitled to vote with respect to the subject matter
thereof and are delivered to the corporation for inclusion in the
minute book. If the act to be taken requires that notice be given to
non-voting shareholders, the corporation shall give the non-voting
shareholders written notice of the proposed action at least 10 days
before the action is taken, which notice shall contain or be
accompanied by the same material that would have been required if a
formal meeting had been called to consider the action. A consent signed
under this section has the effect of a meeting vote and may be
described as such in any document.
SS. 2.13 VOTING FOR DIRECTORS .
(a) GENERAL PROVISION .
Unless otherwise provided in the articles, at each election
for directors every shareholder entitled to vote at such
election shall have the right to vote, in person or by proxy,
the number of votes he is entitled to cast for as many persons
as there are directors to be elected and for whose election he
has a right to vote, and, if notice of cumulative voting has
been given either as provided in subsection (b)(1) or (b)(2),
to cumulate his votes.
(b) NOTICE OF CUMULATIVE VOTING .
Notice of cumulative voting shall be given either by:
(1) the meeting notice or proxy statement accompanying
the notice, which states conspicuously that
cumulative voting is authorized; or
(2) a shareholder who has the right to cumulate his votes
shall either (a) give written notice of his intention
to the president or other officer of the corporation
not less than forty-eight hours before the time fixed
for the meeting, which notice must be announced in
the meeting before the voting, or (b) announce his
intention in the meeting before
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10
the Voting for directors commences; and all
shareholders entitled to vote at the meeting shall
without further notice be entitled to cumulate their
votes.
(c) RECESS .
If cumulative voting is to be used, the person presiding may,
or if requested by any shareholder shall, recess the meeting
for a reasonable time to allow deliberation by shareholders,
not to exceed two hours.
(d) PLURALITY REQUIREMENT .
Unless otherwise provided in the articles of incorporation,
directors are elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which
a quorum is present.
SS. 2.14 SHAREHOLDER'S RIGHTS TO INSPECT CORPORATE RECORDS .
(a) MINUTES AND ACCOUNTING RECORDS .
The corporation shall keep as permanent records minutes of all
meetings of its shareholders and board of directors, a record
of all actions taken by the shareholders or board of directors
without a meeting, and a record of all actions taken by a
committee of the board of directors in place of the board of
directors on behalf of the. corporation. The corporation shall
maintain appropriate accounting records.
(b) ABSOLUTE INSPECTION RIGHTS OF RECORDS REQUIRED AT PRINCIPAL
OFFICE .
If he gives the corporation written notice of his demand at
least five business days before the date on which he wishes to
inspect and copy, a shareholder (or his agent or attorney) has
the right to inspect and copy, during regular business hours
any of the following records, all of which the corporation is
required to keep at its principal office:
(1) its articles or restated articles of incorporation
and all amendments to them currently in effect;
(2) its bylaws or restated bylaws and all amendments to
then currently in effect;
(3) resolutions adopted by its board of directors
creating one or more classes or series of shares,
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11
and fixing their relative rights, preferences, and
limitations, if shares issued pursuant to those
resolutions are outstanding;
(4) the minutes of all shareholders' meetings, and
records of all action taken by shareholders without a
meeting, for the past 10 years;
(5) all written communications to shareholders generally
within the past three years, including the financial
statement furnished for the past three years to the
shareholders;
(6) a list of the names and business addresses of its
current directors and officers;
(7) its most recent annual report delivered to the Tax
Commission; and
(8) if the shareholder owns at least one percent of any
class of shares, he may inspect and copy its federal
and state income tax returns for the last ten years.
(c) CONDITIONAL INSPECTION RIGHT .
In addition, if he gives the corporation a written demand made
in good faith and for a proper purpose at least five business
days before the date on which he wishes to inspect and copy,
he describes with reasonable particularity his purpose and the
records he desires to inspect, and the records are directly
connected with his purpose, a shareholder of a corporation (or
his agent or attorney) is entitled to inspect and copy, during
regular business hours at a reasonable location specified by
the corporation, any of the following records of the
corporation:
(1) excerpts from minutes of any meeting of the board of
directors, records of any action of a committee of
the board of directors on behalf of the corporation,
minutes of any meeting of the shareholders, and
records of action taken by the shareholders or board
of directors without a meeting, to the extent not
subject to inspection under paragraph (a) of this ss.
2.14.
(2) accounting records of the corporation; and
(3) the record of shareholders (compiled no earlier than
the date of the shareholder's demand).
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12
(d) COPY COSTS .
The right to copy records includes, if reasonable, the right
to receive copies made by photographic, xerographic, or other
means. The corporation may impose a reasonable charge,
covering the costs of labor and material, for copies of any
documents provided to the shareholder. The charge may not
exceed the estimated cost of production or reproduction of the
records.
SS. 2.15 FINANCIAL STATEMENTS SHALL BE FURNISHED TO THE SHAREHOLDERS .
(a) The corporation shall furnish its shareholders annual
financial statements, which may be consolidated or
combined statements of the corporation and one or
more of its subsidiaries, as appropriate, that
include a balance sheet as of the end of the fiscal
year, an income statement for that year, and a
statement of changes in shareholders' equity for the
year unless that information appears elsewhere in the
financial statements. If financial statements are
prepared for the corporation on the basis of
generally accepted accounting principles, the annual
financial statements for the shareholders also must
be prepared on that basis.
(b) If the annual financial statements are reported upon
by a public accountant, his report must accompany
them. If not, the statements must be accompanied by a
statement of the president or the person responsible
for the corporation's accounting records:
(1) stating his reasonable belief whether the
statements were prepared on the basis of
generally accepted accounting principles
and, if not, describing the basis of
preparation; and
(2) describing any respects in which the
statements were not prepared on a basis of
accounting consistent with the statements
prepared for the preceding year.
(c) A corporation shall mail the annual financial
statements to each shareholder within 120 days after
the close of each fiscal year. Thereafter, on written
request from a shareholder who was not
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13
mailed the statements, the corporation shall mail him
the latest financial statements.
SS. 2.16 DISSENTER'S RIGHTS
Each shareholder shall have the right to dissent from, and obtain
payment for his shares when so authorized by the South Carolina
Business Corporation Act of 1988, articles of incorporation, these
bylaws, or in a resolution of the board of directors.
ARTICLE III. BOARD OF DIRECTORS
SS. 3.1 GENERAL POWERS .
Unless the articles of incorporation have dispensed with or limited the
authority of the board of directors by describing who will perform some
or all of the duties of a board of directors, all corporate powers
shall be exercised by or under the authority of, and the business and
affairs of the corporation shall be managed under the direction of the
board of directors.
SS. 3.2 NUMBER, TENURE AND QUALIFICATIONS OF DIRECTORS .
Unless otherwise provided in the articles of incorporation, the number
of directors of the corporation shall be not less than 1 nor more than
7. Each director shall hold office until the next annual meeting of
shareholders or until removed. However, if his term expires, he shall
continue to serve until his successor shall have been elected and
qualified or until there is a decrease in the number of directors.
Directors need not be residents of the state of South Carolina or
shareholders of the corporation unless so required by the articles of
incorporation.
SS. 3.3 REGULAR MEETINGS .
Unless otherwise provided in the articles, a regular meeting of the
board of directors shall be held without other notice than this bylaw
immediately after, and at the same place as, the annual meeting of
shareholders. The board of directors may provide, by resolution, the
time and place (which shall be within the county where the company's
principal office is located) for the holding of additional regular
meetings without other notice than such resolution. (If so permitted by
ss. 3.7, any such regular meeting may be held by telephone.)
SS. 3.4 SPECIAL MEETINGS .
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14
Unless otherwise provided in the articles, special meetings of the
board of directors may be called by or at the request of the president
or any one director. The person authorized to call special meetings of
the board of directors may fix any place, only within the County of
South Carolina where this corporation has its principal office as the
place for holding any special meeting of the board of directors, or if
permitted by ss. 3.7, such meeting may be held by telephone.
SS. 3.5 NOTICE OF SPECIAL MEETING .
Unless the articles of incorporation provide for a longer or shorter
period, notice of any special meeting shall be given at least two days
previously thereto either orally or in writing. If mailed, such notice
shall be deemed to be effective at the earlier of: (1) when received;
(2) 5 days after deposited in the United States mail, addressed to the
director's business office, with postage thereon prepaid; or (3) the
date shown on the return receipt if sent by registered or certified
mail, return receipt requested, and the receipt is signed by or on
behalf of the director. Any director may waive notice of any meeting.
Except as provided in the next sentence, the waiver must be in writing,
signed by the director entitled to the notice, and filed with the
minutes or corporate records. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business and at the beginning of the meeting (or
promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting, and does not thereafter vote for
or assent to action taken at the meeting.
SS. 3.6 DIRECTOR QUORUM .
A majority of the number of directors in office immediately before the
meeting begins shall constitute a quorum for the transaction of
business at any meeting of the board of directors, unless the articles
require a greater number. Any amendment to this quorum requirement is
subject to the provisions of ss. 3.8 of this Article III.
SS. 3.7 MANNER OF ACTING .
(a) REQUIRED VOTE
The act of the majority of the directors present at a meeting
at which a quorum is present when the vote is taken shall be
the act of the board of directors unless the articles of
incorporation require a greater percentage. Any amendment
which changes the number of
<PAGE>
15
directors needed to take action, is subject to the provisions
of ss. 3.8 of this Article III.
(b) TELEPHONE MEETING
Unless the articles of incorporation provide otherwise, any or
all directors may participate in a regular or special meeting
by, or conduct the meeting through the use of, any means of
communication by which all directors participating may
simultaneously hear each other during the meeting. A director
participating in a meeting by this means is deemed to be
present in person at the meeting.
(c) FAILURE TO OBJECT TO ACTION
A director who is present at a meeting of the board of
directors or a committee of the board of directors when
corporate action is taken is deemed to have assented to the
action taken unless: (1) he objects at the beginning of the
meeting (or promptly upon his arrival) to holding it or
transacting business at the meeting; or (2) his dissent or
abstention from the action taken is entered in the minutes of
the meeting; or (3) he delivers written notice of his dissent
or abstention to the presiding officer of the meeting before
its adjournment or to the corporation immediately after
adjournment of the meeting. The right of dissent or abstention
is not available to a director who votes in favor of the
action taken.
SS. 3.8 ESTABLISHING A "SUPERMAJORITY" QUORUM OR VOTING REQUIREMENT .
For purposes of this ss. 3.8, a "supermajority" quorum is a requirement
that more than a majority of the directors in office constitute a
quorum; and a "supermajority" voting requirement is any requirement
that requires the vote of more than a majority of those directors
present at a meeting at which a quorum is present to be the act of the
directors. A bylaw that fixes a supermajority quorum or supermajority
voting requirement may be amended or repealed:
(1) if originally adopted by the shareholders, only by the
shareholders (unless otherwise provided by the shareholders);
(2) if originally adopted by the board of directors, either by the
shareholders or by the board of directors.
A bylaw adopted or amended by the shareholders that fixes a
supermajority quorum or supermajority voting requirement for
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16
the board of directors may provide that it may be amended or repealed
only by a specified vote of either the shareholders or the board of
directors.
Subject to the provisions of the preceding paragraph, action by the
board of directors to adopt, amend, or repeal a bylaw that changes the
quorum or voting requirement for the board of directors must most the
same quorum requirement and be adopted by the same vote required to
take action under the quorum and voting requirement then in effect or
proposed to be adopted, whichever is greater.
SS. 3.9 ACTION WITHOUT A MEETING .
Unless the articles of incorporation provide otherwise, action required
or permitted by the South Carolina Business Corporation Act of 1988, to
be taken at a board of directors' meeting may be taken without a
meeting if the action is assented to by all members of the board.
The action may be evidenced by one or more written consents describing
the action taken, signed by each director, and included in the minutes
or filed with the corporate records reflecting the action taken. Action
evidenced by written consents under this section is effective when the
last director signs the consent, unless the consent specifies a
different effective date. A consent signed under this section has the
effect of a meeting vote and may be described as such in any document.
SS. 3.10 REMOVAL OF A DIRECTOR
The shareholders may remove one or more directors at a meeting called
for that purpose if notice has been given that a purpose of the meeting
is such removal. The removal may be with or without cause unless the
articles provide that directors may only be removed with cause. If a
director is elected by a voting group of shareholders, only the
shareholders of that voting group may participate in the vote to remove
him. If cumulative voting is authorized, a director may not be removed
if the number of votes sufficient to elect him under cumulative voting
is voted against his removal. If cumulative voting is not authorized, a
director may be removed only if the number of votes cast to remove him
exceeds the number of votes cast not to remove him.
SS. 3.11 VACANCIES .
Unless the articles of incorporation provide otherwise, if a vacancy
occurs on a board of directors, including a vacancy resulting from an
increase in the number of directors, the
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17
shareholders may fill the vacancy. During such time that the
shareholders fail or are unable to fill such vacancies then and until
the shareholders act:
(1) the board of directors may fill the vacancy; or
(2) if the directors remaining in office constitute fewer than a
quorum of the board, they may fill the vacancy by the
affirmative vote of a majority of all the directors remaining
in office.
If the vacant office was held by a director elected by a voting group
of shareholders, only the holders of shares of that voting group are
entitled to vote to fill the vacancy if it is filled by the
shareholders.
A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date) may be filled before the vacancy
occurs but the new director may not take office until the vacancy
occurs.
The term of a director elected to fill a vacancy expires at the next
shareholders' meeting at which directors are elected. However, if his
term expires, he shall continue to serve until his successor is elected
and qualifies or until there is a decrease in the number of directors.
SS. 3.12 COMPENSATION .
Unless otherwise provided in the articles, by resolution of the board
of directors, each director may be paid his expenses, if any, of
attendance at each meeting of the board of directors, and may be paid a
stated salary as director or a fixed sum for attendance at each meeting
of the board of directors or both. No such payment shall preclude any
director from serving the corporation in any capacity and receiving
compensation therefor.
SS. 3.13 COMMITTEES .
(a) CREATION OF COMMITTEES .
Unless the articles of incorporation provide otherwise, the
board of directors may create one or more committees and
appoint members of the board of directors to serve on them.
Each committee must have two or more members, who serve at the
pleasure of the board of directors.
(b) SELECTION OF MEMBERS .
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18
The creation of a committee and appointment of members to it
must be approved by the greater of (1) a majority of all the
directors in office when the action is taken or (2) the number
of directors required by the articles of incorporation to take
such action, (or if not specified in the articles the numbers
required by, ss. 3.7 of this Article III to take action).
(c) REQUIRED PROCEDURES .
ss.ss. 3.4, 3.5, 3.6, 3.7, 3.8 and 3.9 of this Article III,
which govern meetings, action without meetings, notice and
waiver of notice, quorum and voting requirements of the board
of directors, apply to committees and their members.
(d) AUTHORITY .
Unless limited by the articles of incorporation, each
committee may exercise those aspects of the authority of the
board of directors which the board of directors confers upon
such committee in the resolution creating the committee.
Provided, however, a committee may not:
(1) authorize distributions;
(2) approve or propose to shareholders action that the
South Carolina Business Corporation Act of 1988
requires be approved by shareholders;
(3) fill vacancies on the board of directors or on any of
its committees;
(4) amend the articles of incorporation pursuant to the
authority of directors, to do so granted by ss.
33-10-102 of the South Carolina Revised Code;
(5) adopt, amend, or repeal bylaws;
(6) approve a plan of merger not requiring shareholder
approval;
(7) authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the
board of directors; or
(8) authorize or approve the issuance or sale or contract
for sale of shares or determine the designation and
relative rights, preferences, and limitations of a
class or series of shares, except that the board of
directors may authorize a committee (or a senior
executive officer of the corporation)
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19
to do so within limits specifically prescribed by the
board of directors.
ARTICLE IV. OFFICERS
SS. 4.1 NUMBER .
The officers of the corporation shall be a president, a secretary, and
a treasurer, each of whom shall be appointed by the board of directors.
Such other officers and assistant officers as may be deemed necessary,
including any vicepresidents, may be appointed by the board of
directors. If specifically authorized by the board of directors, an
officer may appoint one or more officers or assistant officers. The
same individual may simultaneously hold more than one office in the
corporation.
SS. 4.2 APPOINTMENT AND TERM OF OFFICE .
The officers of the corporation shall be appointed by the board of
directors for a term as determined by the board of directors. (The
designation of a specified term grants to the officer no contract
rights, and the board can remove the officer at any time prior to the
termination of such term). If no term is specified, they shall hold
office until they resign, die, or until they are removed in the manner
provided in ss. 4.3 of this Article IV.
SS. 4.3 REMOVAL .
Unless appointed by the shareholders, any officer or agent may be
removed by the board of directors at any time, with or without cause.
Any officer or agent appointed by the shareholders may be removed by
the shareholders with or without cause. Such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Appointment of an officer or agent shall not of itself create contract
rights.
SS. 4.4 PRESIDENT .
The president shall be the principal executive officer of the
corporation and, subject to the control of the board of directors,
shall in general supervise and control all of the business and affairs
of the corporation. He shall, when present, preside at all meetings of
the shareholders and of the board of directors. He may sign, with the
secretary or any other proper officer of the corporation thereunto
authorized by the board of directors, certificates for shares of the
corporation and deeds, mortgages, bonds, contracts, or
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20
other instruments which the board of directors has authorized to be
executed, except in cases where the signing and execution thereof shall
be expressly delegated by the board of directors or by these bylaws to
some other officer or agent of the corporation, or shall be required by
law to be otherwise signed or executed; and in general shall perform
all duties incident to the office of president and such other duties as
may be prescribed by the board of directors from time to time.
SS. 4.5 THE VICE-PRESIDENTS .
If appointed, in the absence of the president or in the event of his
death, inability or refusal to act, the vice-president (or in the event
there be more than one vice-president, the vice-presidents in the order
designated at the time of their election, or in the absence of any
designation, then in the order of their appointment) shall perform the
duties of the president, and when so acting, shall have all the powers
of and be subject to all the restrictions upon the president. (If there
is no vice-president, then the treasurer shall perform such duties of
the president). Any vice-president may sign, with the secretary or an
assistant secretary, certificates for shares of the corporation the
issuance of which have been authorized by resolution of the board of
directors; and shall perform such other duties as from time to time may
be assigned to him by the president or by the board of directors.
SS. 4.6 THE SECRETARY .
The secretary shall: (a) keep the minutes of the proceedings of the
shareholders and of the board of directors in one or more books
provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these bylaws or as required by law;
(c) be custodian of the corporate records and of any seal of the
corporation and if there is a seal of the corporation, see that it is
affixed to all documents the execution of which on behalf of the
corporation under its seal is duly authorized; (d) when requested or
required, authenticate any records of the corporation; (e) keep a
register of the post office address of each shareholder which shall be
furnished to the secretary by such shareholder; (f) sign with the
president, or a vice-president, certificates for shares of the
corporation, the issuance of which shall have been authorized by
resolution of the board of directors; (g) have general charge of the
stock transfer books of the corporation; and (h) in general perform all
duties incident to the office of secretary and such other duties as
from
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21
time to time may be assigned to him by the president or by the board of
directors.
SS. 4.7 THE TREASURER .
The treasurer shall: (a) have charge and custody of and be responsible
for all funds and securities of the corporation; (b) receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation
in such banks, trust companies or other depositaries an shall be
selected by the board of directors; and (c) in general perform all of
the duties incident to the office of treasurer and such other duties as
from time to time may be assigned to him by the president or by the
board of directors. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in
such sum and with such surety or sureties as the board of directors
shall determine.
SS. 4.8. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS .
The assistant secretaries, when authorized by the board of directors,
may sign with the president or a vice-president certificates for shares
of the corporation the issuance of which shall have been authorized by
a resolution of the board of directors. The assistant treasurers shall
respectively, if required by the board of directors, give bonds for the
faithful discharge of their duties in such sums and with such sureties
as the board of directors shall determine. The assistant secretaries
and assistant treasurers, in general, shall perform such duties as
shall be assigned to them by the secretary or the treasurer,
respectively, or by the president or the board of directors.
SS. 4.9 SALARIES .
The salaries of the officers shall be fixed from time to time by the
board of directors.
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22
ARTICLE V. INDEMNIFICATION
OF DIRECTORS, OFFICERS,
AGENTS, AND EMPLOYEES
SS. 5.1 INDEMNIFICATION OF DIRECTORS .
Unless otherwise provided in the articles, the corporation shall
indemnify any individual made a party to a proceeding because he is or
was a director of the company, against liability incurred in the
proceeding, but only if such indemnification is both (i) permissible
and (ii) authorized, as defined in subsection (a) of this ss. 5.1.
(Such indemnification is further subject to the limitation specified in
subsection (c).)
(a) DETERMINATION AND AUTHORIZATION
The corporation shall not indemnify a director under this ss.
5.1 of Article V unless:
(1) DETERMINATION:
A determination has been made in accordance with the
procedures set forth in ss. 33-8-550(b) of the South Carolina
Revised Code that the director met the standard of conduct set
forth in subsection (b) below, and
(2) AUTHORIZATION:
The board of directors (as specified in ss. 33-8-550(c))
authorizes payment after they have concluded that the expenses
are reasonable, the corporation has the financial ability to
make the payment, and that the financial resources of the
company should be devoted to this use rather than some other
use by the corporation.
(b) STANDARD OF CONDUCT
The individual shall demonstrate that:
(1) he conducted himself in good faith; and
(2) he reasonably believed:
(i) in the case of conduct in his official capacity
with the corporation, that his conduct was in its
best interests; and
(ii) in all other cases, that his conduct was at
least not opposed to its best interests; and
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23
(iii) in the case of any criminal proceeding, he had
no reasonable cause to believe his conduct was
unlawful.
The corporation shall not indemnify a director under this ss.
5.1 of Article V:
(1) in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or
(2) in connection with any other proceeding charging improper
personal benefit to him, whether or not involving action in
his official capacity, in which he was adjudged liable on the
basis that personal benefit was improperly received by him.
(c) INDEMNIFICATION IN DERIVATIVE ACTIONS LIMITED
Indemnification permitted under this ss. 5.1 of Article V in
connection with a proceeding by or in the right of the
corporation is limited to reasonable expenses incurred in
connection with the proceeding.
SS. 5.2 ADVANCE EXPENSES FOR DIRECTORS
If a determination is made, following the procedures of Article V ss.
5.1(a), that the director has met the following requirements; and if an
authorization of payment is made, also following the procedures and
standards sot forth in Article V ss. 5.1(a); then unless otherwise
provided in the articles of incorporation, the company shall pay for or
reimburse the reasonable expenses incurred by a director who is a party
to a proceeding in advance of final disposition of the proceeding, if:
(1) the director furnishes the corporation a written affirmation
of his good faith belief that he has met the standard of
conduct described in subsection (b) of ss. 5.1 of this Article
V;
(2) the director furnishes the corporation a written undertaking,
executed personally or on his behalf, to repay the advance if
it is ultimately determined that he did not meet the standard
of conduct (which undertaking must be an unlimited general
obligation of the director but need not be secured and may be
accepted without reference to financial ability to make
repayment); and
(3) a determination is made that the facts then known to those
making the determination would not preclude
<PAGE>
24
indemnification under section 5.1 of this Article V or ss.
33-8-500 through ss. 33-8-580 of the South Carolina Revised
Code.
SS. 5.3 INDEMNIFICATION OF OFFICERS, AGENTS, AND EMPLOYEES WHO ARE NOT
DIRECTORS .
Unless otherwise provided in the articles of incorporation, the board
of directors may indemnify and advance expenses to any officer,
employee, or agent of the corporation, who is not a director of the
corporation, to any extent, consistent with public policy, as
determined by the general or specific action of the board of directors.
ARTICLE VI. CERTIFICATES FOR
SHARES AND THEIR TRANSFER
SS. 6.1 CERTIFICATES FOR SHARES .
(a) CONTENT .
Certificates representing shares of the corporation shall at
minimum, state on their face the name of the issuing
corporation and that it is formed under the laws of South
Carolina; the name of the person to whom issued; and the
number and class of shares and the designation of the series,
if any, the certificate represents; and be in such form as
determined by the board of directors. Such certificates shall
be signed (either manually or by facsimile) by the president
or a vice-president and by the secretary or an assistant
secretary and may be sealed with a corporate seal or a
facsimile thereof. Each certificate for shares shall be
consecutively numbered or otherwise identified.
(b) LEGEND AS TO CLASS OR SERIES .
If the corporation is authorized to issue different classes of
shares or different series within a class, the designations,
relative rights, preferences, and limitations applicable to
each class and the variations in rights, preferences, and
limitations determined for each series (and the authority of
the board of directors to determine variations for future
series) must be summarized on the front or back of each
certificate. Alternatively, each certificate may state
conspicuously on its front or back that the corporation will
furnish the shareholder this information on request in writing
and without charge.
<PAGE>
25
(c) SHAREHOLDER LIST .
The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and
date of issue, shall be entered on the stock transfer books of
the corporation.
(d) TRANSFERRING SHARES .
All certificates surrendered to the corporation for transfer
shall be cancelled and no now certificate shall be issued
until the former certificate for a like number of shares shall
have been surrendered and cancelled, except that in case of a
lost, destroyed or mutilated certificate a new one may be
issued therefor upon such terms and indemnity to the
corporation as the board of directors may prescribe.
SS. 6.2 [RESERVED]
SS. 6.3 REGISTRATION OF THE TRANSFER OF SHARES .
Registration of the transfer of shares of the corporation shall be made
only on the stock transfer books of the corporation. In order to
register a transfer, the record owner shall surrender the shares to the
corporation for cancellation, properly endorsed by the appropriate
person or persons with reasonable assurances that the endorsements are
genuine and effective. Subject to the provisions of ss. 33-7-300(d) of
the South Carolina Revised Code (relating to shares held in a voting
trust), and unless the corporation has established a procedure by which
a beneficial owner of shares held by a nominee is to be recognized by
the corporation as the owner, the person in whose name shares stand on
the books of the corporation shall be deemed by the corporation to be
the owner thereof for all purposes.
SS. 6.4 RESTRICTIONS ON TRANSFER OF SHARES PERMITTED .
The board of directors (or shareholders) may impose restrictions on the
transfer or registration of transfer of shares (including any security
convertible into, or carrying a right to subscribe for or acquire
shares). A restriction does not affect shares issued before the
restriction was adopted unless the holders of the shares are parties to
the restriction agreement or voted in favor of the restriction.
A restriction on the transfer or registration of transfer of shares may
be authorized:
<PAGE>
26
(1) to maintain the corporation's status when it is dependent on
the number or identity of its shareholders;
(2) to preserve exemptions under federal or state securities law;
(3) for any other reasonable purpose.
A restriction on the transfer or registration of transfer of shares
may:
(1) obligate the shareholder first to offer the corporation or
other persons (separately, consecutively, or simultaneously)
an opportunity to acquire the restricted shares;
(2) obligate the corporation or other persons (separately,
consecutively, or simultaneously) to acquire the restricted
shares;
(3) require the corporation, the holders or any class of its
shares, or another person to approve the transfer of the
restricted shares, if the requirement is not manifestly
unreasonable;
(4) prohibit the transfer of the restricted shares to designated
persons or classes of persons, if the prohibition is not
manifestly unreasonable.
A restriction on the transfer or registration of transfer of shares is
valid and enforceable against the holder or a transferee of the holder
if the restriction is authorized by this section and its existence is
noted conspicuously on the front or back of the certificate. Unless so
noted, a restriction is not enforceable against a person without
knowledge of the restriction.
SS. 6.5 ACQUISITION OF SHARES
The corporation may acquire its own shares and unless otherwise
provided in the articles of incorporation, the shares so acquired
constitute authorized but unissued shares.
If the articles of incorporation prohibit the reissue of acquired
shares, the number of authorized shares is reduced by the number of
shares acquired, effective upon amendment of the articles of
incorporation, which amendment shall be adopted by the shareholders or
the board of directors without shareholder action. The article of
amendment must be delivered to the Secretary of State and must set
forth:
<PAGE>
27
(1) the name of the corporation;
(2) the reduction in the number of authorized shares, itemized by
class and series; and
(3) the total number of authorized shares, itemized by class and
series, remaining after reduction of the shares.
ARTICLE VII. DISTRIBUTIONS
SS. 7.1 DISTRIBUTIONS .
The board of directors may authorize, and the corporation may make,
distributions (including dividends on its outstanding shares) in the
manner and upon the terms and conditions provided by law and in the
corporation's articles of incorporation.
ARTICLE VIII. CORPORATE SEAL
SS. 8.1 CORPORATE SEAL .
The board of directors may provide a corporate seal which may be
circular in form and have inscribed thereon any designation including
the name of the corporation, South Carolina as the state of
incorporation, and the words "Corporate Seal."
ARTICLE IX. EMERGENCY BYLAWS
SS. 9.1 EMERGENCY BYLAWS .
Unless the articles of incorporation provide otherwise, the following
provisions of this Article IX, ss. 9.1 "Emergency Bylaws" shall be
effective during an emergency which is defined as when a quorum of the
corporation's directors cannot be readily assembled because of some
catastrophic event.
During such emergency:
(a) NOTICE OF BOARD MEETINGS
Any one member of the board of directors or any one of the
following officers: president, any vice-president, secretary,
or treasurer, may call a meeting of the board of directors.
Notice of such meeting need be given only to those directors
whom it is practicable
<PAGE>
28
to reach, and may be given in any practical manner, including
by publication and radio. Such notice shall be given at least
six hours prior to commencement of the meeting.
(b) TEMPORARY DIRECTORS AND QUORUM
One or more officers of the corporation present at the
emergency board meeting, an is necessary to achieve a quorum,
shall be considered to be directors for the meeting, and shall
so serve in order of rank, and within the same rank, in order
of seniority. In the event that less than a quorum (as
determined by Article III ss. 3.6) of the directors are
present (including any officers who are to serve as directors
for the meeting), those directors present (including the
officers serving as directors) shall constitute a quorum.
(c) ACTIONS PERMITTED TO BE TAKEN
The board may as constituted in paragraph (b), and after
notice as set forth in paragraph (a):
(1) OFFICERS POWERS
Prescribe emergency powers to any officer of the
corporation;
(2) DELEGATION OF ANY POWER
Delegate to any officer or director, any of the
powers of the board of directors;
(3) LINES OF SUCCESSION
Designate lines of succession of officers and agents,
in the event that any of them are unable to discharge
their duties;
(4) RELOCATE PRINCIPAL PLACE OF BUSINESS
Relocate the principal place of business, or
designate successive or simultaneous principal places
of business;
(5) ALL OTHER ACTION
Take any other action, convenient, helpful, or
necessary to carry on the business of the
corporation.
<PAGE>
29
ARTICLE X. AMENDMENTS
SS. 10.1 AMENDMENTS .
The corporation's board of directors may amend or repeal any of the
corporation's bylaws unless:
(1) the articles of incorporation or the South Carolina Business
Corporation Act of 1988 reserve this power exclusively to the
shareholders in whole or part; or
(2) the shareholders in adopting, amending, or repealing a
particular bylaw provide expressly that the board of directors
may not amend or repeal that bylaw; or
(3) the bylaw either establishes, amends, or deletes, a
supermajority shareholder quorum or voting requirement (as
defined in ss. 2.8 of Article II).
Any amendment which changes the voting or quorum requirement for the
board must comply with Article III ss. 3.8, and for the shareholders,
must comply with Article II ss. 2.8.
The corporation's shareholders may amend or repeal the corporation's
bylaws even though the bylaws may also be amended or repealed by its
board of directors. Any notice of a meeting of shareholders at which
bylaws are to be adopted, amended, or repealed shall state that the
purpose, or one of the purposes, of the meeting is to consider the
adoption, amendment, or repeal of bylaws and contain or be accompanied
by a copy or summary of the proposal.
APPROVED AND ACCEPTED
/s/ MARK E. DANIELS
----------------------------------------
Mark E. Daniels, President
Dated: July 15, 1991
Filing Fee: $70.00
EXHIBIT 3.7
RESTATED ARTICLES OF INCORPORATION
OF
NEW ENGLAND CONTAINER CO., INC.
Pursuant to the provisions of Section 7-1.1-59 of the General
Laws, 1956, as amended, the undersigned corporation adopts the following
Restated Articles of Incorporation:
FIRST: The name of the corporation is NEW ENGLAND CONTAINER
CO., INC.
SECOND: The period of its duration is PERPETUAL.
THIRD: The purpose or purposes which the corporation is
authorized to pursue are:
(1) to purchase, manufacture, recondition and deal in
steel drums and similar containers; and
(2) to engage in any lawful act or activity for which
corporations may be organized under the General Laws
of Rhode Island.
FOURTH: The aggregate number of shares which the corporation
has authority to issue is TWENTY THOUSAND (20,000) SHARES OF COMMON STOCK, EACH
WITH A PAR VALUE OF $.01.
Note: If the authorized shares consist of one class only, insert a statement
of the par value of such shares or a statement that all of such shares
are without par value.
If the authorized shares are divided into classes, insert a statement
of the number of shares of each class, a statement of the par value of
the shares of each such class or that such shares are without par
value, and a statement of the preferences, limitations and relative
rights in respect of the shares of each class.
If the authorized shares of any preferred or special class are issuable
in series, insert a statement of the designation of each series, a
statement of the variations in the relative rights and preferences as
between series in so far as the same are fixed in the articles of
incorporation and a statement of any authority vested in the board of
directors to establish series and fix and determine the variations in
the relative rights and preferences as between series.
FIFTH: Existing provisions limiting or denying to
shareholders the preemptive right to acquire additional or treasury shares of
the corporation are:
Stockholders shall not have a preemptive right to acquire
unissued or treasury shares or securities convertible into shares or carrying a
right to subscribe to or acquire shares.
<PAGE>
SIXTH: Existing provisions of the articles of incorporation
for the regulation of the internal affairs of the corporation are:
See Exhibit A attached hereto
2
<PAGE>
EXHIBIT A
Article SIXTH: No director of the corporation shall be liable
to the corporation or to its stockholders for monetary damages for breach of the
director's duty as a director; provided, however, that this Article SIXTH shall
not eliminate or limit the liability of a director: (i) for any breach of the
director's duty of loyalty to the corporation or to its stockholders; (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) the liability imposed pursuant to the provisions
of R.I.G.L. Section 7-1.1-43 (as in effect or as hereafter amended); or (iv) for
any transaction from which the director derived an improper personal benefit
unless said transaction is permitted by R.I.G.L. Section 7-1.1-37.1 (as in
effect or as hereafter amended). If the Rhode Island General Laws are amended
after the adoption of this Article SIXTH to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of each director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Rhode Island General Laws, as so amended.
Neither the amendment nor repeal of this Article SIXTH nor the adoption of any
provision of these Articles of Incorporation inconsistent with this Article
SIXTH shall eliminate or reduce the effect of this Article SIXTH in respect of
any matter occurring, or any cause of action, suit or claim that, but for this
Article SIXTH, would occur or arise, prior to such amendment, repeal or adoption
of an inconsistent provision.
<PAGE>
SEVENTH: The restated articles of incorporation correctly set
forth without change the corresponding provisions of the articles of
incorporation as heretofore amended, and supersede the original articles of
incorporation and all amendments thereto.
Dated JANUARY 28, 1993 NEW ENGLAND CONTAINER CO., INC.
By: /s/ VINCENT J. BUONANNO
------------------------
Its _____ President
and /s/ LINDA M. FRAME
Its _______ Secretary
STATE OF RHODE ISLAND }
: SC.
COUNTY OF PROVIDENCE }
At PROVIDENCE in said county on this 28TH day of JANUARY, 1993,
personally appeared before me LINDA M. FRAME, who, being by me first duly sworn,
declared that he is the SECRETARY of NEW ENGLAND CONTAINER CO., INC., that he
signed the foregoing document as SECRETARY of the corporation, and that the
statements therein contained are true.
/s/ EUGENE M. D'ONOFRIO
-----------------------------------
Notary Public
(NOTARIAL SEAL)
2
<PAGE>
FICTITIOUS BUSINESS NAME STATEMENT
OF
NEW ENGLAND CONTAINER CO., INC.
(Correct Name of Corporation)
To the Secretary of State
of the State of Rhode Island
Pursuant to the provisions of Section 7-1.1-7.1 of the General Laws,
1956, as amended, the undersigned corporation hereby submits the following
statement for authority to transact business in the State of Rhode Island under
a fictitious name:
FIRST: Fictitious Business name to be used: NEW ENGLAND CONTAINER
SECOND: Name of applicant corporation: NEW ENGLAND CONTAINER CO., INC.
THIRD: Incorporated under the laws of RHODE ISLAND
FOURTH: Date of incorporation: JANUARY 8, 1953
FIFTH: Business in which engaged: DRUM RECONDITIONING
SIXTH: Address of registered office within Rhode Island C/O DESIMONE &
DEL SESTO LAW CORPORATION, 49 WEYBOSSET STREET, PROVIDENCE, RI 02903
SEVENTH: Applicant is otherwise qualified to do business in the State
of Rhode Island.
Dated: JUNE 8, 1984
(This statement shall expire
five (5) years from date of
filing)
NEW ENGLAND CONTAINER CO., INC.
(Applicant)
By: /s/VINCENT J. BUONANNO
------------------------
Its PRESIDENT
Exhibit 3.8
AMENDED AND RESTATED BY-LAWS
OF
NEW ENGLAND CONTAINER CO., INC.
ARTICLE I
ARTICLES OF INCORPORATION AND PROVISIONS LAW
These by-laws, the powers of NEW ENGLAND CONTAINER CO., INC.
(the "Corporation") and of its directors and shareholders and all matters
concerning the conduct and regulation of the business of the Corporation shall
be subject to such provisions in regard thereto, if any, as are provided by law
or set forth in the Articles of Incorporation. All references herein to the
Articles of Incorporation shall be construed to mean the Restated Articles of
Incorporation of the Corporation as from time to time amended.
ARTICLE II
OFFICES
SECTION 2.01. PRINCIPAL OFFICE. The principal office of the
Corporation shall be located in the town of Smithfield or such other place
within or without the State of Rhode Island as may be determined by the Board of
Directors from time to time.
SECTION 2.02. OTHER OFFICES. The Corporation may also have an
office or offices at such other place or places either within or without the
State of Rhode Island as the Board of Directors may from time to time determine
or the business of the Corporation may require.
<PAGE>
2
ARTICLE III
MEETINGS OF SHAREHOLDERS
SECTION 3.01. PLACE OF MEETINGS. All meetings of the
shareholders of the Corporation shall be held at the principal office of the
Corporation or at such other place, within or without the State of Rhode Island,
as shall be fixed by the Board of Directors and specified in the respective
notices or waivers of notice of said meetings.
SECTION 3.02. ANNUAL MEETINGS. The annual meeting of the
shareholders for the election of directors and for the transaction of such other
business as may come before the meeting shall be held at 10:00 o'clock in the
forenoon, local time, on the second Monday in January in each year, if not a
legal holiday, and, if a legal holiday, then on the next succeeding business day
not a legal holiday. If such annual meeting is omitted by oversight or otherwise
on the day herein provided therefor, a special meeting may be held in place
thereof, and any business transacted or elections held at such special meeting
shall have the same effect as if transacted or held at the annual meeting. The
purposes for which an annual meeting is to be held, in addition to those
prescribed by law or these-by-laws, may be specified by a majority of the Board
of Directors, the President or a shareholder or shareholders holding of record
at least twenty percent (20%) in voting power of the outstanding shares of the
Corporation entitled to vote at such meeting.
SECTION 3.03. SPECIAL MEETINGS. A special meeting of the
shareholders for any purpose or purposes, unless otherwise
<PAGE>
3
prescribed by statute, may be called at any time by the President, by order of
the Board of Directors or by a shareholder or shareholders holding of record at
least twenty percent (20%) in voting power of the outstanding shares of the
Corporation entitled to vote at such meeting.
SECTION 3.04. NOTICE OF MEETINGS. Notice of each meeting of
the shareholders shall be given to each shareholder of record entitled to vote
at such meeting at least ten (10) days but not more than sixty (60) days before
the day on which the meeting is to be held. Such notice shall be given by
delivering a written or printed notice thereof personally or by mail. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail, postage prepaid, addressed to the shareholder at the post office address
of such shareholder as it appears upon the stock record books of the
Corporation, or at such other address as such shareholder shall have provided to
the Corporation for such purpose. No publication of any notice of a meeting of
shareholders shall be required. Every such notice shall state the time and place
of the meeting, and, in case of a special meeting, shall state the purpose or
purposes thereof. Notice of any meeting of shareholders shall not be required to
be given to any shareholder who shall attend such meeting in person or by proxy
or who shall waive notice thereof in the manner hereinafter provided. Notice of
any adjourned meeting of the shareholders shall not be required to be given.
SECTION 3.05. QUORUM. At each meeting of the shareholders, a
majority of the outstanding shares of the
<PAGE>
4
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum for the transaction of business. In the absence of a quorum,
a majority of the shares so represented at such meeting, or, in the absence of
all the shareholders entitled to vote, any officer entitled to preside or to act
as secretary at such meeting, may adjourn the meeting from time to time without
further notice. At any such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. The absence from any meeting of
shareholders holding a sufficient number of shares required for action on any
given matter shall not prevent action at such meeting upon any other matter or
matters which properly come before the meeting, if shareholders holding a
sufficient number of shares required for action on such other matter or matters
shall be present. The shareholders present or represented at any duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave, less than a quorum.
SECTION 3.06 VOTING. Each shareholder of the Corporation
shall, whether the voting is by one or more classes voting separately or by two
or more classes voting as one class, be entitled to one vote in person or by
proxy for each share of the Corporation registered in the name of such
shareholder on the books of the Corporation. The Corporation shall not vote
directly or indirectly any shares held in its own name. Any vote of shares may
be given by the shareholder entitled to vote
<PAGE>
5
such shares in person or by proxy appointed by an instrument in writing. At all
meetings of the shareholders at which a quorum is present, all matters (except
where other provision is made by law or by these by-laws) shall be decided by
the affirmative vote of holders of a majority of the shares present in person or
represented by proxy and entitled to vote thereat.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 4.01. GENERAL POWERS. The property, affairs and
business of the Corporation shall be managed by the Board of Directors, and the
Board shall have, and may exercise, all of the powers of the Corporation, except
such as are conferred by these by-laws upon the shareholders. The Board of
Directors shall have the power by vote to create from time to time such
committee or committees of directors, officers, employees or other persons
designated by it for the purpose of advising with the Board, and the officers
and employees of the Corporation in all such matters as the Board shall deem
advisable and with such sanctions and duties as the Board shall by vote
prescribe.
SECTION 4.02. NUMBER, QUALIFICATIONS AND TERM OF OFFICE. The
number of directors to constitute the Board of Directors shall be such number,
not less than one (1), as shall be fixed from time to time by the shareholders
at any annual meeting or at any special meeting called for the purpose;
provided, however, that between such meetings of shareholders the number so
fixed may at any time be increased or decreased, subject to the above-specified
limit, by the affirmative vote of
<PAGE>
6
a majority of the Board of Directors. Directors shall be elected by the
shareholders at each annual meeting of shareholders, or at any special meeting
hold in place thereof, except as provided in this Article IV. Each director
shall hold office until the next annual election of directors and until his
successor shall have been duly elected and qualified, or until the death,
resignation or removal of such directors in the manner herein provided. No
director need be a shareholder.
SECTION 4.03. ELECTION OF DIRECTORS. Subject to any
provisions in the Articles of Incorporation providing for cumulative voting, at
each meeting of the shareholders for the election of directors at which a quorum
is present, the persons receiving the greatest number of votes shall be the
directors, and each shareholder entitled to vote at such election shall have the
right to vote, in person or by proxy, for as many nominees as the number of
directors fixed as constituting the Board of Directors and to cast for each such
nominee as many votes as the number of shares which such shareholder is entitled
to vote, without the right to cumulate such votes.
SECTION 4.04 QUORUM AND MANNER OF ACTING. A majority of the
total number of directors at the time in office shall constitute a quorum for
the transaction of business at any meeting, and except as otherwise provided by
these by-laws, the act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board of Directors. In the
absence of a quorum, a majority of the directors present may adjourn any meeting
from time to time
<PAGE>
7
without further notice until a quorum be had. The directors shall act only as a
Board, and the individual directors shall have no power as such.
SECTION 4.05. PLACE OF MEETINGS. The Board of Directors may
hold its meetings at any place within or without the State of Rhode Island as it
may from time to time determine or shall be specified or fixed in the respective
notices or waivers of notice thereof.
SECTION 4.06. ANNUAL MEETING. The Board of Directors shall
meet for the purpose of organization, the election of officers and the
transaction of other business, as soon as practicable after each annual election
of directors on the same day and at the same place e at which such election of
directors was held. Notice of such meeting need not be given. Such meeting may
be held at any other time or place which shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors or in a
consent and waiver of notice thereof signed by all the directors.
SECTION 4.07. REGULAR MEETINGS. Regular meetings of the Board
of Directors shall be held at such-places and at such times as the Board shall
from time to time by vote determine. If any day fixed for a regular meeting
shall be a legal holiday at the place where the meeting is to be held, then the
meeting which would otherwise be held on that day shall be held at the same hour
on the next succeeding business day not a legal holiday. Notice of regular
meetings need not be given.
<PAGE>
8
SECTION 4.08. SPECIAL MEETINGS; NOTICE. Special meetings of
the Board of Directors shall be held whenever called by the President or any
member of the Board of Directors. Notice of each such meeting shall be given by,
or at the order of, the Secretary or the person calling the meeting to each
director by mailing the same addressed to the director's residence or usual
place of business, or personally by delivery or by telegraph, cable or
telephone, at least five (5) days before the day on which the meeting is to be
held. Every such notice shall state the time and place of the meeting but need
not state the purpose thereof except as otherwise in these by-laws expressly
provided.
SECTION 4.09. PRESUMPTION OF ASSENT. A director of the
Corporation who is present at a meeting of the Board of Directors at which
action on any corporate matter is taken shall be presumed to have assented to
the action taken unless his dissent shall be entered in the minutes of the
meeting or unless he shall file his written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the Secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
SECTION 4.10. TELEPHONE MEETINGS. Meetings of the Board of
Directors, regular or special, may be held by means of a telephone conference
circuit and connection to such circuit shall constitute presence at such
meeting.
<PAGE>
9
SECTION 4.11. REMOVAL OF DIRECTORS. Any director may be
removed, either with or without cause, at any time, by the affirmative vote of
the holders of record of a majority of the issued and outstanding shares
entitled to vote for the election of directors of the Corporation given at a
special meeting of the shareholders called and held for the purpose.
SECTION 4.12. RESIGNATION. Any director of the Corporation
may resign at any time by giving written notice to the Board of Directors or to
the President or to the Secretary of the Corporation. The resignation of any
director shall take effect at the time specified therein, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 4.13. VACANCIES. Subject to any provisions of the
Articles of Incorporation providing for cumulative voting, any vacancy in the
Board of Directors caused by death, resignation, removal, disqualification, an
increase in the number of directors, or any other cause, may be filled by a
majority vote of the remaining directors then in office, though less than a
quorum, at any regular meeting or special meeting, including the meeting at
which any such vacancy may arise, or by the shareholders of the Corporation at
the meeting at which any such vacancy may arise or the next annual meeting or
any special meeting, and each director so elected shall hold office until the
next annual election of directors, and until a successor shall have been duly
elected and qualified, or until the death or
<PAGE>
10
resignation or removal of such director in the manner herein provided.
ARTICLE V
EXECUTIVE COMMITTEE
SECTION 5.01. APPOINTMENT. The Board of Directors may
designate two or more of its members to constitute an Executive Committee. The
designation of such committee and the delegation thereto of authority shall not
operate to relieve the Board of Directors, or any member thereof, of any
responsibility imposed by law.
SECTION 5.02. AUTHORITY. The Executive Committee, when the
Board of Directors is not in session, shall have and may exercise all of the
authority of the Board of Directors except to the extent, if any, that such
authority shall be limited by the resolution appointing the Executive Committee
and except also that the Executive Committee shall not have the authority of the
Board of Directors in reference to amending the Articles of Incorporation,
adopting a plan of merger or consolidation, recommending to the shareholders the
sale, lease or other disposition of all or substantially all of the property and
assets of the Corporation otherwise than in the usual and regular course of its
business, recommending to the shareholders a voluntary dissolution of the
Corporation or a revocation thereof, increasing the number of directors
constituting the Board of Directors, filling any vacancies on the Board of
Directors, removing or electing any officer of the Corporation or amending the
by-laws of the Corporation.
<PAGE>
11
SECTION 5.03. TENURE AND QUALIFICATIONS. Each member of the
Executive Committee shall hold office until the next regular annual meeting of
the Board of Directors following designation and until a successor is designated
as a member of the Executive Committee, and is elected and qualified or until
the death or resignation or removal of such member in the manner herein
provided.
SECTION 5.04. MEETINGS. Regular meetings of the Executive
Committee may be held without notice at such times and places as the Executive
Committee may fix from time to time by resolution. Special meetings of the
Executive Committee may be called by any member thereof upon not less than five
(5) days, notice stating the place, date and hour of the meeting, which notice
may be written or oral, and if mailed, shall be deemed to be delivered when
deposited in the United States mail addressed to the member of the Executive
Committee at such member's business address. Any member of the Executive
Committee may waive notice of any meeting and no notice of any meeting need be
given to any member thereof who attends in person. The notice of a meeting of
the Executive Committee need not state the business proposed to be transacted at
the meeting.
SECTION 5.05. TELEPHONE MEETINGS. Meetings of the Executive
Committee may be held by means of a telephone conference circuit and connection
to such circuit shall constitute attendance at such meeting.
SECTION 5.06. QUORUM. A majority of the members of the
Executive Committee shall constitute a quorum for the
<PAGE>
12
transaction of business at any meeting thereof, and action of the Executive
Committee shall be authorized by the affirmative vote of a majority of the
members present at a meeting at which a quorum is present.
SECTION 5.07. VACANCIES. Any vacancy in the Executive
Committee may be filled by a resolution adopted by a majority of the full Board
of Directors.
SECTION 5.08. RESIGNATIONS AND REMOVAL. Any member of the
Executive Committee may be removed at any time with or without cause by the
Board of Directors. Any member of the Executive Committee may resign from the
Executive Committee at any time by giving written notice to the Chairman or
Secretary of the Corporation, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 5.09. PROCEDURE. The Executive Committee may elect a
presiding officer from its members and may fix its own rules of procedure which
shall not be inconsistent with these by-laws. It shall keep regular minutes of
its proceedings and report the same to the Board of Directors for its
information at the meeting thereof held next after the proceedings shall have
been taken.
ARTICLE VI
WAIVER OF NOTICE; WRITTEN CONSENT
SECTION 6.01. WAIVER OF NOTICE. Notice of the time, place and
purpose of any meeting of the shareholders, Board of Directors or Executive
Committee may be waived in writing by any
<PAGE>
13
shareholder or director either before or after such meeting. Attendance in
person, or in case of a meeting of the shareholders, by proxy, at a meeting of
the shareholders, Board of Directors or Executive Committee shall be deemed to
constitute a waiver of notice thereof.
SECTION 6.02. WRITTEN CONSENT OF SHAREHOLDERS. (a) Any action
required or permitted to be taken at a meeting of shareholders by the Rhode
Island Business Corporation Act, as amended from time to time (the "RI Act"), or
the Articles of Incorporation or these by-laws may be taken without a meeting if
all of the shareholders entitled to vote thereon, or their proxies, shall
consent in writing to such action.
(b) To the extent authorized by the Articles of
Incorporation, any action required or permitted to be taken at a meeting of
shareholders may be taken without a meeting upon the written consent of less
than all of the shareholders entitled to vote thereon, or their proxies, to the
extent and in the manner permitted by Section 7-1.1-30.3(b) of the RI Act.
SECTION 6.03. WRITTEN CONSENT OF DIRECTORS. Unless otherwise
restricted by the Articles of Incorporation or these by-laws, any action
required or permitted to be taken at any meeting of the Board of Directors or
Executive Committee may be taken without a meeting if a consent in writing,
setting forth the action so to be taken, shall be signed before or after such
action by all of the directors, or all of the members of the Executive
Committee, as the case may be. Such written consent shall be filed with the
records of the Corporation.
<PAGE>
14
ARTICLE VII
OFFICERS
SECTION 7.01. NUMBER. The officers of the Corporation shall
be a Chairman, a President, a Secretary, a Treasurer, and such other officers as
the Board of Directors may from time to time appoint, including one or more Vice
Presidents, one or more Assistant Secretaries and one or more Assistant
Treasurers. One person may hold the offices and perform the duties of any two or
more of said officers.
SECTION 7.02. ELECTION, QUALIFICATIONS AND TERMS OF OFFICE.
Each officer shall be elected annually by the Board of Directors, or from time
to time to fill any vacancy, and shall hold office until a successor shall have
been duly elected and qualified, or until the death, resignation or removal of
such officer in the manner hereinafter provided.
SECTION 7.03. REMOVAL. Any officer may be removed by the vote
of a majority of the whole Board of Directors at a special meeting called for
the purpose, whenever in the judgment of the Board of Directors the best
interests of the Corporation will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the officer so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
SECTION 7.04. RESIGNATION. Any officer may resign at any time
by giving written notice to the Board of Directors or to the President or the
Secretary. Any such resignation shall take effect at the date of receipt of such
notice or at any later time
<PAGE>
15
specified therein; and unless otherwise specified therein the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 7.05. VACANCIES. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be filled
for the unexpired portion of the term by the Board of Directors at any regular
or special meeting.
SECTION 7.06. CHAIRMAN. The Chairman shall be a director and
shall preside at all meetings of the Board of Directors and shareholders.
Subject to determination by the Board of Directors, the Chairman shall have
general executive powers and such specific powers and duties as from time to
time may be conferred or assigned by the Board of Directors.
SECTION 7.07. THE PRESIDENT. The President shall be the chief
executive officer of the Corporation and shall have general direction of the
affairs of the Corporation. In addition, the President shall perform such other
duties and have such other responsibilities as the Board of Directors may from
time to time determine. In the absence of the Chairman, the President shall
preside at all meetings of the shareholders.
SECTION 7.08. THE VICE PRESIDENTS. The Vice President, or if
there shall be more than one, the Vice Presidents in the order determined by the
Board of Directors, shall, in the absence or disability of the President,
perform the duties and exercise the powers of the President and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
<PAGE>
16
SECTION 7.09. THE SECRETARY. The Secretary shall record or
cause to be recorded in books provided for the purpose all the proceedings of
the meetings of the Corporation, including the shareholders, the Board of
Directors, Executive Committee and all committees of which a secretary shall not
have been appointed; shall see that all notices are duly given in accordance
with the provisions of these by-laws and as required by law; shall be custodian
of the records (other than financial) and of the seal of the Corporation; and in
general, shall perform all duties incident to the office of Secretary and such
other duties as may, from time to time, be assigned by the Board of Directors or
the President.
SECTION 7.10. THE ASSISTANT SECRETARIES. At the request, or in
absence or disability, of the Secretary, the Assistant Secretary designated by
the Secretary or the Board of Directors shall perform all the duties of the
Secretary and, when so acting, shall have all the powers of the Secretary. The
Assistant Secretaries shall perform such other duties as from time to time may
be assigned to them by the Board of Directors, the Chairman, the President or
the Secretary.
SECTION 7.11. THE TREASURER. The Treasurer shall have charge
and custody of, and be responsible for, all funds and securities of the
Corporation, and deposit all such funds to the credit of the Corporation in such
banks, trust companies or other depositaries as shall be selected in accordance
with the provisions of these by-laws; disburse the funds of the Corporation
under the general control of the Board of Directors,
<PAGE>
17
based upon proper vouchers for such disbursements; receive, and give receipts
for, moneys due and payable to the corporation from any source whatsoever,
render a statement of the condition of the finances of the Corporation at all
regular meetings of the Board of Directors, and a full financial report at the
annual meeting of the shareholders, if called upon to do so; and render such
further statements to the Board of Directors and the President as they may
respectively require concerning all transactions as Treasurer or the financial
condition of the Corporation. The Treasurer shall also have charge of the books
and records of account of the Corporation, which shall be kept at such office or
offices of the Corporation as the Board of Directors shall from time to time
designate; be responsible for the keeping of correct and adequate records of the
assets, liabilities, business and transactions of the Corporation; at all
reasonable times exhibit the books and records of account to any of the
directors of the Corporation upon application at the office of the Corporation
where such books and records are kept; be responsible for the preparation and
filing of all reports and returns relating to or based upon the books and
records of the Corporation kept under the direction of the Treasurer; and, in
general, perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned by the Board of Directors or
the President.
SECTION 7.12. THE ASSISTANT TREASURERS. At the request, or in
the absence or disability, of the Treasurer, the Assistant Treasurer designated
by the Treasurer or the Board of
<PAGE>
18
Directors shall perform all the duties of the Treasurer, and when so acting,
shall have all the powers of the Treasurer. The Assistant Treasurers shall
perform such other duties as from time to time may be assigned to them by the
Board of Directors, the President or the Treasurer.
SECTION 7.13. GENERAL POWERS. Each officer shall, subject to
these by-laws, have, in addition to the duties and powers herein set forth, such
duties and powers as are commonly incident to the respective office, and such
duties and powers as the Board of Directors shall from time to time designate.
SECTION 7.14. BONDING. Any officer, employee, agent or factor
shall give such bond with such surety or sureties for the faithful performance
of his or her duties as the Board of Directors may, from time to time, require.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) RIGHT TO INDEMNIFICATION. Each person who was or is made
a party, or is threatened to be made a party to, or is involved in any action,
suit or proceeding, whether criminal, administrative or investigative by reason
of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
<PAGE>
19
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the RI Act, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment) against all expenses, liability and loss (including attorneys
fees, judgments, fines, March 12, 1999ERISA excise taxes or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith; PROVIDED, HOWEVER, that the Corporation
shall indemnify any such person seeking indemnity in connection with any action,
suit or proceeding (or part thereof) initiated by such person only if such
action, suit or proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation. Such right shall be a contract right and shall
include the right to be paid by the Corporation expenses incurred in defending
any such proceeding in advance of its final-disposition; PROVIDED, HOWEVER,
that, the payment of such expenses incurred by a director or officer in his or
her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of such proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director
20
or officer, to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be indemnified under
this Section or otherwise.
(b) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under
paragraph (a) is not paid in full by the Corporation within ninety days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking has been tendered to the Corporation) that the claimant
has not met the standards of conduct which make, it permissible under the RI Act
for the Corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standards of conduct set forth in the
RI Act, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) that the claimant had
not met such applicable standards of conduct,
<PAGE>
21
shall be a defense to the action or create a presumption that claimant had not
met the applicable standards of conduct.
(c) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by paragraphs (a) and (b) shall not be exclusive of any other right which
such person may have or hereafter acquire under any statute, provision of the
Restated Articles of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
(d) INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any such director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Rhode Island Act.
ARTICLE IX
EXECUTION OF DOCUMENTS
SECTION 9.01. CONTRACT, ETC., HOW EXECUTED. Unless the Board
of Directors shall otherwise determine, the Chairman, the President, any
Vice President or the Treasurer may enter into any contract or execute any
contract or other instrument, the execution of which is not otherwise
specifically provided for, in the name and on behalf of the Corporation. The
Board of Directors, except as in these by-laws otherwise provided, may authorize
any other or additional officer or officers, agent or agents, of the Corporation
to enter into any contract or execute
<PAGE>
22
and deliver any contract or other instrument in the name and on behalf of the
Corporation, and such authority may be general or confined to specific
instances. Unless authorized so to do by these by-laws or by the Board of
Directors, no officer, agent or employee shall have any power or authority to
bind the Corporation by any contract or engagement, or to pledge its credit, or
to render it liable pecuniarily for any purpose or for any amount.
SECTION 9.02. CHECKS, DRAFTS, ETC. All checks, drafts, bills
of exchange or other orders for the payment of money, obligations, notes, or
other evidences of indebtedness, bills of lading, warehouse receipts and
insurance certificates of the Corporation, shall be signed or endorsed by such
officer or officers, employee or employees, of the Corporation as shall from
time to time be determined by resolution of the Board of Directors.
ARTICLE X
BOOKS AND RECORDS
SECTION 10.01. PLACE. The books and records of the
Corporation, including the stock record books, shall be kept at such places
within or without the State of Rhode Island, as may from time to time be
determined by the Board of Directors.
SECTION 10.02. ADDRESSES OF SHAREHOLDERS. Each shareholder
shall designate to the Secretary of the Corporation an address at which notices
of meetings and all other corporate notices may be served upon or mailed, and if
any shareholder shall fail to designate such address, corporate notices may be
<PAGE>
23
served by mail directed to the shareholder's last known post office address, or
by transmitting a notice thereof to such address by telegraph, cable, or
telephone.
ARTICLE XI
SHARES AND THEIR TRANSFER
SECTION 11.01. CERTIFICATES FOR SHARES. Every owner of shares
of the Corporation shall be entitled to have a certificate certifying the number
of shares owned by such owner in the Corporation and designating the class of
shares to which such shares belong, which shall otherwise be in such form, in
conformity to law, as the Board of Directors shall prescribe. Each such
certificate shall be signed by such officer or officers as the Board of
Directors may prescribe, or, if not so prescribed, by the Chairman or the
President or a Vice President and the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer of the Corporation.
SECTION 11.02. RECORD. A record shall be kept of the name of
the person, firm or corporation owning the shares of the Corporation issued, the
number of shares represented by each certificate, and the date thereof, and, in
the case of cancellation, the date of cancellation. The person in whose name
shares stand on the books of the Corporation shall be deemed the owner thereof
for all purposes as regards the Corporation.
SECTION 11.03. TRANSFER OF SHARES. Transfers of shares of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by such holder's attorney thereunto authorized, and on the
surrender of the
<PAGE>
24
certificate or certificates for such shares properly endorsed or accompanied by
a properly executed stock power.
SECTION 11.04. CLOSING OF TRANSFER BOOKS; RECORD DATES.
Insofar as permitted by law, the Board of Directors may direct that the stock
transfer books of the Corporation be closed for a period not exceeding fifty
(50) days preceding the date of any meeting of shareholders or the date for the
payment of any dividend or the date for the allotment of rights or the date when
any change or conversion or exchange of shares of the Corporation shall go into
effect, or for a period not exceeding fifty (50) days in connection with
obtaining the consent of shareholders for any purpose; provided, however, that
in lieu of closing the stock transfer books as aforesaid, the Board of Directors
may, insofar as permitted by law, fix in advance a date, not exceeding fifty
(50) days preceding the date of any meeting of shareholders, or the date for the
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of shares of the Corporation shall go
into effect, or a date in connection with obtaining such consent, as a record
date for the determination of the shareholders entitled to notice of, and to
vote at, any such meeting or any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights, or to exercise
the rights in respect of any change, conversion or exchange of shares of the
Corporation, or to give such consent, and in each such case shareholders and
only such shareholders as shall be shareholders of record on the date so fixed
shall be entitled to notice of, and to vote at, such
<PAGE>
25
meeting and any adjournment thereof, or to receive payment of such dividend, or
to receive such allotment of rights, or to exercise such rights or to give such
consent, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after any such record date fixed as aforesaid.
SECTION 11.05. LOST, DESTROYED OR MUTILATE CERTIFICATES. In
case of the alleged loss or destruction or the mutilation of a certificate
representing shares of the Corporation, a new certificate may be issued in place
thereof, in the manner and upon such terms as the Board of Directors may
prescribe.
ARTICLE XII
SEAL
The Board of Directors may provide for a corporate seal,
which shall be in the form of a circle and shall bear the name of the
Corporation and the state and year of incorporation.
ARTICLE XIII
FISCAL YEAR
Except as from time to time otherwise provided by the Board
of Directors, the fiscal year of the Corporation shall end on the last day of
December in each year.
ARTICLE XIV
AMENDMENTS
All by-laws of the Corporation shall be subject to alteration
or repeal, and new by-laws may be adopted either by the vote of a majority of
the outstanding shares of the Corporation entitled to vote in respect thereof,
or by the vote
<PAGE>
26
of the Board of Directors, provided that in each case notice of the proposed
alteration or repeal or of the proposed new by-laws be included in the notice of
the meeting at which such alteration, repeal or adoption is acted upon, and
provided further that any such action by the Board of Directors may be changed
by the shareholders, except that no such change shall affect the validity of any
actions theretofore taken pursuant to the by-laws as altered, repealed or
adopted by the Board of Directors.
EXHIBIT 3.9
ARTICLES OF INCORPORATION
Pursuant to the provisions of "The Business Corporation Act of 1983",
the undersigned incorporator(s) hereby adopt the following Articles of
Incorporation.
ARTICLE ONE: The name of the corporation is RUSSELL-STANLEY MIDWEST, INC.
ARTICLE TWO: The name and address of the initial registered agent and its
registered office are:
C T CORPORATION SYSTEM
c/o C T CORPORATION SYSTEM,
208 S. La Salle Street
Chicago 60604 Cook County
ARTICLE THREE: The purpose or purposes for which the corporation is
organized are: The transaction of any or all lawful
businesses for which corporations may be incorporated under
the Illinois business corporation act.
ARTICLE FOUR: Paragraph 1: The authorized shares shall be:
Par Value Number of Shares
Class per share authorized
----- --------- ----------
Common no par value 1000
Paragraph 2: The preferences, qualifications, limitations,
restrictions and the special or relative rights in respect of
the shares of each class are: none
ARTICLE FIVE: The number of shares to be issued initially, and the
consideration to be received by the corporation therefor,
are:
<PAGE>
Number of Shares Consideration
Par Value proposed to be to be received
Class per share issued therefor
----- --------- ---------- ---------------
Common no par value 1000 $1,000
TOTAL $ 1,000
NAMES AND ADDRESSES OF INCORPORATORS
The undersigned incorporator(s) hereby declare(s), under penalties
of perjury, that the statements made in the foregoing Article of Incorporation
are true.
Dated June 24, 1985
Signatures and Names Post Office Address
1. /s/ Ellen S. Estes 1.1633 Broadway
ELLEN S. ESTES New York, New York 10019
2./s/ Bonnie L. Campbell 2.1633 Broadway
BONNIE L. CAMPBELL New York, New York 10019
3./s/ Todd A. Rudner 3.1633 Broadway
TODD A. RUDNER New York, New York 10019
(SIGNATURES MUST BE IN INK ON ORIGINAL DOCUMENT. CARBON COPY, XEROX OR RUBBER
STAMP SIGNATURES MAY ONLY BE USED ON CONFORMED COPIES)
NOTE: If a corporation acts as incorporator, the name of the corporation and the
state of incorporation shall be shown and the execution shall be by its
President or Vice President and verified by him, and attested by its Secretary
or an Assistant Secretary.
<PAGE>
ARTICLES OF AMENDMENT
1. CORPORATE NAME: Russell-Stanley Midwest, Inc.
2. MANNER OF ADOPTION OF AMENDMENT:
The following amendment of the Articles of incorporation was adopted on
October 22, 1998 in the manner indicated below. ("X" one box only)
[ ] By a majority of the incorporators, provided no directors were
named in the articles of incorporation and no directors have been
elected;
[ ] By a majority of the board of directors, in accordance with
Section 10.10, the corporation having issued no shares as of the
time of adoption of this amendment;
[ ] By a majority of the board of directors, in accordance with
Section 10.15, shares having been issued but shareholder action
not being required for the adoption of the amendment;
[ ] By the shareholders, in accordance with Section 10.20, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. At a meeting of shareholders, not
less than the minimum number of votes required by statute and by
the articles of incorporation were voted in favor of the
amendment;
[ ] By the shareholders, in accordance with Section 10.20 and 7.10, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. A consent in writing has been
signed by shareholders having not less than the minimum number of
votes required by statute and by the articles of incorporation.
Shareholders who have not consented in writing have been given
notice in accordance with Section 7.10;
[x] By the shareholders, in accordance with Sections 10.20 and 7.10, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. A consent in writing has been
signed by all the shareholders entitled to vote on this amendment.
3. TEXT OF AMENDMENT
a. When amendment effects a name change, insert the new corporate name
below. Use Page 2 for all other amendments.
Article I: The name of the corporation is:
Russell-Stanley, Inc.
(NEW NAME) Nov 09 1998
All changes other than name, include on page 2
(ILL. - 583 - 9/14/95) (over) SECRETARY OF STATE
<PAGE>
Text of Amendment
b. (If amendment affects the corporate purpose, the amended purpose is
required to be set forth in its entirety. If there is not sufficient space
to do so, add one or more sheets of this size.)
<PAGE>
4. The manner, if not set forth in Article 3b, in which any exchange,
reclassification or cancellation of issued shares, or a reduction of the
number of authorized shares of any class below the number of issued shares
of that class, provided for or affected by this amendment, is as follows:
(If not applicable, insert "No change")
No change.
5. (a) The manner, if not set forth in Article 3b, in which said amendment
effects a change in the amount of paid-in capital (Paid-in capital replaces
the terms Stated Capital and Paid-In Surplus and is equal to the total of
these accounts) is as follows: (If not applicable, insert "No change")
No change.
(b) The amount of paid-in capital (Paid-in Capital replaces the terms
Stated Capital and Paid-in Surplus and is equal to the total of these
accounts) as changed by this amendment is as follows: (If not applicable,
insert No "Change")
No change.
Before Amendment After Amendment
Paid-in Capital $______________ $___________
6. The undersigned corporation has caused this statement to be signed by its
duly authorized officers, each of whom affirms, under penalties of perjury,
that the facts stated herein are true.
Dated October 22, 1998 Russell-Stanley Midwest, Inc.
(Exact Name of Corporation at date of execution)
attested by /s/ RONALD M. LITCHKOWSKI by /s/ DANIEL W. MILLER
Ronald M. Litchkowski, Secretary Daniel W. Miller,
Executive Vice President
EXHIBIT 3.10
RUSSELL-STANLEY MIDWEST, INC.
* * * * *
B Y - L A W S
* * * * *
ARTICLE I.
OFFICES
Section 1. The registered office shall be located in Chicago,
Illinois.
Section 2. The corporation may also have offices at such other
places both within and without the State of Illinois as the board of directors
may from time to time determine or the business of the corporation may require.
ARTICLE II.
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of
directors shall be held in Red Bank, State of New Jersey, at such place as may
be fixed from time to time by the board of directors.
Section 2. Annual meetings of shareholders, commencing with
the year 1985, shall be held on the third Monday in July if not a legal holiday,
and if a legal holiday, then on the next secular day following, at 10:00 A. M.,
at which they shall elect by a plurality vote a board of directors, and transact
such other business as may properly be brought before the meeting.
<PAGE>
2
Section 3. Written or printed notice of the annual meeting
stating the place, day and hour of the meeting shall be delivered not less than
ten nor more than sixty days before the date of the meeting, either personally
or by mail, by or at the direction of the president, or the secretary, or the
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting.
ARTICLE III.
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any purpose
other than the election of directors may be held at such time and place within
or without the State of Illinois as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the articles
of incorporation, may be called by the president, the board of directors, or the
holders of not less than one-fifth of all the shares entitled to vote at the
meeting.
Section 3. Written or printed notice of a special meeting
stating the place, day and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be delivered not less than ten nor more than
sixty days before the date of the meeting, either personally or by mail, by or
at the direction of the president, or the secretary, or the officer or
<PAGE>
3
persons calling the meeting, to each shareholder of record entitled to vote at
such meeting.
Section 4. The business transacted at any special meeting of
shareholders shall be limited to the purposes stated in the notice.
ARTICLE IV.
QUORUM AND VOTING OF STOCK
Section 1. The holders of a majority of the shares of stock
issued and outstanding and entitled to vote, represented in person or by proxy,
shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise provided by statute or by the
articles of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders present in
person or represented by proxy shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 2. If a quorum is present, the affirmative vote of a
majority of the shares of stock represented at the meeting shall be the act of
the shareholders unless the vote of a greater number of shares of stock is
required by law or the articles of incorporation.
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Section 3. Each outstanding share of stock, having voting
power, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or by his duly authorized
attorney-in-fact.
Section 4. Unless otherwise provided in the articles of
incorporation, any action required by this Act to be taken at any annual or
special meeting of the shareholders of a corporation, or any other action which
may be taken at a meeting of the shareholders, may be taken without a meeting
and without a vote, if a consent in writing, setting forth the action so taken,
shall be signed (i) if five days prior notice of the proposed action is given in
writing to all of the shareholders entitled to vote with respect to the subject
matter thereof, by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present ane
voting or (ii) by all of the shareholders entitled to vote with respect to the
subject matter thereof.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be one. The
directors, other than the first board of directors, shall be elected at the
annual meeting of the shareholders, and each director elected shall serve until
the next succeeding annual meeting and until his successor shall have been
elected and
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qualified. The first board of directors shall hold office until the first annual
meeting of shareholders.
Section 2. Vacancies and newly created directorships resulting
from any increase in the number of directors may be filled by election at an
annual meeting or at a special meeting of shareholders called for that purpose.
A majority of directors then in office, though less than a quorum, may fill one
or more vacancies in the board of directors arising between meetings of
shareholders by reason of an increase in the number of directors or otherwise. A
director appointed to fill a vacancy, or a newly created directorship, shall
hold office until the next succeeding annual meeting of shareholders and until
his successor shall have been elected and qualified.
Section 3. The business affairs of the corporation shall be
managed by its board of directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the articles of incorporation or by these by-laws directed or required to be
exercised or done by the shareholders.
Section 4. The directors may keep the books of the
corporation, except such as are required by law to be kept within the state,
outside of the State of Illinois, at such place or places as the directors may
from time to time determine.
Section 5. The board of directors, by the affirmative vote of
a majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors
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for services to the corporation as directors, officers or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or
special, may be held either within or without the State of Illinois.
Section 2. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the vote of
the shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the board of directors may be
held upon such notice, or without notice, and at such time and at such place as
shall from time to time be determined by the board.
Section 4. Special meetings of the board of directors may be
called by the president on three days' notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
president or secretary in like manner and on like notice on the written request
of two directors.
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Section 5. Attendance of a director at any meeting shall
constitute a waiver of notice of such meeting, except where a director attends
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
Section 6. A majority of the directors shall constitute a
quorum for the transaction of business unless a greater number is required by
law or by the articles of incorporation. The act of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
board of directors, unless the act of a greater number is required by statute or
by the articles of incorporation. If a quorum shall not be present at any
meeting of directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 7. Unless specifically prohibited by the articles of
incorporation or these by-laws, any action required to be taken at a meeting of
the board of directors of a corporation, or any other action which may be taken
at a meeting of the board of directors or a committee thereof, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors entitled to vote with respect
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8
to the subject matter thereof, or by all the members of such committee, as the
case may be.
ARTICLE VII
COMMITTEES OF DIRECTORS
Section 1. The board of directors, by resolution adopted by a
majority of the number of directors may create one or more committees and
appoint members of the board to serve on the committee or committees. To the
extent provided in such resolution, each committee shall have and exercise all
of the authority of the board of directors in the management of the corporation,
except as otherwise required by law. Each committee shall have two or more
members, who serve at the pleasure of the board. The committees shall keep
regular minutes of its proceedings and report the same to the board when
required.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or
of the articles of incorporation or of these by-laws, notice is required to be
given to any director or shareholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or shareholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
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Section 2. Whenever any notice whatever is required to be
given under the provisions of the statutes or under the provisions of the
articles of incorporation or these by-laws, a waiver thereof in writing signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by
the board of directors and shall be a president, a vice-president, a secretary
and a treasurer. The board of directors may also choose additional
vice-presidents, and one or more assistant secretaries and assistant treasurers.
Section 2. The board of directors at its first meeting after
each annual meeting of shareholders shall choose a president, one or more
vice-presidents, a secretary and a treasurer, none of whom need be a member of
the board.
Section 3. The board of directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms ane shall exercise such powers and perform such duties as shall be
determined from time to time by the board of directors.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office
until their successors are chosen and qualify. Any
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10
officer elected or appointed by the board of directors may be removed at any
time by the affirmative vote of a majority of the board of directors. Any
vacancy occurring in any office of the corporation shall be filled by the board
of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer
of the corporation, shall preside at all meetings of the shareholders and the
board of directors, shall have general and active management of the business of
the corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. The vice-president, or if there shall be more than
one, the vice-presidents in the order determined by the board of directors,
shall, in the absence or disability of the president, perform the duties and
exercise the powers of the president and shall perform such other duties ane
have such other powers as the board of directors may from time to time
prescribe.
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11
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the
board of directors and all meetings of the shareholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the shareholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 10. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
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12
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
Section 12. He shall disburse the funds of the corporation as
may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall
give the corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful performance of
the duties of his office and for the restoration to the corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 14. The assistant treasurer, or, if there shall be
more than one, the assistant treasurers in the order determined by the board of
directors, shall, in the absence or
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13
disability of the treasurer, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented
by a certificate or shall be uncertificated. Certificates shall be signed by the
president or a vice-president and the secretary or an assistant secretary of the
corporation, and may be sealed with the seal of the corporation or a facsimile
thereof.
When the corporation is authorized to issue shares of more
than one class there shall be set forth upon the face or back of the
certificate, or the certificate shall have a statement that the corporation will
furnish to any shareholder upon request and without charge, a full or summary
statement of the designations, preferences, limitations, and relative rights of
the shares of each class authorized to be issued and, if the corporation is
authorized to issue any preferred or special class in series, the variations in
the relative rights and preferences between the shares of each such series so
far as the same have been fixed and determined and the authority of the board of
directors to fix and determine the relative rights and preferences of subsequent
series.
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Within a reasonable time after the issuance or transfer of
uncertificated shares, the corporation shall send to the registered owner
thereof a written notice containing the information required to be set forth or
stated on certificates pursuant to statute.
Section 2. The signatures of the officers of the corporation
upon a certificate may be facsimiles if the certificate is countersigned by a
transfer agent, or registered by a registrar, other than the corporation itself
or an employee of the corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate
to be issued in place of any certificate theretofore issued by the corporation
alleged to have been lost or destroyed. When authorizing such issue of a new
certificate, the board of directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
deems expedient, and may require such indemnities as it deems adequate, to
protect the corporation from any claim that may be made against it with respect
to any such certificate alleged to have been lost or destroyed.
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15
TRANSFERS OF SHARES
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto, and
the old certificate cancelled and the transaction recorded upon the books of the
corporation.
CLOSING OF TRANSFER BOOKS
Section 5. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, or shareholders
entitled to receive payment of any dividend, or in order to make a determination
of shareholders for any other proper purpose, the board of directors of a
corporation may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than sixty
days and, for a meeting of shareholders, not less than ten days, or in the case
of a merger, consolidation, share exchange, dissolution or sale, lease or
exchange of assets, not less than twenty days, immediately preceding such
meeting. If no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the board of directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such
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16
determination of shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this Section,
such determination shall apply to any adjournment thereof.
REGISTERED SHAREHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Illinois.
LIST OF SHAREHOLDERS
Section 7. The officer or agent having charge of the transfer
books for shares shall make, within twenty days after the record date for a
meeting of shareholders or ten days before such meeting, whichever is earlier, a
complete list of the shareholders entitled to vote at such meeting, arranged in
alphabetical order, with the address of each and the number of shares held by
each, which list, for a period of ten days prior to such meeting, shall be kept
on file at the registered office of the corporation and shall be subject to
inspection by any shareholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the
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17
meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting. The original share ledger or transfer book, or a
duplicate thereof, shall be prima facie evidence as to who are the shareholders
entitled to examine such list or share ledger or transfer book or to vote at any
meeting of the shareholders.
ARTICLE XI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Subject to the provisions of the articles of
incorporation relating thereto, if any, dividends may be declared by the board
of directors at any regular or special meeting, pursuant to law. Dividends nay
be paid in cash, in property or in shares of the capital stock, subject to any
provisions of the articles of incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal, Illinois". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
ARTICLE XII
AMENDMENT
Section 1. These by-laws may be altered, amended or repealed
by the shareholders or the board of directors, but no by-law adopted by the
shareholders may be altered, amended or repealed by the board of directors if
the by-laws so provide.
EXHIBIT 3.11
CERTIFICATE OF INCORPORATION
OF
RSLPCO, INC.
The undersigned, in order to form a corporation for the
purpose hereinafter stated, under and pursuant to the provisions of the Delaware
General Corporation Law, hereby certifies that:
FIRST: The name of the Corporation is RSLPCO, INC.
SECOND: The registered office and registered agent of the
Corporation is The Corporation Trust Company, Corporation Trust Center, 1209
Orange Street, in the City of Wilmington, County of New Castle, State of
Delaware 19801.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
Delaware General Corporation Law.
FOURTH: The total number of shares of stock that the
corporation is authorized to issue is 3,000 shares of common stock, no par value
per share.
FIFTH: The name of the sole incorporator is Jeffrey M.
Shapiro, and his address is c/o Greenbaum, Rowe, Smith, Ravin, Davis & Himmel
LLP, Metro Corporate Campus One, 99 Wood Avenue South, P.O. Box 5600,
Woodbridge, New Jersey 07095.
SIXTH: The Board of Directors of the Corporation, acting by
majority vote, may adopt, amend or repeal the By-Laws of the Corporation.
Election of the directors need not be by written ballot.
SEVENTH: Except as otherwise provided by the Delaware General
Corporation Law as the same exists or may hereafter be amended, no director of
the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of this Article SEVENTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate of Incorporation on October 16, 1998.
/s/ JEFFREY M. SHAPIRO
Jeffrey M. Shapiro
Sole Incorporator
EXHIBIT 3.12
RSLPCO, INC.
BY-LAWS
ADOPTED OCTOBER 19, 1998
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETING AND NOTICE. Meetings of the
stockholders of 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 AND SPECIAL MEETINGS. Annual meetings of
stockholders shall be held, at a date, time and place fixed by the Board of
Directors and stated in the notice of meeting, to elect a Board of Directors and
to transact such other business as may properly come before the meeting. Special
meetings of the stockholders may be called by the President for any purpose and
shall be called by the President or Secretary if directed by the Board of
Directors or requested in writing by the holders of not less than 25% of the
common stock of the Corporation. Each such stockholder shall state the purpose
of the proposed meeting.
Section 3. NOTICE. Except as otherwise provided by law, at
least 10 and not more than 60 days before each meeting of stockholders, written
notice of the time, date and place of the meeting, and in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be given
to each stockholder.
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 at 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.
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ARTICLE II
DIRECTORS
Section 1. NUMBER, ELECTION AND REMOVAL OF DIRECTORS. The
number of Directors that shall constitute the Board of Directors shall not be
less than one or more than fifteen. The first Board of Directors shall consist
of three Directors. Thereafter, within the limits specified above, the number of
Directors shall be determined by the Board of Directors or the stockholders. The
Directors shall be elected by stockholders at their annual 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. MEETINGS. Regular meetings of the Board of
Directors shall be held at such times and places as may from time to time be
fixed by the Board of Directors or as may be specified in a notice of meeting.
Section 3. QUORUM. One-half of the total number of Directors
shall constitute a quorum for the transaction of business. If a quorum is not
present at any meeting of the Board of Directors, the Directors present may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until such a quorum is present. Except as otherwise provided by
law, the Certificate of Incorporation of the Corporation or these By-Laws, the
act of a majority of the Directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors.
Section 4. COMMITTEES. 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 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 or they constitute a quorum, may unanimously appoint another Director
to act as the absent or disqualified member.
ARTICLE III
OFFICERS
The officers of the Corporation shall consist of a President,
a Vice President, a Secretary, a Treasurer, and such other additional officers
with such titles as the Board of Directors shall determine, all of which 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 normal 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
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3
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.
ARTICLE IV
INDEMNIFICATION
Section 1. INDEMNITY UNDERTAKING. To the fullest extent
permitted by law (including, without limitation, Section 145 of the General
Corporation Law of the State of Delaware (as amended from time to time, the
"GENERAL CORPORATION LAW")), the Corporation shall indemnify any person who is
or was made, or threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding (a "PROCEEDING"), whether civil, criminal,
administrative or investigative, including without limitation, any action by or
in the right of the Corporation to procure a judgment in its favor, by reason of
the fact that such person, or a person of whom such person is the legal
representative, is or was a Director or officer of the Corporation, or is or was
serving in any capacity at the request of the Corporation for any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise (an "OTHER ENTITY"), against judgments, fines, penalties, excise
taxes, amounts paid in settlement and costs, charges and expenses (including
attorneys' fees and disbursements). Persons who are not Directors or officers of
the Corporation may be similarly indemnified in respect of service to the
Corporation or to any Other Entity at the request of the Corporation to the
extent the Board of Directors at any time specifies that such persons are
entitled to the benefits of this Article IV.
Section 2. ADVANCEMENT OF EXPENSES. The Corporation shall,
from time to time, reimburse or advance to any Director or officer or other
person entitled to indemnification hereunder the funds necessary for payment of
expenses, including attorneys' fees and disbursements, incurred in connection
with any Proceeding, in advance of the final disposition of such Proceeding;
PROVIDED, HOWEVER, that, if required by the General Corporation Law, such
expenses incurred by or on behalf of any such Director, officer or other person
may be paid in advance of the final disposition of a Proceeding only upon
receipt by the Corporation of an undertaking, by or on behalf of such Director,
officer or other person indemnified hereunder, to repay any such amount so
advanced if it shall ultimately be determined by final judicial decision from
which there is not further right of appeal that such Director, officer or other
person is not entitled to be indemnified for such expenses.
Section 3. RIGHTS NOT EXCLUSIVE. The rights to indemnification
and reimbursement or advancement of expenses provided by, or granted pursuant
to, this Article IV shall not be deemed exclusive of any other rights which a
person seeking indemnification or reimbursement or advancement of expenses may
have or to which such person hereafter may be entitled under any statute, the
Certificate of Incorporation, these By-Laws, any agreement, any vote of
stockholders or disinterested Directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office.
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Section 4. CONTINUATION OF BENEFITS. The rights to
indemnification and reimbursement or advancement of expenses provided by, or
granted pursuant to, this Article IV shall continue as to a person who has
ceased to be a Director or officer (or other person indemnified hereunder) and
shall inure to the benefit of the executors, administrators, legatees and
distributees of any such person.
Section 5. INSURANCE. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
Director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a Director, officer, employee or agent of any
Other Entity, against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such persons' status as
such, whether or not the Corporation would have the power to indemnity such
person against such liability under the provisions of this Article IV or the
Certificate of Incorporation or under Section 145 of the General Corporation Law
or any other provision of law.
Section 6. BINDING EFFECT. The provisions of this Article IV
shall be a contract between the Corporation, on the one hand, and each Director
and officer who serves in such capacity at any time while this Article IV is in
effect and/or any other person indemnified hereunder, on the other hand,
pursuant to which the Corporation and each such Director, officer or other
person intend to be legally bound. No repeal or modification of this Article IV
shall affect any rights or obligations with respect to any state of facts then
or theretofore existing or thereafter arising or any proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state
of facts.
Section 7. PROCEDURAL RIGHTS. The rights to indemnification
and reimbursement or advancement of expenses provided by, or granted pursuant
to, this Article IV shall be enforceable by any person entitled to such
indemnification or reimbursement or advancement of expenses in any court of
competent jurisdiction. The burden of proving that such indemnification or
reimbursement or advancement of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such action that such indemnification
or reimbursement or advancement of expenses is proper in the circumstances nor
an actual determination by the Corporation (including its Board of Directors,
its independent legal counsel and its stockholders) that such person is not
entitled to such indemnification or reimbursement or advancement of expenses
shall constitute a defense to the action or create a presumption that such
person is not so entitled. Such a person shall also be indemnified for any
expenses incurred in connection with successfully establishing his or her right
to such indemnification or reimbursement or advancement of expenses, in whole or
in part, in any such proceeding.
Section 8. SERVICE DEEMED AT CORPORATION'S REQUEST. Any
Director or officer of the Corporation serving in any capacity (a) another
corporation of which a majority of the shares entitled to vote in the election
of its directors is held, directly or indirectly, by the Corporation or (b) any
employee benefit plan of the Corporation or any corporation referred to in
clause (a) shall be deemed, in each case, to be doing so at the request of the
Corporation.
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5
Section 9. ELECTION OF APPLICABLE LAW. Any person entitled to
be indemnified or receive reimbursement or advancement of expenses as a matter
of right pursuant to this Article IV may elect to have the right to
indemnification or advancement of expenses interpreted on the basis of the
applicable law in effect at the time of occurrence or the event or events giving
rise to the applicable Proceeding, to the extent permitted by law, or on the
basis of the applicable law in effect at the time such indemnification or
reimbursement or advancement of expenses is sought. Such election shall be made
by a notice in writing to the Corporation, at the time indemnification or
reimbursement or advancement of expenses is sought; PROVIDED, HOWEVER, that if
no such notice is given, the right to indemnification or reimbursement or
advancement of expenses shall be determined by law in effect at the time
indemnification or reimbursement or advancement expenses is sought.
ARTICLE V
GENERAL PROVISIONS
Section 1. NOTICES. Whenever any statute, the Certificate of
Incorporation or these By-Laws require notice to be given to any Director or
stockholder, such notice may be given in writing by mail, addressed to such
Director or stockholder at his or her address as it appears in the records of
the Corporation, with postage thereon prepaid. Such notice shall be deemed to
have been given when it is deposited in the United States mail. Notice to
Directors may also be given by telegram or personally delivered.
Section 2. FISCAL YEAR. The fiscal year of the Corporation
shall be fixed by the Board of Directors.
EXHIBIT 3.13
CERTIFICATE OF LIMITED PARTNERSHIP
OF RUSSELL-STANLEY, L.P.
PARAGRAPH 1. The name of the limited partnership is RUSSELL
STANLEY, L.P., (the "LIMITED PARTNERSHIP").
PARAGRAPH 2. The address of the registered office of the
Limited Partnership is 350 N. St. Paul Street, Dallas, Texas 75201.
PARAGRAPH 3. The name of the registered agent of the Limited
Partnership at the above address is CT Corporation System.
PARAGRAPH 4. The address in the United States where the
records of the Limited Partnership are to be kept or made available is 685 Route
202/206, Bridgewater, New Jersey 08807.
PARAGRAPH 5. The name and address of the general partner of
the Limited Partnership is as follows:
Russell-Stanley Midwest, Inc.
685 Route 202/206
Bridgewater, New Jersey 08807.
PARAGRAPH 6. The Limited Partnership shall be formed
immediately upon the filing of this Certificate with the Secretary of State of
the State of Texas.
IN WITNESS WHEREOF, this Certificate of Limited Partnership
is signed this 22ND day of October, 1998.
RUSSELL-STANLEY MIDWEST, INC.,
as General Partner of the Limited Partnership
By: /S/ DANIEL W. MILLER
Daniel W. Miller
Executive Vice President
EXHIBIT 3.14
AGREEMENT
OF
LIMITED PARTNERSHIP
OF
RUSSELL-STANLEY, L.P.
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
RUSSELL-STANLEY, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP made as of the 1st day
of November, 1998, by and between RUSSELL-STANLEY MIDWEST, INC., an Illinois
corporation having an address at 685 Route 202/206, Bridgewater, New Jersey
08807 (hereinafter referred to as the "General Partner"), and RSLPCO, INC., a
Delaware corporation having an address at 685 Route 202/206, Bridgewater, New
Jersey 08807 (hereinafter referred to as the "Limited Partner").
W I T N E S S E T H:
WHEREAS, the parties desire to form a limited partnership
under the Revised Limited Partnership Act of the State of Texas and to enter
into a limited partnership agreement to govern their respective rights and
obligations; and
WHEREAS, the parties hereto desire to assure the continuity of
the management and the policies of the Partnership (as herein defined).
NOW, THEREFORE, in consideration of the covenants contained in
this Agreement and other good and valuable consideration, the parties agree as
follows:
ARTICLE 1.
DEFINITIONS
For purposes of this Agreement, the terms defined in this
Article 1. shall have the following meanings, unless the context clearly
requires a different interpretation:
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2
1.1 ACT. The Texas Revised Limited Partnership Act, Tex. Rev.
Civ. Stat. Art. 6132a-1, as amended from time to time.
1.2 AFFILIATE. Any Person controlling or controlled by or
under common control with the Partnership, including, without limitation (a) any
Person who has a familial relationship, by blood, marriage or otherwise with any
director, officer or employee of the Partnership, its parent, or any Affiliate
thereof and (b) any Person which receives compensation for administrative, legal
or accounting services from the Partnership, its parent or any Affiliate. For
purposes of this definition, "control" when used with respect to any specified
Person, means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
1.3 AGREEMENT. This Agreement of Limited Partnership, as it
may be amended from time to time.
1.4 APPROVAL OF THE LIMITED PARTNERS. An affirmative vote by
the Limited Partners. The Limited Partners shall vote by Percentage Interest and
not per capita.
1.5 CAPITAL ACCOUNT. An account maintained for each Partner
throughout the term of the Partnership in accordance with the rules of Treasury
Regulation Section 1.704-(b)(2)(iv) as in effect from time to time, and, to the
extent not inconsistent therewith, shall reflect the Capital Contribution of
each of the Partners to the capital of the Partnership, from time to time (a)
increased from time to time by such Partner's distributive share of Partnership
income and gains, and (b) decreased from time to time by distributions to such
Partner by the Partnership (other than distributions in repayment of loans by a
Partner or for services rendered by any Partner) and by such Partner's
distributive share of Partnership losses. The Capital Account of
<PAGE>
3
each Partner shall otherwise appropriately reflect transactions of the
Partnership and the Partners in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv).
1.6 CAPITAL CONTRIBUTION. The amount of cash and real and
personal properties contributed in exchange for the Partnership Interests held
by the Partners, as reflected on the books of the Partnership, as same may
change from time to time. The references in this Agreement to the Capital
Contribution of a then Partner shall include the Capital Contribution previously
made by any predecessor Partner of a then Partner.
1.7 CASH FLOW. All cash receipts of the Partnership during
such period from any source (including, without limitation, sales of portions of
the assets of the Partnership, borrowings, condemnation awards, interest earned
on Partnership funds, proceeds of insurance, if any, and Capital Contributions),
plus the cash available from reduction in the amount of any reserve or escrow of
the Partnership, less (a) an amount equal to the Partnership's expenses,
interest, fees, and principal payments on any loans, and (b) such amounts as the
General Partner determines, subject to Section 6.2 hereof, should be retained by
the Partnership for use in its business and not distributed, including, but not
limited to, amounts retained for or in anticipation of expenses, capital
expenditures, working capital requirements or reserves. The determination of
Cash Flow for any period by the General Partner, absent manifest error and
subject to the limitations of Section 6.2 hereof, shall be binding and
conclusive.
1.8 CODE. The Internal Revenue Code of 1986, as amended from
time to time, and any successor statute thereto, including all regulations and
rules promulgated thereunder.
1.9 FISCAL YEAR. The calendar year ending December 31.
1.10 GENERAL PARTNER. Russell-Stanley Midwest, Inc. and any
successor general partner pursuant to the terms hereof.
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4
1.11 LIMITED PARTNER. RSLPCO, Inc. and any Person who may
acquire a Partnership Interest from the Limited Partner pursuant to the terms
hereof.
1.12 MINIMUM GAIN. The total gain which the Partnership would
realize if it sold, in a taxable disposition, each of its assets which were
subject to nonrecourse liabilities in full satisfaction of the liabilities. In
computing said gain, only the portion of the assets' bases allocated to
nonrecourse liabilities of the Partnership shall be taken into account.
1.13 NET LOSSES. The net losses of the Partnership as reported
on its information returns for Federal income tax purposes.
1.14 NET OPERATING CASH FLOW. With respect to each Fiscal Year
of the Partnership, the gross revenues of the Partnership, less (a) the actual
cash expenditures (other than organization expenses, syndication costs, property
acquisition costs, nonrecurring or extraordinary business expenses) for such
period, and (b) such reasonable and necessary reserves for working capital,
capital investments, potential liabilities and other contingencies as shall be
determined in the sole discretion of the General Partner. Gross revenues shall
not include (x) the proceeds of any contributions or loans to the Partnership,
and (y) security deposits, until the Partnership is entitled unconditionally to
retain the same for its own use and benefit. The Partnership's accountants shall
conclusively determine the nature and amount of any other adjustments in
determining Net Operating Cash Flow.
1.15 NET PROFITS. The net income of the Partnership as
reported on its information returns for Federal income tax purposes.
1.16 PARTNERS. The Limited Partner and the General Partner,
collectively.
1.17 PARTNERSHIP. The limited partnership between the General
Partner and the Limited Partner formed pursuant to the terms of this Agreement.
<PAGE>
5
1.18 PARTNERSHIP INTEREST. A Partner's interest in the
Partnership, which shall include, without limitation, its Capital Account,
Percentage Interest, distributive share of Partnership income, gain, loss,
deduction and credits, its interest in Net Operating Cash Flow and other
distributions, as provided for in this Agreement, and all other rights, duties,
and obligations under this Agreement.
1.19 PERCENTAGE INTEREST. The percentage interest of a Partner
in the Partnership: for the Limited Partner, ninety-nine (99%) percent and for
the General Partner, one (1%) percent.
1.20 PERSON. Any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization, or government
or any agency or political subdivision thereof.
1.21 SECURITIES ACT. The Securities Act of 1933, as amended
from time to time, and all regulations and rules promulgated thereunder.
1.22 TAX CREDITS. The tax credits of the Partnership as
reported on its information returns for Federal income tax purposes.
ARTICLE 2.
GENERAL
2.1 FORMATION OF PARTNERSHIP. The Partnership is hereby formed
as a Texas limited partnership pursuant to the terms of this Agreement.
2.2 NAME. The name of the Partnership shall be
Russell-Stanley, L.P., but it may do business under such other names as the
General Partner hereby designates in writing to the
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6
Limited Partners, provided that the General Partner shall file all certificates
required by law to be filed with respect to any name used by the Partnership.
2.3 INSTRUMENTS TO BE FILED. Prior to the execution and
delivery of the Agreement, the General Partner filed on behalf of the
Partnership a Certificate of Limited Partnership in accordance with the Act. The
General Partner shall execute such other documents and instruments and shall
take all such other actions deemed by the General Partner to be necessary or
appropriate to effectuate and permit the formation of the Partnership under the
laws of the State of Texas and as a limited partnership qualified to do business
as a foreign limited partnership in such states as the General Partner may
consider necessary or appropriate from time to time as a result of the business
being conducted by the Partnership. The General Partner shall, from time to
time, take appropriate action, including the preparation and filing of such
amendments to the Certificate of Limited Partnership, as may be required by the
Act. The Limited Partner shall execute such documents and instruments and take
such other action as may be necessary to enable the General Partner to fulfill
its responsibilities under this Section. The Power of Attorney granted under
Article 11 by the Limited Partner hereby may be exercised by the General Partner
to accomplish the foregoing.
2.4 PRINCIPAL PLACE OF BUSINESS. The principal office of the
Partnership shall be at 685 Route 202/206, Bridgewater, New Jersey 08807. The
General Partner shall notify the Limited Partner of any change in the principal
place of business of the Partnership. The Partnership may maintain other offices
at other locations inside or outside New Jersey as the General Partner deems
advisable from time to time.
<PAGE>
7
2.5 REGISTERED AGENT AND REGISTERED OFFICE. The registered
agent for the Partnership shall be CT Corporation System (the "Registered
Agent"), 350 N. St. Paul Street, Dallas, Texas 75201, or at such other location
in Texas, as determined by the Registered Agent.
2.6 BUSINESS OF THE PARTNERSHIP. The business of the
Partnership shall be to:
(a) own, hold, sell, assign, transfer, operate, lease,
mortgage, pledge and otherwise deal with real and personal properties inside and
outside the States of Texas and Georgia in connection with the manufacture and
sale of steel and plastic containers.
(b) exercise all powers enumerated in the Act necessary or
convenient to the conduct, promotion or attainment of the business or purposes
otherwise set forth herein; and
(c) enter into any and all documents in connection with the
business of the Partnership as determined by the General Partner.
(d) to have and exercise all of the powers related or
incidental thereto and to engage in any lawful business related or incidental
thereto
2.7 RESTRICTIONS ON PARTNERS. The relationship among the
Partners created by this Agreement shall be limited to the performance of this
Agreement and shall not affect any other business or activity of any Partner or
Affiliate. Nothing in this Agreement shall be deemed to restrict in any way the
freedom of any Partner or Affiliate of a Partner to conduct any business
activity of whatever nature including, without limitation, the manufacture and
sale of steel and plastic containers, without any accountability to the
Partnership or any other Partner, even if such business or activity directly
competes with the business of the Partnership.
2.8 Term. The term of the Partnership shall commence upon the
filing of a Certificate of Limited Partnership consistent with the terms of this
Agreement in the Office of the Secretary of State of Texas and shall continue
indefinitely until:
<PAGE>
8
(a) sixty (60) days following the date upon which the
Partnership no longer owns any assets; or
(b) the termination of the Partnership pursuant to the terms
of this Agreement, by Approval of the Limited Partners and the approval of the
General Partner, operation of law, or judicial decree.
ARTICLE 3.
BANK ACCOUNTS, BOOKS, FISCAL YEAR,
ACCOUNTING AND REPORTS
3.1 BANK ACCOUNTS. The funds of the Partnership shall be
deposited in the name of the Partnership in one or more bank accounts as
designated by the General Partner, and shall not be commingled nor shall the
funds be used except for the business of the Partnership. Withdrawals therefrom
shall be made only from such account or accounts in such manner and in such form
as the General Partner may from time to time determine.
3.2 BOOKS OF ACCOUNT. The General Partner shall keep, or cause
to be kept, complete and accurate books of account, in which shall be entered,
fully and accurately, each and every transaction of the Partnership. The books
of the Partnership shall be kept on the accrual basis, unless the General
Partner shall determine otherwise, in accordance with generally accepted
accounting principles consistently applied from year to year, and shall be
maintained at all times at the principal office of the Partnership.
3.3 TAX ELECTIONS.
<PAGE>
9
(a) The General Partner, in its sole discretion, may cause the
Partnership to make or revoke the election referred to in Section 754 of the
Code, or any similar provision enacted in lieu thereof, as well as any other
elections permitted by the Code.
(b) Organization expenses shall be amortized over the first
sixty (60) months of the Partnership's business, as permitted under Code Section
709.
(c) The General Partner shall, for each fiscal year, file on
behalf of the Partnership United States tax returns of income within the time
prescribed by law for such filing. The General Partner shall also file on behalf
of the Partnership such other tax returns and other documents from time to time
as may be required by the United States of America or by any state. The
determination of the General Partner with respect to the treatment of any item
or its allocation for federal, state or local tax purposes shall be binding upon
all of the Partners so long as such determination will not be inconsistent with
any express term hereof or applicable law.
ARTICLE 4.
RIGHTS, POWERS AND OBLIGATIONS OF
GENERAL PARTNER AND LIMITATIONS, THEREON
4.1 EXERCISE OF MANAGEMENT. The General Partner shall manage
the day to day affairs of the Partnership subject to the terms and provisions of
this Agreement. The General Partner shall have complete and exclusive control
over the management of the Partnership's business and affairs in accordance with
the business of the Partnership set forth in Section 2.6 hereof, and, except as
otherwise specifically provided in this Agreement, the General Partner shall
have the right, power and authority on behalf of the Partnership and in its
name, to exercise all of the rights, powers and authority of a partner of a
partnership without limited partners. In
<PAGE>
10
addition, the General Partner shall formulate all substantial policy decisions
with respect to the Partnership. Except as otherwise specifically provided in
this Agreement, no Limited Partner, as such, shall take part in the management
or control of the business of the Partnership or have authority to bind the
Partnership.
4.2 SPECIFIC POWER AND AUTHORITY OF GENERAL PARTNER. Except as
otherwise specifically provided in this Agreement, the General Partner shall
have the power and authority to take any action of any type and to do all of the
following:
(a) hold, improve, manage, sell, lease or otherwise dispose of
real and personal property owned by the. Partnership, interests therein or
appurtenances thereto;
(b) borrow money and incur indebtedness, and to secure the
repayment of such borrowings and incurring of indebtedness, by executing
mortgages or deeds of trust, pledging or otherwise encumbering or subjecting to
security interests, all or any part of the assets of the Partnership;
(c) operate, manage and develop the assets of the Partnership
and to enter into agreements with others with respect to such operation,
management and development including without limitation the manufacture and sale
of steel and plastic containers;
(d) purchase from others, at the expense of the Partnership,
contracts of liability, casualty and other insurance which the General Partner
deems advisable, appropriate or convenient for the protection of thue assets or
affairs to the Partnership or for any purpose convenient or beneficial to the
Partnership;
(e) employ persons or entities, other than the General Partner
and its Affiliates except as provided herein, at the expense of the Partnership,
and on its behalf in the operation and management of the Partnership's property,
including, but not limited to, supervisory
<PAGE>
11
managing agents, building management agents, architects, engineers, accountants,
attorneys, bookkeepers, insurance brokers and property appraisers;
(f) make capital expenditures and improvements with respect to
the real and personal property of the Partnership and to take all appropriate
action in connection with the maintenance, operation and management thereof; and
(g) Subject to the terms of this Agreement, the General
Partner is Rather hereby fully authorized to take any action of any type and to
do anything and everything which a general partner of a Texas limited
partnership may be authorized to take or do hereunder.
4.3 DUTIES OF GENERAL PARTNER. The General Partner, through
its agents and employees, shall devote such time to the Partnership as may be
necessary for the operation of the Partnership with the assistance of such
agents and professionals as the General Partner shall cause the Partnership to
retain.
4.4 NO DUTY OF THIRD PARTY TO INQUIRE AS TO AUTHORITY OF THE
GENERAL PARTNER. No Person dealing with the Partnership shall be required to
inquire into the authority of the General Partner to take any action or to make
any decision hereunder.
4.5 LIMITATION ON OBLIGATIONS OF GENERAL PARTNER.
Notwithstanding any provision of this Agreement or any law to the contrary and
except as may otherwise specifically be provided in any other agreement to which
the General Partner is a party, the General Partner shall not be obligated to
advance funds to prevent a default by the Partnership on any note, lease or
other agreement to which the Partnership is a party or by which it is bound and
the General Partner shall not be obligated to make any contribution, loan or
other advance to or for the benefit of the Partnership for any purpose
whatsoever.
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12
4.6 LIMITATION OF THE GENERAL PARTNER'S LIABILITY TO OTHER
PARTNERS AND INDEMNIFICATION TO GENERAL PARTNER.
(a) Except with respect to any material misrepresentation or
breach of this Agreement by the General Partner, or acts attributable to fraud
or gross negligence by the General Partner, the General Partner shall not be
liable to any other Partner or the Partnership for any claim, loss, expense,
liability, action, cause of action, suit or damage resulting from any act or
omission of the General Partner in the management of the affairs of the
Partnership other than for the General Partner's gross mismanagement. The
General Partner shall not be personally liable for the return of any
contribution made to the Partnership by a Limited Partner. By way of example,
and not by way of limitation, the General Partner shall not be liable in any
respect whatsoever to the Limited Partners by reason of (i) any disallowance or
adjustment of any deductions or credits claimed on the Limited Partner's income
tax returns or the Partnership's information returns, (ii) the filing of Federal
information returns on behalf of the Partnership which do not reflect the
reporting positions that the Partnership presently expects to adopt, or (iii)
any penalties or interest which are imposed on any taxpayer as a direct or
indirect result of the reporting positions which are adopted by the Partnership
on any of its returns.
(b) The Partnership shall indemnify, save harmless and pay all
judgments arising against any Partner and its shareholders, partners, directors,
employees and agents, from any cost, expense, claim, liability or damage
incurred by reason of such Person's relationship to the Partnership or any act
performed or omitted to be performed by them in connection with the business of
the Partnership, including attorney fees and costs incurred by them in
connection with the defense of any action based on any such act or omission,
which attorney fees and costs may be paid as incurred, including all such
liabilities under any Federal or state securities act
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13
(including the Securities Act of 1933, as amended) as permitted by law, except
that the Partnership shall have no indemnification obligation hereunder with
respect to any act or omission of any Person that constitutes willful misconduct
or gross negligence or was outside the scope of such Person's authority under
this Agreement. In the event of any action against any Partner by any other
Partner, including a Partnership derivative suit, the Partnership shall
indemnify, save harmless and pay all expenses of the defendant Partner,
including attorney fees and costs incurred in the defense of said action, if the
defendant Partner is successful in said action. Notwithstanding the foregoing,
no Partner shall be indemnified against any liability to the other Partners
imposed by this Agreement or by law, including liability for fraud, bad faith,
willful misconduct or gross negligence. Any such indemnification shall be
recovered only from the assets of the Partnership and not from the assets of the
Limited Partners. The General Partner may require in any Partnership contract
and any other agreements for which the Limited Partner(s) agrees to be
personally liable, that it and its shareholders will not be personally liable
thereon and that the remedy for a breach of such contract shall be satisfied
solely from the assets of the Partnership. The indemnified Partner also shall be
entitled to recover its attorney fees and costs of enforcing this indemnity from
the Partnership's assets, if the Partner is successful in said action.
4.7 NO LIABILITY OF THE GENERAL PARTNER FOR COMPUTATION OR
DETERMINATION. With respect to all matters (including disputes with respect
thereto) relating to computations and determinations required to be made under
this Agreement, the General Partner may rely upon, and shall have no liability
to the Limited Partner(s) or the Partnership if it relies upon, the opinion of
the accountants or attorneys for the Partnership.
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14
4.8 SUCCESSOR GENERAL PARTNER. In the event that the General
Partner shall withdraw as a partner as provided under the Act, with the Approval
of the Limited Partners a replacement General Partner shall be elected. The
Successor General Partner shall signify his, her or its acceptance of such
appointment by executing a copy of this Agreement within 20 days after receiving
notice of said appointment and, by doing so, shall be deemed to have agreed to
be bound by all of the terms and conditions of this Agreement, as such Agreement
may be amended, as though he, she or it were an original signatory thereto.
ARTICLE 5.
CAPITAL ACCOUNTS AND CONTRIBUTIONS
5.1 ESTABLISHMENT OF CAPITAL ACCOUNTS. An individual Capital
Account shall be established and maintained for each Partner, including any
permitted additional or substituted Partner. Upon the admission, substitution or
withdrawal of any Partner, the books and records of the appropriate Partners
shall be adjusted to reflect such admission, withdrawal or substitution. The
initial Capital Account of each Partner as of the date of this Agreement is the
amount of such Partner's Capital Contribution.
5.2 CREDITS AND CHARGES TO CAPITAL ACCOUNTS. All credits and
charges to the Capital Account of each Partner shall be made in accordance with
the provisions of Section 1.5 above.
5.3 NO PRIORITY AMONG PARTNERS, NO WITHDRAWAL OF CAPITAL.
Except as specifically provided in Article 6 hereof, no Partner shall have
priority over any other Partner either as to the return of such Partner's
Capital Contribution to the Partnership or as to allocation of Net Profits or
Net Losses or distributions of cash or property made by the Partnership, and all
<PAGE>
15
such returns, allocations and distributions to the Partners shall be divided
among the Partners pro rata in accordance with their respective Percentage
Interests. No Partner shall have the right to demand or receive any funds or
property of the Partnership or to bring any action of or partition against the
Partnership. No Partner shall have the right or power to withdraw any part of
such Partner's Capital Contribution from the Partnership, except as specifically
provided herein.
5.4 NO INTEREST ON CAPITAL CONTRIBUTIONS. Except as
specifically provided in Article 6 hereof, no Partner shall receive any interest
whatsoever on such Partner's Capital Account or Capital Contribution made to the
Partnership.
ARTICLE 6.
ALLOCATION OF NET PROFITS, NET LOSSES
AND NET OPERATING CASH FLOW
6.1 ALLOCATION OF NET PROFITS, NET LOSSES AND TAX CREDITS.
(a) Net Losses and Tax Credits. The Net Losses and Tax Credits
of the Partnership shall be allocated in accordance with the Partners' then
Percentage Interests.
(b) Net Profits. Net Profits in an amount not exceeding the
amount of Cash Flow distributed to the Partners pursuant to Section 6.2 during
the Partnership's tax year shall be allocated among the Partners in the same
manner as the Cash Flow was distributed pursuant to Section 6.2. Net Profits in
excess of the amount of Cash Flow distributed during the Partnership's tax year
pursuant to Section 6.2 shall be allocated in accordance with the Partners' then
Percentage Interests.
6.2 DISTRIBUTION OF CASH FLOW. Cash Flow shall be distributed
in accordance with the Partners' then Percentage Interests.
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16
6.3 SPECIAL ALLOCATIONS. Notwithstanding any other provision
of this Agreement, the following allocations shall be made prior to any other
allocations under this Agreement:
(a) QUALIFIED INCOME OFFSET. No Partner shall be allocated any
item of loss or deduction to the extent said allocation will cause or increase
any deficit in said Partner's Capital Account (in excess of any amount that such
Partner is obligated or deemed obligated to restore) as of the end of the
Partnership's tax year to which such allocation relates. In determining the
above, a Partner's Capital Account shall be reduced for the items described in
Treasury Regulation Sections l.704-l(b)(2)(ii)(d)(4), (5), and (6). If any
Partner with a deficit in such Partner's Capital Account unexpectedly receives
any adjustment, allocation or distribution described in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), then Partnership items of income
and gain shall be specifically allocated to such Partner in an amount and manner
sufficient to eliminate the deficit in said Partner's Capital Account created by
such adjustment, allocation, or distribution as quickly as possible.
(b) SPECIAL INCOME ALLOCATION. In the event any Partner has a
deficit in such Partner's Capital Account at the end of any Partnership tax year
(or other period of the Partnership) that is in excess of the sum of (i) the
amount such Partner is obligated to restore and (ii) the amount such Partner is
deemed to be obligated to restore pursuant to the penultimate sentence of
Regulation Section 1.704-2(g)(1), each such Partner shall be specially allocated
items of Partnership income and gain in the amount of such excess as quickly as
possible.
(c) MINIMUM GAIN CHARGEBACK. The following provisions shall be
applicable in the first taxable year in which the Partnership has nonrecourse
deductions as defined in Treasury Regulation Section 1.704-2(b):
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17
(i) If there is a net decrease in Minimum Gain for a
tax year, then each Partner must be allocated items of income and gain
for such year equal to that Partner's share of the net decrease in
Minimum Gain, in accordance with the minimum gain chargeback
requirements pursuant to Treasury Regulation Section 1.704-2(f). A
Partner's share of the net decrease in Minimum Gain is the amount of
the total net decrease in Minimum Gain multiplied by the Partner's
percentage share of the Minimum Gain at the end of the immediately
preceding tax year. Treasury Regulation Section 1.704-2(g)(2).
(ii) In allocating the income and gain pursuant to
subsection (i) above, gains recognized from the disposition of
Partnership assets subject to nonrecourse liabilities of the
Partnership shall be allocated first to the extent of the decrease in
Minimum Gain attributable to the disposition of the said asset.
Thereafter, any income and gain to be allocated shall consist of a pro
rata amount of other Partnership income and gain for that year.
(iii) Any allocation under subsection (i) above shall
be made no later than the end of the tax year in which such Minimum
Gain deficiency arises; provided, however, that in no event shall there
be a reallocation of any item of income, gain, loss or deduction
previously allocated among the Partners pursuant to this Agreement.
(iv) This subsection (c) is intended to comply with
the minimum gain chargeback requirements under Treasury Regulation
Section 1.704-2(f) and shall be interpreted and applied consistently
therewith.
(d) CODE SECTION 704(c) ALLOCATIONS. In accordance with Code
Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction
(including depreciation) with respect to any property contributed to the capital
of the Partnership by a Partner shall, solely for
<PAGE>
18
tax purposes, be allocated among the Partners so as to take account of any
variation between the adjusted basis of such property to the Partnership for
Federal income tax purposes and its fair market value at the time it was
contributed to the Partnership.
(e) RECAPTURE. To the extent that any allocation of income or
gain made pursuant to this Agreement includes the allocation of an item of
income or gain that is recaptured as ordinary income under Code Sections 1245 or
1250, such ordinary income shall be allocated to the Partners who received the
allocation of the depreciation or cost recovery deductions that generated the
ordinary income recapture in proportion to their shares of such deductions,
provided that such allocation of ordinary income shall be limited to the amount
of income or gain allocated to such Partner for the period to which such
allocation relates.
(f) Code Section 754 Adjustment. To the extent an adjustment
to the adjusted tax basis of any Partnership asset pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Treasury Regulation
Section 1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704.1(b)(2)(iv)(m)(4),
to be taken into account in determining Capital Accounts as the result of a
distribution to a Partner in complete liquidation of such Partner's Partnership
Interest, the amount of such adjustment to the Capital Accounts shall be treated
as an item of gain (if the adjustment increases the basis of the asset) or loss
(if the adjustment decreases such basis) and such gain or loss shall be
specially allocated to the Partners in accordance with their Percentage
Interests in the event Treasury Regulation Section 1.704-1(b)(2)(iv)(m)(2)
applies, or to the Partners to whom such distribution was made in the event
Treasury Regulation Section 1.704-1(b)(2)(iv)(m)(4) applies.
6.4 ALLOCATIONS IN THE EVENT OF TRANSFER OF A PARTNERSHIP
INTEREST. If a Partnership Interest is transferred in accordance with the terms
of this Agreement, there shall be
<PAGE>
19
allocated to each Partner who held the transferred Partnership Interest during
the fiscal year of transfer the product of (a) the Partnership's Net Profit or
Net Losses allocable to such transferred Partnership Interest for such fiscal
year, and (b) a fraction, the numerator of which is the number of days such
Partner held the transferred Partnership Interests during such fiscal year and
the denominator of which is the total number of days in such fiscal year,
provided, however, that the Partners may allocate such Net Profit or Net Losses
by closing the Partnership's books immediately after the transfer of any
Partnership Interest. Either allocation shall be made without regard to the
date, amount or recipient of any distributions which may have been made with
respect to such transferred Partnership Into-est. No Partnership Interest may be
transferred without the approval in writing of the General Partner.
ARTICLE 7.
ADMISSION OF NEW PARTNERS
The issuance of additional Partnership Interests and thus the
admission of any Person to the Partnership as a new partner (the "Admittee")
shall be subject to the following:
7.1 The unanimous consent of the Partners, which consent may
be withheld for any cause or for no cause, regardless of the reasonableness
thereof;
7.2 The Admittee's execution of an instrument satisfactory to
counsel to the Partnership, by which the Admittee agrees to be bound by and
comply with all of the terms and provisions of this Agreement; and
7.3 Execution of any other instruments required under the Act
to effect such admittance.
<PAGE>
20
ARTICLE 8.
RESTRICTIONS ON TRANSFER
8.1 GENERAL RULE. No Partner may Transfer all or any part of
its Partnership Interest or grant or create any participation in such Partner's
right to receive distributions or returns of capital without the prior written
consent of the General Partner. "Transfer" shall mean any disposition including,
but not limited to, gifts, bequests, sales, assignments, pledges, encumbrances,
whether voluntary or involuntary, or pursuant to this Agreement, court order or
operation of law.
8.2 OTHER TRANSFERS. Any Transfer by a Partner of its
Partnership Interest in a manner not permitted under Article 8 shall be null,
void and of no effect against the Partnership or the other Partners. In addition
to, and not in limitation of, the foregoing, in the event that any Person
acquires any Partnership Interest in contravention of this Agreement, such
Person shall have no voting rights as a Partner.
8.3 NEED FOR RESTRICTIONS. The parties hereto recognize and
acknowledge that the provisions set forth in this Agreement respecting the
restrictions on Transfer of their Partnership Interests are fair and reasonable
in consideration of their absolute necessity for the proper conduct of the
business of the Partnership.
ARTICLE 9.
DISSOLUTION
9.1 GENERAL. The Partnership shall dissolve upon, but not
before, the termination of the Partnership in accordance with Section 2.8
hereof.
<PAGE>
21
9.2 LIQUIDATION OF ASSETS. Upon the dissolution of the
Partnership, the General Partner shall proceed to liquidate the assets thereof
The proceeds of such liquidation and dissolution shall be distributed as
follows:
FIRST: To creditors whose debt is secured by mortgages or
security interests granted in the assets of the Partnership, if the Partnership
is winding up or if required by the terms of the instruments evidencing or
securing such indebtedness;
SECOND: To third party creditors of the Partnership in payment
of the unpaid operating expenses of the Partnership to the extent required under
agreements with said creditors;
THIRD: To the payment of all other creditors of the
Partnership to the extent due and payable; and
FOURTH: To the Limited Partner(s), until they have received,
pursuant to Section 6.2 and this Section 9.2, an amount equal to a 100% return
of its Capital Contribution; and
FIFTH: To the General Partner, until it has received, pursuant
to Section 6.2 and this Section 9.2, an amount equal to its Capital
Contribution; and
SIXTH: To the Partners, pro rata to their Percentage
Interests.
ARTICLE 10.
RIGHTS AND LIABILITIES OF LIMITED PARTNERS
10.1 ACTIVITIES OF LIMITED PARTNERS. The Limited Partner(s)
shall not participate in, or have any part in the management, conduct or control
of, the Partnership business, except as otherwise specifically set forth in this
Agreement. The Limited Partner(s) shall have no authority whatsoever to act on
behalf of or bind the Partnership.
<PAGE>
22
10.2 LIMITATION ON LIABILITY OF LIMITED PARTNERS.
(a) Except as otherwise provided herein, the liability of each
Limited Partner in the Partnership shall be limited to the amount of such
Limited Partner's aggregate Capital Contribution. No Limited Partner shall have
any further personal liability to contribute money or other property to, or in
respect of, the liabilities or obligations of the Partnership.
(b) Notwithstanding anything to the contrary herein, if a
Limited Partner has received a return of all or any portion of such Limited
Partner's Capital Contribution to the Partnership, such Limited Partner will be
liable to the Partnership for any sum, not in excess of such amount returned,
which is necessary to discharge the Partnership's liabilities to any creditor
which extended credit to the Partnership or whose claims arose before the return
of said amount to the Limited Partner.
ARTICLE 11.
POWER OF ATTORNEY
11.1 POWER OF ATTORNEY GIVEN BY LIMITED PARTNER. The Limited
Partner hereby constitutes and appoints the General Partner as its true and
lawful attorney-in-fact with power to act in its name and on its behalf, to
consent to, adopt, make, execute and deliver, swear to, acknowledge, file and
record:
(a) copies of this Agreement and any and all amendments hereto
and, upon termination of the Partnership, a certificate or agreement of
dissolution, if required by the laws of the State of Texas;
(b) the Certificate of Limited Partnership, as well as
amendments thereto, under the laws of the State of Texas or any other
jurisdiction;
<PAGE>
23
(c) any Certificate of Fictitious Name, if required by law;
and
(d) such other ministerial certificates or instruments as may
be required under the laws of the State of Texas, or any other jurisdiction, or
by any other regulatory agency, as the General Partner may deem necessary or
advisable; provided, however, that none of the foregoing acts shall increase the
liability of the Limited Partner or decrease the liability of the General
Partner beyond the liability expressly set forth in this Agreement.
The power of attorney granted herein is a special power of
attorney coupled with an interest, is irrevocable, and shall survive the
dissolution, bankruptcy or insolvency of the Limited Partner, and may be
exercised by the General Partner, and shall survive the transfer of a Limited
Partner's interest in the Partnership.
ARTICLE 12.
MISCELLANEOUS
12.1 INTEGRATION. This Agreement contains the entire agreement
between the parties pertaining to the subject matter hereof, supersedes any
prior agreements between the parties hereto and may not be amended except as
provided in Section 12.9 herein.
12.2 Notices. Except as otherwise expressly provided in this
Agreement, all notices, demands and other communications hereunder shall be in
writing and shall be deemed to have been given (a) if delivered personally, (b)
three (3) days after being mailed, registered or certified mail, first class
postage prepaid, return receipt requested, or (c) the business day next
following the day delivered to a reputable overnight courier providing proof of
delivery, to the applicable party at the address herein set forth or at such
other address of which a Partner has
<PAGE>
24
given notice to the General Partner in accordance herewith. The substance of any
such notice shall be deemed to have been fully acknowledged in the event of any
refusal of acceptance by the party to whom the notice is addressed.
12.3 FURTHER ASSURANCES. The Partners will execute and deliver
such further assurances and do such further acts and things as may be required
to carry out the intent and purpose of this Agreement.
12.4 CAPTIONS. All captions and headings of articles,
sections, paragraphs, subparagraphs and subdivisions of this Agreement are
solely for convenience and are not part of this Agreement, and shall not be used
for the interpretation or determination of the validity of this Agreement or any
provision thereof.
12.5 GENDER. The masculine gender shall include the feminine
and neuter genders, as appropriate in the context of this Agreement.
12.6 SINGULAR OR PLURAL. Whenever the singular number is used
in this Agreement, the same shall include the plural when required by context.
12.7 THIRD PARTY BENEFICIARIES. None of the provisions of this
Agreement shall be for the benefit of, or enforceable by, any creditors of the
Partnership.
12.8 SEVERABILITY. In case any one or more of the provisions
of this Agreement shall be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or enforceability shall not affect other
provisions hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision never had been contained herein.
12.9 AMENDMENT. This Agreement may be modified or amended only
with the unanimous written consent of the General Partner and the Limited
Partner.
<PAGE>
25
12.10 GOVERNING LAW. This Agreement shall be construed in
accordance with the laws and other legal authority of the State of Texas,
including the Act, but excluding the conflicts of laws provisions of the State
of Texas.
12.11 PARTNERS INDEPENDENTLY BOUND.Partner shall become bound
by this Agreement immediately upon its execution hereof.
12.12 COMPUTATION OF TIME. In computing any period of time
pursuant to this Agreement, the day of the act or event of default from which
the designated period of time begins to run shall be included, unless it is a
Saturday, Sunday or legal holiday, in which event the period shall begin to run
on the next day which is not a Saturday, Sunday or legal holiday, and such
period shall end with the last day of the designated period of time unless it is
a Saturday, Sunday or legal holiday, in which event such period shall end with
the end of the next day thereafter which is not a Saturday, Sunday or legal
holiday.
12.13 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
12.14 TAX MATTERS PARTNER. The General Partner is hereby
designated as the "Tax Matters Partner" of the Partnership, as defined in
Section 6231(a)(7) of the Code.
IN WITNESS WHEREOF, each of the Partners hereby execute this
Agreement the day and year first above written.
GENERAL PARTNER:
RUSSELL-STANLEY MIDWEST, INC.
By: /s/ DANIEL W. MILLER
-----------------------------------
Daniel W. Miller
Executive Vice President
<PAGE>
26
LIMITED PARTNER:
RSLPCO, INC.
By: /s/ DANIEL W. MILLER
-----------------------------------
Daniel W. Miller
Executive Vice President
EXHIBIT 4.1
RUSSELL-STANLEY HOLDINGS, INC.
10 7/8% SENIOR SUBORDINATED NOTES DUE 2009
INDENTURE
Dated as of February 10, 1999
The Bank of New York
Trustee
<PAGE>
CROSS-REFERENCE TABLE <F1>
Trust Indenture Act Section Indenture
Section
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b)(i), (ii) . . . . . . . . . . . . . . . . . . . . 7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(iii)(c) . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 12.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . 4.03; 12.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . 12.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 12.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316 (a)(last sentence) . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
-2-
<PAGE>
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . 12.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 12.01
N.A. means not applicable.
<F1> This Cross-Reference Table is not part of the Indenture.
-3-
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . 1
Section 1.01 Definitions. . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Other Definitions. . . . . . . . . . . . . . . . . . 19
Section 1.03 Terms of TIA. . . . . . . . . . . . . . . . . . . . 20
Section 1.04 Rules of Construction. . . . . . . . . . . . . . . . 20
ARTICLE 2
THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.01 Form and Dating. . . . . . . . . . . . . . . . . . . 21
Section 2.02 Execution and Authentication. . . . . . . . . . . . 22
Section 2.03 Registrar and Paying Agent. . . . . . . . . . . . . 23
Section 2.04 Paying Agent to Hold Money in Trust. . . . . . . . . 24
Section 2.05 Holder Lists. . . . . . . . . . . . . . . . . . . . 24
Section 2.06 Transfer and Exchange. . . . . . . . . . . . . . . . 24
Section 2.07 Replacement Notes . . . . . . . . . . . . . . . . . 36
Section 2.08 Outstanding Notes. . . . . . . . . . . . . . . . . . 36
Section 2.09 Treasury Notes. . . . . . . . . . . . . . . . . . . 37
Section 2.10 Temporary Notes . . . . . . . . . . . . . . . . . . 37
Section 2.11 Cancellation. . . . . . . . . . . . . . . . . . . . 37
Section 2.12 Defaulted Interest. . . . . . . . . . . . . . . . . 37
Section 2.13 CUSIP Numbers. . . . . . . . . . . . . . . . . . . . 38
ARTICLE 3
REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 3.01 Notice of Redemption to Trustee. . . . . . . . . . . 38
Section 3.02 Selection of Notes to Be Redeemed. . . . . . . . . . 38
Section 3.03 Notice of Redemption to Holders. . . . . . . . . . . 39
Section 3.04 Effect of Notice of Redemption. . . . . . . . . . . 39
Section 3.05 Deposit of Redemption Price. . . . . . . . . . . . . 39
Section 3.06 Notes Redeemed in Part. . . . . . . . . . . . . . . 40
Section 3.07 Optional Redemption. . . . . . . . . . . . . . . . . 40
Section 3.08 Mandatory Redemption. . . . . . . . . . . . . . . . 41
ARTICLE 4
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.01 Payment of Notes. . . . . . . . . . . . . . . . . . 41
Section 4.02 Maintenance of Office or Agency. . . . . . . . . . . 41
Section 4.03 Reports. . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.04 Compliance Certificate. . . . . . . . . . . . . . . 43
Section 4.05 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.06 Stay, Extension and Usury Laws. . . . . . . . . . . 44
Section 4.07 Restricted Payments. . . . . . . . . . . . . . . . . 44
- i -
<PAGE>
Section 4.08 Dividend and Other Payment Restrictions Affecting
Subsidiaries. . . . . . . . . . . . . . . . . . 47
Section 4.09 Incurrence of Indebtedness and Issuance of Preferred
Stock. . . . . . . . . . . . . . . . . . . . . 49
Section 4.10 Asset Sales . . . . . . . . . . . . . . . . . . . . 52
Section 4.11 Transactions with Affiliates. . . . . . . . . . . . 55
Section 4.12 Liens. . . . . . . . . . . . . . . . . . . . . . . . 57
Section 4.13 No Senior Subordinated Debt. . . . . . . . . . . . . 57
Section 4.14 Corporate Existence. . . . . . . . . . . . . . . . . 57
Section 4.15 Offer to Repurchase upon Change of Control. . . . . 57
Section 4.16 Payments for Consent. . . . . . . . . . . . . . . . 59
Section 4.17 Additional Subsidiary Guarantees . . . . . . . . . . 60
Section 4.18 Designation of Restricted and Unrestricted
Subsidiaries. . . . . . . . . . . . . . . . . . 60
Section 4.19 Sale and Leaseback Transactions. . . . . . . . . . . 60
Section 4.20 Issuances and Sales of Equity Interests in Wholly
Owned Subsidiaries. . . . . . . . . . . . . . . 61
Section 4.21 Issuances of Guarantees of Indebtedness. . . . . . . 61
Section 4.22 Business Activities. . . . . . . . . . . . . . . . . 61
ARTICLE 5
SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 5.01 Merger, Consolidation or Sale of Assets. . . . . . . 62
Section 5.02 Successor Corporation Substituted. . . . . . . . . . 63
ARTICLE 6
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 63
Section 6.01 Events of Default. . . . . . . . . . . . . . . . . . 63
Section 6.02 Acceleration. . . . . . . . . . . . . . . . . . . . 65
Section 6.03 Other Remedies. . . . . . . . . . . . . . . . . . . 66
Section 6.04 Waiver of Past Defaults. . . . . . . . . . . . . . . 66
Section 6.05 Control by Majority. . . . . . . . . . . . . . . . . 66
Section 6.06 Limitation on Suits. . . . . . . . . . . . . . . . . 67
Section 6.07 Rights of Holders of Notes to Receive Payment. . . . 67
Section 6.08 Collection Suit by Trustee. . . . . . . . . . . . . 67
Section 6.09 Trustee May File Proofs of Claim. . . . . . . . . . 67
Section 6.10 Priorities. . . . . . . . . . . . . . . . . . . . . 68
Section 6.11 Undertaking for Costs. . . . . . . . . . . . . . . . 68
ARTICLE 7
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 7.01 Duties of Trustee. . . . . . . . . . . . . . . . . . 69
Section 7.02 Rights of Trustee. . . . . . . . . . . . . . . . . . 70
Section 7.03 Individual Rights of Trustee. . . . . . . . . . . . 71
Section 7.04 Trustee's Disclaimer. . . . . . . . . . . . . . . . 71
Section 7.05 Notice of Defaults. . . . . . . . . . . . . . . . . 71
Section 7.06 Reports by Trustee to Holders of the Notes. . . . . 72
- ii -
<PAGE>
Section 7.07 Compensation and Indemnity. . . . . . . . . . . . . 72
Section 7.08 Replacement of Trustee. . . . . . . . . . . . . . . 73
Section 7.09 Successor Trustee by Merger, etc. . . . . . . . . . 74
Section 7.10 Eligibility; Disqualification. . . . . . . . . . . . 74
Section 7.11 Preferential Collection of Claims Against Holdings. 74
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE; DISCHARGE . . . . . . . . 75
Section 8.01 Option to Effect Legal Defeasance or Covenant
Defeasance. . . . . . . . . . . . . . . . . . . 75
Section 8.02 Legal Defeasance and Discharge. . . . . . . . . . . 75
Section 8.03 Covenant Defeasance. . . . . . . . . . . . . . . . . 75
Section 8.04 Conditions to Legal or Covenant Defeasance. . . . . 76
Section 8.05 Deposited Money and Government Securities to Be Held
in Trust; Other Miscellaneous Provisions. . . . 77
Section 8.06 Repayment to Holdings. . . . . . . . . . . . . . . . 78
Section 8.07 Reinstatement. . . . . . . . . . . . . . . . . . . . 78
Section 8.08 Discharge. . . . . . . . . . . . . . . . . . . . . . 79
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER . . . . . . . . . . . . . . . . . 79
Section 9.01 Without Consent of Holders of Notes. . . . . . . . . 79
Section 9.02 With Consent of Holders of Notes. . . . . . . . . . 80
Section 9.03 Compliance with Trust Indenture Act. . . . . . . . . 82
Section 9.04 Revocation and Effect of Consents. . . . . . . . . . 82
Section 9.05 Notation on or Exchange of Notes. . . . . . . . . . 82
Section 9.06 Trustee to Sign Amendments, etc. . . . . . . . . . . 82
ARTICLE 10
SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 10.01 Agreement to Subordinate. . . . . . . . . . . . . . 83
Section 10.02 Certain Definitions. . . . . . . . . . . . . . . . . 83
Section 10.03 Liquidation; Dissolution; Bankruptcy. . . . . . . . 84
Section 10.04 Default on Designated Senior Debt. . . . . . . . . . 84
Section 10.05 Acceleration of Securities. . . . . . . . . . . . . 85
Section 10.06 When Distribution Must Be Paid Over. . . . . . . . . 85
Section 10.07 Notice by Holdings. . . . . . . . . . . . . . . . . 86
Section 10.08 Subrogation. . . . . . . . . . . . . . . . . . . . . 86
Section 10.09 Relative Rights. . . . . . . . . . . . . . . . . . . 86
Section 10.10 Subordination May Not Be Impaired by Holdings. . . . 86
Section 10.11 Distribution or Notice to Representative. . . . . . 87
Section 10.12 Rights of Trustee and Paying Agent. . . . . . . . . 87
Section 10.13 Authorization to Effect Subordination. . . . . . . . 88
Section 10.14 Amendments. . . . . . . . . . . . . . . . . . . . . 88
- iii -
<PAGE>
ARTICLE 11
SUBSIDIARY GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . 88
Section 11.01 Guarantee. . . . . . . . . . . . . . . . . . . . . . 88
Section 11.02 Subordination of Subsidiary Guarantee. . . . . . . . 90
Section 11.03 Limitation on Guarantor Liability. . . . . . . . . . 90
Section 11.04 Execution and Delivery of Subsidiary Guarantee. . . 90
Section 11.05 Guarantors May Consolidate, etc., on Certain Terms. 91
Section 11.06 Releases Following Sale of Assets or Capital Stock. 91
ARTICLE 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 12.01 Trust Indenture Act Controls. . . . . . . . . . . . 92
Section 12.02 Notices. . . . . . . . . . . . . . . . . . . . . . . 92
Section 12.03 Communication by Holders of Notes with Other Holders
of Notes. . . . . . . . . . . . . . . . . . . . 93
Section 12.04 Certificate and Opinion as to Conditions Precedent. 93
Section 12.05 Statements Required in Certificate or Opinion. . . . 94
Section 12.06 Rules by Trustee and Agents. . . . . . . . . . . . . 94
Section 12.07 No Personal Liability of Directors, Officers,
Employees and Stockholders. . . . . . . . . . . 94
Section 12.08 Governing Law. . . . . . . . . . . . . . . . . . . . 95
Section 12.09 No Adverse Interpretation of Other Agreements. . . . 95
Section 12.10 Successors. . . . . . . . . . . . . . . . . . . . . 95
Section 12.11 Severability. . . . . . . . . . . . . . . . . . . . 95
Section 12.12 Counterpart Originals; Acceptance by Trustee. . . . 95
Section 12.13 Table of Contents, Headings, etc. . . . . . . . . . 95
- iv -
<PAGE>
EXHIBITS
Exhibit A-1 Form of Note
Exhibit A-2 Form of Regulation S Temporary Global Note
Exhibit B Form of Certificate Of Transfer
Exhibit C Form Of Certificate Of Exchange
Exhibit D Form Of Certificate From Acquiring Institutional Accredited
Investor
Exhibit E Form Of Subordinated Subsidiary Guarantee
Exhibit F Form Of Supplemental Indenture
- v -
<PAGE>
INDENTURE dated as of February 10, 1999 by and among Russell-
Stanley Holdings, Inc., a Delaware corporation ("Holdings"), the Guarantors
(as defined) and The Bank of New York, a New York banking corporation, as
trustee (the "Trustee").
Holdings and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the Notes:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions.
"144A Global Note" means a global note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary
or its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified
Person, whether or not such Indebtedness is 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.
"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," as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of
voting securities, by agreement or otherwise; provided that beneficial
ownership of 10% or more of the Voting Stock of a Person shall be deemed to
be control. For purposes of this definition, the terms "controlling,"
"controlled by" and "under common control with" shall have correlative
meanings.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer
or exchange.
"Asset Sale" means: (i) the sale, lease, conveyance or other
disposition of any assets or rights, other than sales or leases of inventory
in the ordinary course of business consistent with past practices (provided
that the sale, lease, conveyance or other disposition of all or substantially
<PAGE>
all of the assets of Holdings and its Restricted Subsidiaries taken as a
whole will be governed by Sections 4.15 or 5.01 and not by Section 4.10
hereof); and (ii) the issuance of Equity Interests by any of Holdings'
Restricted Subsidiaries or the sale of Equity Interests in any of it
Subsidiaries. Notwithstanding the preceding, the following items shall not
be deemed to be Asset Sales: (i) any single transaction or series of related
transactions that involves assets having a fair market value of less than
$2.0 million in any consecutive 12-month period; (ii) a transfer of assets
between or among Holdings and its Wholly Owned Restricted Subsidiaries; (iii)
an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to
Holdings or to another Wholly Owned Restricted Subsidiary; (iv) disposals or
replacements of obsolete equipment or Cash Equivalents in the ordinary course
of business; (v) a Restricted Payment or a Permitted Investment that is
permitted by Section 4.07 hereof; and (vi) any sale of accounts receivable,
or participations therein, in connection with any Qualified Receivables
Transaction.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value of the obligation of
the lessee for net rental payments during the remaining term of the lease
included in such sale and leaseback transaction including any period for
which such lease has been extended or may, at the option of the lessor, be
extended. Such present value shall be calculated using a discount rate equal
to the rate of interest implicit in such transaction, determined in
accordance with GAAP.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal
or state law for the relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have
beneficial ownership of all securities that such "person" has the right to
acquire, whether such right is currently exercisable or is exercisable only
upon the occurrence of a subsequent condition.
"Board of Directors" means the Board of Directors of Holdings, or
any authorized committee of the Board of Directors.
"Broker-Dealer" means any broker or dealer registered with the
Commission under the Exchange Act.
"Buonanno Agreement" means a consulting, advisory or similar
agreement to be entered into between Holdings and Vincent J. Buonanno
providing for payments of fees in an aggregate amount not to exceed $1.0
million, plus expense reimbursement.
"Business Day" means any day other than a Legal Holiday.
<PAGE>
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital
lease that would at that time be required to be capitalized on a balance
sheet in accordance with GAAP.
"Capital Stock" means: (i) in the case of a corporation, corporate
stock (however designated); (ii) in the case of an association or business
entity, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock; (iii) in the case of a
partnership or limited liability company, partnership or membership interests
(whether general or limited); and (iv) any other interest or participation
that confers on a Person the right to receive a share of the profits and
losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means: (i) United States dollars;
(ii) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof (provided
that the full faith and credit of the United States is pledged in support
thereof) having maturities of not more than twelve months from the date of
acquisition; (iii) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, or with any domestic commercial bank having capital
and surplus in excess of $500 million and a Thompson Bank Watch Rating of "B"
or better; (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and
(iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above; (v) commercial paper and
other securities having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Corporation and in each case maturing
within twelve months after the date of acquisition; and (vi) money market
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i) - (v) of this definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following:
(i) the sale, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of Holdings and its Restricted
Subsidiaries taken as a whole to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act) other than a Principal; (ii) the
adoption of a plan relating to the liquidation or dissolution of Holdings;
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as defined
above), other than the Principals, becomes the Beneficial Owner, directly or
indirectly, of more than (a) 50% of the Voting Stock of Holdings or (b) 35%
of the Voting Stock of Holdings and such Person Beneficially Owns a greater
percentage of the Voting Stock of Holdings than the Principals, in either
case (i) or (ii), measured by voting power rather than number of shares; (iv)
<PAGE>
the first day on which a majority of the members of the Board of Directors of
Holdings are not Continuing Directors; or (v) Holdings consolidates with, or
merges with or into, any Person, or any Person consolidates with, or merges
with or into, Holdings, in any such event pursuant to a transaction in which
any of the outstanding Voting Stock of Holdings is converted into or ex-
changed for cash, securities or other property, other than any such
transaction where the Voting Stock of Holdings outstanding immediately prior
to such transaction is converted into or exchanged for Voting Stock (other
than Disqualified Stock) of the surviving or transferee Person constituting a
majority of the outstanding shares of such Voting Stock of such surviving or
transferee Person immediately after giving effect to such issuance.
"Closing" means the original issuance of Notes on the date of this
Indenture.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus: (i)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale, to the extent such losses were deducted in
computing such Consolidated Net Income; plus (ii) provision for taxes based
on income or profits of such Person and its Restricted Subsidiaries for such
period, to the extent that such provision for taxes was deducted in computing
such Consolidated Net Income; plus (iii) consolidated interest expense of
such Person and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, interest on guaranteed indebtedness, commissions,
discounts and other fees and charges incurred in respect of letter of credit
or bankers' acceptance financings, and net payments, if any, pursuant to
Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income; plus (iv) fees and expenses paid to
Vestar or any of its Affiliates pursuant to the Management Agreement during
such period in an aggregate amount not to exceed $1.0 million; plus (v)
charges classified and reflected as non-recurring on the date of Closing and
for any other such period, in each case, on Holdings' consolidated financial
statements prepared in accordance with GAAP; plus (vi) amounts paid pursuant
to the Buonanno Agreement (to the extent not already included in clause (vii)
below) during such period; plus (vii) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it
represents an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of
such Person and its Restricted Subsidiaries for such period to the extent
that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income; minus (viii) non-cash
items increasing such Consolidated Net Income for such period, other than
<PAGE>
items that were accrued in the ordinary course of business, in each case, on
a consolidated basis and determined in accordance with GAAP. Notwithstanding
the preceding, the provision for taxes based on the income or profits of, and
the depreciation and amortization and other non-cash charges of, a Restricted
Subsidiary of Holdings shall be added to Consolidated Net Income to compute
Consolidated Cash Flow of Holdings only to the extent that a corresponding
amount would be permitted at the date of determination to be dividended to
Holdings by such Restricted Subsidiary without prior approval (that has not
been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that: (i) the Net Income (but not loss) of
any Person that is not a Restricted Subsidiary or that is accounted for by
the equity method of accounting shall be included only to the extent of the
amount of dividends or distributions received in cash by the specified Person
or a Restricted Subsidiary thereof (provided that if such Restricted
Subsidiary is not a Guarantor, the amount of such dividends or distributions
includable in Consolidated Net Income shall be limited to Holdings' direct
and indirect pro rata portion of the outstanding Equity Interests in such
Restricted Subsidiary); (ii) the Net Income of any Restricted Subsidiary
shall be excluded to the extent that the declaration or payment of dividends
or similar distributions by that Restricted Subsidiary of that Net Income is
not at the date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulations applicable to that
Restricted Subsidiary or its stockholders; (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the
date of such acquisition shall be excluded; (iv) the cumulative effect of a
change in accounting principles shall be excluded; (v) any restoration to
income of any contingency reserve of an extraordinary, non-recurring or
unusual nature shall be excluded, except to the extent that provision for
such reserve was made out of Consolidated Net Income accrued in any period
for which Consolidated Net Income is required to be calculated for purposes
of the Indenture; and (vi) for purposes of Section 4.07 hereof, in the case
of a successor to the specified Person by consolidation or merger or as a
transferee of the specified Person's assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets shall
be excluded.
"Consolidated Net Worth" means, with respect to any Person as of
any date, the sum of: (i) the consolidated equity of the common stockholders
of such Person and its consolidated Subsidiaries as of such date; plus (ii)
the respective amounts reported on such Person's balance sheet as of such
date with respect to any series of preferred stock (other than Disqualified
<PAGE>
Stock) that by its terms is not entitled to the payment of dividends unless
such dividends may be declared and paid only out of net earnings in respect
of the year of such declaration and payment, but only to the extent of any
cash received by such Person upon issuance of such preferred stock.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of Holdings who: (i) was a member of such
Board of Directors on the date of this Indenture; or (ii) was nominated for
election or elected to such Board of Directors with the approval of a
majority of the Continuing Directors who were members of such Board at the
time of such nomination or election.
"Corporate Trust Office" of the Trustee shall be at the address of
the Trustee specified in Section 12.02 hereof or such other address as to
which the Trustee may give notice to Holdings.
"Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Default" means any event that is, or with the passage of time or
the giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name
of the Holder thereof and issued in accordance with Section 2.06 hereof, in
the form of Exhibit A-1 hereto except that such Note shall not bear the
Global Note Legend and shall not have the "Schedule of Exchanges of Interests
in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof
as the Depositary with respect to the Notes, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to
the applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
Holder thereof, in whole or in part, on or prior to the date that is 91 days
after the date on which the Notes mature. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely
because the holders thereof have the right to require Holdings to repurchase
such Capital Stock upon the occurrence of a Change of Control or an Asset
Sale shall not constitute Disqualified Stock if the terms of such Capital
Stock provide that Holdings may not repurchase or redeem any such Capital
Stock pursuant to such provisions unless such repurchase or redemption com-
plies with Section 4.07 hereof.
<PAGE>
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that
is convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Holdings of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the Notes issued in exchange for the Initial
Notes in the Exchange Offer pursuant to Section 2.06(f) hereof or, with
respect to Initial Notes issued under this Indenture subsequent to the date
of this Indenture pursuant to Section 2.02 hereof, the exchange offer
contemplated by the registration rights agreement relating thereto
substantially identical to the Registration Rights Agreement.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth
in the Registration Rights Agreement.
"Existing Indebtedness" means the Obligations of Holdings and its
Restricted Subsidiaries in existence on the date of this Indenture (including
amounts outstanding under the Senior Credit Facility on such date), until
such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period,
the sum, without duplication, of: (i) the consolidated interest expense of
such Person and its Restricted Subsidiaries for such period, whether paid or
accrued, including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments, if any, pursuant to Hedging Obligations; plus
(ii) the consolidated interest of such Person and its Restricted Subsidiaries
that was capitalized during such period (other than Capital Lease
Obligations); plus (iii) any interest expense on Indebtedness of another
Person that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries, whether or not such Guarantee or Lien is called
upon; plus (iv) the product of (a) all dividend payments, whether or not in
cash, on any series of Disqualified Stock of such Person and on any series of
preferred stock of any of its Restricted Subsidiaries, other than dividend
payments on Equity Interests payable solely in Equity Interests of Holdings
(other than Disqualified Stock) or payable to Holdings or a Restricted
Subsidiary of Holdings, times (b) a fraction, the numerator of which is one
<PAGE>
and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified
Person for any period, the ratio of the Consolidated Cash Flow of such Person
for such period to the Fixed Charges of such Person for such period. In the
event that the specified Person or any of its Restricted Subsidiaries incurs,
assumes, Guarantees, redeems or repays any Indebtedness (other than revolving
credit borrowings) or issues or redeems preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation
of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to
such incurrence, assumption, Guarantee, redemption or prepayment of
Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of calculating the Fixed Charge Coverage
Ratio: (i) acquisitions that have been made by the specified Person or any
of its Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date shall be deemed to have occurred on the first day of the
four-quarter reference period and Consolidated Cash Flow for such reference
period shall be calculated without giving effect to clause (iii) of the
proviso set forth in the definition of Consolidated Net Income (including any
pro forma expense and cost reductions attributable to the assets acquired
calculated on a basis consistent with the standard set forth in Regulation S-
X under the Securities Act as in effect on the date of Closing); (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to
the Calculation Date, shall be excluded; and (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with
GAAP, and operations or businesses disposed of prior to the Calculation Date,
shall be excluded, but only to the extent that the obligations giving rise to
such Fixed Charges will not be obligations of the specified Person or any of
its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant
segment of the accounting profession, which are in effect on the date of
Closing; provided that all reports and other financial information provided
by Holdings to the holders of the Notes, the Trustee and/or the Commission
shall be prepared in accordance with GAAP, as in effect on the date of such
report or other financial information.
<PAGE>
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii) which is required to be placed on all Global Notes issued under
this Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee other than by endorsement of
negotiable instruments for collection in the ordinary course of business,
direct or indirect, in any manner including, without limitation, by way of a
pledge of assets or through letters of credit and reimbursement agreements in
respect thereof, of all or any part of any Indebtedness.
"Guarantors" means each of: (i) Russell-Stanley Corp., Container
Management Services, Inc., New England Container Co., Inc., Russell-Stanley,
Inc., RSLPCO, Inc. and Russell-Stanley, L.P.; and (ii) any other subsidiary
that executes a Guarantee in accordance with the provisions of this
Indenture, and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under: (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements; and
(ii) other agreements or arrangements designed to protect such Person against
fluctuations in interest rates or foreign currency exchange rates.
"Holder" means a Person in whose name a Note is registered.
"Holdings" means Russell-Stanley Holdings, Inc., a Delaware
corporation, and any and all successors thereto.
"Indebtedness" means, with respect to a specified Person, 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 reimbursement agreements in respect
thereof); (iii) in respect of banker's acceptances; (iv) representing Capital
Lease Obligations; (v) representing the balance deferred and unpaid of the
purchase price of any property, except any such balance that constitutes an
accrued expense or trade payable; (vi) representing any Hedging Obligations;
(vii) representing any Disqualified Stock of such Person and any preferred
stock issued by a Restricted Subsidiary of such Person, if and to the extent
any of the preceding items (other than letters of credit, Hedging
Obligations, Disqualified Stock and preferred stock of a Restricted
Subsidiary) would appear as a liability upon a balance sheet of the specified
Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes (a) all Indebtedness of others secured by a Lien on
<PAGE>
any asset of the specified Person (whether or not such Indebtedness is
assumed by the specified Person), and (b) to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other
Person. The amount of any Indebtedness outstanding as of any date shall be:
(i) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount; (ii) the maximum fixed redemption or repurchase
price, in the case of Disqualified Stock of such Person; (iii) the maximum
voluntary or involuntary liquidation preferences plus accrued and unpaid
dividends, in the case of preferred stock of a Restricted Subsidiary of such
Person; and (iv) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Notes" means, collectively, (i) the 10 7/8% Senior
Subordinated Notes due 2009 of Holdings issued on the date of this Indenture
and (ii) one or more series of 10 7/8% Senior Subordinated Notes due 2009
that are issued subsequent to the date of this Indenture pursuant to Section
2.02 hereof, in each case for so long as such securities constitute
"restricted securities" as such term is defined in Rule 144(a)(3) under the
Securities Act; provided that the Trustee shall be entitled to request and
conclusively rely on an Opinion of Counsel with respect to whether any Note
constitutes such a restricted security.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions, purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP. If Holdings or any Restricted
Subsidiary of Holdings sells or otherwise disposes of any Equity Interests of
any direct or indirect Restricted Subsidiary of Holdings such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of Holdings, Holdings shall be deemed to have made an Investment
on the date of any such sale or disposition equal to the fair market value of
the Equity Interests of such Restricted Subsidiary not sold or disposed of in
an amount determined as provided in the final paragraph of Section 4.07
hereof.
<PAGE>
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York are authorized by law,
regulation or executive order to remain closed. If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by Holdings and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset, whether or not filed, recorded or otherwise perfected under
applicable law, including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction.
"Liquidated Damages" means all liquidated damages, if any, then
owing pursuant to Section 2(c) of the Registration Rights Agreement.
"Management Agreement" means the management agreement dated July
23, 1997 between Holdings and Vestar, as amended, modified or supplemented
from time to time.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends and Disqualified Stock
dividends, excluding, however: (i) any gain or loss, together with any
related provision for taxes on such gain or loss, realized in connection with
(a) any Asset Sale or (b) the disposition of any securities by such Person or
any of its Restricted Subsidiaries or the extinguishment of any Indebtedness
of such Person or any of its Restricted Subsidiaries; and (ii) any
extraordinary gain (but not loss), together with any related provision for
taxes on such extraordinary gain.
"Net Proceeds" means the aggregate cash proceeds received by
Holdings 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 non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof, in each case after taking into account any available tax
credits or deductions and any tax sharing arrangements and amounts required
to be applied to the repayment of Indebtedness, other than Senior Debt,
secured by a Lien on the asset or assets that were the subject of such Asset
Sale.
<PAGE>
"Non-Recourse Debt" means Indebtedness: (i) as to which neither
Holdings nor any of its Restricted Subsidiaries (a) provides credit support
of any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable as a guarantor
or otherwise or (c) constitutes the lender; (ii) no default with respect to
which (including any rights that the holders thereof may have to take enfor-
cement action against an Unrestricted Subsidiary) would permit upon notice,
lapse of time or both any holder of any other Indebtedness (other than the
Notes) of Holdings or any of its Restricted Subsidiaries to declare a default
on such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity; and (iii) as to which the lenders have
been notified in writing that they will not have any recourse to the stock or
assets of Holdings or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" means, collectively, the Initial Notes and the Unrestricted
Notes, treated as a single class of securities, as amended or supplemented
from time to time in accordance with the terms hereof, that are issued
pursuant to the terms of this Indenture
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, any Executive or Senior
Vice President, the Chief Operating Officer, the Chief Financial Officer, the
Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice
President of such Person.
"Officers' Certificate" means a certificate signed on behalf of
Holdings by two Officers of Holdings, one of whom must be the principal
executive officer, the principal financial officer or the principal
accounting officer of Holdings, that meets the requirements of Section 12.05
hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to Holdings, any
Subsidiary of Holdings or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Holdings, shall
include Euroclear and Cedel).
"Permitted Business" means the business of Holdings and its
Restricted Subsidiaries conducted on the date of Closing and businesses
ancillary or reasonably related thereto.
<PAGE>
"Permitted Investments" means: (i) any Investment in Holdings or
in a Restricted Subsidiary of Holdings; (ii) any Investment in Cash
Equivalents; (iii) any Investment by Holdings or any Restricted Subsidiary of
Holdings in a Person, if as a result of such Investment (a) such Person
becomes a Restricted Subsidiary of Holdings or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, Holdings or a
Restricted Subsidiary of Holdings; (iv) any Investment made as a result of
the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with Section 4.10 hereof or any transaction not
constituting an Asset Sale by reason of the $2 million threshold contained in
the definition thereof; (v) any acquisition of assets solely in exchange for
the issuance of Equity Interests (other than Disqualified Stock) of Holdings;
(vi) other Investments in any Person having an aggregate fair market value
(measured on the date each such Investment was made and without giving effect
to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (f), not to exceed $10.0 million at
any one time outstanding; (vii) Investments in securities of trade creditors
or customers received in settlement of obligations or pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy of insolvency of
such trade creditors of customers; and (viii) Investments by Holdings or a
Restricted Subsidiary in a Receivables Subsidiary or any Investment by a
Receivables subsidiary in any other Person, in each case, in connection with
a Qualified Receivables Transaction.
"Permitted Liens" means: (i) Liens on the assets of Holdings and
any Restricted Subsidiary securing Indebtedness and other Obligations under
the Senior Credit Facility that were permitted by the terms of this Indenture
to be incurred; (ii) Liens in favor of Holdings or any Restricted Subsidiary;
(iii) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with Holdings or any Restricted
Subsidiary of Holdings, provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with
Holdings; (iv) Liens on property existing at the time of acquisition thereof
by Holdings or any Restricted Subsidiary of Holdings, provided that such
Liens were in existence prior to the contemplation of such acquisition and do
not extend to any assets other than property so acquired; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course
of business; (vi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (iii) of Section 4.09 hereof covering only
the assets acquired with such Indebtedness; (vii) Liens existing on the date
of this Indenture; (viii) Liens incurred in the ordinary course of business
of Holdings or any Restricted Subsidiary of Holdings with respect to
obligations that, together with all other Liens incurred pursuant to this
clause (xvii), do not exceed $5.0 million at any one time outstanding.
<PAGE>
"Permitted Refinancing Indebtedness" means any Indebtedness of
Holdings or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease
or refund other Indebtedness of Holdings or any of its Restricted
Subsidiaries (other than intercompany Indebtedness); provided that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (ii) such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of, the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either
by Holdings or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means an individual, partnership, corporation, limited
liability, unincorporated organization, trust or joint venture or a
governmental agency or political subdivision thereof.
"Principals" means Vestar and its Affiliates.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Public Equity Offering" means any underwritten public offering of
common stock of Holdings in which the gross proceeds to Holdings are at least
$35.0 million.
"Purchase Money Note" means a promissory note evidencing a line of
credit, or evidencing other Indebtedness owed to Holdings or any Restricted
Subsidiary in connection with a Qualified Receivables Transaction, which note
shall be repaid from cash available to the maker of such note, other than
amounts required to be established as reserves pursuant to agreement, amount
paid to investors in respect of interest, principal and other amounts owing
to such investors and amounts paid in connection with the purchase of newly
generated receivables.
"Qualified Receivables Transaction" means any transaction or series
of transactions that may be entered into by Holdings or any Restricted
<PAGE>
Subsidiary pursuant to which Holdings or any Restricted Subsidiary may sell,
convey or otherwise transfer to (a) a Receivables Subsidiary (in the case of
a transfer by Holdings or any Restricted Subsidiary) and (b) any other Person
(in the case of a transfer by a Receivables Subsidiary), or may grant a
security interest in, any accounts receivable (whether now existing or
arising in the future) of Holdings or any Restricted Subsidiary and any asset
related thereto including, without limitation, all collateral securing such
accounts receivable and all guarantees or other obligations in respect of
such accounts receivable, proceeds of such accounts receivable and other
assets which are customarily transferred, or in respect of which security
interests are customarily granted, in connection with asset securitization
transactions involving accounts receivable.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Receivable Subsidiary" means a Wholly Owned Restricted Subsidiary
(other than a Guarantor) which engages in no activities other than in
connection with the financing of accounts receivables and which is designated
by the Board of Directors of Holdings (as provided below) as a Receivables
Subsidiary (a) no portion of the Indebtedness of any other Obligations
(contingent or otherwise) of which (i) is guaranteed by Holdings or any other
Restricted Subsidiary (excluding guarantees of Obligations (other than the
principal of, and interest on, Indebtedness) constituting Standard
Securitization Undertakings), (ii) is recourse to or obligates Holdings or
any other Restricted Subsidiary in any way other than pursuant to Standard
Securitization Undertakings or (iii) subjects any property or asset of
Holdings or any other Restricted Subsidiary, directly or indirectly, contin-
gently or otherwise, to the satisfaction thereof, other than pursuant to
Standard Securitization Undertakings, (b) with which neither Holdings nor any
other Restricted Subsidiary has any material contract, agreement, arrangement
or understanding (except in connection with a Purchase Money Note or
Qualified Receivables Transaction) other than on terms no less favorable to
Holdings or such other Restricted Subsidiary than those that might be
obtained at the time from persons that are not Affiliates of Holdings, other
than fees payable in the ordinary course of business in connection with
servicing accounts receivable, and (c) to which neither Holdings nor any
other Restricted Subsidiary has any obligation to maintain or preserve such
entity's financial condition or cause such entity to achieve certain level of
operating result. Any such designation by the Board of Directors of Holdings
shall be evidenced to the Trustee by filing with the Trustee a certified copy
of the resolution of the Board of Directors of Holdings giving effect to such
designation and an Officers' Certificate certifying, to the best of such
officer's knowledge and belief after consulting with counsel, that such
designation complied with the foregoing conditions.
"Registration Rights Agreement" means the Exchange Offer and
Registration Rights Agreement, dated as of the date of this Indenture, by and
among Holdings and the other parties named on the signature pages thereof, as
<PAGE>
such agreement may be amended, modified or supplemented from time to time,
and, with respect to Initial Notes issued under this Indenture subsequent to
the date of this Indenture pursuant to Section 2.02 hereof, the registration
rights agreement relating thereto relating thereto substantially identical to
the Registration Rights Agreement.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a Regulation S Temporary Global
Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note
in the form of Exhibit A-1 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to
the outstanding principal amount of the Regulation S Temporary Global Note
upon expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note
in the form of Exhibit A-2 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to
the outstanding principal amount of the Notes initially sold in reliance on
Rule 903 of Regulation S.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined
in Regulation S.
"Restricted Subsidiary" of a Person means each Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
<PAGE>
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means the Fifth Amended and Restated
Revolving Credit and Term Loan Agreement, dated as of February 10, 1999,
among Holdings and its Subsidiaries, as borrowers, the lenders listed therein
and BankBoston, N.A., as administrative agent, and Goldman Sachs Credit
Partners L.P., as syndication agent, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Securities Act, as such Regulation is in
effect on the date of this Indenture.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by Holdings or any
Restricted Subsidiary which are reasonably customary in an accounts
receivable transaction.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person: (i) any
corporation, association or other business entity of which more than 50% of
the total voting power of shares of Capital Stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof); and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"Subsidiary Guarantee" means the subordinated Guarantee by each
Guarantor of Holdings' payment obligations under this Indenture and the
Notes, executed pursuant to the provisions of this Indenture.
<PAGE>
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA, except as provided in Section 9.03 hereof.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture
and thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note in the
form of Exhibit A-1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the
name of the Depositary, representing a series of Notes that do not and are
not required to bear the Private Placement Legend.
"Unrestricted Definitive Notes" means one or more Definitive Notes
that do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Notes" means one or more Unrestricted Global Notes
and/or Unrestricted Definitive Notes, including, without limitation, the
Exchange Notes.
"Unrestricted Subsidiary" means any Subsidiary of Holdings that is
designated by the Board of Directors of Holdings as an Unrestricted
Subsidiary pursuant to a Board Resolution, but only to the extent that such
Subsidiary: (i) has no Indebtedness other than Non-Recourse Debt; (ii) is not
party to any agreement, contract, arrangement or understanding with Holdings
or any Restricted Subsidiary of Holdings unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to
Holdings or such Restricted Subsidiary than those that might be obtained at
the time from Persons who are not Affiliates of Holdings; (iii) is a Person
with respect to which neither Holdings nor any of its Restricted Subsidiaries
has any direct or indirect obligation (A) to subscribe for additional Equity
Interests or (B) to maintain or preserve such Person's financial condition or
to cause such Person to achieve any specified levels of operating results;
and (iv) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of Holdings or any of its Restricted
Subsidiaries. Any designation of a Subsidiary of Holdings as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation compiled with the
preceding conditions and was permitted by Section 4.07 hereof. If, at any
time, any Unrestricted Subsidiary would fail to meet the preceding
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be
an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of Holdings as of such date and, if such Indebtedness
is not permitted to be incurred as of such date under Section 4.09 hereof,
Holdings shall be in default of such covenant. The Board of Directors of
Holdings may at any time designate any Unrestricted Subsidiary to be a
<PAGE>
Restricted Subsidiary; provided that such designation shall be deemed to be
an incurrence of Indebtedness by a Restricted Subsidiary of Holdings of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under Section
4.09 hereof, calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (ii) no
Default or Event of Default would be in existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under
the Securities Act.
"Voting Stock" of any Person means the Capital Stock of such Person
that is entitled (without regard to the occurrence of a contingency) to vote
in the election of directors, managers or trustees of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Disqualified Stock at any date, the number of years obtained
by dividing (i) the sum of the products obtained by multiplying (a) the
amount of each then remaining installment, sinking fund, serial maturity or
other required payments of principal or liquidation preference, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date
and the making of such payment, by (ii) the then outstanding principal amount
or liquidation preference of such Indebtedness or Disqualified Stock.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person and/or by one or more Wholly Owned
Restricted Subsidiaries of such Person.
Section 1.02 Other Definitions.
Defined
Term in Section
"Affiliate Transaction" . . . . . . . . . . . . . . . 4.11
"Alternate Offer" . . . . . . . . . . . . . . . . . . 4.15
"Asset Sale Offer" . . . . . . . . . . . . . . . . . 4.10
"Asset Sale Offer Amount" 4.10
"Asset Sale Payment" . . . . . . . . . . . . . . . . 4.10
"Asset Sale Payment Date" 4.10
"Authentication Order" . . . . . . . . . . . . . . . 2.02
"Change of Control Offer" . . . . . . . . . . . . . . 4.15
"Change of Control Payment" . . . . . . . . . . . . . 4.15
"Change of Control Payment Date" . . . . . . . . . . 4.15
"Commission" . . . . . . . . . . . . . . . . . . . . 4.03
"Covenant Defeasance" . . . . . . . . . . . . . . . . 8.03
"Designated Senior Debt" . . . . . . . . . . . . . . 10.02
"DTC" . . . . . . . . . . . . . . . . . . . . . . . . 2.03
<PAGE>
"Event of Default" . . . . . . . . . . . . . . . . . 6.01
"Excess Proceeds" . . . . . . . . . . . . . . . . . . 4.10
"incur" . . . . . . . . . . . . . . . . . . . . . . . 4.09
"Legal Defeasance" . . . . . . . . . . . . . . . . . 8.02
"Paying Agent" . . . . . . . . . . . . . . . . . . . 2.03
"Payment Blockage Notice" . . . . . . . . . . . . . . 10.04
"Payment Default" . . . . . . . . . . . . . . . . . . 6.01
"Permitted Debt" . . . . . . . . . . . . . . . . . . 4.09
"Permitted Junior Securities" . . . . . . . . . . . . 10.02
"Qualified Proceeds" . . . . . . . . . . . . . . . . 4.10
"Registrar" . . . . . . . . . . . . . . . . . . . . . 2.03
"Representative" . . . . . . . . . . . . . . . . . . 10.02
"Restricted Payments" . . . . . . . . . . . . . . . . 4.07
"Senior Debt" . . . . . . . . . . . . . . . . . . . . 10.02
"Vestar" . . . . . . . . . . . . . . . . . . . . . . 4.11
Section 1.03 Terms of TIA.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the Notes and the Subsidiary Guarantees means Holdings
and the Guarantors, respectively, and any successor obligor upon the Notes
and the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule
under the TIA have the meanings so assigned to them.
Section 1.04 Rules of Construction.
Unless the context otherwise requires: (i) a term has the meaning
assigned to it; (ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP; (iii) "or" is not exclusive;
(iv) words in the singular include the plural, and in the plural include the
singular; (v) provisions apply to successive events and transactions; and
(vi) references to sections of or rules under the Securities Act shall be
<PAGE>
deemed to include substitute, replacement of successor sections or rules
adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
Section 2.01 Form and Dating.
(a) General. The Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of $1,000 and integral
multiples thereof.
The terms and provisions contained in the Notes shall constitute,
and are hereby expressly made, a part of this Indenture, and Holdings, the
Guarantors and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound
thereby. However, to the extent any provision of any Note conflicts with the
express provisions of this Indenture, the provisions of this Indenture shall
govern and be controlling.
(b) Global Notes. Notes issued in global form shall be
substantially in the form of Exhibits A-1 or A-2 attached hereto (including
the Global Note Legend thereon and the "Schedule of Exchanges of Interests in
the Global Note" attached thereto). Notes issued in definitive form shall be
substantially in the form of Exhibit A-1 attached hereto (but without the
Global Note Legend thereon and without the "Schedule of Exchanges of
Interests in the Global Note" attached thereto). Each Global Note shall
represent such of the outstanding Notes as shall be specified therein and
each shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding Notes
represented thereby shall be made by the Trustee or the Custodian, at the
direction of the Trustee, in accordance with instructions given by the Holder
thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in
reliance on Regulation S shall be issued initially in the form of the
Regulation S Temporary Global Note, which shall be deposited on behalf of the
purchasers of the Notes represented thereby with the Trustee, at its
Corporate Trust Office, as custodian for the Depositary, and registered in
the name of the Depositary or the nominee of the Depositary for the accounts
of designated agents holding on behalf of Euroclear or Cedel, duly executed
<PAGE>
by Holdings and authenticated by the Trustee as hereinafter provided. The
Restricted Period shall terminate upon the receipt by the Trustee of (i) a
written certificate from the Depositary, together with copies of certificates
from Euroclear and Cedel Bank certifying that they have received
certification of non-United States beneficial ownership of 100% of the ag-
gregate principal amount of the Regulation S Temporary Global Note (except to
the extent of any beneficial owners thereof who acquired an interest therein
during the Restricted Period pursuant to another exemption from registration
under the Securities Act and who will take delivery of a beneficial ownership
interest in a 144A Global Note bearing a Private Placement Legend, all as
contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers'
Certificate from Holdings. Following the termination of the Restricted
Period, beneficial interests in the Regulation S Temporary Global Note shall
be exchanged for beneficial interests in Regulation S Permanent Global Notes
pursuant to the Applicable Procedures. Simultaneously with the
authentication of Regulation S Permanent Global Notes, the Trustee shall
cancel the Regulation S Temporary Global Note. The aggregate principal
amount of the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The
provisions of the "Operating Procedures of the Euroclear System" and "Terms
and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes that are held by
Participants through Euroclear or Cedel Bank.
Section 2.02 Execution and Authentication.
An Officer shall sign the Notes for Holdings by manual or facsimile
signature. If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual of
facsimile signature of the Trustee. The signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of Holdings signed by an
Officer (an "Authentication Order"), authenticate (i) Initial Notes for
original issue up to a maximum aggregate principal amount of $225.0 million
and (ii) Unrestricted Notes from time to time only (x) in exchange for a like
principal amount of Initial Notes or (y) in an aggregate principal amount of
not more than the excess of $225.0 million over the sum of the aggregate
principal amount of (A) Initial Notes then outstanding and (B) Unrestricted
Notes issued in accordance with (ii)(x) above. The aggregate principal
<PAGE>
amount of Notes outstanding at any time may not exceed $225.0 million except
as provided in Section 2.07 hereof.
In the event that Holdings shall issue and the Trustee shall
authenticate any Notes issued under this Indenture subsequent to the date of
this Indenture, Holdings shall use its reasonable best efforts to obtain the
same "CUSIP" number for such Notes as is printed on the Notes outstanding at
such time; provided, however, that if any series of Notes issued under this
Indenture subsequent to the date of this Indenture is determined, pursuant to
an Opinion of Counsel of Holdings in a form reasonably satisfactory to the
Trustee to be a different class of security than the Notes outstanding at
such time for federal income tax purposes, the Issuer may obtain a "CUSIP"
number for such Notes that is different than the "CUSIP" number printed on
the Notes then outstanding. Notwithstanding the foregoing, all Notes issued
and outstanding under this Indenture shall vote and consent together on all
matters as one class and no series of Notes will have the right to vote or
consent as a separate class on any matter.
The Trustee may appoint an authenticating agent acceptable to
Holdings to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or
an Affiliate of Holdings.
Section 2.03 Registrar and Paying Agent.
Holdings shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Notes and of their transfer and
exchange. Holdings may appoint one or more co-registrars and one or more
additional paying agents. The term "Registrar" includes any co-registrar and
the term "Paying Agent" includes any additional paying agent. Holdings may
change any Paying Agent or Registrar without notice to any Holder. Holdings
shall notify the Trustee in writing of the name and address of any Agent not
a party to this Indenture. If Holdings fails to appoint or maintain another
entity as Registrar or Paying Agent, the Trustee shall act as such. Holdings
or any of its Subsidiaries may act as Paying Agent or Registrar.
Holdings initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
Holdings initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
Holdings shall, prior to each interest record date, notify the
Paying Agent of any wire transfer instructions for payments that it receives
from Holders.
<PAGE>
Section 2.04 Paying Agent to Hold Money in Trust.
Holdings shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes,
and will notify the Trustee of any default by Holdings in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. Holdings at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon
payment over to the Trustee, the Paying Agent (if other than Holdings or a
Subsidiary) shall have no further liability for the money. If Holdings or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the benefit of the Holders all money held by it as Paying
Agent. Upon any bankruptcy or reorganization proceedings relating to
Holdings, the Trustee shall serve as Paying Agent for the Notes.
Section 2.05 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses
of all Holders and shall otherwise comply with TIA Section 312(a). If the
Trustee is not the Registrar, Holdings shall furnish to the Trustee at least
seven Business Days before each interest payment date and at such other times
as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of the
Holders of Notes and Holdings shall otherwise comply with TIA Section 312(a).
Section 2.06 Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not
be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. Global Notes
will not be exchanged by Holdings for Definitive Notes unless (i) Holdings
delivers to the Trustee notice from the Depositary that it is unwilling or
unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by Holdings within 120 days after the date of
such notice from the Depositary; (ii) Holdings in its sole discretion
determines that the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes and delivers a written notice to such effect
to the Trustee (provided that in no event shall the Regulation S Temporary
Global Note be exchanged by Holdings for Definitive Notes prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act and provided further, there shall be no continuing Default or
Event of Default); or (iii) an Event of Default shall have occurred and be
continuing with respect to the Notes and the Trustee has received a request
<PAGE>
from DTC or any Holder to issue Definitive Notes. Upon the occurrence of any
of the preceding events in (i), (ii) or (iii) above, Definitive Notes shall
be issued in such names as the Depositary shall instruct the Trustee. Global
Notes also may be exchanged or replaced, in whole or in part, as provided in
Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in
exchange for, or in lieu of, a Global Note or any portion thereof, pursuant
to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated
and delivered in the form of, and shall be, a Global Note. A Global Note may
not be exchanged for another Note other than as provided in this Section
2.06(a), however, beneficial interests in a Global Note may be transferred
and exchanged as provided in Section 2.06(b) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in
Global Notes. The transfer and exchange of beneficial interests in the
Global Notes shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Notes shall be subject to restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Notes also
shall require compliance with either subparagraph (i) or (ii) below, as
applicable, as well as one or more of the other following subparagraphs, as
applicable:
(i) Transfer of Beneficial Interests in the Same Global
Note. Beneficial interests in any Restricted Global Note may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Note in
accordance with the transfer restrictions set forth in the
Private Placement Legend; provided, however, that prior to the
expiration of the Restricted Period, transfers of beneficial
interests in the Temporary Regulation S Global Note may not be
made to a U.S. Person or for the account or benefit of a U.S.
Person (other than an Initial Purchaser). Beneficial interests
in any Unrestricted Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions
shall be required to be delivered to the Registrar to effect the
transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial
Interests in Global Notes. In connection with all transfers and
exchanges of beneficial interests in any Global Note that is not
subject to Section 2.06(b)(i) above, the transferor of such
beneficial interest must deliver to the Registrar (1) a written
order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing
the Depositary to credit or cause to be credited a beneficial
interest in another Global Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2)
<PAGE>
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be
credited with such increase. Upon consummation of the Exchange
Offer by Holdings in accordance with Section 2.06(f) hereof, the
requirements of this Section 2.06(b)(ii) shall be deemed to have
been satisfied upon receipt by the Registrar of the instructions
contained in the Letter of Transmittal delivered by the holder of
such beneficial interests in the Restricted Global Notes. Upon
satisfaction of all of the requirements for transfer or exchange
of beneficial interests in Global Notes contained in this
Indenture and the Notes or otherwise applicable under the
Securities Act, the Trustee shall adjust the principal amount of
the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another
Restricted Global Note. A beneficial interest in any Restricted
Global Note may be transferred to a Person who takes delivery
thereof in the form of a beneficial interest in another
Restricted Global Note if the transfer complies with the
requirements of Section 2.06(b)(ii) above and the Registrar
receives the following:
(A) if the transferee will take delivery in the
form of a beneficial interest in a 144A Global Note, then
the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item
(1) thereof; and
(B) if the transferee will take delivery in the
form of a beneficial interest in a Regulation S Global
Note, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the
certifications in item (2) thereof;
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in an
Unrestricted Global Note. A beneficial interest in any
Restricted Global Note may be exchanged by any holder thereof for
a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note if the
exchange or transfer complies with the requirements of Section
2.06(b)(ii) above and:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the holder of the
beneficial interest to be transferred, in the case of an
exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it
<PAGE>
is not (1) a broker-dealer, (2) a Person participating in
the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of Holdings;
(B) such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) such transfer is effected by a Broker-
Dealer pursuant to the Shelf Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit
C hereto, including the certifications in item
(1)(a) thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note,
a certificate from such holder in the form of
Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph
(D), if the Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with
the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued,
Holdings shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
<PAGE>
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the
form of, a beneficial interest in a Restricted Global Note.
(c) Transfer and Exchange of Beneficial Interests in Global Notes
for Definitive Notes. A beneficial interest in a Global Note may not be
exchanged for a Definitive Note except under the circumstances described in
Section 2.06(a) hereof. A beneficial interest in a Global Note may not be
transferred to a Person who takes delivery thereof in the form of a
Definitive Note except under the circumstances described in Section 2.06(a)
hereof.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests in Global Notes.
(i) Restricted Definitive Notes to Beneficial Interests
in Restricted Global Notes. If any Holder of a Restricted
Definitive Note proposes to exchange such Note for a beneficial
interest in a Restricted Global Note or to transfer such Restri-
cted Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following
documentation:
(A) if the Holder of such Restricted Definitive
Note proposes to exchange such Note for a beneficial
interest in a Restricted Global Note, a certificate from
such Holder in the form of Exhibit C hereto, including
the certifications in item (2)(a) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under
the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item
(1) thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore
transaction in accordance with Rule 903 or Rule 904 under
the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item
(2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the
registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(a) thereof;
<PAGE>
(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration
requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications, certificates and Opinion of
Counsel required by item (3)(d) thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to Holdings or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration
statement under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, and
increase or cause to be increased the aggregate principal amount
of, in the case of clause (A) above, the appropriate Restricted
Global Note, in the case of clause (B) above, the 144A Global
Note, and in the case of clause (c) above, the Regulation S
Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests
in Unrestricted Global Notes. A Holder of a Restricted
Definitive Note may exchange such Note for a beneficial interest
in an Unrestricted Global Note or transfer such Restricted
Definitive Note to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note only
if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case
of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange
Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of Holdings;
(B) such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
<PAGE>
(C) such transfer is effected by a Broker-
Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive
Notes proposes to exchange such Notes for a
beneficial interest in the Unrestricted Global Note,
a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in
item (1)(b) thereof; or
(2) if the Holder of such Definitive
Notes proposes to transfer such Notes to a Person
who shall take delivery thereof in the form of a
beneficial interest in the Unrestricted Global Note,
a certificate from such Holder in the form of
Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph
(D), if the Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with
the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs
in this Section 2.06(d)(ii), the Trustee shall cancel the
Definitive Notes and increase or cause to be increased the
aggregate principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial
Interests in Unrestricted Global Notes. A Holder of an
Unrestricted Definitive Note may exchange such Note for a
beneficial interest in an Unrestricted Global Note or transfer
such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note
at any time. Upon receipt of a request for such an exchange or
transfer, the Trustee shall cancel the applicable Unrestricted
Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global
Notes.
<PAGE>
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been
issued, Holdings shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive
Notes. Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied
by a written instruction of transfer in form satisfactory to the Registrar
duly executed by such Holder or by its attorney, duly authorized in writing.
In addition, the requesting Holder shall provide any additional
certifications, documents and information, as applicable, required pursuant
to the following provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in
the form of a Restricted Definitive Note if the Registrar
receives the following:
(A) if the transfer will be made pursuant to
Rule 144A under the Securities Act, then the transferor
must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to
Rule 903 or Rule 904, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including
the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to
any other exemption from the registration requirements of
the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including
the certifications, certificates and Opinion of Counsel
required by item (3)(d) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted
Definitive Notes. Any Restricted Definitive Note may be
exchanged by the Holder thereof for an Unrestricted Definitive
Note or transferred to a Person or Persons who take delivery
thereof in the form of an Unrestricted Definitive Note if:
<PAGE>
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case
of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange
Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of Holdings;
(B) any such transfer is effected pursuant to
the Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a Broker-
Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Notes proposes to exchange such Notes for
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto, includ-
ing the certifications in item (1)(c) thereof; or
(2) if the Holder of such Restricted
Definitive Notes proposes to transfer such Notes to
a Person who shall take delivery thereof in the form
of an Unrestricted Definitive Note, a certificate
from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph
(D), if the Registrar so requests, an Opinion of Counsel
in form reasonably acceptable to Holdings to the effect
that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with
the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted
Definitive Notes. A Holder of Unrestricted Definitive Notes may
transfer such Notes to a Person who takes delivery thereof in the
form of an Unrestricted Definitive Note. Upon receipt of a
request to register such a transfer, the Registrar shall register
the Unrestricted Definitive Notes pursuant to the instructions
from the Holder thereof.
<PAGE>
(f) Exchange Offer. Upon the occurrence of the Exchange
Offer in accordance with the Registration Rights Agreement, Holdings shall
issue and, upon receipt of an Authentication Order in accordance with Section
2.02, the Trustee shall authenticate (i) one or more Unrestricted Global
Notes in an aggregate principal amount equal to the principal amount of the
beneficial interests in the Restricted Global Notes tendered for acceptance
by Persons that certify in the applicable Letters of Transmittal that (x)
they are not broker-dealers, (y) they are not participating in a distribution
of the Exchange Notes and (z) they are not affiliates (as defined in Rule
144) of Holdings, and accepted for exchange in the Exchange Offer and (ii)
Definitive Notes in an aggregate principal amount equal to the principal
amount of the Restricted Definitive Notes accepted for exchange in the
Exchange Offer. Concurrently with the issuance of such Notes, the Trustee
shall cause the aggregate principal amount of the applicable Restricted
Global Notes to be reduced accordingly, and Holdings shall execute and the
Trustee shall authenticate and deliver to the Persons designated by the
Holders of Definitive Notes so accepted Definitive Notes in the appropriate
principal amount.
(g) Legends. The following legends shall appear on the face
of all Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B)
below, each Global Note and each Definitive Note (and all
Notes issued in exchange therefor or substitution
thereof) shall bear the legend in substantially the
following form:
"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (A) (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (3) TO AN INSTITUTIONAL
ACCREDITED INVESTOR AS DEFINED IN RULE 501(a)(1), (2), (3) or (7)
OF REGULATION D IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF
THE UNITED STATES."
<PAGE>
(B) Notwithstanding the foregoing, any Global
Note or Definitive Note issued pursuant to subparagraph
(b)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of
this Section 2.06 (and all Notes issued in exchange
therefor or substitution thereof) shall not bear the
Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a
legend in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN
THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR
THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT
(I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE
FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND
(IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF HOLDINGS."
(iii) Regulation S Temporary Global Note Legend. The
Regulation S Temporary Global Note shall bear a legend in
substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL
NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE
FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS
DEFINED HEREIN)."
(h) Cancellation and/or Adjustment of Global Notes. At such
time as all beneficial interests in a particular Global Note have been
exchanged for Definitive Notes or a particular Global Note has been redeemed,
repurchased or canceled in whole and not in part, each such Global Note shall
be returned to or retained and canceled by the Trustee in accordance with
Section 2.11 hereof. At any time prior to such cancellation, if any
beneficial interest in a Global Note is exchanged for or transferred to a
Person who will take delivery thereof in the form of a beneficial interest in
another Global Note or for Definitive Notes, the principal amount of Notes
represented by such Global Note shall be reduced accordingly and an
endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such reduction; and if
the beneficial interest is being exchanged for or transferred to a Person who
will take delivery thereof in the form of a beneficial interest in another
Global Note, such other Global Note shall be increased accordingly and an
endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
<PAGE>
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges,
Holdings shall execute and the Trustee shall authenticate Global
Notes and Definitive Notes upon Holdings' order or at the
Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a
Definitive Note for any registration of transfer or exchange, but
Holdings may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer pursuant to
Sections 2.10, 3.06, 4.10, 4.15 and 9.05 hereof).
(iii) All Global Notes and Definitive Notes issued
upon any registration of transfer or exchange of Global Notes or
Definitive Notes shall be the valid obligations of Holdings,
evidencing the same debt, and entitled to the same benefits under
this Indenture, as the Global Notes or Definitive Notes
surrendered upon such registration of transfer or exchange.
(iv) The Registrar shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of
any selection of Notes for redemption under Section 3.02 hereof
and ending at the close of business on the day of selection, (B)
to register the transfer of or to exchange any Note so selected
for redemption in whole or in part, except the unredeemed portion
of any Note being redeemed in part or (c) to register the
transfer of or to exchange a Note between a record date and the
next succeeding Interest Payment Date.
(v) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and Holdings may
deem and treat the Person in whose name any Note is registered as
the absolute owner of such Note for the purpose of receiving
payment of principal of and interest on such Notes and for all
other purposes, and none of the Trustee, any Agent or Holdings
shall be affected by notice to the contrary.
(vi) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section
2.02 hereof.
(vii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to
this Section 2.06 to effect a registration of transfer or
exchange may be submitted by facsimile.
<PAGE>
(viii) Each Holder of a Note agrees to indemnify
Holdings and the Trustee against any liability that may result
from the transfer, exchange or assignment of such Holder's Note
in violation of any provision of this Indenture and/or applicable
United States federal or state securities law.
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 Note (including any transfers between or among Depositary
Participants or beneficial owners of interests in any Global Note) 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.
Section 2.07 Replacement Notes
If any mutilated Note is surrendered to the Trustee or Holdings and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, Holdings shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. An indemnity bond must be supplied by the Holder that
is sufficient in the judgment of the Trustee and Holdings to protect
Holdings, the Trustee, any Agent and any authenticating agent from any loss
that any of them may suffer if a Note is replaced. Holdings may charge for
its expenses in replacing a Note.
Every replacement Note is an additional obligation of Holdings and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08 Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by
the Trustee in accordance with the provisions hereof and those described in
this Section as not outstanding. Except as set forth in Section 2.09 hereof,
a Note does not cease to be outstanding because Holdings or an Affiliate of
Holdings holds the Note; however, Notes held by Holdings or a Subsidiary of
Holdings shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
<PAGE>
If the Paying Agent (other than Holdings, a Subsidiary of Holdings or
an Affiliate of any thereof) holds, on a redemption date or maturity date,
money sufficient to pay Notes payable on that date, then on and after that
date such Notes shall be deemed to be no longer outstanding and shall cease
to accrue interest.
Section 2.09 Treasury Notes.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent, Notes owned by
Holdings, or by any Person directly or indirectly controlling or controlled
by or under direct or indirect common control with Holdings, shall be
considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that a Responsible Officer of the
Trustee knows are so owned shall be so disregarded.
Section 2.10 Temporary Notes
Holdings may prepare and the Trustee, upon receipt of an
Authentication Order, shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form of permanent Notes but may have variations
that Holdings considers appropriate for temporary Notes and as shall be
reasonably acceptable to the Trustee. Holdings may prepare and the Trustee,
upon receipt of an Authentication Order, shall authenticate permanent Notes
in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits
of this Indenture.
Section 2.11 Cancellation.
Holdings at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Notes surrendered for
registration of transfer, exchange, payment, replacement or cancellation and
shall dispose of the Notes in accordance with its customary procedures
(subject to the record retention requirement of the Exchange Act). Holdings
may not issue new Notes to replace Notes that it has paid or that have been
delivered to the Trustee for cancellation.
Section 2.12 Defaulted Interest.
If Holdings defaults in a payment of interest on the Notes, such
interest shall cease to be payable to the Holders on the relevant record date
and Holdings shall instead pay the defaulted interest in any lawful manner
plus, to the extent lawful, interest payable on the defaulted interest, to
the Persons who are Holders on a subsequent special record date, in each case
at the rate provided in the Notes and in Section 4.01 hereof. Holdings shall
notify the Trustee in writing of the amount of defaulted interest proposed to
<PAGE>
be paid on each Note and the date of the proposed payment. Holdings shall
fix or cause to be fixed each such special record date and payment date,
provided that no such special record date shall be less than 10 days prior to
the related payment date for such defaulted interest. At least 15 days
before the special record date, Holdings (or, upon the written request of
Holdings, the Trustee in the name and at the expense of Holdings) shall mail
or cause to be mailed to Holders a notice that states the special record
date, the related payment date and the amount of such interest to be paid.
Section 2.13 CUSIP Numbers.
Holdings, in issuing the Notes, may use "CUSIP" numbers (if then
generally in use) and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Notes or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Notes, and any such redemption shall not be affected
by any defect in or omission of such numbers. Holdings will promptly notify
the Trustee of any change in the "CUSIP" numbers.
ARTICLE 3
REDEMPTION
Section 3.01 Notice of Redemption to Trustee.
If Holdings elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the
Trustee, at least 30 days but not more than 90 days before the redemption
date, an Officers' Certificate setting forth (i) the clause of this Indenture
pursuant to which the redemption shall occur, (ii) the redemption date, (iii)
the principal amount of Notes to be redeemed and (iv) the redemption price.
Section 3.02 Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed at any time pursuant
to Section 3.07 hereof, the Trustee shall select the Notes to be redeemed
among the Holders of the Notes in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not so listed, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate. In the event of
partial redemption by lot pursuant to Section 3.07 hereof, the particular
Notes to be redeemed shall be selected, unless otherwise provided herein, not
less than 30 nor more than 90 days prior to the redemption date by the
Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify Holdings in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
<PAGE>
redemption, the principal amount thereof to be redeemed. Notes and portions
of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03 Notice of Redemption to Holders.
If Holdings elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, at least 30 days but not more
than 90 days before the redemption date, Holdings shall mail or cause to be
mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address. The notice shall
identify the Notes to be redeemed (including "CUSIP" number(s)) and shall
state: (i) the redemption date; (ii) the redemption price; (iii) if any Note
is being redeemed in part, the portion of the principal amount of such Note
to be redeemed and that, after the redemption date upon surrender of such
Note, a new Note or Notes in principal amount equal to the unredeemed portion
shall be issued upon cancellation of the original Note; (iv) the name and
address of the Paying Agent; (v) that Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price; (vi) that,
unless Holdings defaults in making such redemption payment, interest on Notes
called for redemption ceases to accrue on and after the redemption date;
(vii) the paragraph of the Notes and/or Section of this Indenture pursuant to
which the Notes called for redemption are being redeemed; and (viii) that no
representation is made as to the correctness or accuracy of the "CUSIP"
number, if any, listed in such notice or printed on the Notes.
At Holdings' request, the Trustee shall give the notice of redemption
in Holdings' name and at its expense; provided, however, that Holdings shall
have delivered to the Trustee, at least 60 days prior to the redemption date,
an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
Section 3.04 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05 Deposit of Redemption Price.
One Business Day prior to the redemption date, Holdings shall deposit
with the Paying Agent money sufficient to pay the redemption price of and
accrued interest on all Notes to be redeemed on that date. The Paying Agent
shall promptly return to Holdings any money deposited with the Paying Agent
<PAGE>
by Holdings in excess of the amounts necessary to pay the redemption price
of, and accrued interest on, all Notes to be redeemed.
If Holdings complies with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Notes
or the portions of Notes called for redemption. If a Note is redeemed on or
after an interest record date but on or prior to the related interest payment
date, then any accrued and unpaid interest shall be paid to the Person in
whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender
for redemption because of the failure of Holdings to comply with the
preceding paragraph, interest shall be paid on the unpaid principal, from the
redemption date until such principal is paid, and to the extent lawful on any
interest not paid on such unpaid principal, in each case at the rate provided
in the Notes and in Section 4.01 hereof.
Section 3.06 Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, Holdings shall
issue and, upon Holdings' written request, the Trustee shall authenticate for
the Holder at the expense of Holdings a new Note equal in principal amount to
the unredeemed portion of the Note surrendered.
Section 3.07 Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07,
Holdings shall not have the option to redeem the Notes pursuant to this
Section 3.07 prior to February 15, 2004. On or after February 15, 2004, the
Notes will be subject to redemption at any time at the option of Holdings, in
whole or in part, upon not less than 30 nor more than 90 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on February 15 of the years indicated below:
Year Percentage
2004 . . . . . . . . . . . . . . . 105.438%
2005 . . . . . . . . . . . . . . . 103.625%
2006 . . . . . . . . . . . . . . . 101.813%
2007 and thereafter . . . . . . . . 100.000%
(b) Notwithstanding the provisions of clause (a) of this
Section 3.07, at any time on or prior to February 15, 2002, Holdings may on
any one or more occasions redeem up to 35% of the aggregate principal amount
of Notes originally issued hereunder at a redemption price of 110.875% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds
of one or more Public Equity Offerings by Holdings; provided that (i) at
least 65% of the aggregate principal amount of Notes originally issued
<PAGE>
remains outstanding immediately after the occurrence of such redemption
(excluding Notes held by Holdings and its Subsidiaries) and (ii) such
redemption shall occur within 90 days of the date of the closing of such
Public Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be
made pursuant to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08 Mandatory Redemption.
Except as set forth in Sections 4.10 and 4.15 hereof, Holdings shall
not be required to make mandatory redemption payments with respect to the
Notes.
ARTICLE 4
COVENANTS
Section 4.01 Payment of Notes.
Holdings shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on
the date due if the Paying Agent, if other than Holdings or a Subsidiary
thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited
by Holdings in immediately available funds and designated for and sufficient
to pay all principal, premium, if any, and interest then due. Holdings shall
pay all Liquidated Damages, if any, in the same manner on the dates and in
the amounts set forth in the Registration Rights Agreement.
Holdings shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes
to the extent lawful; it shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace
period) at the same rate to the extent lawful.
Section 4.02 Maintenance of Office or Agency.
Holdings shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices
and demands to or upon Holdings in respect of the Notes and this Indenture
may be served. Holdings shall give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If
at any time Holdings shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
<PAGE>
Holdings may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve Holdings of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. Holdings shall
give prompt written notice to the Trustee of any such designation or rescis-
sion and of any change in the location of any such other office or agency.
Holdings hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of Holdings in accordance with Section 2.03.
Section 4.03 Reports.
(a) Whether or not required by the rules and regulations of
the Securities and Exchange Commission (the "Commission"), so long as any
Notes are outstanding, Holdings shall furnish to the Holders of Notes, within
the time periods specified in the Commission's rules and regulations: (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if Holdings
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by Holdings' certified
independent accountants; and (ii) all current reports that would be required
to be filed with the Commission on Form 8-K if Holdings were required to file
such reports. In addition, whether or not required by the Commission,
Holdings shall file a copy of all of the information and reports referred to
in clause (i) and (ii) above with the Commission for public availability
within the time periods specified in the Commission's rules and regulations
(unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request.
Notwithstanding the foregoing, so long as Holdings is in compliance
with its obligations under the Registration Rights Agreement, and any such
exchange offer registration statement contains all of the financial and other
information otherwise required by Forms 10-K and 10-Q for the year ended
December 31, 1998 and the three months ending March 31, 1999, respectively,
Holdings shall not be required to file with the Commission or otherwise
provide an annual report on Form 10-K or a quarterly report on Form 10-Q for
the year ended December 31, 1998 or the quarter ending March 31, 1999,
respectively.
(b) In addition, for so long as any Restricted Global Notes
or Restricted Definitive Notes remain outstanding, Holdings and the
Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act. Any
materials required to be furnished to Holders of Notes by this Section 4.03
shall discuss, in reasonable detail, either on the face of the financial
<PAGE>
statements included therein or in the footnotes thereto and in any
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the financial condition and results of operations of Holdings
and its Restricted Subsidiaries separate from the financial condition and
results of operations of the Unrestricted Subsidiaries of Holdings.
(c) 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
Holdings' compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
Section 4.04 Compliance Certificate.
(a) Holdings and each Guarantor (to the extent that such
Guarantor is so required under the TIA) shall deliver to the Trustee, within
100 days after the end of each fiscal year, an Officers' Certificate stating
that a review of the activities of Holdings and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether Holdings has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best
of his or her knowledge Holdings has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in
the performance or observance of any of the terms, provisions and conditions
of this Indenture (or, if a Default or Event of Default shall have occurred
and be continuing, describing all such Defaults or Events of Default of which
he or she may have knowledge and what action Holdings is taking or proposes
to take with respect thereto) and that to the best of his or her knowledge no
event has occurred and remains in existence by reason of which payments on
account of the principal of or interest, if any, on the Notes is prohibited
or if such event has occurred, a description of the event and what action
Holdings is taking or proposes to take with respect thereto.
(b) Holdings shall, so long as any of the Notes are
outstanding, deliver to the Trustee as soon as possible and in any event
within five days, forthwith upon Holdings becoming aware of any Default or
Event of Default that has occurred and is continuing, an Officers'
Certificate specifying such Default or Event of Default and what action
Holdings is taking or proposes to take with respect thereto.
Section 4.05 Taxes.
Holdings shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate
proceedings or where the failure to effect such payment is not adverse in any
material respect to the Holders of the Notes.
<PAGE>
Section 4.06 Stay, Extension and Usury Laws.
Holdings and each of the Guarantors covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture;
and Holdings and each of the Guarantors (to the extent that it may lawfully
do so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it shall not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
Section 4.07 Restricted Payments.
Holdings will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of Holdings' or any of its Restricted
Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or
consolidation involving Holdings or any of its Restricted
Subsidiaries) or to the direct or indirect holders of
Holdings' or any of its Restricted Subsidiaries' Equity
Interests in their capacity as such (other than dividends or
distributions payable solely in Equity Interests (other than
Disqualified Stock) of Holdings or dividends or distributions
payable to Holdings or a Restricted Subsidiary of Holdings);
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger
or consolidation involving Holdings) any Equity Interests of
Holdings or any direct or indirect parent of Holdings or any
Restricted Subsidiary of Holdings (other than any such Equity
Interests owned by Holdings or any Restricted Subsidiary of
Holdings);
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes (other than
the Notes), except a payment of interest or principal at the
Stated Maturity thereof or as a mandatory sinking fund
payment; or
(4) make any Restricted Investment (all such payments and other
actions set forth in clauses (1) through (4) above being
collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
<PAGE>
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) Holdings would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted
Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of
Section 4.09 hereof; and
(3) such Restricted Payment, together with the aggregate amount
of all other Restricted Payments made by Holdings and its
Restricted Subsidiaries after the date of the Indenture
(excluding Restricted Payments permitted by clauses (2), (3),
(5), (7) and (8) of the next succeeding paragraph), is less
than the sum, without duplication, of
(a) 50% of the Consolidated Net Income of Holdings for the
period (taken as one accounting period) from January 1, 1999 to the
end of Holdings' most recently ended fiscal quarter for which
internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus
(b) 100% of the aggregate net cash proceeds received by
Holdings since the date of the Indenture as a contribution to its
common equity capital or from the issue or sale of Equity Interests
of Holdings (other than Disqualified Stock) or from the issue or sale
of convertible or exchangeable Disqualified Stock or convertible or
exchangeable debt securities of Holdings that have been converted
into or exchanged for such Equity Interests (other than Equity
Interests (or Disqualified Stock or debt securities) sold to a
Subsidiary of Holdings), plus
(c) to the extent that any Restricted Investment that was
made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (without duplication of
amounts included in Consolidated Net Income at any time after the
Closing) (i) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (ii)
the initial amount of such Restricted Investment.
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such
payment would have complied with the provisions of the
Indenture;
<PAGE>
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness of
Holdings or any Guarantor or of any Equity Interests of
Holdings or any Restricted Subsidiary in exchange for, or out
of the net cash proceeds of the substantially concurrent sale
(other than to a Restricted Subsidiary of Holdings) of,
Equity Interests of Holdings (other than Disqualified Stock);
provided that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause
(3) (b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition
of subordinated Indebtedness of Holdings or any Guarantor
with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of
Holdings to the holders of all of its common Equity Interests
on a pro rata basis;
(5) the repurchase of Equity Interests deemed to occur upon the
exercise of stock options if such Equity Interests represent
a portion of the exercise price thereof;
(6) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of Holdings or any
Restricted Subsidiary of Holdings held by (A) any director of
Holdings or member of Holdings' (or any of its Restricted
Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement in effect as
of the date of the Indenture or (B) any employee of Holdings
or any of its Subsidiaries upon the retirement of any such
employee; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests
shall not exceed $2.5 million in any twelve-month period;
(7) the defeasance, redemption or repurchase of any Disqualified
Stock of Holdings or any Restricted Subsidiary in exchange
for, or out of the substantially concurrent sale (other than
to Holdings or a Subsidiary of Holdings) of Disqualified
Stock of Holdings or such Restricted Subsidiary,
respectively; provided that: (A) the aggregate liquidation
preference of such Disqualified Stock does not exceed the
aggregate liquidation preference of the Disqualified Stock so
extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses incurred in
connection therewith); (B) such Disqualified Stock has a
final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or
<PAGE>
greater than the Weighted Average Life to Maturity of the
Notes; and (C) such Disqualified Stock is incurred either by
Holdings or by the Restricted Subsidiary who is the obligor
on the Disqualified Stock being extended, refinanced,
renewed, replaced, defeased or refunded;
(8) the making of loans by Holdings or any of its Restricted
Subsidiaries to officers or directors of Holdings; provided
that the aggregate outstanding amount of such loans shall not
exceed, at any time, $2.0 million; and
(9) so long as no Default or Event of Default is continuing or
would be caused thereby, the defeasance, redemption or
repurchase of any preferred stock or Disqualified Stock
issued in connection with the acquisition of assets or a
Permitted Business; provided that the aggregate amount of
such Defeasance, redemption or repurchase payments shall not
exceed $5.0 million.
The amount of all Restricted Payments (other than cash) and Qualified
Proceeds (other than cash) shall be the fair market value on the date of the
Restricted Payment or date of receipt of Qualified Proceeds of the asset(s)
or securities proposed to be transferred or issued by Holdings or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment. The fair market value of any assets or securities that are required
to be valued by this covenant shall be determined by the Board of Directors
whose resolution with respect thereto shall be delivered to the Trustee. The
Board of Directors' determination must be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if the fair market value exceeds $5.0 million. Not later than the
date of making any Restricted Payment, Holdings shall deliver to the Trustee
an Officers' Certificate stating that such Restricted Payment is permitted
and setting forth the basis upon which the calculations required by this
"Restricted Payments" covenant were computed, together with a copy of any
fairness opinion or appraisal required by the Indenture. Accrual of
interest, accretion or amortization of original issue discount, the payment
of interest on any Indebtedness in the form of additional Indebtedness with
the same terms and the payment of dividends on Disqualified Stock in the form
of additional shares of the same class of Disqualified Stock will not be
deemed to be a Restricted Payment for purposes of this covenant; provided in
each such case, that the amount thereof is included in Fixed Charges of
Holdings as accrued.
Section 4.08 Dividend and Other Payment Restrictions Affecting
Subsidiaries.
Holdings will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
<PAGE>
(1) pay dividends or make any other distributions on its Capital
Stock to Holdings or any of Holdings' Restricted
Subsidiaries, or with respect to any other interest or par-
ticipation in, or measured by, its profits, or pay any
indebtedness owed to Holdings or any of Holdings' Restricted
Subsidiaries;
(2) make loans or advances to Holdings or any of Holdings'
Restricted Subsidiaries; or
(3) transfer any of its properties or assets to Holdings or any
of Holdings' Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) the Senior Credit Facility and Existing Indebtedness, in each
case, as in effect on the date of the Indenture and any
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive, taken as
a whole, with respect to such dividend and other payment
restrictions than those contained in the Senior Credit
Facility or such Existing Indebtedness, as in effect on the
date of the Indenture;
(2) the Indenture, the Notes and the Exchange Notes;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a
Person acquired by Holdings or any of its Restricted
Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so
acquired; provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to
be incurred;
(5) customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past
practices;
(6) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions on the
<PAGE>
property so acquired of the nature described in clause (3) of
the preceding paragraph;
(7) any agreement for the sale or other disposition of a
Restricted Subsidiary that restricts distributions by such
Restricted Subsidiary pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness; provided that the
restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive,
taken as a whole, than those contained in the agreements
governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness otherwise permitted to be
incurred pursuant to the provisions of Section 4.12 hereof
that limit the right of Holdings or any of its Restricted
Subsidiaries to dispose of the assets subject to such Lien;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other
similar agreements entered into in the ordinary course of
business;
(11) restrictions on cash or other deposits or net worth imposed
by customers under contracts entered into in the ordinary
course of business;
(12) any other security agreement, installment or document
relating to Senior Debt hereafter in effect; provided that
such encumbrances or restrictions are customary in connection
with such documents and that the terms and conditions of such
encumbrances or restrictions are, in the aggregate, no more
restrictive or adverse to the holders of the Notes than those
encumbrances or restrictions imposed in connection with the
Senior Credit Facility as in effect on the date of Closing;
and
(13) any agreement relating to a sale and leaseback transaction or
Capital Lease Obligation, in each case, otherwise permitted
by the Indenture, but only on the property subject to such
transaction or lease and only to the extent that such
restrictions or encumbrances are customary with respect to a
sale and leaseback transaction or capital lease.
Section 4.09 Incurrence of Indebtedness and Issuance of Preferred
Stock.
Holdings 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 (collectively, "incur"), with respect to any Indebtedness
<PAGE>
(including Acquired Debt), and Holdings will not issue any Disqualified Stock
and will not permit any of its Restricted Subsidiaries to issue any shares of
preferred stock; provided that Holdings and any Restricted Subsidiary may
incur Indebtedness (including Acquired Debt), and Holdings may issue
Disqualified Stock, if the Fixed Charge Coverage Ratio for Holdings' most
recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such ad-
ditional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.0 to 1, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period.
The first paragraph of this Section 4.09 will not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the incurrence by Holdings and any Restricted Subsidiary of
Indebtedness and letters of credit under the Senior Credit
Facility (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of
Holdings and its Restricted Subsidiaries thereunder) in an
aggregate principal amount at any one time not to exceed
$100.0 million less the aggregate amount of all Net Proceeds
of Asset Sales applied by Holdings or any of its Subsidiaries
since the date of the Indenture to repay Indebtedness under
the Senior Credit Facility pursuant to Section 4.10 hereto;
(2) the incurrence by Holdings and the Restricted Subsidiaries of
Indebtedness represented by the Notes issued on the date of
Closing, Existing Indebtedness, the Exchange Notes and the
Subsidiary Guarantees thereof;
(3) the incurrence by Holdings or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money obligatio-
ns, in each case, incurred for the purpose of financing all
or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the
business of Holdings or such Restricted Subsidiary, in an
aggregate principal amount not to exceed $5.0 million at any
time outstanding;
(4) the incurrence by Holdings or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in
exchange for, or the net proceeds of which are used to
refund, refinance or replace, Indebtedness (other than
intercompany Indebtedness) that was permitted by the
Indenture to be incurred under the first paragraph of this
covenant or clause (2) of this paragraph;
<PAGE>
(5) the incurrence by Holdings or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among
Holdings and any of its Restricted Subsidiaries; provided
that:
(a) if Holdings or any Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly
subordinated to the prior payment in full in cash of all
Obligations with respect to the Notes, in the case of
Holdings, or the Subsidiary Guarantee of such Guarantor, in
the case of a Guarantor; and
(b)(i) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by
a Person other than Holdings or a Restricted Subsidiary
thereof and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not either Holdings or a
Restricted Subsidiary thereof; shall be deemed, in each case,
to constitute an incurrence of such Indebtedness by Holdings
or such Restricted Subsidiary, as the case may be, that was
not permitted by this clause (5);
(6) the incurrence by Holdings or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the
purpose of fixing or hedging (i) interest rate risk with
respect to any floating rate Indebtedness that is permitted
by the terms of the Indenture to be outstanding or
(ii) foreign currency exchange rate risk;
(7) the guarantee by Holdings or any of the Restricted
Subsidiaries of Indebtedness of Holdings or a Restricted
Subsidiary of Holdings that was permitted to be incurred by
another provision of this covenant;
(8) indebtedness incurred in respect of workers' compensation
claims, self-insurance obligations, performance, surety and
similar bonds and completion guarantees provided by Holdings
or a Guarantor in the ordinary course of business;
(9) Indebtedness arising from guarantees of Indebtedness of
Holdings or any Subsidiary or the agreements of Holdings 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 Capital Stock of a Restricted
Subsidiary, or other guarantees of Indebtedness incurred by
any person acquiring all or any portion of such business,
assets or Capital Stock of a Restricted Subsidiary for the
purpose of financing such acquisition; provided that the
maximum aggregate liability in respect of all such
<PAGE>
Indebtedness shall at no time exceed the gross proceeds
actually received by Holdings and its Restricted Subsidiaries
in connection with such disposition;
(10) Indebtedness of a Receivables Subsidiary that is non-recourse
to Holdings or any other Restricted Subsidiary of Holdings
(other than Standard Securitization Undertakings) incurred in
connection with a Qualified Receivables Transaction;
(11) the incurrence by Holdings or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate
principal amount (or accreted value, as applicable) at any
time outstanding not to exceed $20.0 million; and
(12) the accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the
same terms, and the payment of dividends on Disqualified
Stock in the form of additional shares of the same class of
Disqualified Stock; provided in each such case, that the
amount thereof is included in Fixed Charges of Holdings as
accrued.
For purposes of determining compliance with this Section 4.09, in the
event that an item of proposed Indebtedness meets the criteria of more than
one of the categories of Permitted Debt described in clauses (1) through (12)
above, or is entitled to be incurred pursuant to the first paragraph of this
covenant, Holdings will be permitted to classify such item of Indebtedness on
the date of its incurrence in any manner that complies with this covenant.
Section 4.10 Asset Sales
Holdings will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) Holdings (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at
least equal to the fair market value of the assets or Equity
Interests issued or sold or otherwise disposed of;
(2) such fair market value is determined by Holdings' Board of
Directors and evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to
the Trustee; and
(3) at least 75% of the consideration therefor received by
Holdings or such Restricted Subsidiary is in the form of cash
or Cash Equivalents. For purposes of this provision, each of
the following shall be deemed to be cash:
<PAGE>
(a) any liabilities (as shown on Holdings' or such Restricted
Subsidiary's most recent balance sheet), of Holdings or
any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms
subordinated to the Notes or any Subsidiary Guarantee)
that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases
Holdings or such Restricted Subsidiary from further
liability; and
(b) any securities, notes or other obligations received by
Holdings or any such Restricted Subsidiary from such
transferee that are contemporaneously (subject to
ordinary settlement periods) converted by Holdings or
such Restricted Subsidiary into cash (to the extent of
the cash received in that conversion).
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, Holdings may apply such Net Proceeds at its option:
(1) to repay Senior Debt;
(2) to acquire all or substantially all of the assets of, or a
majority of the Voting Stock of, another Permitted Business;
(3) to make a capital expenditure; or
(4) to acquire other long-term assets that are used or useful in
a Permitted Business.
Pending the final application of any such Net Proceeds, Holdings may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $10.0 million, Holdings will
make an offer (an "Asset Sale Offer") to all Holders of Notes and all holders
of other Indebtedness that is pari passu with the Notes containing provisions
similar to those set forth in this Indenture with respect to offers to
purchase or redeem with the proceeds of sales of assets to purchase the
maximum principal amount of Notes and such other pari passu Indebtedness that
may be purchased out of the Excess Proceeds (the "Asset Sale Offer Amount").
The offer price in any Asset Sale Offer will be equal to 100% of principal
amount plus accrued and unpaid interest, if any, to the date of purchase (the
"Asset Sale Payment"), and will be payable in cash. If any Excess Proceeds
remain after consummation of an Asset Sale Offer, Holdings may use such
Excess Proceeds for any purpose not otherwise prohibited by the Indenture.
If the aggregate principal amount of Notes and such other pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes and such other pari passu
<PAGE>
Indebtedness to be purchased on a pro rata basis. Upon completion of each
Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
Upon the commencement of an Asset Sale Offer, Holdings shall send, by
first class mail, a notice to the Trustee and to each Holder at its
registered address. The notice shall contain all instructions and materials
necessary to enable such Holder to tender Notes pursuant to the Asset Sale
Offer. Any Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state: (1) that the
Asset Sale Offer is being made pursuant to this Section 4.10; (2) the Asset
Sale Offer Amount, the Asset Sale Payment and the date on which Notes
tendered and accepted for payment shall be purchased, which date shall be at
least 30 days and no later than 60 days from the date such notice is mailed
(the "Asset Sale Payment Date"); (3) that any Note not tendered or accepted
for payment shall continue to accrete or accrue interest; (4) that, unless
Holdings defaults in making such payment, any Note accepted for payment
pursuant to the Asset Sale Offer shall cease to accrete or accrue interest
after the Asset Sale Payment Date; (5) that Holders electing to have a Note
purchased pursuant to the Asset Sale Offer may only elect to have all of such
Note purchased and may not elect to have only a portion of such Note
purchased; (6) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form en-
titled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to Holdings, a depositary, if
appointed by Holdings, or the Paying Agent at the address specified in the
notice at least three days before the Asset Sale Payment Date; (7) that
Holders shall be entitled to withdraw their election if Holdings, the
depositary or the Paying Agent, as the case may be, receives, not later than
the Asset Sale Payment Date, a notice setting forth the name of the Holder,
the principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased; (8) that, if the aggregate principal amount of Notes surrendered
by Holders exceeds the Asset Sale Offer Amount, Holdings shall select the
Notes to be purchased on a pro rata basis (with such adjustments as may be
deemed appropriate by Holdings so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased); and (9) that Holders
whose Notes were purchased only in part shall be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered (or
transferred by book-entry transfer). Holdings shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of an
Asset Sale
On the Asset Sale Payment Date, Holdings shall, to the extent lawful:
(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Asset Sale Offer; (2) deposit with the Paying Agent an amount
equal to the Asset Sale Payment in respect of all Notes or portions thereof
so tendered; and (3) deliver or cause to be delivered to the Trustee the
<PAGE>
Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being repurchased by
Holdings. Holdings shall publicly announce the results of the Asset Sale
Offer on the Asset Sale Payment Date.
The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Asset Sale Payment for such Notes, and the Trustee shall
promptly authenticate pursuant to an Authentication Order and mail (or cause
to be transferred by book entry) to each Holder a new Note equal in principal
amount to any unrepurchased portion of the Notes surrendered, if any;
provided that each such new Note shall be in a principal amount of $1,000 or
an integral multiple thereof. However, if the Asset Sale Payment Date is on
or after an interest record date and on or before the related interest
payment date, any accrued and unpaid interest shall be paid to the Person in
whose name a Note is registered at the close of business on such record date,
and no additional interest shall be payable to Holders who tender Notes
pursuant to the Asset Sale Offer.
Notwithstanding the immediately preceding paragraphs, Holdings and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent that (i) at least 75% of
the consideration for such Asset Sale constitutes long-term assets that are
used or useful in a Permitted Business ("Qualified Proceeds") and/or Cash
Equivalents and (ii) such Asset Sale is for fair market value; provided that
any consideration not constituting long-term assets that are used or useful
in a Permitted Business received by Holdings or any of its Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated
under this paragraph shall constitute Excess Proceeds subject to the
provisions of the preceding paragraphs.
Section 4.11 Transactions with Affiliates.
Holdings 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 (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less
favorable to Holdings or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable
transaction by Holdings or such Restricted Subsidiary with an
unrelated Person; and
(2) Holdings delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution of
<PAGE>
the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction
complies with this Section 4.11 and that such Affiliate
Transaction has been approved by a majority of the
disinterested members of the Board of Directors; and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate
consideration in excess of $5.0 million, an opinion as to
the fairness to the Holders of such Affiliate Transaction
from a financial point of view issued by an accounting,
appraisal or investment banking firm of national
standing.
The following items shall not be deemed to be Affiliate Transactions
and, therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement entered into by Holdings or any of
its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of Holdings or
such Restricted Subsidiary;
(2) transactions between or among Holdings and/or its Restricted
Subsidiaries;
(3) any sale or other issuance of Equity Interests (other than
Disqualified Stock of Holdings);
(4) Restricted Payments and Permitted Investments that are
permitted by the provisions of Section 4.07 hereof;
(5) the payment of fees and expenses to Vestar Capital Partners
("Vestar") or any of its Affiliates (i) pursuant to the
Management Agreement as in effect on the date of Closing;
(ii) pursuant to any amended, supplemented or replacement
management agreement, provided that the terms of any such
amended, supplemented or replacement management agreement are
not, with respect to the payment of fees and expenses to
Vestar and its Affiliates, more favorable to Vestar or any of
its Affiliates than the Management Agreement; and
(iii) consisting of advisory, investment banking or similar
fees in connection with acquisitions or other corporate
transactions in an amount not to exceed 1.0% of the value of
any such transaction; and
(6) the payment by Holdings or any Restricted Subsidiary of
amounts pursuant to the Buonanno Agreement as in effect on
the date of Closing.
<PAGE>
Section 4.12 Liens.
Holdings will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind securing Indebtedness, Attributable Debt or trade
payables on any asset now owned or hereafter acquired, except (i) Liens
solely on the assets of Unrestricted Subsidiaries and (ii) Permitted Liens
unless all payments due under the Indenture and the Notes are secured on an
equal and ratable basis with the Indebtedness so secured until such time as
such is no longer secured by a Lien; provided that if such Indebtedness is by
its terms expressly subordinated to the Notes or any Subsidiary Guarantee,
the Lien securing such Indebtedness shall be subordinate and junior to the
Lien securing the Notes and the Subsidiary Guarantees with the same relative
priority as such subordinate or junior Indebtedness shall have with respect
to the Notes and the Subsidiary Guarantees.
Section 4.13 No Senior Subordinated Debt.
Holdings shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt of Holdings and senior in any respect in
right of payment to the Notes. No Guarantor shall incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt of such
Guarantor and senior in any respect in right of payment to such Guarantor's
Subsidiary Guarantee.
Section 4.14 Corporate Existence.
Subject to Article 5 hereof, Holdings shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of Holdings or any
such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of Holdings and its Subsidiaries; provided, however, that Holdings
shall not be required to preserve any such right, license or franchise, or
the corporate, partnership or other existence of any of its Subsidiaries, if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of Holdings and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in
any material respect to the Holders of the Notes.
Section 4.15 Offer to Repurchase upon Change of Control.
If a Change of Control occurs, each Holder of Notes will have the
right to require Holdings to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and
<PAGE>
unpaid interest and Liquidated Damages thereon, if any, to the date of
purchase (the "Change of Control Payment").
Within 30 days following any Change of Control, Holdings shall send,
by first class mail, a notice to the Trustee and to each Holder at its
registered address. The notice shall contain all instructions and materials
necessary to enable such Holder to tender Notes pursuant to the Change of
Control Offer. Any Change of Control Offer shall be made to all Holders.
The notice, which shall govern the terms of the Change of Control Offer,
shall state: (1) that the Change of Control Offer is being made pursuant to
this Section 4.15; (2) the Change of Control Payment and the date on which
Notes tendered and accepted for payment shall be purchased, which date shall
be at least 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"); (3) that any Note not tendered
or accepted for payment shall continue to accrete or accrue interest;
(4) that, unless Holdings defaults in making such payment, any Note accepted
for payment pursuant to the Change of Control Offer shall cease to accrete or
accrue interest after the Change of Control Payment Date; (5) that Holders
electing to have a Note purchased pursuant to the Change of Control Offer may
only elect to have all of such Note purchased and may not elect to have only
a portion of such Note purchased; (6) that Holders electing to have a Note
purchased pursuant to any Change of Control Offer shall be required to
surrender the Note, with the form entitled "Option of Holder to Elect Pur-
chase" on the reverse of the Note completed, or transfer by book-entry
transfer, to Holdings, a depositary, if appointed by Holdings, or the Paying
Agent at the address specified in the notice at least three days before the
Change of Control Payment Date; (7) that Holders shall be entitled to
withdraw their election if Holdings, the depositary or the Paying Agent, as
the case may be, receives, not later than the Change of Control Payment Date,
a notice setting forth the name of the Holder, the principal amount of the
Note the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased; (8) that Notes and
portions of Notes purchased shall be in amounts of $1,000 or whole multiples
of $1,000, except that if all of the Notes of a Holder are to be purchased,
the entire outstanding amount of Notes held by such Holder, even if not a
multiple of $1,000, shall be purchased; and (9) that Holders whose Notes were
purchased only in part shall be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered (or transferred by book-
entry transfer). Holdings shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Notes as a result of a Change of
Control.
On the Change of Control Payment Date, Holdings shall, to the extent
lawful: (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer; (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all
Notes or portions thereof so tendered; and (3) deliver or cause to be
<PAGE>
delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Notes or portions
thereof being repurchased by Holdings. Holdings shall publicly announce the
results of the Change of Control Offer on the Change of Control Payment Date.
The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate pursuant to an Authentication Order and mail (or cause
to be transferred by book entry) to each Holder a new Note equal in principal
amount to any unrepurchased portion of the Notes surrendered, if any;
provided that each such new Note shall be in a principal amount of $1,000 or
an integral multiple thereof. However, if the Change of Control Payment Date
is on or after an interest record date and on or before the related interest
payment date, any accrued and unpaid interest shall be paid to the Person in
whose name a Note is registered at the close of business on such record date,
and no additional interest shall be payable to Holders who tender Notes
pursuant to the Change of Control Offer.
Subject to the second succeeding paragraph, the provisions described
above that require Holdings to make a Change of Control Offer following a
Change of Control will be applicable regardless of whether or not any other
provisions of the Indenture are applicable.
Notwithstanding anything to the contrary in this Section 4.15,
Holdings shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in this Section 4.15 and purchases all Notes validly tendered and not
withdrawn under such Change of Control Offer.
Notwithstanding anything to the contrary in this Section 4.15,
Holdings shall not be required to make a Change of Control Offer, as provided
above, if, in connection with or in contemplation of any Change of Control,
it has made an offer to purchase (an "Alternate Offer") any and all Notes
validly tendered at a cash price equal to or higher than the Change of
Control Payment and has purchased all Notes properly tendered in accordance
with the terms of such Alternate Offer.
Section 4.16 Payments for Consent.
Holdings will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for
the benefit of any Holder of Notes for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of this Indenture or
the Notes unless such consideration is offered to be paid and is paid to all
Holders of the Notes that consent, waive or agree to amend in the time frame
set forth in the solicitation documents relating to such consent, waiver or
agreement.
<PAGE>
Section 4.17 Additional Subsidiary Guarantees
If Holdings or any of its Restricted Subsidiaries transfers or causes
to be transferred, in one transaction or a series of related transactions,
any property or assets in excess of $500,000 to any domestic Restricted
Subsidiary that is not a Guarantor, or if Holdings or any of its Restricted
Subsidiaries acquires or creates another domestic Restricted Subsidiary after
the date of this Indenture with a book value in excess of $500,000, then that
newly acquired or created domestic Restricted Subsidiary must become a
Guarantor and shall (i) execute and deliver to the Trustee a supplemental
indenture in form reasonably satisfactory to the Trustee pursuant to which
such Restricted Subsidiary shall unconditionally guarantee all of Holdings'
obligations under the Notes and the Indenture on the terms set forth in the
Indenture and (ii) deliver to the Trustee an opinion of counsel that such
supplemental indenture has been duly authorized, executed and delivered by
such Restricted Subsidiary and constitutes a legal, valid, binding and
enforceable obligation of such Restricted Subsidiary, subject to normal
exceptions. Thereafter, such Restricted Subsidiary shall be a Guarantor for
all purposes of the Indenture.
Section 4.18 Designation of Restricted and Unrestricted
Subsidiaries.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if that designation would not cause a Default. If
a Restricted Subsidiary is designated as an Unrestricted Subsidiary, all
outstanding Investments owned by Holdings and its Restricted Subsidiaries in
the Subsidiary so designated will be deemed to be an Investment made as of
the time of such designation and will reduce the amount available for
Restricted Payments under the first paragraph of Section 4.07 hereof or Per-
mitted Investments, as applicable. All such outstanding Investments will be
valued at the fair market value at the time of such designation. That
designation will only be permitted if such Restricted Payment would be
permitted at that time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary. The Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the
redesignation would not cause a Default.
Section 4.19 Sale and Leaseback Transactions.
Holdings will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
Holdings or any Restricted Subsidiary of Holdings that is a Guarantor may
enter into a sale and leaseback transaction if:
(1) Holdings or that Guarantor, as applicable, could have
(a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback
transaction under the Fixed Charge Coverage Ratio test in the
first paragraph of Section 4.09 hereof and (b) incurred a
<PAGE>
Lien to secure such Indebtedness pursuant to Section 4.12
hereof;
(2) the gross cash proceeds of that sale and leaseback
transaction are at least equal to the fair market value, as
determined in good faith by the Board of Directors and set
forth in an Officers' Certificate delivered to the Trustee,
of the property that is the subject of such sale and
leaseback transaction; and
(3) the transfer of assets in that sale and leaseback transaction
is permitted by, and Holdings applies the proceeds of such
transaction in compliance with Section 4.10 hereof.
Section 4.20 Issuances and Sales of Equity Interests in Wholly
Owned Subsidiaries.
Holdings will not, and will not permit any of its Restricted
Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any
Equity Interests in any Wholly Owned Restricted Subsidiary of Holdings to any
Person (other than Holdings or a Wholly Owned Restricted Subsidiary of
Holdings), unless the cash Net Proceeds from such transfer, conveyance, sale,
lease or other disposition are applied in accordance with Section 4.10
hereof.
Section 4.21 Issuances of Guarantees of Indebtedness.
Holdings will not permit any of its Restricted Subsidiaries, directly
or indirectly, to Guarantee or pledge any assets to secure the payment of any
other Indebtedness of Holdings unless such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture providing for
the Guarantee of the payment of the Notes by such Restricted Subsidiary,
which Guarantee shall be senior to or pari passu with such Restricted
Subsidiary's Guarantee of or pledge to secure such other Indebtedness, unless
such other Indebtedness is Senior Debt, in which case the Guarantee of the
Notes may be subordinated to the Guarantee of such Senior Debt to the same
extent as the Notes are subordinated to such Senior Debt.
Notwithstanding the preceding paragraph, any Subsidiary Guarantee of
the Notes will provide by its terms that it will be automatically and
unconditionally released and discharged under the circumstances described
under Section 11.06 hereof.
Section 4.22 Business Activities.
Holdings will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to the extent
that any such business would not be material to Holdings and its
Subsidiaries, taken as a whole.
<PAGE>
ARTICLE 5
SUCCESSORS
Section 5.01 Merger, Consolidation or Sale of Assets.
Holdings may not, directly or indirectly: (i) consolidate or merge
with or into another Person (whether or not Holdings is the surviving
corporation); or (ii) sell, assign, lease, transfer, convey or otherwise
dispose of all or substantially all of Holdings' properties or assets
(determined on a consolidated basis for Holdings and its Restricted
Subsidiaries), in one or more related transactions, to another Person unless:
(1) either: (a) Holdings is the surviving corporation; or (b)
the Person formed by or surviving any such consolidation or
merger (if other than Holdings) or to which such sale,
assignment, transfer, conveyance or other disposition shall
have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the
District of Columbia;
(2) the Person formed by or surviving any such consolidation or
merger (if other than Holdings) or the Person to which such
sale, assignment, transfer, conveyance or other disposition
shall have been made assumes all the obligations of Holdings
under the Notes, the Indenture and the Exchange and
Registration Rights Agreement pursuant to agreements
reasonably satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of
Default exists (including, without limitation, after giving
effect to any Liens incurred, assumed or granted in
connection with or in respect of such transaction); and
(4) Holdings or the Person formed by or surviving any such
consolidation or merger (if other than Holdings):
(a) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net
Worth of Holdings immediately preceding the transaction;
and
(b) will, on the date of such transaction after giving pro
forma effect thereto and any related financing
transactions as if the same had occurred at the beginning
of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof.
<PAGE>
The provisions of this Section 5.01 will not apply to a sale, assignment,
transfer, conveyance or other disposition of assets between or among Holdings
and any of its Wholly Owned Subsidiaries, and Holdings may merge with an
Affiliate incorporated or organized solely for the purpose of reincorporating
or reorganizing Holdings in another jurisdiction to realize tax or other
benefits without complying with the provisions of clauses (3) or (4) above.
Section 5.02 Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the
assets of Holdings in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which Holdings is
merged or to which such sale, assignment, transfer, lease, conveyance or
other disposition is made shall succeed to, and be substituted for (so that
from and after the date of such consolidation, merger, sale, lease,
conveyance or other disposition, the provisions of this Indenture referring
to the "Holdings" shall refer instead to the successor corporation and not to
Holdings), and may exercise every right and power of Holdings under this
Indenture with the same effect as if such successor Person had been named as
Holdings herein; provided, however, that the predecessor Holdings shall not
be relieved from the obligation to pay the principal of and interest on the
Notes except in the case of a sale of all of Holdings' assets that meets the
requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.
Each of the following is an "Event of Default":
(a) default for a continued period of 30 days in the payment
when due of interest on, or Liquidated Damages with respect to, the
Notes, whether or not prohibited by the subordination provisions of this
Indenture;
(b) default in the payment when due of the principal of or
premium, if any, on the Notes, whether or not prohibited by the
subordination provisions of this Indenture;
(c) failure by Holdings or any of its Subsidiaries to comply
with any of the provisions of Section 4.10 or 4.15 hereof;
(d) failure by Holdings or any of its Restricted Subsidiaries
for 30 days after notice to comply with any of the other agreements in
this Indenture;
<PAGE>
(e) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by Holdings or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by Holdings or any of
its Restricted Subsidiaries) whether such Indebtedness or Guarantee now
exists, or is created after the date of this Indenture, if that default
(i) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness at final maturity (a "Payment Default") or
(ii) results in the acceleration of such Indebtedness prior to its
express maturity, and, in each case, the principal amount of such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more;
(f) failure by Holdings or any of its Restricted Subsidiaries
to pay final judgments aggregating in excess of $5.0 million, which
judgments are not paid, discharged or stayed for a period of 60 days;
(g) Holdings or any of its Significant Subsidiaries or any
group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary pursuant to or within the meaning of Bankruptcy
Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against
it in an involuntary case,
(iii)consents to the appointment of a custodian of it
or for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become
due; or
(h) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against Holdings or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary in an
involuntary case;
(ii) appoints a custodian of Holdings or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary or for all
or substantially all of the property of Holdings or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary; or
<PAGE>
(iii) orders the liquidation of Holdings or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive
days; or
(i) except as permitted by this Indenture, any
Subsidiary Guarantee is held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in
full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations
under its Subsidiary Guarantee.
Section 6.02 Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to Holdings, any
Significant Subsidiary or any group of Subsidiaries that, taken together,
would constitute a Significant Subsidiary) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, if an Event of Default specified
in clause (g) or (h) of Section 6.01 hereof occurs with respect to Holdings,
any of its Significant Subsidiaries or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Notes
shall be due and payable without further action or notice.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the Holders of a majority in aggregate principal amount of the
Notes outstanding, by written notice to Holdings and the Trustee, may rescind
and annul such declaration and its consequences if:
(a) Holdings has paid or deposited with the Trustee a sum
sufficient to pay
(i) all sums paid or advanced by the Trustee under
Section 7.07 and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel,
(ii) all overdue interest on all Notes,
(iii)the principal of and premium, if any, on any
Notes which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes,
and
<PAGE>
(iv) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by the
Notes; and
(b) all Events of Default, other than the non-payment of
principal of Notes which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 6.04.
No such rescission shall affect any subsequent default or impair any right
consequent thereon provided in Section 6.04.
Section 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may,
subject to Article 10, pursue any available remedy to collect the payment of
principal, premium, if any, and interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
Section 6.04 Waiver of Past Defaults.
Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any past or existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in
the payment of the principal of, premium and Liquidated Damages, if any, or
interest on the Notes. Upon such waiver, such Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
Section 6.05 Control by Majority.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or
power conferred on it. Holders may not enforce this Indenture or the Notes,
however, except as provided in this Indenture. In addition, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or
that the Trustee determines may be unduly prejudicial to the rights of other
Holders of Notes or that may involve the Trustee in personal liability.
<PAGE>
Section 6.06 Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if: (a) the Holder of a Note gives to the Trustee written
notice of a continuing Event of Default; (b) the Holders of at least 25% in
principal amount of the then outstanding Notes make a written request to the
Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes
offer and, if requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense; (d) the Trustee does not
comply with the request within 60 days after receipt of the request and the
offer and, if requested, the provision of indemnity; and (e) during such
60-day period the Holders of a majority in principal amount of the then
outstanding Notes do not give the Trustee a direction inconsistent with the
request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
Section 6.07 Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture and subject to
Article 10 and Section 11.02, the right of any Holder of a Note to receive
payment of principal, premium and Liquidated Damages, if any, and interest on
the Note, on or after the respective due dates expressed in the Note
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of such Holder.
Section 6.08 Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against Holdings for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent
lawful, interest and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
Section 6.09 Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Holders of the Notes allowed in any judicial proceedings relative to
Holdings (or any other obligor upon the Notes), its creditors or its property
and shall be entitled and empowered to collect, receive and distribute any
money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder
<PAGE>
to make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.07 hereof. To the extent that
the payment of any such compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 7.07 hereof out of the estate in any such proceeding, shall be
denied for any reason, payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other properties that the Holders may be entitled to receive in such
proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 6.10 Priorities.
If the Trustee collects any money pursuant to this Article, it shall,
subject to Article 10, pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the
costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal, premium and
Liquidated Damages, if any and interest, respectively; and
Third: to Holdings or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as a Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or
defenses made by the party litigant. This Section does not apply to a suit
<PAGE>
by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof,
or a suit by Holders of more than 10% in principal amount of the then
outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent 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:
(i) the duties of the Trustee shall be determined solely
by the express provisions of this Indenture and the Trustee need
perform only those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee
shall examine the certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it
is proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii)the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Section 6.05 hereof.
<PAGE>
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject
to the paragraphs 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 Holdings.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
Section 7.02 Rights of Trustee.
(a) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by the
proper Person. The Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel. The
Trustee may consult with counsel of its selection and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection from liability in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith that it believes to be authorized or within
the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from Holdings shall be sufficient if
signed by an Officer of Holdings.
(f) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights or powers under this
Indenture at the request or direction of any of the Holders unless such
Holders shall have offered to the Trustee security or indemnity satisfactory
to the Trustee against any loss, liability or expense that might be incurred
by it in compliance with such request or direction.
(g) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and Holdings' premises, personally or by agent or attorney at the
<PAGE>
sole cost of Holdings, and shall incur no liability or additional liability
of any kind by reason of such inquiry or investigation.
(h) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed with
due care by it hereunder.
(i) The Trustee shall not be deemed to have notice of any
Default or Event of Default unless a Responsible Officer of the Trustee has
actual knowledge thereof or unless written notice of any event which is in
fact such a default is received by the Trustee at the Corporate Trust Office
of the Trustee, and such notice references the Securities and this Indenture.
(j) The rights, privileges, protections, immunities and
benefits given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in
each of its capacities hereunder, and to each agent, custodian and other
Person employed to act hereunder.
Section 7.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with Holdings or any
Affiliate of Holdings with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and
7.11 hereof.
Section 7.04 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not
be accountable for Holdings' use of the proceeds from the Notes or any money
paid to Holdings or upon Holdings' direction under any provision of this
Indenture, it shall not be responsible for the use or application of any
money received by any Paying Agent other than the Trustee, and it shall not
be responsible for any statement or recital herein or any statement in the
Notes or any other document in connection with the sale of the Notes or
pursuant to this Indenture other than its certificate of authentication.
Section 7.05 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it
is actually known to a Responsible Officer of the Trustee, the Trustee shall
mail to Holders of Notes as it appears on the Registrar a notice of the
Default or Event of Default within 90 days after it occurs. Except in the
case of a Default or Event of Default relating to the payment of principal or
<PAGE>
interest on any Note, the Trustee may withhold the notice if it determines,
in good faith, that withholding the notice is in the interests of the Holders
of the Notes.
Section 7.06 Reports by Trustee to Holders of the Notes.
Within 60 days after each January 15 beginning with the January 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief
report dated as of such reporting date that complies with TIA Section 313(a)
(but if no event described in TIA Section 313(a) has occurred within the
twelve months preceding the reporting date, no report need be transmitted).
The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall
also transmit by mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to Holdings and filed with the Commission and each
stock exchange on which the Notes are listed in accordance with TIA
Section 313(d). Holdings shall promptly notify the Trustee when the Notes
are listed on any stock exchange and of any delisting thereof.
Section 7.07 Compensation and Indemnity.
Holdings shall pay to the Trustee from time to time compensation for
its acceptance of this Indenture and services as Holdings and the Trustee
shall from time to time agree in writing. The Trustee's compensation shall
not be limited by any law on compensation of a trustee of an express trust.
Holdings shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to
the compensation for its services. Such expenses shall include the
compensation, disbursements and expenses of the Trustee's agents and counsel.
Holdings shall indemnify the Trustee or any predecessor Trustee
against any and all losses, damages, claims, liabilities or expenses incurred
by it including taxes (other than taxes based upon, measured by or determined
by the income of the Trustee) arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including
the costs and expenses of enforcing this Indenture against Holdings (includ-
ing this Section 7.07) and defending itself against any claim (whether
asserted by Holdings or any Holder or any other person) or liability in
connection with the acceptance, exercise or performance of any of its powers
or duties hereunder, except to the extent any such loss, damage, claim,
liability or expense may be attributable to its negligence or bad faith. The
Trustee shall notify Holdings promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify Holdings shall not relieve
Holdings of its obligations hereunder, except to the extent that Holdings is
actually prejudiced thereby. Holdings shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and
Holdings shall pay the reasonable fees and expenses of such counsel.
<PAGE>
Holdings need not pay for any settlement made without its consent, which
consent shall not be unreasonably withheld.
The obligations of Holdings under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure Holdings' payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration
under any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.
Section 7.08 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying Holdings. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and Holdings in writing. Holdings may
remove the Trustee if: (a) the Trustee fails to comply with Section 7.10
hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or (d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, Holdings shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by
Holdings.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, Holdings, or
the Holders of Notes of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee, at the expense of Holdings.
<PAGE>
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to Holdings. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of
its succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee,
provided all sums owing to the Trustee hereunder have been paid and subject
to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement
of the Trustee pursuant to this Section 7.08, Holdings' obligations under
Section 7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.09 Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
Section 7.10 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America
or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of
at least $50 million as set forth in its most recent published annual report
of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject
to TIA Section 310(b).
Section 7.11 Preferential Collection of Claims Against Holdings.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or
been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
<PAGE>
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE; DISCHARGE
Section 8.01 Option to Effect Legal Defeasance or Covenant
Defeasance.
Holdings may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes and
Subsidiary Guarantees upon compliance with the conditions set forth below in
this Article 8.
Section 8.02 Legal Defeasance and Discharge.
Upon Holdings' exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, Holdings shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that Holdings shall
be deemed to have paid and discharged the entire Indebtedness represented by
the outstanding Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its
other obligations under such Notes and this Indenture (and the Trustee, on
demand of and at the expense of Holdings, shall execute proper instruments
acknowledging the same), except for the following provisions which shall
survive until otherwise terminated or discharged hereunder: (a) the rights
of Holders of outstanding Notes to receive, solely from the trust fund
described in Section 8.04 hereof, and as more fully set forth in such Section
8.04, payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due,
(b) Holdings' obligations with respect to such Notes under Article 2 and
Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of
the Trustee hereunder and Holdings' obligations in connection therewith and
(d) this Article 8. Subject to compliance with this Article Eight, Holdings
may exercise its option under this Section 8.02 notwithstanding the prior
exercise of its option under Section 8.03 hereof.
Section 8.03 Covenant Defeasance.
Upon Holdings' exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, Holdings shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.03, 4.04, 4.05, 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.19, 4.20, 4.21, 4.22
and clauses (3) and (4) of Section 5.01 hereof with respect to the outstan-
ding Notes on and after the date the conditions set forth in Section 8.04 are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
<PAGE>
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding
Notes, Holdings may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein
to any such covenant or by reason of any reference in any such covenant to
any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section
6.01 hereof, but, except as specified above, the remainder of this Indenture
and such Notes shall be unaffected thereby. In addition, upon Holdings'
exercise under Section 8.01 hereof of the option applicable to this Section
8.03 hereof, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, Sections 6.01(c) through 6.01(f) hereof shall not
constitute Events of Default.
Section 8.04 Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) Holdings must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders of the Notes, cash in United States
dollars, non-callable Government Securities, or a combination thereof, in
such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal
of, premium, if any, and interest and Liquidated Damages on the
outstanding Notes on the Stated Maturity or on the applicable redemption
date, as the case may be, and Holdings must specify whether the Notes are
being defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.02 hereof,
Holdings shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that (i)
Holdings has received from, or there has been published by, the Internal
Revenue Service a ruling or (ii) since the date of this Indenture, there
has been a change in the applicable federal income tax law, in either
case to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
<PAGE>
(c) in the case of an election under Section 8.03 hereof,
Holdings shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that the
Holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit);
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, any
material agreement or instrument (other than this Indenture) to which
Holdings or any of its Restricted Subsidiaries is a party or by which
Holdings or any of its Restricted Subsidiaries is bound;
(f) Holdings shall have delivered to the Trustee an Opinion
of Counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(g) Holdings shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by Holdings with the
intent of preferring the Holders of Notes over any other creditors of
Holdings with the intent of defeating, hindering, delaying or defrauding
any creditors of Holdings or others; and
(h) Holdings shall have delivered to the Trustee an Officers'
Certificate stating that all conditions precedent relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
Section 8.05 Deposited Money and Government Securities to
Be Held in Trust; Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding
Notes shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Notes and this Indenture, to the payment, either
directly or through any Paying Agent (including Holdings acting as Paying
Agent) as the Trustee may determine, to the Holders of such Notes of all sums
due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to
the extent required by law.
<PAGE>
Holdings shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the
principal and interest received in respect thereof other than any such tax,
fee or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to Holdings from time to time upon the request
of Holdings any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
Section 8.06 Repayment to Holdings.
Any money deposited with the Trustee or any Paying Agent, or then
held by Holdings, in trust for the payment of the principal of, premium, if
any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall
be paid to Holdings on its request or (if then held by Holdings) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as
a secured creditor, look only to Holdings for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of Holdings as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of Holdings cause to
be published once, in The New York Times and The Wall Street Journal
(national edition), notice that such money remains unclaimed and that, after
a date specified therein, which shall not be less than 30 days from the date
of such notification or publication, any unclaimed balance of such money then
remaining will be repaid to Holdings.
Section 8.07 Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02
or 8.03 hereof, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then Holdings' obligations under this Indenture
and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 or 8.03 hereof until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance
with Section 8.02 or 8.03 hereof, as the case may be; provided, however,
that, if Holdings makes any payment of principal of, premium, if any, or
interest on any Note following the reinstatement of its obligations, Holdings
<PAGE>
shall be subrogated to the rights of the Holders of such Notes to receive
such payment from the money held by the Trustee or Paying Agent.
Section 8.08 Discharge.
This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange
of the Notes, as expressly provided for in this Indenture) as to all
outstanding Notes when (a) either (i) all Notes theretofore authenticated and
delivered (except lost, stolen or destroyed Notes which have been replaced or
paid and Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by Holdings and thereafter repaid to
Holdings or discharged from such trust) have been delivered to the Trustee
for cancellation or (ii) all Notes not theretofore delivered to the Trustee
for cancellation have become due and payable and Holdings has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together
with irrevocable instructions from Holdings directing the Trustee to apply
such funds to the payment thereof at maturity or redemption, as the case may
be; (b) Holdings has paid all other sums payable under this Indenture by
Holdings; and (c) Holdings has delivered to the Trustee an Officers' Cer-
tificate and an Opinion of Counsel stating that all conditions precedent
under this Indenture relating to the satisfaction and discharge of this
Indenture have been complied with; provided, however, that such counsel may
rely, as to matters of fact, on a certificate or certificates of officers of
Holdings.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01 Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, Holdings and the
Trustee may (subject to Section 10.14 hereof) amend or supplement this
Indenture or the Notes without notice to or the consent of any Holder of a
Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for
uncertificated Notes in addition to or in place of certificated Notes; (c) to
provide for the assumption of Holdings' obligations to the Holders of the
Notes in the case of a merger or consolidation of Holdings or sale of all or
substantially all of Holdings' assets; (d) to provide for the assumption of a
Guarantor's obligations under its Subsidiary Guarantee and this Indenture in
the case of a merger or consolidation of such Guarantor or sale of all or
substantially all of such Guarantor's assets; (e) to make any change that
would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights hereunder of any such
<PAGE>
Holder; and (f) to comply with requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA.
Upon the request of Holdings accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of any of the documents requested
by it pursuant to Section 7.02(b) hereof, the Trustee shall join with
Holdings and the Guarantors in the execution of such amended or supplemental
Indenture and to make any further appropriate agreements and stipulations
that may be therein contained, unless such amended or supplemental Indenture
directly affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amended or supplemental Indenture.
Section 9.02 With Consent of Holders of Notes.
Except as provided below in this Section 9.02 and in Section 10.14,
Holdings and the Trustee may amend or supplement this Indenture (including
Sections 4.10 and 4.15 hereof) or the Notes and/or any Subsidiary Guarantees
may be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding voting as a single
class (including, without limitation, consents obtained in connection with a
purchase of, tender offer or exchange offer for, Notes), and, subject to
Sections 6.04 and 6.07 hereof, any existing Default or Event of Default
(other than a Default or Event of Default in the payment of the principal of,
premium, if any, or interest on the Notes, except a payment default resulting
from an acceleration that has been rescinded) or compliance with any
provision of this Indenture, the Notes or the Subsidiary Guarantees may be
waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
purchase of, tender offer or exchange offer for, Notes). Section 2.08 hereof
shall determine which Notes are considered to be "outstanding" for purposes
of this Section 9.02.
Upon the request of Holdings accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to
the Trustee of the consent of the Holders of Notes as aforesaid, and upon
receipt by the Trustee of any document requested by it pursuant to Section
7.02(b) hereof, the Trustee shall join with Holdings and the Guarantors in
the execution of such amended or supplemental Indenture and to make any
further appropriate agreements and stipulations that may be therein
contained, unless such amended or supplemental Indenture directly affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise,
in which case the Trustee may in its discretion, but shall not be obligated
to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed
<PAGE>
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, Holdings shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of Holdings to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof,
the Holders of a majority in aggregate principal amount of the Notes then
outstanding voting as a single class may waive compliance in a particular
instance by Holdings and/or the Guarantors with any provision of this
Indenture, the Notes or the Subsidiary Guarantees. However, without the
consent of each Holder affected, an amendment or waiver under this Section
9.02 may not (with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change or have the effect of
changing the fixed maturity of any Note or alter the provisions with
respect to the redemption of the Notes (except as provided above with
respect to Sections 4.10 and 4.15 hereof);
(c) reduce the rate of or change the time for payment of
interest on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in
the Notes;
(f) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest on the
Notes;
(g) waive a redemption payment with respect to any Note
(other than a payment required by Sections 4.10 and 4.15 hereof);
(h) amend, change or modify in any material respect the
obligation of Holdings to make and consummate a Change of Control Offer
in the event of a Change of Control or make and consummate an Asset Sale
Offer with respect to any Asset Sale that has been consummated or modify
any of the provisions or definitions with respect thereto in this
Indenture or the Notes;
<PAGE>
(i) release any Guarantor from any of its obligations under
its Guarantee or this Indenture otherwise than in accordance with the
terms of this Indenture; or
(j) make any change in Section 6.04 or 6.07 hereof or in the
preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of
Article 10 of this Indenture (including the related definitions) that
adversely affects the rights of the Holders of the Notes will require the
consent of the Holders of at least 75% in aggregate principal amount of the
Notes then outstanding.
Section 9.03 Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA
as then in effect.
Section 9.04 Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note
and every subsequent Holder of a Note or portion of a Note that evidences the
same debt as the consenting Holder's Note, even if notation of the consent is
not made on any Note. However, any such Holder of a Note or subsequent
Holder of a Note may revoke the consent as to its Note if the Trustee
receives written notice of revocation before the date the waiver, supplement
or amendment becomes effective. An amendment, supplement or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
Section 9.05 Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. Holdings in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
Section 9.06 Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the
Trustee. Holdings may not sign an amendment or supplemental Indenture until
the Board of Directors approves it. In executing any amended or supplemental
indenture, the Trustee shall be entitled to receive and (subject to Section
7.01 hereof) shall be fully protected in relying upon, in addition to the
<PAGE>
documents required by Section 12.04 hereof, an Officers' Certificate and an
Opinion of Counsel stating that the execution of such amended or supplemental
indenture is authorized or permitted by this Indenture.
ARTICLE 10
SUBORDINATION
Section 10.01 Agreement to Subordinate.
Holdings agrees, and each Holder by accepting a Note agrees, that the
Indebtedness, interest and other Obligations of any kind evidenced by the
Notes and this Indenture is subordinated in right of payment, to the extent
and in the manner provided in this Article 10, to the prior payment in full
in cash of all Senior Debt (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed), and that the
subordination is for the benefit of the holders of Senior Debt.
Section 10.02 Certain Definitions.
"Designated Senior Debt" means (i) the Obligations of Holdings under
the Senior Credit Facility and (ii) any other Senior Debt permitted under the
Indenture (a) the principal amount of which is $25.0 million or more and
(b) that has been designated by Holdings as "Designated Senior Debt."
"Permitted Junior Securities" means: (i) Equity Interests in Holdings
or any Guarantor; or (ii) debt securities of Holdings or any Guarantor that
(a) are subordinated to all Senior Debt and any debt securities issued in
exchange for Senior Debt to substantially the same extent as, or to a greater
extent than, the Notes and the Subsidiary Guarantees are subordinated to
Senior Debt pursuant to of the Indenture and (b) have a Weighted Average Life
to Maturity equal to or greater than the Weighted Average Life to Maturity of
the Notes.
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Debt.
"Senior Debt" means: (i) all Indebtedness outstanding under the
Senior Credit Facility, and all Hedging Obligations with respect thereto;
(ii) any other Indebtedness permitted to be incurred by Holdings or a
Guarantor under the terms of the Indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that it is on a parity with
the Notes or subordinated in right of payment to the Notes or any other
Indebtedness of Holdings; and (iii) all Obligations with respect to the items
listed in the preceding clauses (i) and (ii). Notwithstanding anything to
the contrary in the preceding, Senior Debt will not include: (i) any
liability for federal, state, local or other taxes owed or owing by Holdings;
(ii) any Indebtedness of Holdings to any of its Subsidiaries or other
<PAGE>
Affiliates; (iii) any trade payables; or (iv) any Indebtedness that is
incurred in violation of the Indenture.
Section 10.03 Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of Holdings or any Guarantor
whether in cash, properties, securities or otherwise, (i) in a liquidation or
dissolution of Holdings or any Guarantor, (ii) or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to
Holdings or its property, (iii) in an assignment for the benefit of creditors
or (iv) in any marshaling of Holdings' assets and liabilities, the holders of
Senior Debt shall be entitled to receive payment in full in cash of all
Obligations due in respect of such Senior Debt (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Debt) before the Holders of Notes will be entitled to receive any
payment with respect to the Notes or under the Subsidiary Guarantees, and
until all Obligations with respect to Senior Debt are paid in full in cash,
any distribution to which the Holders of Notes would be entitled shall be
made to the holders of Senior Debt (except that Holders of Notes may receive
and retain Permitted Junior Securities and payments made from the trust
created pursuant to Article 8 hereof).
To the extent any payment of Senior Debt (whether by or on behalf of
Holdings or any Subsidiary, as proceeds of security or enforcement of any
right of setoff or otherwise) is declared to be fraudulent or preferential,
set aside or required to be paid to any receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person under any bankruptcy,
insolvency, receivership, fraudulent conveyance or similar law, then if such
payment is recovered by, or paid over to, such receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person, the Senior
Debt or part thereof originally intended to be satisfied shall be deemed to
be reinstated and outstanding as if such payment had not occurred. To the
extent the obligation to repay any Senior Debt is declared to be fraudulent,
invalid, or otherwise set aside under any bankruptcy, insolvency, receiver-
ship, fraudulent conveyance or similar law, then the obligations so declared
fraudulent, invalid or otherwise set aside (and all other amounts that would
come due with respect thereto had such obligation not been affected) shall be
deemed to be reinstated and outstanding as Senior Debt for all purposes
hereof as if such declaration, invalidity or setting aside had not occurred.
Section 10.04 Default on Designated Senior Debt.
Holdings also may not make any payment upon or in respect of the
Notes (except in Permitted Junior Securities or from the trust created
pursuant to Article 8 hereof) if: (i) a default in the payment of the
principal of, premium, if any, or interest on Designated Senior Debt occurs
and is continuing beyond any applicable grace period; or (ii) any other
default occurs and is continuing with respect to Designated Senior Debt that
currently, or with the passage of time or giving of notice, permits holders
of the Designated Senior Debt as to which such default relates to accelerate
<PAGE>
its maturity and, in the case of any such default described in this clause
(ii), a Responsible Officer of the Trustee receives a notice of such default
of the type referred to in this clause (ii) (a "Payment Blockage Notice")
from Holdings or the holders of any Designated Senior Debt.
Payments on the Notes may and shall be resumed: (i) in the case of a
payment default, upon the date on which such default is cured or waived in
writing by the holders of the applicable Designated Senior Debt; and (ii) in
case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived in writing by the holders of Designated
Senior Debt or 179 days after the date on which the applicable Payment
Blockage Notice is received by the Trustee, unless the maturity of any
Designated Senior Debt has been accelerated. No new Payment Blockage Notice
may be delivered under clause (ii) above unless and until 360 days have
elapsed since the effectiveness of the immediately prior Payment Blockage
Notice. No nonpayment default that existed and was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made,
the basis for a subsequent Payment Blockage Notice unless such default shall
have been waived in writing or cured for a period of not less than 180 days.
In the event that Holdings or any Guarantor makes any payment to the Trustee
or any Holder of any Note prohibited by the foregoing, such payment will be
required to be held in trust for and paid over to the holders of Senior Debt
(or the representative thereof). The Trustee and the Holders of the Notes
will not challenge or contest the enforceability or validity of the Senior
Credit Facility or any obligation, Lien or encumbrance thereunder.
Section 10.05 Acceleration of Securities.
If payment of the Notes is accelerated because of an Event of
Default, Holdings shall promptly notify holders of Senior Debt of the
acceleration.
Section 10.06 When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Notes (other than payments in the form of
Permitted Junior Securities or payments made from the trust created pursuant
to Article 8 hereof) at a time when the Trustee or such Holder, as
applicable, has actual knowledge that such payment is prohibited by Section
10.04 hereof, such payment shall be held by the Trustee or such Holder, in
trust for the benefit of, and shall be paid forthwith over and delivered,
upon written request, to, the holders of Senior Debt as their interests may
appear or their Representative under the indenture or other agreement (if
any) pursuant to which Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Senior Debt remaining unpaid to the extent necessary to pay such
Obligations in full in cash in accordance with their terms, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Debt.
<PAGE>
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically
set forth in this Article 10, and no implied covenants or obligations with
respect to the holders of Senior Debt shall be read into this Indenture
against the Trustee. The Trustee shall not be deemed to owe any fiduciary
duty to the holders of Senior Debt, and shall not be liable to any such
holders if the Trustee shall pay over or distribute to or on behalf of
Holders or Holdings or any other Person money or assets to which any holders
of Senior Debt shall be entitled by virtue of this Article 10, except if such
payment is made as a result of the willful misconduct or gross negligence of
the Trustee.
Section 10.07 Notice by Holdings.
Holdings shall promptly notify the Trustee and the Paying Agent of
any facts known to Holdings that would cause a payment of any Obligations
with respect to the Notes to violate this Article 10, but failure to give
such notice shall not affect the subordination of the Notes to the Senior
Debt as provided in this Article 10.
Section 10.08 Subrogation.
After all Senior Debt is paid in full in cash and until the Notes are
paid in full, Holders of Notes shall be subrogated (equally and ratably with
all other Indebtedness pari passu with the Notes) to the rights of holders of
Senior Debt to receive distributions applicable to Senior Debt to the extent
that distributions otherwise payable to the Holders of Notes have been
applied to the payment of Senior Debt. A distribution made under this
Article 10 to holders of Senior Debt that otherwise would have been made to
Holders of Notes is not, as between Holdings and Holders, a payment by
Holdings on the Notes.
Section 10.09 Relative Rights.
This Article 10 defines the relative rights of Holders of Notes and
holders of Senior Debt. Nothing in this Indenture shall: (i) impair, as
between Holdings and Holders of Notes, the obligation of Holdings, which is
absolute and unconditional, to pay principal of and interest on the Notes in
accordance with their terms; (ii) affect the relative rights of Holders of
Notes and creditors of Holdings other than their rights in relation to
holders of Senior Debt; or (iii) prevent the Trustee or any Holder of Notes
from exercising its available remedies upon a Default or Event of Default,
subject to the rights of holders and owners of Senior Debt to receive
distributions and payments otherwise payable to Holders of Notes. If
Holdings fails because of this Article 10 to pay principal of or interest on
a Note on the due date, the failure is still a Default or Event of Default.
Section 10.10 Subordination May Not Be Impaired by Holdings.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or
<PAGE>
failure to act by Holdings or any Holder or by the failure of Holdings or any
Holder to comply with this Indenture.
The Trustee and Holders agree that they will not challenge the
validity, enforceability or perfection of any Senior Debt or the liens,
guarantees and security interests securing the same and that as between the
holders of the Senior Debt on the one hand and the Trustee and Holders on the
other, the terms hereof shall govern even if all or part of the Senior Debt
or such liens and security interests are avoided, disallowed, subordinated,
set aside or otherwise invalidated in any judicial proceeding or otherwise,
regardless of the theory upon which such action is premised.
Without in any way limiting the generality of this Section 10.10, the
holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders, without incurring
responsibility to the Trustee or the Holders and without impairing or
releasing the subordination provided in this Article 10 or the obligations
hereunder of the Holders to the holders of Senior Debt, do any one or more of
the following: (a) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Debt, the Senior Credit
Facility or any instrument evidencing the same or any agreement under which
Senior Debt is outstanding or secured; (b) sell, exchange, release, foreclose
against or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Debt; (c) release any Person liable in any manner for the
collection of Senior Debt; and (d) exercise or refrain from exercising any
rights against Holdings, any Subsidiary thereof or any other Person.
Section 10.11 Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
any Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of Holdings referred to in
this Article 10, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative(s) or of the liquidating trustee
or agent or other Person making any distribution to the Trustee or to the
Holders of Notes for the purpose of ascertaining the Persons entitled to
participate in such distribution, all holders of the Senior Debt and other
Indebtedness of Holdings, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto
or to this Article 10.
Section 10.12 Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge
of the existence of any facts that would prohibit the making of any payment
or distribution by the Trustee, and the Trustee and the Paying Agent may
<PAGE>
continue to make payments on the Notes, unless the Trustee shall have
received at its Corporate Trust Office at least two Business Days prior to
the date of such payment written notice of facts that would cause the payment
of any Obligations with respect to the Notes to violate this Article 10.
Only Holdings or a Representative may give the notice. Nothing in this
Article 10 shall impair the claims of, or payments to, the Trustee under or
pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights.
Section 10.13 Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10 and the subordination of the Subsidiary Guarantees as provided in
Section 11.02, and appoints the Trustee to act as such Holder's
attorney-in-fact for any and all such purposes, including, in the event of
any dissolution, winding up, liquidation or reorganization of Holdings or any
Subsidiary (whether in bankruptcy, insolvency, receivership, reorganization
or similar proceedings or upon an assignment for the benefit of creditors or
otherwise), the filing of a claim for the unpaid balance of its Notes in the
form required in those proceedings. If the Trustee does not file a proper
proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of
the time to file such claim, the Representatives are hereby authorized to
file an appropriate claim for and on behalf of the Holders of the Notes.
Section 10.14 Amendments.
The provisions of this Article 10 or Section 11.02 or 11.06
(including, without limitation, any definitions or other sections included by
reference or incorporation or the terms and conditions of the Subsidiary
Guarantees) shall not be amended or modified without the written consent of
the holders of all Senior Debt.
ARTICLE 11
SUBSIDIARY GUARANTEES
Section 11.01 Guarantee.
Subject to this Article 11, each of the Guarantors hereby, jointly
and severally, unconditionally guarantees to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of
this Indenture, the Notes or the obligations of Holdings hereunder or
<PAGE>
thereunder, that: (a) the principal of and interest on the Notes will be
promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of and
interest on the Notes, if any, if lawful, and all other obligations of
Holdings to the Holders or the Trustee hereunder or thereunder will be
promptly paid in full or performed, all in accordance with the terms hereof
and thereof; and (b) in case of any extension of time of payment or renewal
of any Notes or any of such other obligations, that same will be promptly
paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or
otherwise. Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Guarantors shall be
jointly and severally obligated to pay the same immediately. Each Guarantor
agrees that this is a guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of
the Notes or this Indenture, the absence of any action to enforce the same,
any waiver or consent by any Holder of the Notes with respect to any
provisions hereof or thereof, the recovery of any judgment against Holdings,
any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of Holdings, any right to require a proceeding first against
Holdings, protest, notice and all demands whatsoever and covenant that this
Subsidiary Guarantee shall not be discharged except by complete performance
of the obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to Holdings, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either Holdings or the
Guarantors, any amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between the Guarantors, on the one
hand, and the Holders and the Trustee, on the other hand, (x) the maturity of
the obligations guaranteed hereby may be accelerated as provided in Article 6
hereof for the purposes of this Subsidiary Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect
of the obligations guaranteed hereby, and (y) in the event of any declaration
of acceleration of such obligations as provided in Article 6 hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Subsidiary Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
<PAGE>
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Guarantee.
Section 11.02 Subordination of Subsidiary Guarantee.
The Obligations of each Guarantor under its Subsidiary Guarantee
pursuant to this Article 11 shall be junior and subordinated to the prior
payment in full in cash of the Senior Debt of such Guarantor on the same
basis as the Notes are junior and subordinated to Senior Debt of Holdings.
For the purposes of the foregoing sentence, the Trustee and the Holders shall
have the right to receive and/or retain payments by any of the Guarantors
only at such times as they may receive and/or retain payments in respect of
the Notes pursuant to this Indenture, including Article 10 hereof.
Section 11.03 Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or
conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar federal or state law
to the extent applicable to any Subsidiary Guarantee. To effectuate the
foregoing intention, the Trustee, the Holders and the Guarantors hereby ir-
revocably agree that the obligations of such Guarantor under its Subsidiary
Guarantee and this Article 11 shall be limited to the maximum amount as will,
after giving effect to such maximum amount and all other contingent and fixed
liabilities of such Guarantor that are relevant under such laws, and after
giving effect to any collections from, rights to receive contribution from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under this Article 11, result in the
obligations of such Guarantor under its Subsidiary Guarantee not constituting
a fraudulent transfer or conveyance.
Section 11.04 Execution and Delivery of Subsidiary Guarantee.
To evidence its Subsidiary Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit E shall be endorsed by an
Officer of such Guarantor on each Note authenticated and delivered by the
Trustee and that this Indenture shall be executed on behalf of such Guarantor
by its President, Executive or Senior Vice President, Treasurer or one of its
Vice Presidents. Further, Holdings shall cause all future Guarantors to
execute a Supplemental Indenture substantially in the form of Exhibit F.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth
in Section 11.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
<PAGE>
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee
set forth in this Indenture on behalf of the Guarantors.
In the event that Holdings creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.17 hereof
Holdings shall cause such Subsidiaries to execute supplemental indentures to
this Indenture and Subsidiary Guarantees in accordance with Section 4.17
hereof and this Article 11, to the extent applicable; provided that all
Subsidiaries that have properly been designated as Unrestricted Subsidiaries
in accordance with this Indenture (i) will not be subject to the requirements
of Section 4.17 hereof and (ii) be released from all Obligations under any
Subsidiary Guarantee, in each case for so long as they continue to constitute
Unrestricted Subsidiaries.
Section 11.05 Guarantors May Consolidate, etc., on Certain Terms.
A Guarantor may not sell or otherwise dispose of all or substantially
all of its assets, or consolidate with or merge with or into (whether or not
such Guarantor is the surviving Person), another Person unless: (i)
immediately after giving effect to such transaction, no Default or Event of
Default exists; and (ii) either (a) the Person acquiring the property in any
such sale or disposition or the Person formed by or surviving any such
consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor under the Notes, the Indenture and the
Registration Rights Agreement pursuant to a supplemental indenture reasonably
satisfactory to the Trustee; or (b) the Net Proceeds of such sale or other
disposition are applied in accordance with the applicable provisions of this
Indenture, including, without limitation, Section 4.10 or Article 10 hereof.
Section 11.06 Releases Following Sale of Assets or Capital Stock.
The Subsidiary Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of such Guarantor (including
by way of merger or consolidation), if Holdings applies the
Net Proceeds of that sale or other disposition in accordance
with the applicable provisions of this Indenture, including,
without limitation, Section 4.10 or Article 10 hereof; or
(2) in connection with any sale of all of the capital stock of a
Guarantor, if Holdings applies the Net Proceeds of that sale
in accordance with the applicable provisions of this
Indenture, including, without limitation, Section 4.10 or
Article 10 hereof; or
<PAGE>
(3) if Holdings designates any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary in accordance with
this Indenture.
The Trustee will provide any written confirmation or evidence of the
termination of such Subsidiary Guarantee as reasonably required by the
Representative.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor under
this Indenture as provided in this Article 11.
ARTICLE 12
MISCELLANEOUS
Section 12.01 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA Section 318(c), the imposed duties shall
control.
Section 12.02 Notices.
Any notice or communication by Holdings, any Guarantor or the Trustee
to the others is duly given if in writing and delivered in person or mailed
by first class mail (registered or certified, return receipt requested), or
sent by telecopier or overnight courier guaranteeing next day delivery, to
the other's address.
If to Holdings and/or any Guarantor:
Russell-Stanley Holdings, Inc.
685 Route 202/206
Bridgewater, NJ 08807
Telecopier No.: (908) 203-1940
Attention: Chief Financial Officer
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Telecopier No.: (212) 455-2502
Attention: Stephan J. Feder, Esq.
<PAGE>
If to the Trustee:
The Bank of New York
101 Barclay Street, 21W
New York, NY 10286
Telecopier No.: (212) 815-5915
Attention: Corporate Trust Trustee Administration
Re: Russell-Stanley Holdings, Inc.
Holdings, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight
air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first
class mail, or by overnight air courier guaranteeing next day delivery to its
address shown on the register kept by the Registrar. Any notice or
communication shall also be so mailed to any Person described in TIA
Section 313(c), to the extent required by the TIA. Failure to mail a notice
or communication to a Holder or any defect in it shall not affect its
sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If Holdings mails a notice or communication to Holders, it shall mail
a copy to the Trustee and each Agent at the same time.
Section 12.03 Communication by Holders of Notes with Other Holders
of Notes.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes.
Holdings, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
Section 12.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by Holdings to the Trustee to take
any action under this Indenture, Holdings shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of the signers, all
<PAGE>
conditions precedent and covenants, if any, provided for in this
Indenture relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of such counsel,
all such conditions precedent and covenants have been satisfied.
Section 12.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a
certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the
provisions of TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or
she has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
Section 12.06 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.07 No Personal Liability of Directors, Officers, Employees
and Stockholders.
No director, officer, employee, incorporator or stockholder of
Holdings or any Guarantor, as such, shall have any liability for any
obligations of Holdings or such Guarantor under the Notes, this Indenture,
the Subsidiary Guarantees, the Registration Rights Agreement or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance
of the Notes.
<PAGE>
Section 12.08 Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
Section 12.09 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of Holdings or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 12.10 Successors.
All agreements of Holdings in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
Section 12.11 Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 12.12 Counterpart Originals; Acceptance by Trustee.
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. The Bank of New York hereby accepts the trusts in this Indenture
declared or provided, upon the terms and conditions hereinabove set forth.
Section 12.13 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
<PAGE>
SIGNATURES
Dated as of February 10, 1999
Russell-Stanley Holdings, Inc.
By: /s/ Daniel W. Miller
Name: Daniel W. Miller
Title: Executive Vice President and Chief
Financial Officer
Russell-Stanley Corp., as Guarantor
By: /s/ Daniel W. Miller
Name: Daniel W. Miller
Title: Executive Vice President and Chief
Financial Officer
Container Management Services, Inc.,
as Guarantor
By: /s/ Daniel W. Miller
Name: Daniel W. Miller
Title: Executive Vice President and Chief
Financial Officer
New England Container Co., Inc.
as Guarantor
By: /s/ Daniel W. Miller
Name: Daniel W. Miller
Title: Executive Vice President and Chief
Financial Officer
<PAGE>
Russell-Stanley, Inc., as Guarantor
By: /s/ Daniel W. Miller
Name: Daniel W. Miller
Title: Executive Vice President and Chief
Financial Officer
RSLPCO, Inc., as Guarantor
By: /s/ Daniel W. Miller
Name: Daniel W. Miller
Title: Executive Vice President and Chief
Financial Officer
Russell-Stanley, L.P., as Guarantor
By: Russell-Stanley, Inc.,
in its capacity as general partner
By: /s/ Daniel W. Miller
Name: Daniel W. Miller
Title: Executive Vice President and Chief
Financial Officer
The Bank of New York, as Trustee
By: /s/ Mary LaGumina
Name: Mary LaGumina
Title: Assistant Vice President
<PAGE>
EXHIBIT A-1
(Face of Note)
===============================================================================
CUSIP:
10 7/8% Senior Subordinated Notes due 2009
No.: $
Russell-Stanley Holdings, Inc.
promises to pay to ____________________________________________________________
or registered assigns,
the principal sum of __________________________________________________________
Dollars on February 15, 2009.
Interest Payment Dates: February 15 and August 15, commencing August 15, 1999.
Record Dates: February 1 and August 1.
Dated:_____________________
Russell-Stanley Holdings, Inc.
By:________________________
Name:
Title:
This is one of the
Notes referred to in the
within-mentioned Indenture:
The Bank of New York,
as Trustee
By:_______________________
Authorized Signatory
===============================================================================
<PAGE>
(Back of Note)
10 7/8% Senior Subordinated Notes due 2009
[INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF
THE INDENTURE]
[INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE
PROVISIONS OF THE INDENTURE]
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. Interest. Russell-Stanley Holdings, Inc., a Delaware corporation
("Holdings"), promises to pay interest on the principal amount of this Note
at 10.875% per annum from February 10, 1999 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 2(c) of the Registration
Rights Agreement referred to below. Holdings will pay interest and
Liquidated Damages semi-annually on February 15 and August 15 of each year,
or if any such day is not a Business Day, on the next succeeding Business Day
(each an "Interest Payment Date"). 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; provided that if there is no
existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the
next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be August 15, 1999. Holdings shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law)
on overdue principal and premium, if any, from time to time on demand to the
extent lawful at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time
to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. Holdings will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the February 1 or
August 1 next preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. Principal, premium, if any, and interest and Liquidated Damages on
the Notes will be payable at the office or agency of Holdings maintained for
such purpose or, at the option of Holdings, payment of interest and
Liquidated Damages may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes;
provided that all payments of principal, premium, interest and Liquidated
Damages with respect to Notes the Holders of which have given wire transfer
<PAGE>
instructions to Holdings prior to the Record Date will be required to be made
by wire transfer of immediately available funds to the accounts specified by
the Holders thereof. Until otherwise designated by Holdings, Holdings'
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. Such payment shall be in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. Paying Agent and Registrar. Initially, The Bank of New York, the
Trustee under the Indenture, will act as Paying Agent and Registrar.
Holdings may change any Paying Agent or Registrar without notice to any
Holder. Holdings or any of its Subsidiaries may act in any such capacity.
4. Indenture and Subordination. Holdings issued the Notes under an
Indenture dated as of February 10, 1999 ("Indenture") by and among Holdings,
the Guarantors and the Trustee. The terms of the Notes include those stated
in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb)
(the "TIA"). The Notes are subject to all such terms, and Holders are
referred to the Indenture and the TIA for a statement of such terms. To the
extent any provision of this Note conflicts with the express provisions of
the Indenture, the provisions of the Indenture shall govern and be
controlling. The payment of the Notes will, to the extent set forth in the
Indenture, be subordinated in right of payment to the prior payment in full
in cash or cash equivalents of all Senior Debt.
5. Optional Redemption. Except as set forth in the following
paragraph, the Notes will not be redeemable at Holdings' option prior to
February 15, 2004. On or after February 15, 2004, the Notes will be subject
to redemption at any time at the option of Holdings, in whole or in part,
upon not less than 30 nor more than 90 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued
and unpaid interest and Liquidated Damages thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
February 15 of the years indicated below:
YEAR PERCENTAGE
2004 105.438%
2005 103.625%
2006 101.813%
2007 and thereafter 100.000%
Notwithstanding the foregoing, at any time on or prior to
February 15, 2002, Holdings may on any one or more occasions redeem up to 35%
of the aggregate principal amount of Notes originally issued under the
Indenture at a redemption price of 110.875% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to
the redemption date, with the net cash proceeds of Public Equity Offerings by
<PAGE>
Holdings; provided that (i) at least 65% of the aggregate principal amount of
Notes remain outstanding immediately after the occurrence of such redemption
(excluding Notes held by Holdings and its Subsidiaries); and (ii) such
redemption shall occur within 90 days of the date of the closing of such
Public Equity Offering.
6. Mandatory Redemption. Except as set forth in Paragraph 7, Hol-
dings shall not be required to make mandatory redemption payments with
respect to the Notes.
7. Repurchase at Option of Holder. If a Change of Control occurs,
each Holder of Notes will have the right to require Holdings to make an offer
to all Holders to repurchase Notes on the terms, in accordance with the
procedures and subject to the limitations set forth in the Indenture. If
Holdings or a Restricted Subsidiary consummates any Asset Sales, when the
aggregate amount of Excess Proceeds exceeds $10.0 million, Holdings will be
required to make an offer to all Holders of Notes and all holders of other
pari passu Indebtedness containing provisions similar to those set forth in
the Indenture with respect to offers to purchase or redeem with the proceeds
of sales of assets to purchase the maximum principal amount of Notes and such
other pari passu Indebtedness that may be purchased out of the Excess
Proceeds on the terms, in accordance with the procedures and subject to the
limitations set forth in the Indenture and such other pari passu
Indebtedness.
8. Notice of Redemption. Notice of redemption will be mailed by
first class mail at least 30 days but not more than 90 days before the
redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. Notes in
denominations larger than $1,000 may be redeemed in part. If any Note is to
be redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed. A
new Note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
Note. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged
as provided in the Indenture. The Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and Holdings may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. Holdings or the Registrar is
not required to transfer or exchange any Note selected for redemption. Also,
Holdings or the Registrar is not required to transfer or exchange any Notes
for a period of 15 days before a selection of Notes to be redeemed.
10. Persons Deemed Owners. The registered Holder of a Note may
be treated as its owner for all purposes.
<PAGE>
11. Amendment, Supplement and Waiver. Subject to certain
exceptions, the Indenture, the Notes or the Subsidiary Guarantees may be
amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes) and any existing default or
compliance with any provision of the Indenture or the Notes may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
Without the consent of any Holder of Notes, Holdings and the Trustee may
amend or supplement the Indenture or the Notes to cure any ambiguity, defect
or inconsistency, to provide for uncertificated Notes in addition to or in
place of certificated Notes, to provide for the assumption of Holdings'
obligations to Holders of the Notes in case of a merger or consolidation or
sale of all or substantially all of Holdings' assets, to make any change that
would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, or to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the TIA.
12. Defaults and Remedies. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency as set forth
in the Indenture, with respect to Holdings, any Significant Subsidiary or any
group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the
Notes then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes.
13. Trustee Dealings with Holdings. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from,
and perform services for Holdings or its Affiliates, and may otherwise deal
with Holdings or its Affiliates, as if it were not the Trustee; however, if
it acquires any conflicting interest it must eliminate such conflict within
90 days, apply to the Commission for permission to continue or resign.
<PAGE>
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of Holdings or any Guarantor, as such, shall not
have any liability for any obligations of Holdings or any Guarantor under the
Notes, the Indenture, the Subsidiary Guarantees, the Registration Rights
Agreement or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. Guarantees. This Note will be entitled to the benefits of
certain Guarantees made for the benefit of the Holders. Reference is hereby
made to the Indenture for a statement of the respective rights, limitations
of rights, duties and obligations thereunder of the Guarantors, the Trustee
and the Holders.
16. Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
17. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
18. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and
Restricted Definitive Notes shall have all the rights set forth in the
Registration Rights Agreement dated as of the date of the Indenture, between
Holdings and the parties named on the signature pages thereof (the
"Registration Rights Agreement").
19. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, Holdings has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
20. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS NOTE WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Holdings will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to: Russell-Stanley Holdings, Inc., 685 Route 202/206,
Bridgewater, NJ 08807, Attention: Chief Financial Officer.
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
_______________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Note on the books of Holdings. The agent may substitute
another to act for him.
_______________________________________________________________________________
Date:___________________
Your Signature:____________________________
(Sign exactly as your name
appears on the Note)
SIGNATURE GUARANTEE
______________________________
Participant in a Recognized
Signature Guarantee Medallion
Program
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by Holdings pursuant
to Section 4.10 or 4.15 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Note purchased by
Holdings pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $_______________
_______________________________________________________________________________
Date: Your Signature:
(Sign exactly as your name appears on the Note)
Tax Identification No:_______________________________
SIGNATURE GUARANTEE
_______________________________
Participant in a Recognized
Signature Guarantee Medallion
Program
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE <F1>
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Amount of decrease Amount of Principal Amount Signature of
in increase in of this authorized
Principal Principal Global Note signatory of
Amount of Amount of following such Trustee or
Date of Exchange this Global Note this Global Note decrease (or increase) Custodian
<S> <C> <C> <C> <C>
</TABLE>
<F1> This should be included only if the Note is issued in global form.
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
===============================================================================
CUSIP:_________________________
10 7/8% Senior Subordinated Notes due 2009
No.:___ $______________________________
Russell-Stanley Holdings, Inc.
promises to pay to ____________________________________________________________
or registered assigns, ________________________________________________________
the principal sum of __________________________________________________________
Dollars on February 15, 2009. _________________________________________________
Interest Payment Dates: February 15 and August 15, commencing August 15,
1999.
Record Dates: February 1 and August 1.
Dated: __________________________
Russell-Stanley Holdings, Inc.
By:______________________________
Name:
Title:
This is one of the
Notes referred to in the
within-mentioned Indenture:
The Bank of New York,
as Trustee
By:________________________
Authorized Signatory
===============================================================================
<PAGE>
(Back of Regulation S Temporary Global Note)
10 7/8% Senior Subordinated Notes due 2009
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF
THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EX-
CHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL
NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF HOLDINGS.
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN
ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION
MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) TO AN INSTITUTIONAL ACCREDITED INVESTOR AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES.
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. Interest. Russell-Stanley Holdings, Inc., a Delaware corporation
("Holdings"), promises to pay interest on the principal amount of this Note
at 10.875% per annum from February 10, 1999 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 2(c) of the Registration
Rights Agreement referred to below. Holdings will pay interest and
Liquidated Damages semi-annually on February 15 and August 15 of each year,
or if any such day is not a Business Day, on the next succeeding Business Day
(each an "Interest Payment Date"). 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; provided that if there is no
existing Default in the payment of interest, and if this Note is
<PAGE>
authenticated between a record date referred to on the face hereof and the
next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be August 15, 1999. Holdings shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law)
on overdue principal and premium, if any, from time to time on demand to the
extent lawful at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time
to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for one or
more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be
entitled to the same benefits as other Senior Subordinated Notes under the
Indenture.
2. Method of Payment. Holdings will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the February 1 or
August 1 next preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. Principal, premium, if any, and interest and Liquidated Damages on
the Notes will be payable at the office or agency of Holdings maintained for
such purpose or, at the option of Holdings, payment of interest and
Liquidated Damages may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes;
provided that all payments of principal, premium, interest and Liquidated
Damages with respect to Notes the Holders of which have given wire transfer
instructions to Holdings prior to the Record Date will be required to be made
by wire transfer of immediately available funds to the accounts specified by
the Holders thereof. Until otherwise designated by Holdings, Holdings'
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. Such payment shall be in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. Paying Agent and Registrar. Initially, The Bank of New York, the
Trustee under the Indenture, will act as Paying Agent and Registrar.
Holdings may change any Paying Agent or Registrar without notice to any
Holder. Holdings or any of its Subsidiaries may act in any such capacity.
4. Indenture and Subordination. Holdings issued the Notes under an
Indenture dated as of February 10, 1999 ("Indenture") by and among Holdings,
<PAGE>
the Guarantors and the Trustee. The terms of the Notes include those stated
in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb)
(the "TIA"). The Notes are subject to all such terms, and Holders are
referred to the Indenture and the TIA for a statement of such terms. To the
extent any provision of this Note conflicts with the express provisions of
the Indenture, the provisions of the Indenture shall govern and be
controlling. The payment of the Notes will, to the extent set forth in the
Indenture, be subordinated in right of payment to the prior payment in full
in cash or cash equivalents of all Senior Debt.
5. Optional Redemption. Except as set forth in the following
paragraph, the Notes will not be redeemable at Holdings' option prior to
February 15, 2004. On or after February 15, 2004, the Notes will be subject
to redemption at any time at the option of Holdings, in whole or in part,
upon not less than 30 nor more than 90 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued
and unpaid interest and Liquidated Damages thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
February 15 of the years indicated below:
YEAR PERCENTAGE
2004 105.438%
2005 103.625%
2006 101.813%
2007 and thereafter 100.000%
Notwithstanding the foregoing, at any time on or prior to
February 15, 2002, Holdings may on any one or more occasions redeem up to 35%
of the aggregate principal amount of Notes originally issued under the
Indenture at a redemption price of 110.875% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to
the redemption date, with the net cash proceeds of Public Equity Offerings by
Holdings; provided that (i) at least 65% of the aggregate principal amount of
Notes remain outstanding immediately after the occurrence of such redemption
(excluding Notes held by Holdings and its Subsidiaries); and (ii) such
redemption shall occur within 90 days of the date of the closing of such
Public Equity Offering.
6. Mandatory Redemption. Except as set forth in Paragraph 7, Hol-
dings shall not be required to make mandatory redemption payments with
respect to the Notes.
7. Repurchase at Option of Holder. If a Change of Control occurs,
each Holder of Notes will have the right to require Holdings to make an offer
to all Holders to repurchase Notes on the terms, in accordance with the
procedures and subject to the limitations set forth in the Indenture. If
Holdings or a Restricted Subsidiary consummates any Asset Sales, when the
aggregate amount of Excess Proceeds exceeds $10.0 million, Holdings will be
<PAGE>
required to make an offer to all Holders of Notes and all holders of other
pari passu Indebtedness containing provisions similar to those set forth in
the Indenture with respect to offers to purchase or redeem with the proceeds
of sales of assets to purchase the maximum principal amount of Notes and such
other pari passu Indebtedness that may be purchased out of the Excess
Proceeds on the terms, in accordance with the procedures and subject to the
limitations set forth in the Indenture and such other pari passu
Indebtedness.
8. Notice of Redemption. Notice of redemption will be mailed by
first class mail at least 30 days but not more than 90 days before the
redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. Notes in
denominations larger than $1,000 may be redeemed in part. If any Note is to
be redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed. A
new Note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
Note. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged
as provided in the Indenture. The Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and Holdings may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. Holdings or the Registrar is
not required to transfer or exchange any Note selected for redemption. Also,
Holdings or the Registrar is not required to transfer or exchange any Notes
for a period of 15 days before a selection of Notes to be redeemed.
This Regulation S Temporary Global Note is exchangeable in whole or
in part for one or more Global Notes only (i) on or after the termination of
the 40-day restricted period (as defined in Regulation S) and (ii) upon
presentation of certificates (accompanied by an Opinion of Counsel, if
applicable) required by Article 2 of the Indenture. Upon exchange of this
Regulation S Temporary Global Note for one or more Global Notes, the Trustee
shall cancel this Regulation S Temporary Global Note.
10. Persons Deemed Owners. The registered Holder of a Note may
be treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain
exceptions, the Indenture, the Notes or the Subsidiary Guarantees may be
amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the 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
<PAGE>
compliance with any provision of the Indenture or the Notes may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
Without the consent of any Holder of Notes, Holdings and the Trustee may
amend or supplement the Indenture or the Notes to cure any ambiguity, defect
or inconsistency, to provide for uncertificated Notes in addition to or in
place of certificated Notes, to provide for the assumption of Holdings'
obligations to Holders of the Notes in case of a merger or consolidation or
sale of all or substantially all of Holdings' assets, to make any change that
would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, or to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the TIA.
12. Defaults and Remedies. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency as set forth
in the Indenture, with respect to Holdings, any Significant Subsidiary or any
group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the
Notes then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes.
13. Trustee Dealings with Holdings. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from,
and perform services for Holdings or its Affiliates, and may otherwise deal
with Holdings or its Affiliates, as if it were not the Trustee; however, if
it acquires any conflicting interest it must eliminate such conflict within
90 days, apply to the Commission for permission to continue or resign.
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of Holdings or any Guarantor, as such, shall not
have any liability for any obligations of Holdings or any Guarantor under the
Notes, the Indenture, the Subsidiary Guarantees, the Registration Rights
Agreement or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
<PAGE>
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. Guarantees. This Note will be entitled to the benefits of
certain Guarantees made for the benefit of the Holders. Reference is hereby
made to the Indenture for a statement of the respective rights, limitations
of rights, duties and obligations thereunder of the Guarantors, the Trustee
and the Holders.
16. Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
17. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
18. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and
Restricted Definitive Notes shall have all the rights set forth in the
Registration Rights Agreement dated as of the date of the Indenture, between
Holdings and the parties named on the signature pages thereof (the
"Registration Rights Agreement").
19. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, Holdings has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
20. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS NOTE WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Holdings will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to: Russell-Stanley Holdings, Inc., 685 Route 202/206,
Bridgewater, NJ 08807, Attention: Chief Financial Officer.
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
_______________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Note on the books of Holdings. The agent may substitute
another to act for him.
_______________________________________________________________________________
Date:___________________
Your Signature:____________________________
(Sign exactly as your name
appears on the Note)
SIGNATURE GUARANTEE
______________________________
Participant in a Recognized
Signature Guarantee Medallion
Program
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by Holdings pursuant
to Section 4.10 or 4.15 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Note purchased by
Holdings pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $_______________
_______________________________________________________________________________
Date: Your Signature:
(Sign exactly as your name appears on the Note)
Tax Identification No:_______________________________
SIGNATURE GUARANTEE
_______________________________
Participant in a Recognized
Signature Guarantee Medallion
Program
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE <F2>
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Amount of decrease Amount of Principal Amount Signature of
in increase in of this authorized
Principal Principal Global Note signatory of
Amount of Amount of following such Trustee or
Date of Exchange this Global Note this Global Note decrease (or increase) Custodian
<S> <C> <C> <C> <C>
</TABLE>
<F2> This should be included only if the Note is issued in global form.
<F3> This should be included only if the Note is issued in global form.
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Russell-Stanley Holdings, Inc.
685 Route 202/206
Bridgewater, NJ 08807
[Registrar address block]
Re: 10 7/8% Senior Subordinated Notes due 2009
(CUSIP _____________)
Reference is hereby made to the Indenture, dated as of February 10,
1999 (the "Indenture"), by and among Russell-Stanley Holdings, Inc., as
issuer ("Holdings"), the Guarantors and The Bank of New York, as trustee.
Capitalized terms used but not defined herein shall have the meanings given
to them in the Indenture.
______________ (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex
A hereto. In connection with the Transfer, the Transferor hereby certifies
that:
[CHECK ALL THAT APPLY]
1. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN A
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Note for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and
such Person and each such account is a "qualified institutional buyer" within
the meaning of Rule 144A in a transaction meeting the requirements of Rule
144A and such Transfer is in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the 144A Global Note and/or the Definitive Note and in the Indenture and
the Securities Act.
2. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN A
REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The
<PAGE>
Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and, accordingly, the Transferor hereby
further certifies that (i) the Transfer is not being made to a person in the
United States and (x) at the time the buy order was originated, the
Transferee was outside the United States or such Transferor and any Person
acting on its behalf reasonably believed and believes that the Transferee was
outside the United States or (y) the transaction was executed in, on or
through the facilities of a designated offshore securities market and neither
such Transferor nor any Person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements
of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii)
the transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not
being made to a U.S. Person or for the account or benefit of a U.S. Person
(other than an initial purchaser). Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
Transfer enumerated in the Private Placement Legend printed on the Regulation
S Global Note and/or the Definitive Note and in the Indenture and the
Securities Act.
3. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF
THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive
Notes and pursuant to and in accordance with the Securities Act and any
applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) / / such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) / / such Transfer is being effected to Holdings or a
Subsidiary thereof;
or
(c) / / such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with
the prospectus delivery requirements of the Securities Act;
or
<PAGE>
(d) / / such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule
904, and the Transferor hereby further certifies that it has not engaged
in any general solicitation within the meaning of Regulation D under the
Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Note or
Restricted Definitive Notes and the requirements of the exemption
claimed, which certification is supported by (1) a certificate executed
by the Transferee in the form of Exhibit D to the Indenture and (2) if
such Transfer is in respect of a principal amount of Notes at the time of
transfer of less than $250,000, an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has attached
to this certification), to the effect that such Transfer is in compliance
with the Securities Act. Upon consummation of the proposed transfer in
accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Global
Note and/or the Definitive Notes and in the Indenture and the Securities
Act.
4. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
AN UNRESTRICTED GLOBAL NOTE OR AN UNRESTRICTED DEFINITIVE NOTE.
(a) / / CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under
the Securities Act and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any state of
the United States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will no longer be subject
to the restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Notes, on Restricted Definitive Notes and in
the Indenture.
(b) / / CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky
securities laws of any state of the United States and (ii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will no
longer be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
<PAGE>
(c) / / CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i)
The Transfer is being effected pursuant to and in compliance with an
exemption from the registration requirements of the Securities Act other than
Rule 144, Rule 903 or Rule 904 and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky
securities laws of any State of the United States and (ii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will not be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Notes or Restricted Definitive Notes
and in the Indenture.
This certificate and the statements contained herein are made for
your benefit and the benefit of Holdings.
_______________________________________
[Insert Name of Transferor]
By:____________________________________
Name:
Title:
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ), or
(ii) / / Regulation S Global Note (CUSIP ), or
(b) / / a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ), or
(ii) / / Regulation S Global Note (CUSIP ), or
(iii) / / Unrestricted Global Note (CUSIP ); or
(b) / / a Restricted Definitive Note; or
(c) / / an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Russell-Stanley Holdings, Inc.
685 Route 202/206
Bridgewater, NJ 08807
[Registrar address block]
Re: 10 7/8% Senior Subordinated Notes due 2009
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of February 10,
1999 (the "Indenture"), by and among Russell-Stanley Holdings, Inc., as
issuer ("Holdings"), the Guarantors and The Bank of New York, as trustee.
Capitalized terms used but not defined herein shall have the meanings given
to them in the Indenture.
____________ (the "Owner") owns and proposes to exchange the Note[s]
or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection
with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE.
In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Note for a beneficial interest in an Unrestricted Global
Note in an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Global Notes and pursuant to and in
accordance with the United States Securities Act of 1933, as amended (the
"Securities Act"), (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest
in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in
an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
<PAGE>
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest
is being acquired in compliance with any applicable blue sky securities laws
of any state of the United States.
(c) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Unrestricted Definitive Note is being acquired for
the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive Note
is being acquired in compliance with any applicable blue sky securities laws
of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES FOR RESTRICTED DEFINITIVE NOTES
OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES
(a) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest
in the [CHECK ONE] __144A Global Note, __Regulation S Global Note with an
equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer and
(ii) such Exchange has been effected in compliance with the transfer restr-
ictions applicable to the Restricted Global Notes and pursuant to and in
accordance with the Securities Act, and in compliance with any applicable
blue sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the beneficial interest issued will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the
relevant Restricted Global Note and in the Indenture and the Securities Act.
<PAGE>
This certificate and the statements contained herein are made for
your benefit and the benefit of Holdings.
_________________________________
[Insert Name of Owner]
By:______________________________
Name:
Title:
Dated: ______________________
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Russell-Stanley Holdings, Inc.
685 Route 202/206
Bridgewater, NJ 08807
[Registrar address block]
Re: 10 7/8% Subordinated Notes due 2009
(CUSIP _____________)
Reference is hereby made to the Indenture, dated as of February 10,
1999 (the "Indenture"), between Russell-Stanley Holdings, Inc., as issuer
("Holdings"), the Guarantors and The Bank of New York, as trustee.
Capitalized terms used but not defined herein shall have the meanings given
to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) / / a beneficial interest in a Global Note, or
(b) / / a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth
in the Indenture and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Notes or any interest therein except
in compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest
therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for
which we are acting as hereinafter stated, that if we should sell the Notes
or any interest therein, we will do so only (A) to Holdings or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) to an institutional
"accredited investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and
to Holdings a signed letter substantially in the form of this letter and, if
such transfer is in respect of a principal amount of Notes, at the time of
transfer, of less than $250,000, an Opinion of Counsel in form reasonably
acceptable to Holdings to the effect that such transfer is in compliance with
<PAGE>
the Securities Act, (D) outside the United States in accordance with Rule 904
of Regulation S under the Securities Act, (E) pursuant to the provisions of
Rule 144(k) under the Securities Act or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to
provide to any person purchasing the Definitive Note or beneficial interest
in a Global Note from us in a transaction meeting the requirements of clauses
(A) through (E) of this paragraph a notice advising such purchaser that
resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and
Holdings such certifications, legal opinions and other information as you and
Holdings may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the Notes
purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes,
and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of
which is an institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You and Holdings are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby.
_____________________________________
[Insert Name of Accredited Owner]
By:__________________________________
Name:
Title:
Dated: ________________
<PAGE>
EXHIBIT E
FORM OF SENIOR SUBORDINATED SUBSIDIARY GUARANTEE
For value received, the undersigned (including any successor Person
under the Indenture) has, jointly and severally, unconditionally guaranteed,
to the extent set forth in the Indenture and subject to the provisions in the
Indenture dated as of February 10, 1999 (the "Indenture") by and among
Russell-Stanley Holdings, Inc. ("Holdings"), the Guarantors listed on the
signature page thereto and The Bank of New York, as trustee (the "Trustee"),
(a) the due and punctual payment of the principal of, premium, if any, and
interest on the Notes (as defined in the Indenture), whether at maturity, by
acceleration, redemption or otherwise, the due and punctual payment of
interest on overdue principal and premium, and, to the extent permitted by
law, interest, and the due and punctual performance of all other obligations
of Holdings to the Holders or the Trustee all in accordance with the terms of
the Indenture and (b) in case of any extension of time of payment or renewal
of any Notes or any of such other obligations, that the same will be promptly
paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or
otherwise. The obligations of the undersigned to the Holders of Notes and to
the Trustee pursuant to this Subsidiary Guarantee and the Indenture are
expressly set forth in Article 11 of the Indenture and reference is hereby
made to the Indenture for the precise terms of this Subsidiary Guarantee.
Each Holder of a Note, by accepting the same, (a) agrees to and shall be
bound by such provisions, (b) authorizes and directs the Trustee, on behalf
of such Holder, to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints
the Trustee attorney-in-fact of such Holder for such purpose; provided,
however, that the Indebtedness evidenced by this Subsidiary Guarantee shall
cease to be so subordinated and subject in right of payment upon any
defeasance of this Note in accordance with the provisions of the Indenture.
The terms of the Indenture, including, without limitation, Articles
10 and 11 of the Indenture, are incorporated herein by reference.
Capitalized terms used herein shall have the meanings assigned to them in the
Indenture unless otherwise indicated.
[Name of Guarantor]
By:_______________________________
Name:
Title:
<PAGE>
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guaranteeing Subsidiary"),
a subsidiary of Russell-Stanley Holdings, Inc. (or its permitted successor),
a Delaware corporation ("Holdings"), Holdings, the other Guarantors (as
defined in the Indenture referred to herein) and The Bank of New York, as
trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, Holdings has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of February 10, 1999
providing for the issuance of an aggregate principal amount of up to $225.0
million of 10 7/8% Senior Subordinated Notes due 2009 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a
supplemental indenture pursuant to which the Guaranteeing Subsidiary shall
unconditionally guarantee all of Holdings' Obligations under the Notes and
the Indenture on the terms and conditions set forth herein (the "Subsidiary
Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby
agrees as follows:
(a) Along with all Guarantors named in the Indenture, to jointly
and severally Guarantee to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee
and its successors and assigns, irrespective of the validity
and enforceability of the Indenture, the Notes or the
obligations of Holdings hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be
promptly paid in full when due, whether at maturity,
<PAGE>
by acceleration, redemption or otherwise, and
interest on the overdue principal of and interest on
the Notes, if any, if lawful, and all other
obligations of Holdings to the Holders or the
Trustee hereunder or thereunder will be promptly
paid in full or performed, all in accordance with
the terms hereof and thereof; and
(ii) in case of any extension of time of payment or
renewal of any Notes or any of such other
obligations, that same will be promptly paid in full
when due or performed in accordance with the terms
of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated
to pay the same immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of
the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the
Notes with respect to any provisions hereof or thereof, the
recovery of any judgment against Holdings, any action to
enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or
defense of a guarantor.
(c) The following is hereby waived: diligence, presentment,
demand of payment, filing of claims with a court in the event
of insolvency or bankruptcy of Holdings, any right to require
a proceeding first against Holdings, protest, notice and all
demands whatsoever.
(d) This Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the
Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to Holdings, the Guarantors, or any
Custodian, Trustee, liquidator or other similar official
acting in relation to either Holdings or the Guarantors, any
amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any
right of subrogation in relation to the Holders in respect of
<PAGE>
any obligations guaranteed hereby until payment in full of
all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided
in Article 6 of the Indenture for the purposes of this
Subsidiary Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of
any declaration of acceleration of such obligations as
provided in Article 6 of the Indenture, such obligations
(whether or not due and payable) shall forthwith become due
and payable by the Guarantors for the purpose of this
Subsidiary Guarantee.
(h) The Guarantors shall have the right to seek contribution from
any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the
Guarantee.
(i) The obligations hereunder shall be subject to the
subordination provisions set forth in Article 10 of the
Indenture.
3. Execution and Delivery. Each Guaranteeing Subsidiary agrees that
the Subsidiary Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain Terms.
The Guaranteeing Subsidiary may not sell or otherwise dispose of all or
substantially all of its assets, or consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person) another corporation,
Person or entity whether or not affiliated with such Guarantor except in
accordance with the provisions set forth in the Indenture, including, without
limitation, Section 11.05 of the Indenture.
5. Releases. The Subsidiary Guarantee of the Guaranteeing
Subsidiary will be released in accordance with the provisions set forth in
the Indenture, including, without limitation, Section 11.06 of the Indenture.
The Trustee will provide any written confirmation or evidence of the
termination of such Subsidiary Guarantee as reasonably required by the
Representative. Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of principal of
and interest on the Notes and for the other obligations of any Guarantor
under the Indenture as provided in Article 11 of the Indenture.
<PAGE>
6. No Recourse Against Others. No director, officer, employee,
incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such,
shall have any liability for any obligations of Holdings or any Guaranteeing
Subsidiary under the Notes, the Indenture, any Subsidiary Guarantees or this
Supplemental Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by accepting a
Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws.
7. New York Law to Govern. THE INTERNAL LAW OF THE STATE OF NEW
YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
8. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
9. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and
Holdings.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: ________________
[Guaranteeing Subsidiary]
By:________________________________
Name:
Title:
Exhibit 5
[Letterhead of SIMPSON THACHER & BARTLETT]
April 12, 1999
Russell-Stanley Holdings, Inc.
685 Route 202/206
Bridgewater, New Jersey 08807
Ladies and Gentlemen:
We have acted as special counsel for Russell-Stanley Holdings,
Inc., a Delaware corporation (the "Company"), and for the entities listed on
Schedule A hereto (the "Guarantors"), in connection with the Registration
Statement on Form S-4 (the "Registration Statement") filed by the Company and
the Guarantors with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the issuance by the Company of $150,000,000 aggregate principal amount of its
10-7/8% Senior Subordinated Notes due 2009 which have been registered under the
Securities Act (the "Exchange Notes") and the issuance by the Guarantors of
guarantees (the "Guarantees") with respect to the Exchange Notes. The Exchange
Notes are to be offered by the Company in exchange for (the "Exchange")
$150,000,000 aggregate principal amount of its outstanding 10-7/8% Senior
Subordinated Notes due 2009 (the "Original Notes"). The Original Notes have
been, and the Exchange Notes will be, issued under an Indenture, dated as of
February 10, 1999 (the "Indenture"), between the Company and The Bank of New
York, as Trustee.
<PAGE>
We have examined the Registration Statement and the Indenture,
which has been filed with the Commission as an Exhibit to the Registration
Statement. In addition, we have examined the originals or duplicates, or
certified or conformed copies, of such records, agreements, instruments and
other documents and have made such other and further 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
Company and the Guarantors.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the due incorporation and
valid existence of the Guarantors, the due authorization, execution and delivery
of the Indenture by the Guarantors, 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.
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that:
1. When the Exchange Notes have been duly executed,
authenticated, issued and delivered in accordance with the
provisions of the Indenture upon the Exchange, the Exchange
Notes will constitute valid and legally binding obligations
of the Company enforceable against the Company in accordance
with their terms.
2. When (a) the Exchange Notes have been duly executed,
authenticated, issued and delivered in accordance with the
provisions of the Indenture upon the Exchange and (b) the
Guarantees have been duly issued, the Guarantees will
constitute valid and legally binding obligations of the
<PAGE>
Guarantors enforceable against the Guarantors in accordance
with their terms.
Our opinions set forth in paragraphs 1 and 2 above are subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
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.
We hereby consent to the use of this opinion as an exhibit to
the Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus included therein.
Very truly yours,
/s/Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT
<PAGE>
SCHEDULE A
Guarantors
Container Management Services, Inc.
New England Container Co., Inc.
RSLPCO, Inc.
Russell-Stanley Corp.
Russell-Stanley, Inc.
Russell-Stanley, L.P.
EXHIBIT 10.1
FIFTH AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
dated as of June 12, 1989
amended and restated as of April 9, 1990
and further amended and restated as of June 23, 1994
and further amended and restated as of July 23, 1997
and further amended and restated as of November 7, 1997
and further amended and restated as of February 10, 1999
among
RUSSELL-STANLEY HOLDINGS, INC.
RUSSELL-STANLEY CORP.
RUSSELL-STANLEY, INC.
RSLPCO, INC.
RUSSELL-STANLEY, L.P.
CONTAINER MANAGEMENT SERVICES, INC.
NEW ENGLAND CONTAINER CO., INC.
HUNTER DRUMS LIMITED
and
BANKBOSTON, N.A.
CERTAIN OTHER FINANCIAL INSTITUTIONS
BANKBOSTON, N.A., AS ADMINISTRATIVE AGENT
and
GOLDMAN SACHS CREDIT PARTNERS L.P., AS SYNDICATION AGENT
with
BANCBOSTON ROBERTSON STEPHENS INC. AND GOLDMAN SACHS CREDIT
PARTNERS L.P. HAVING ACTED AS ARRANGERS
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS AND RULES OF INTERPRETATION. . . . . . . . . . . . . . . 3
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 Rules of Interpretation. . . . . . . . . . . . . . . . . . . . 27
2. THE REVOLVING CREDIT LOANS. . . . . . . . . . . . . . . . . . . . . . 28
2.1 Commitments to Lend. . . . . . . . . . . . . . . . . . . . . . 28
2.2 Commitment Fee. . . . . . . . . . . . . . . . . . . . . . . . 30
2.3 Reduction of Total Revolving Credit Commitment . . . . . . . . 30
2.4 Evidence of Revolving Credit Loans. . . . . . . . . . . . . . 31
2.5 Interest on Revolving Credit Loans. . . . . . . . . . . . . . 32
2.6 Requests for Revolving Credit Loans. . . . . . . . . . . . . . 33
2.7 Conversion Options. . . . . . . . . . . . . . . . . . . . . . 34
2.7.1 Conversion to Different Type of Revolving Credit Loan. 34
2.7.2 Continuation of Type of Revolving Credit Loan. . . . . 34
2.7.3 Eurodollar Rate Loans. . . . . . . . . . . . . . . . . 35
2.8 Funds for Domestic Revolver Loans. . . . . . . . . . . . . . . 35
2.8.1 Funding Procedures. . . . . . . . . . . . . . . . . . . 35
2.8.2 Advances by Agent. . . . . . . . . . . . . . . . . . . 35
2.9 Funding Procedures for Hunter Revolver Loans. . . . . . . . . 36
2.10 Fronting Provisions. . . . . . . . . . . . . . . . . . . . . . 36
2.10.1 Application of Interest Payments for Hunter Revolver
Loans. . . . . . . . . . . . . . . . . . . . . . . . . 36
2.10.2 Payments to Hunter Fronting Bank. . . . . . . . . . . 37
2.10.3 Currency Conversions and Contingent Funding Agreement. 37
2.10.4 Resignation of Hunter Fronting Bank. . . . . . . . . . 40
2A. THE SWING LINE. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2A.1 The Swing Line Loans . . . . . . . . . . . . . . . . . . . . 41
2A.2 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . 41
2A.3 Interest on Swing Line Loans . . . . . . . . . . . . . . . . 42
2A.4 Repayment of Swing Line Loans . . . . . . . . . . . . . . . . 42
2A.5 The Swing Line Note . . . . . . . . . . . . . . . . . . . . . 43
2B. BANKERS' ACCEPTANCES . . . . . . . . . . . . . . . . . . . . . . . 44
2B.1. Acceptance and Purchase . . . . . . . . . . . . . . . . . . 44
2B.2. Refunding Bankers' Acceptances . . . . . . . . . . . . . . . 47
2B.3. Acceptance Fee . . . . . . . . . . . . . . . . . . . . . . . 48
2B.4. Circumstances Making Bankers' Acceptances Unavailable . . . 48
2B.5 Cash Payments with respect to Outstanding Bankers'
Acceptances . . . . . . . . . . . . . . . . . . . . . . . . . 48
3. REPAYMENT OF THE REVOLVING CREDIT LOANS. . . . . . . . . . . . . . . 49
3.1 Maturity. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.2 Mandatory Repayments of Revolving Credit Loans. . . . . . . . 50
- ii -
<PAGE>
3.3 Optional Repayments of Revolving Credit Loans. . . . . . . . . 50
3.4 Pro Rata Treatment of Revolving Credit Loans. . . . . . . . . 51
4. TERM LOAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.1 Commitments to Lend. . . . . . . . . . . . . . . . . . . . . . 51
4.2 The Term Notes. . . . . . . . . . . . . . . . . . . . . . . . 51
4.3 Schedule of Installment Payments of Principal of Term Loan. . 52
4.4 Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . 52
5. ADDITIONAL PROVISIONS RELATING TO THE TERM LOAN . . . . . . . . . . . 52
5.1 Mandatory Repayments of the Term Loan. . . . . . . . . . . . . 52
5.2 Optional Prepayment of the Term Loan. . . . . . . . . . . . . 54
6. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.1 Letter of Credit Commitments. . . . . . . . . . . . . . . . . 55
6.1.1 Commitment to Issue Letters of Credit . . . . . . . . . 55
6.1.2 Letter of Credit Applications. . . . . . . . . . . . . 56
6.1.3 Terms of Letters of Credit. . . . . . . . . . . . . . . 56
6.1.4 Reimbursement Obligations of Lenders. . . . . . . . . . 56
6.1.5 Participations of Lenders. . . . . . . . . . . . . . . 57
6.2 Reimbursement Obligation of Domestic Borrowers. . . . . . . . 57
6.3 Letter of Credit Payments. . . . . . . . . . . . . . . . . . . 58
6.4 Obligations Absolute. . . . . . . . . . . . . . . . . . . . . 58
6.5 Reliance by Issuer. . . . . . . . . . . . . . . . . . . . . . 59
6.6 Letter of Credit Fee . . . . . . . . . . . . . . . . . . . . . 59
7. CERTAIN GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 60
7.1 Closing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.2 Agent's Fee. . . . . . . . . . . . . . . . . . . . . . . . . 60
7.3 Funds for Payments. . . . . . . . . . . . . . . . . . . . . . 60
7.3.1 Payments to Agent. . . . . . . . . . . . . . . . . . . 60
7.3.2 No Offset, etc. . . . . . . . . . . . . . . . . . . . . 60
7.3.3 Currency of Payments . . . . . . . . . . . . . . . . . 60
7.4 Computations. . . . . . . . . . . . . . . . . . . . . . . . . 62
7.5 Inability to Determine Eurodollar Rate. . . . . . . . . . . . 63
7.6 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.7 Additional Costs, etc. . . . . . . . . . . . . . . . . . . . . 64
7.8 Capital Adequacy. . . . . . . . . . . . . . . . . . . . . . . 66
7.9 Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . 67
7.10 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . 67
7.11 Interest After Default. . . . . . . . . . . . . . . . . . . . 67
7.11.1 Interest After Default. . . . . . . . . . . . . . . . 67
7.11.2 Interest Limitation. . . . . . . . . . . . . . . . . . 68
7.12 Currency Fluctuations. . . . . . . . . . . . . . . . . . . . . 68
7.13 Change in Lending Office. . . . . . . . . . . . . . . . . . . 69
7.14 Replacement of Lenders. . . . . . . . . . . . . . . . . . . . 69
- iii -
<PAGE>
8. COLLATERAL SECURITY AND GUARANTIES. . . . . . . . . . . . . . . . . . 70
8.1 Security of Borrowers. . . . . . . . . . . . . . . . . . . . . 70
8.2 Guaranties and Security of Domestic Borrowers. . . . . . . . . 70
8.3 Collateral Notes. . . . . . . . . . . . . . . . . . . . . . . 70
9. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 71
9.1 Corporate Authority. . . . . . . . . . . . . . . . . . . . . . 71
9.1.1 Incorporation; Good Standing. . . . . . . . . . . . . . 71
9.1.2 Authorization. . . . . . . . . . . . . . . . . . . . . 71
9.1.3 Enforceability. . . . . . . . . . . . . . . . . . . . . 72
9.2 Governmental Approvals . . . . . . . . . . . . . . . . . . . . 72
9.3 Title to Properties; Leases . . . . . . . . . . . . . . . . . 72
9.4 Financial Statements; Projections . . . . . . . . . . . . . . 73
9.4.1 Financial Statements . . . . . . . . . . . . . . . . . 73
9.4.2 Projections . . . . . . . . . . . . . . . . . . . . . . 73
9.5 No Material Changes, etc . . . . . . . . . . . . . . . . . . . 73
9.6 Franchises, Patents, Copyrights, etc . . . . . . . . . . . . . 73
9.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.8 Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.9 No Event of Default . . . . . . . . . . . . . . . . . . . . . 74
9.10 Holding Company and Investment Company Acts . . . . . . . . . 74
9.11 Absence of Financing Statements, etc . . . . . . . . . . . . . 74
9.12 Perfection of Security Interest . . . . . . . . . . . . . . . 74
9.13 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 75
9.13.1 In General . . . . . . . . . . . . . . . . . . . . . . 75
9.13.2 Guaranteed Pension Plans . . . . . . . . . . . . . . . 75
9.13.3 Multiemployer Plans . . . . . . . . . . . . . . . . . 76
9.14 Regulations U and X . . . . . . . . . . . . . . . . . . . . . 76
9.15 Environmental Compliance . . . . . . . . . . . . . . . . . . . 76
9.16 Subsidiaries, etc . . . . . . . . . . . . . . . . . . . . . . 78
9.17 Chief Executive Offices . . . . . . . . . . . . . . . . . . . 79
9.18 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 79
9.19 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . 79
9.20 Fair Labor Standards Act . . . . . . . . . . . . . . . . . . . 79
9.21 Status of Loans as Senior Debt . . . . . . . . . . . . . . . . 79
9.22 No Other Senior Debt . . . . . . . . . . . . . . . . . . . . . 79
9.23 Delivery of Certain Documents . . . . . . . . . . . . . . . . 80
9.24 Year 2000 Problem . . . . . . . . . . . . . . . . . . . . . . 80
9.25 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 80
10.1 Punctual Payment . . . . . . . . . . . . . . . . . . . . . . . 81
10.2 Maintenance of Office . . . . . . . . . . . . . . . . . . . . 81
10.3 Records and Accounts . . . . . . . . . . . . . . . . . . . . . 81
10.4 Financial Statements, Certificates and Information . . . . . . 81
10.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
10.5.1 Defaults . . . . . . . . . . . . . . . . . . . . . . . 82
- iv -
<PAGE>
10.5.2 Environmental Events . . . . . . . . . . . . . . . . . 82
10.5.3 Notification of Claim against Collateral . . . . . . . 83
10.5.4 Notice of Litigation and Judgments . . . . . . . . . . 83
10.6 Corporate Existence . . . . . . . . . . . . . . . . . . . . . 83
10.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 84
10.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
10.9 Inspection of Properties and Books, etc . . . . . . . . . . . 84
10.9.1 General . . . . . . . . . . . . . . . . . . . . . . . 84
10.9.2 Appraisals . . . . . . . . . . . . . . . . . . . . . . 85
10.9.3 Environmental Assessments . . . . . . . . . . . . . . 86
10.9.4 Communications with Accountants . . . . . . . . . . . 86
10.10 Compliance with Laws, Licenses, and Permits . . . . . . . . . 87
10.11 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 87
10.12 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 87
10.13 Additional Mortgaged Property . . . . . . . . . . . . . . . . 88
10.14 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . 88
10.15 Certain Transactions . . . . . . . . . . . . . . . . . . . . 88
10.16 Further Assurances . . . . . . . . . . . . . . . . . . . . . 89
11. CERTAIN NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 89
11.1 Restrictions on Indebtedness . . . . . . . . . . . . . . . . 89
11.2 Restrictions on Liens . . . . . . . . . . . . . . . . . . . . 91
11.3 Restrictions on Investments . . . . . . . . . . . . . . . . . 93
11.4 Distributions . . . . . . . . . . . . . . . . . . . . . . . . 94
11.5 Merger, Consolidation and Disposition of Assets . . . . . . . 95
11.5.1 Mergers and Acquisitions . . . . . . . . . . . . . . 95
11.5.2 Disposition of Assets . . . . . . . . . . . . . . . . 96
11.6 Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . 97
11.7 Compliance with Environmental Laws . . . . . . . . . . . . . 97
11.8 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 97
11.9 Change of Location . . . . . . . . . . . . . . . . . . . . . 98
11.10 Change of Fiscal Year . . . . . . . . . . . . . . . . . . . . 98
11.11 Payments to Shareholders . . . . . . . . . . . . . . . . . . 98
11.12 Change of Corporate Name . . . . . . . . . . . . . . . . . . 99
11.13 Change in Terms of Capital Stock . . . . . . . . . . . . . . 99
11.14 Limitation on Issuance of Shares of Subsidiaries; Disposition
of Shares and Indebtedness of Subsidiaries . . . . . . . . . . 99
11.15 Senior Subordinated Debt . . . . . . . . . . . . . . . . . . 100
11.16 Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . 100
12. FINANCIAL COVENANTS OF THE BORROWERS . . . . . . . . . . . . . . . . 100
12.1 Minimum Interest Coverage . . . . . . . . . . . . . . . . . . 101
12.2 Maximum Senior Leverage Ratio . . . . . . . . . . . . . . . . 101
12.3 Maximum Capital Expenditures . . . . . . . . . . . . . . . . 101
13. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 102
13.1 Loan Documents . . . . . . . . . . . . . . . . . . . . . . . 102
- v -
<PAGE>
13.2 Senior Subordinated Debt Documents . . . . . . . . . . . . . 102
13.3 Certified Copies of Charter Documents . . . . . . . . . . . . 103
13.4 Corporate Action . . . . . . . . . . . . . . . . . . . . . . 103
13.5 Incumbency Certificate . . . . . . . . . . . . . . . . . . . 103
13.6 Validity of Liens . . . . . . . . . . . . . . . . . . . . . . 103
13.7 Perfection Certificates and UCC Search Results . . . . . . . 103
13.8 Title Insurance . . . . . . . . . . . . . . . . . . . . . . . 104
13.9 Certificates of Insurance . . . . . . . . . . . . . . . . . . 104
13.10 Solvency Opinion . . . . . . . . . . . . . . . . . . . . . . 104
13.11 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . 104
13.12 Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . 104
13.13 Disbursement Instructions . . . . . . . . . . . . . . . . . . 104
13.14 Financial Position . . . . . . . . . . . . . . . . . . . . . 104
13.15 Leverage Ratio; Availability . . . . . . . . . . . . . . . . 105
13.16 No Adverse Changes . . . . . . . . . . . . . . . . . . . . . 105
13.17 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . 105
13.18 Senior Subordinated Debt . . . . . . . . . . . . . . . . . . 105
13.19 Proceedings and Documents . . . . . . . . . . . . . . . . . . 105
13.20 Financial Markets . . . . . . . . . . . . . . . . . . . . . . 105
14. CONDITIONS TO ALL BORROWINGS . . . . . . . . . . . . . . . . . . . . 106
14.1 Representations True; No Event of Default . . . . . . . . . . 106
15. EVENTS OF DEFAULT; ACCELERATION; ETC. . . . . . . . . . . . . . . . 106
15.1 Events of Default and Acceleration . . . . . . . . . . . . . 106
15.2 Termination of Commitments . . . . . . . . . . . . . . . . . 109
15.3 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 110
15.4 Distribution of Collateral Proceeds . . . . . . . . . . . . . 110
15.5 Term Loan Premium . . . . . . . . . . . . . . . . . . . . . . 111
16. SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
17. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
17.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . 112
17.2 Employees and Agents . . . . . . . . . . . . . . . . . . . . 113
17.3 No Liability . . . . . . . . . . . . . . . . . . . . . . . . 113
17.4 No Representations . . . . . . . . . . . . . . . . . . . . . 113
17.5 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 114
17.5.1 Payments to Agent . . . . . . . . . . . . . . . . . 114
17.5.2 Distribution by Agent . . . . . . . . . . . . . . . 114
17.5.3 Delinquent Lenders . . . . . . . . . . . . . . . . . 114
17.6 Holders of Notes . . . . . . . . . . . . . . . . . . . . . . 115
17.7 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . 115
17.8 Agent as Lender . . . . . . . . . . . . . . . . . . . . . . . 115
17.9 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . 116
17.10 Notification of Defaults and Events of Default . . . . . . . 116
17.11 Duties in the Case of Enforcement . . . . . . . . . . . . . . 116
- vi -
<PAGE>
18. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
19. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 117
20. SURVIVAL OF COVENANTS, ETC. . . . . . . . . . . . . . . . . . . . . 118
21. ASSIGNMENT AND PARTICIPATION . . . . . . . . . . . . . . . . . . . . 119
21.1 Conditions to Assignment by Lenders . . . . . . . . . . . . . 119
21.2 Certain Representations and Warranties; Limitations;
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 119
21.3 Register . . . . . . . . . . . . . . . . . . . . . . . . . . 121
21.4 New Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 121
21.5 Participations . . . . . . . . . . . . . . . . . . . . . . . 122
21.6 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 122
21.7 Assignee or Participant Affiliated with the Borrowers . . . . 123
21.8 Miscellaneous Assignment Provisions . . . . . . . . . . . . . 123
21.9 Assignment by Borrowers . . . . . . . . . . . . . . . . . . . 124
22. NOTICES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
23. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
24. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
25. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
26. ENTIRE AGREEMENT, ETC. . . . . . . . . . . . . . . . . . . . . . . . 125
27. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . 125
28. CONSENTS, AMENDMENTS, WAIVERS, ETC. . . . . . . . . . . . . . . . . 126
29. GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
29.1 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . 127
29.2 Guaranteed Obligations . . . . . . . . . . . . . . . . . . . 127
29.3 Guaranty Absolute . . . . . . . . . . . . . . . . . . . . . . 127
29.4 Authorized Actions . . . . . . . . . . . . . . . . . . . . . 128
29.5 Effectiveness; Enforcement . . . . . . . . . . . . . . . . . 129
29.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
29.7 Subordination; Subrogation Rights . . . . . . . . . . . . . . 130
29.8 Concerning Joint and Several Liability of the Guarantors . . 131
29.9 New Guarantors . . . . . . . . . . . . . . . . . . . . . . . 133
30. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
31. WITHHOLDING TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 134
- vii -
<PAGE>
32. JOINT AND SEVERAL LIABILITY; LIMITATION OF LIABILITY . . . . . . . . 137
33. PARI PASSU TREATMENT. . . . . . . . . . . . . . . . . . . . . . . . 137
34. TRANSITIONAL ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . 138
34.1 Fourth Restated Credit Agreement Superseded . . . . . . . . . 138
34.2 Return and Cancellation of Notes . . . . . . . . . . . . . . . 139
34.3 Interest and Fees Under Superseded Agreement . . . . . . . . . 139
- viii -
<PAGE>
FIFTH AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT
This FIFTH AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN
AGREEMENT is made as of February 10, 1999, by and among RUSSELL-STANLEY
HOLDINGS, INC. (referred to herein as "Holdings" or a "Borrower"), a Delaware
corporation having its principal place of business at 685 Route 202/206,
Bridgewater, NJ 08807, RUSSELL-STANLEY CORP. (successor by merger to
Vestar/R-S Holdings Corporation and referred to herein as "Russell-Stanley"
or a "Borrower"), a New Jersey corporation having its principal place of
business at 685 Route 202/206, Bridgewater, NJ 08807, RUSSELL-STANLEY, INC.
(f/k/a Russell-Stanley Midwest, Inc., successor by merger to Russell-Stanley
West, Inc., Russell-Stanley Southwest, Inc. and R-S Southwest Realty, Inc.
and referred to herein as "RSI" or a "Borrower"), an Illinois corporation
having its principal place of business at 685 Route 202/206, Bridgewater, NJ
08807, RSLPCO, INC., (referred to herein as "RSLPCO" or a "Borrower") a
Delaware corporation having its principal place of business at 685 Route
202/206, Bridgewater, NJ 08807, RUSSELL-STANLEY, L.P. (referred to herein as
"RSLP" or a "Borrower"), a Texas limited partnership having its principal
place of business at 685 Route 202/206, Bridgewater, NJ 08807, CONTAINER
MANAGEMENT SERVICES, INC. (successor by merger to CMS Acquisition, Inc. and
referred to herein as "CMS" or a "Borrower"), a South Carolina corporation
having its principal place of business at P.O. Box 1148, 1071 Holland Road,
Simpsonville, SC 29681, NEW ENGLAND CONTAINER CO., INC., (referred to herein
as "NEC" or a "Borrower"), a Rhode Island corporation having its principal
place of business and 455 George Washington Highway, Smithfield, Rhode
Island, HUNTER DRUMS LIMITED (successor by amalgamation to HDL Acquisition,
Inc. and referred to herein as "Hunter" or a "Borrower"), an Ontario
corporation having its principal place of business at 5420 N. Service Rd.,
Burlington, Ontario, Canada L7L 6C7, BANKBOSTON, N.A. (referred to herein as
"BKB"), a national banking association, GOLDMAN SACHS CREDIT PARTNERS L.P.
(referred to herein as "GSCP"), a Delaware limited partnership, the other
lending institutions listed on Schedule 1 hereto (the "Lenders"), BKB as
administrative agent for itself and such other lending institutions (the
"Agent") and GSCP as syndication agent (the "Syndication Agent").
W I T N E S S E T H:
WHEREAS, pursuant to a Revolving Credit Agreement dated as of June
12, 1989, as amended, by and among Vestar/R-S Holdings Corporation
(predecessor by merger to Russell-Stanley) and The First National Bank of
Boston (now known as BKB), individually and as agent, and MNC Commercial
Corp. (the "Original Credit Agreement"), the lenders parties thereto provided
financing to Russell-Stanley for the purposes described therein; and
WHEREAS, pursuant to an Amended and Restated Revolving Credit
Agreement dated as of April 9, 1990, by and among Russell-Stanley, The First
National Bank of Boston (now known as BKB), individually and as agent, MNC
Credit Corp., and Xerox Credit Corp. (the "First Restated Credit Agreement"),
<PAGE>
the lenders parties thereto restructured their financing arrangements with
Russell-Stanley; and
WHEREAS, pursuant to a Second Amended and Restated Revolving Credit
and Term Loan Agreement dated as of June 23, 1994, by and among
Russell-Stanley, R-S Midwest, R-S Southwest, R-S Southwest Realty, R-S West,
Inc., The First National Bank of Boston (now known as BKB), individually and
as agent, and MNC Credit Corp. (the "Second Restated Credit Agreement"), the
lenders parties thereto further restructured their financing arrangements
with Russell-Stanley and provided additional financing to certain
Subsidiaries of Russell-Stanley; and
WHEREAS, pursuant to a Third Amended and Restated Revolving Credit
and Term Loan Agreement dated as of July 23, 1997, by and among Holdings,
Russell-Stanley, R-S West, Inc., R-S Midwest, R-S Southwest, R-S Southwest
Realty, CMS Acquisition, Inc. and HDL Acquisition, Inc., BKB (f/k/a The First
National Bank of Boston), individually and as agent, New York Life Insurance
Company, New York Life Insurance and Annuity Corporation and the other
lenders party thereto (the "Third Restated Credit Agreement"), the lenders
party thereto further restructured their financing arrangements with
Russell-Stanley and provided additional financing; and
WHEREAS, pursuant to a Fourth Amended and Restated Revolving Credit
and Term Loan Agreement dated as of November 7, 1997, by and among Holdings,
Russell-Stanley, R-S West, Inc., R-S Midwest, R-S Southwest, R-S Southwest
Realty, CMS, Hunter, BKB (f/k/a The First National Bank of Boston),
individually and as agent, New York Life Insurance Company, New York Life
Insurance and Annuity Corporation and the other lenders party thereto (the
"Fourth Restated Credit Agreement"), the lenders party thereto further
restructured their financing arrangements with Russell-Stanley and provided
additional financing; and
WHEREAS, Holdings and Russell-Stanley have requested that the
Lenders parties hereto further restructure the financing arrangements with
Holdings and its Subsidiaries in connection with the ongoing financing needs
of the Borrowers and the issuance of $150,000,000 of Senior Subordinated
Notes by Holdings; and
WHEREAS, the Lenders are willing to restructure such financing
arrangements with the Borrowers only on the terms and conditions set forth
herein;
NOW, THEREFORE, the Borrowers, the Lenders, the Agent and the
Syndication Agent hereby agree that the Fourth Restated Credit Agreement
shall be amended and restated in its entirety as set forth herein and shall
remain in full force and effect only as provided herein.
<PAGE>
1. DEFINITIONS AND RULES OF INTERPRETATION.
1.1 Definitions.
The following terms shall have the meanings set forth in this
Section 1 or elsewhere in the provisions of this Credit Agreement referred to
below:
Acceptance Fee. See Section 2B.3.
Acquisitions. The CMS Acquisition, the Hunter Acquisition, the
Smurfit Acquisition and the NEC Acquisition.
Adjusted EBITDA. With respect to any Person for any period, the
"Consolidated Net Income" (such term being used in this definition of
Adjusted EBITDA as such term is defined in the Senior Subordinated Indenture)
of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss
realized in connection with an "Asset Sale" (such term being used in
this definition of Adjusted EBITDA as such term is defined in the Senior
Subordinated Indenture), to the extent such losses were deducted in
computing such Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person
and its Subsidiaries for such period to the extent that such provision
for taxes was deducted in computing such Consolidated Net Income; plus
(3) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt
issuance costs and original issue discount, noncash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with "Capital Lease Obligations"
(such term being used in this definition of Adjusted EBITDA as such term
is defined in the Senior Subordinated Indenture), interest on guaranteed
indebtedness, commissions, discounts and other fees and charges incurred
in respect of letter of credit or bankers' acceptance financings, and
net payments, if any, pursuant to "Hedging Obligations" (such term being
used in this definition of Adjusted EBITDA as such term is defined in
the Senior Subordinated Indenture)), to the extent that any such expense
was deducted in computing such Consolidated Net Income; plus
(4) fees and expenses paid to Vestar Capital Partners, Inc. or any
of its Affiliates pursuant to the Vestar Management Agreement during
such period in an aggregate amount not to exceed $1.0 million, to the
extent that any such expense was deducted in computing such Consolidated
Net Income; plus
(5) charges classified and reflected as nonrecurring on the
Closing Date and for any other such period, in each case, on Holdings'
<PAGE>
consolidated financial statements prepared in accordance with GAAP,
provided that any non-recurring charges incurred in connection with any
Acquisition or attempted acquisition of a majority interest in any
Person (whether or not such acquisition actually closed) added to
Consolidated Net Income pursuant to this clause (5) shall be limited to
$8,000,000 in the aggregate; plus
(6) amounts paid pursuant to the Buonanno Agreement (to the extent
not already included in (7) below) during such period; plus
(7) depreciation, amortization and other noncash expenses of such
Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other noncash expenses were deducted in
computing such Consolidated Net Income; minus
(8) noncash items increasing such Consolidated Net Income for such
period, other than items that were accrued in the ordinary course of
business, in each case, on a consolidated basis and determined in
accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the
income or profits of, and the depreciation and amortization and other noncash
charges of, a Subsidiary of Holdings shall be added to Consolidated Net
Income to compute Adjusted EBITDA of Holdings only to the extent that a
corresponding amount would be permitted at the date of determination to be
dividended to Holdings by such Subsidiary without prior approval (that has
not been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
Notwithstanding anything in the Credit Agreement to the contrary, any term
used in this definition of Adjusted EBITDA that is defined by reference to
the Senior Subordinated Indenture (including, without limitation,
"Consolidated Net Income," "Asset Sale," "Capital Lease Obligations" and
"Hedging Obligations") shall have the meaning given to such term in the
Senior Subordinated Indenture as in effect on the Closing Date and without
giving any effect to any subsequent amendment, modification or supplement to
the Senior Subordinated Indenture.
Adjustment Date. The third Business Day following the receipt by
the Agent and the Lenders of a Compliance Certificate delivered by Holdings
pursuant to Section 10.4(c).
Affiliate. Any Person that would be considered to be an affiliate
of any of the Borrowers under Rule 144(a) of the Rules and Regulations of the
Securities and Exchange Commission, as in effect on the date hereof, if the
Borrowers were issuing securities.
<PAGE>
Agent's Head Office. The Agent's head office located at 100
Federal Street, Boston, Massachusetts 02110, or at such other location as the
Agent may designate from time to time.
Agent. BankBoston, N.A. acting as agent for the Lenders.
Agent's Special Counsel. Bingham Dana LLP or such other counsel as
may be approved by the Agent.
Applicable Acceptance Fee Rate. At any time, the rate per annum
equal to the Revolving Credit Loan Margin with respect to Eurodollar Rate
Loans, notwithstanding whether any Eurodollar Rate Loans are outstanding or
may be available on the applicable date of calculation.
Applicable BA Discount Rate. With respect to any Bankers'
Acceptance being purchased by a BA Lender on any Business Day, the average
Bankers' Acceptance discount rate for Schedule I (Bank Act (Canada)) banks
named in, and for the term and face amount of such Bankers' Acceptance as
quoted on Reuters Service Page CDOR at or about 10:00 a.m. (Toronto, Ontario
time) on such Business Day, or if for any reason such BA Lender shall have
determined (which determination shall be conclusive, absent manifest error)
that it is unable to ascertain such CDOR discount rate for any reason,
including without limitation, the inability or failure of such BA Lender to
obtain sufficient bids or publications in accordance with the terms hereof,
the "Applicable BA Discount Rate" shall be the rate calculated in the manner
described above for the most recent business day that such rate is available
until the circumstances giving rise to such inability no longer exist.
Applicable Commitment Fee Rate. An annual percentage rate, equal to
0.5% per annum for the period from the Closing Date until the day immediately
prior to the first Adjustment Date following March 31, 2000, and thereafter
determined as of each Adjustment Date for each Rate Adjustment Period as
follows:
(a) the Applicable Commitment Fee Rate shall equal 1.0% per annum
for such Rate Adjustment Period if the average daily Unused Commitment
divided by the average daily Total Revolving Credit Commitment for the
fiscal quarter ending immediately prior to such Adjustment Date is
greater than or equal to 75%,
(b) the Applicable Commitment Fee Rate shall equal 0.75% per annum
for such Rate Adjustment Period if the average daily Unused Commitment
divided by the average daily Total Revolving Credit Commitment for the
fiscal quarter ending immediately prior to such Adjustment Date is
greater than or equal to 50% but less than 75%,
(c) the Applicable Commitment Fee Rate shall equal 0.5% per annum
for such Rate Adjustment Period if the average daily Unused Commitment
divided by the average daily Total Revolving Credit Commitment for the
<PAGE>
fiscal quarter ending immediately prior to such Adjustment Date is less
than 50% and the ratio of Funded Debt as of the last day of such fiscal
quarter to Adjusted EBITDA for the four consecutive fiscal quarters then
ended is greater than or equal to 2.00:1.00, and
(d) the Applicable Commitment Fee Rate shall equal 0.375% per
annum for such Rate Adjustment Period if the average daily Unused
Commitment divided by the average daily Total Revolving Credit
Commitment for the fiscal quarter ending immediately prior to such
Adjustment Date is less than 50% and the ratio of Funded Debt as of the
last day of such fiscal quarter to Adjusted EBITDA for the four
consecutive fiscal quarters then ended is less than 2.00:1.00.
If the Borrowers shall fail to deliver any Compliance Certificate
pursuant to Section 10.4(c) hereof, then for the period commencing on the
Adjustment Date immediately following the date on which such Compliance
Certificate is due, the Applicable Commitment Fee Rate shall be 1.0% per
annum, such rate to be effective until the third Business Day following the
date on which such Compliance Certificate is actually delivered.
Arrangers. BancBoston Robertson Stephens Inc. and GSCP.
Assignment and Acceptance. See Section 21.1.
BA Discount Proceeds. With respect to any Bankers' Acceptance to
be accepted and purchased by a BA Lender, an amount (rounded to the nearest
whole Canadian cent, and with one-half of one Canadian cent being rounded up)
calculated on such day by multiplying (a) the face amount of such Bankers'
Acceptance times (b) the quotient equal to (such quotient being rounded up or
down to the nearest fifth decimal place and .000005 being rounded up) (i) one
divided by (ii) the sum of (A) one plus (B) the product of (1) the Applicable
BA Discount Rate (expressed as a decimal) applicable to such Bankers'
Acceptance times (2) the quotient equal to (aa) the number of days remaining
in the term of such Bankers' Acceptance divided by (bb) 365.
BA Lenders. See Section 2B.1.
Balance Sheet Date. December 31, 1997.
Bankers' Acceptance. A bill of exchange denominated in Canadian
Dollars drawn on, and accepted by, the Hunter Fronting Bank pursuant to
Section 2B hereof.
Bankers' Acceptance Notice. See Section 2B.1.
Base Rate. The higher of (a) the annual rate of interest announced
from time to time by BKB at its head office in Boston, Massachusetts, as its
"base rate" and (b) one-half of one percent (1/2%) above the Federal Funds
Effective Rate. For the purposes of this definition, "Federal Funds
<PAGE>
Effective Rate" shall mean for any day, the rate per annum equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of
the quotations for such day on such transactions received by the Agent from
three funds brokers of recognized standing selected by the Agent.
Base Rate Loans. Revolving Credit Loans bearing interest
calculated by reference to the Base Rate or the Canadian Base Rate, as
applicable, and any Swing Line Loan.
BKB. BankBoston, N.A., a national banking association, in its
individual capacity.
Borrower(s). The Domestic Borrowers with respect to Domestic Loans
and Letters of Credit, and Hunter with respect to the Hunter Revolver Loans
and Bankers' Acceptances.
Buonanno Agreement. A consulting, advisory or similar agreement to
be entered into between Holdings and Vincent J. Buonanno providing for
payments of fees in an aggregate amount not to exceed $1,000,000, plus
expense reimbursement.
Business Day. Any day on which banking institutions in Boston,
Massachusetts, and New York, New York, are open for the transaction of
banking business and, in the case of Eurodollar Rate Loans, also a day which
is a Eurodollar Business Day and, in the case of the Hunter Revolver Loans
and Bankers' Acceptances, also a day on which banking institutions in
Toronto, Canada are open for the transaction of banking business.
Calculation Date. See Section 7.12(a).
Canadian Base Rate. The higher of (a) the annual rate of interest
announced from time to time by the Hunter Fronting Bank as its "prime rate"
for commercial loans in Canadian Dollars to borrowers in Canada (it being
understood that such rate is a reference rate and not necessarily the lowest
rate of interest charged by the Hunter Fronting Bank) plus a rate to be
negotiated (but not to exceed one-half of one percent (1/2%)), and (b) one
percent (1%) above the one-month acceptance rate quoted by the Hunter
Fronting Bank at 10:00 a.m. (Toronto time) that appears on the Reuters Screen
CDOR page on such day as its rate for acceptance in Canada.
Canadian Dollars or C$. Dollars designated as lawful currency in
Canada.
<PAGE>
Canadian Dollar Equivalent. With respect to an amount of Dollars
on any date, the amount of Canadian Dollars that may be purchased with such
amount of Dollars at the Exchange Rate with respect to Dollars on such date.
Capital Assets. Fixed assets, both tangible (such as containers
and container components, land, buildings, fixtures, machinery and equipment)
and intangible (such as patents, copyrights, trademarks, franchises and good
will); provided that Capital Assets shall not include any item customarily
charged directly to expense or depreciated over a useful life of twelve (12)
months or less in accordance with Generally Accepted Accounting Principles.
Capital Expenditures. Amounts paid or indebtedness incurred by the
Borrowers or any of their Subsidiaries in connection with the purchase or
lease by the Borrowers or any of their Subsidiaries of Capital Assets that
would be required to be capitalized and shown on the balance sheet of such
Person in accordance with Generally Accepted Accounting Principles; provided
however, that Capital Expenditures shall not include any expenditures made in
order to effect any Acquisition or any Permitted Acquisitions.
Capitalized Leases. Leases under which any of the Borrowers or any
of their Subsidiaries is the lessee or obligor, the discounted future rental
payment obligations under which are required to be capitalized on the balance
sheet of the lessee or obligor in accordance with Generally Accepted
Accounting Principles.
Capitalized Lease Obligation. At any time, the amount of the
liability in respect of a Capitalized Lease that would at that time be
required to be capitalized on the balance sheet of the lessee or obligor in
accordance with Generally Accepted Accounting Principles.
CERCLA. See Section 9.15.
Change in Law. See Section 7.7(a).
Closing Date. The first date on which the conditions set forth in
Section 13 have been satisfied, this Credit Agreement shall become effective,
the outstanding loans, letters of credit and bankers' acceptances, if any,
under the Fourth Restated Credit Agreement shall be repaid or converted to
Loans, Letters of Credit and Bankers' Acceptances hereunder, and any Loans
may be made, Letters of Credit may be issued and Bankers' Acceptances may be
accepted and/or purchased from the Borrowers hereunder.
CMS. See preamble.
CMS Acquisition. The acquisition by CMS Acquisition, Inc., a
wholly-owned subsidiary of Holdings, of all the outstanding shares of
Container Management Services, Inc. pursuant to the terms of the CMS Purchase
Agreement.
<PAGE>
CMS Purchase Agreement. The Stock Purchase Agreement among Mark E.
Daniels, R.E. Daniels, Mark E. Daniels Irrevocable Family Trust, R.E. Daniels
Irrevocable Family Trust, Container Management Services, Inc. and
Russell-Stanley dated as of July 1, 1997, in the form delivered to the Agent.
CMS Trademark Assignment. The Trademark Collateral Security and
Pledge Agreement, dated as of the closing date of the Third Restated Credit
Agreement, made by CMS in favor of the Agent, as amended as of the Closing
Date.
Code. The Internal Revenue Code of 1986, as amended.
Collateral. All of the property, rights and interests of Holdings
and its Subsidiaries that are or are intended to be subject to the security
interests and mortgages created by the Security Documents.
Commitment Percentage. With respect to each Lender, the percentage
set forth on Schedule 1 hereto.
Common Stock. The Common Stock of Russell-Stanley, par value $0.01
per share.
Consolidated or consolidated. With reference to any term defined
herein, shall mean that term as applied to the accounts of Holdings and its
Subsidiaries, consolidated in accordance with Generally Accepted Accounting
Principles.
Conversion Request. A notice given by a Borrower to the Agent of
such Borrower's election to convert or continue a Loan in accordance with
Section 2.7.
Credit Agreement. This Fifth Amended and Restated Revolving Credit
and Term Loan Agreement, including the Schedules and Exhibits hereto.
Default. See Section 15.1.
Delinquent Lender. See Section 17.5.3.
Distribution. The declaration or payment of any dividend on or in
respect of any shares of any class of capital stock of any Person, other than
dividends payable solely in shares of common stock of such Person; the
purchase, redemption, or other retirement of any shares of any class of
capital stock of such Person, directly or indirectly through a Subsidiary or
otherwise; the return of capital by any Person to its shareholders as such;
or any other distribution on or in respect of any shares of any class of
capital stock of such Person.
Dollar Equivalent. With respect to an amount of Canadian Dollars
on any date, the amount of Dollars that may be purchased with such amount of
<PAGE>
Canadian Dollars at the Exchange Rate with respect to Canadian Dollars on
such date.
Dollars or $. Dollars in lawful currency of the United States of
America.
Domestic Borrowers. Holdings, Russell-Stanley, RSI, RSLPCO, RSLP,
CMS and NEC.
Domestic Lending Office. Initially, the office of each Lender
designated as such in Schedule 1 hereto; thereafter, such other office of
such Lender, if any, located within the United States that will be making or
maintaining Base Rate Loans.
Domestic Loans. Domestic Revolver Loans and Term Loans.
Domestic Revolver Loan Request. See Section 2.6(a).
Domestic Revolver Loans. Revolving Credit Loans made or to be made
by the Lenders to the Domestic Borrowers pursuant to Section 2.1(a).
Domestic Security Agreement. The Fourth Amended and Restated
Security Agreement, dated as of the Closing Date, by and among the Domestic
Borrowers and the Agent.
Domestic Subsidiary. Any Subsidiary organized under the laws of
the United States, or any State thereof or the District of Columbia.
Drawdown Date. The date on which any Revolving Credit Loan, Swing
Line Loan or any Term Loan is made or is to be made, and the date on which
any Revolving Credit Loan is converted or continued in accordance with
Section 2.7, and the date on which any Bankers' Acceptance is accepted and/or
purchased or refunded in accordance with Section 2B.
Eligible Assignee. Any of (a) a commercial bank or finance company
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000;
(b) a savings and loan association or savings bank organized under the laws
of the United States, or any State thereof or the District of Columbia, and
having a net worth of at least $100,000,000, calculated in accordance with
Generally Accepted Accounting Principles; (c) a commercial bank organized
under the laws of any other country which is a member of the Organization for
Economic Cooperation and Development (the "OECD"), or a political subdivision
of any such country, and having total assets in excess of $1,000,000,000,
provided that such bank is acting through a branch or agency located in the
country in which it is organized or another country which is also a member of
the OECD; (d) the central bank of any country which is a member of the OECD;
and (e) any other bank, insurance company, commercial finance company or
other financial institution or prime rate fund and, with respect to the Term
<PAGE>
Loan, "accredited investors" and "qualified institutional buyers" (as defined
in Regulation D and Rule 144A, respectively, promulgated under the Securities
Act of 1933, as amended), in each case approved by the Agent, such approval
not to be unreasonably withheld, and (f) if, but only if, an Event of Default
has occurred and is continuing, any other Person approved by the Agent, such
approval not to be unreasonably withheld.
Employee Benefit Plan. Any employee benefit plan within the
meaning of Section 3(3) of ERISA maintained or contributed to by the
Borrowers or any ERISA Affiliate, other than a Multiemployer Plan.
Environmental Laws. See Section 9.15(a).
Equity Securities. With respect to any Person, all equity
securities of such Person, including any (a) common or preferred stock, (b)
limited or general partnership interests, (c) options, warrants, or other
rights to purchase or acquire any equity security, or (d) securities
convertible into any equity security.
ERISA. The Employee Retirement Income Security Act of 1974.
ERISA Affiliate. Any Person which is treated as a single employer
with the Borrowers under Section 414 of the Code.
ERISA Reportable Event. A reportable event with respect to a
Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the
regulations promulgated thereunder as to which the requirement of notice has
not been waived.
Eurocurrency Reserve Charge. See Section 7.7(b).
Eurocurrency Reserve Rate. For any day with respect to (i) a
Eurodollar Rate Loan, the rate (expressed as a decimal) at which any Lender
or the Agent is, on the date of calculation of the Eurocurrency Reserve
Charge, required to maintain reserves under Regulation D of the Board of
Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), or against any other
category of liabilities which might be incurred by the Agent in any
Eurodollar interbank market to fund Eurodollar Rate Loans, if any such
liabilities were outstanding and (ii) a Canadian Dollar Eurodollar Rate Loan,
the rate at which such Lender would be required to maintain reserves with
respect to such Canadian Dollar Eurodollar Rate Loan. If none of the Lenders
and the Agent is required by any governmental authority having jurisdiction
over such Lender to maintain any such reserves, the Eurocurrency Reserve Rate
shall be zero. The Eurocurrency Reserve Rate shall be adjusted automatically
on and as of the effective date of any change in the Eurocurrency Reserve
Rate.
<PAGE>
Eurodollar Business Day. Any day on which commercial banks are
open for international business (including dealings in Dollar deposits) in
London or such other eurodollar interbank market as may be selected by the
Agent in its sole discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Lender
designated as such in Schedule 1 hereto; thereafter, such other office of
such Lender, if any, that shall be making or maintaining Eurodollar Rate
Loans.
Eurodollar Rate. For any Interest Period with respect to a
Eurodollar Rate Loan, the rate of interest equal to the rate per annum at
which the Agent's Eurodollar Lending Office is offered Dollar deposits two
Eurodollar Business Days prior to the beginning of such Interest Period in
the interbank eurodollar market where the eurodollar and foreign currency and
exchange operations of such Eurodollar Lending Office are customarily
conducted, for delivery on the first day of such Interest Period for the
number of days comprised therein and in an amount comparable to the amount of
the Eurodollar Rate Loan of the Agent to which such Interest Period applies.
Eurodollar Rate Loans. Domestic Revolver Loans bearing interest
calculated by reference to the Eurodollar Rate.
Event of Default. See Section 15.1.
Exchange Rate. With respect to any amount in U.S. Dollars the rate
of exchange as quoted by the Bank of Canada as the noon rate of Canadian
Dollars for U.S. Dollars on or about 12:00 p.m. (noon) Toronto time on the
Business Day on which the determination is required to be made or, if such
rate is for any reason not available, the spot rate quoted for wholesale
transactions by the Hunter Fronting Bank of Canadian Dollars for U.S. Dollars
on or about 12:00 p.m. Toronto time on the Business Day on which the
determination is required to be made.
Existing Letters of Credit. See Section 6.1.1 hereof.
Fee Letter. The letter agreement dated January 26, 1999 among
BankBoston, N.A., individually and as Agent, BancBoston Robertson Stephens
Inc., GSCP and Holdings.
First Restated Credit Agreement. See preamble.
Fiscal Year. See Section 9.19 hereof.
Fixed Rate Loan. The Term Loan, which shall bear interest as
provided in Section 4.4.
Funded Debt. As of any date of determination, the outstanding
aggregate amount on such date of all Indebtedness of Holdings and its
<PAGE>
Subsidiaries, whether recourse is to all or a portion of the assets of any
such Person, and whether or not contingent, (a) in respect of money borrowed
or the deferred purchase price of property and services, (b) in respect of
letters of credit, bankers' acceptances, or similar facilities, (c) in
respect of any Capitalized Leases, and (d) evidenced by any loan or credit
agreement, reimbursement agreement, promissory note, debenture, bond or
similar contract, in each case determined on a consolidated basis less cash
and cash equivalents held by Holdings and its Subsidiaries on such date.
Garratt Purchase Price Payments. See Section 11.1(o).
Generally Accepted Accounting Principles or GAAP. Principles that
are consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to
time. Notwithstanding anything herein to the contrary, the covenants
contained in Section 11 and Section 12 shall be calculated without giving
effect to any changes in such principles that occur after the Balance Sheet
Date until this Credit Agreement shall have been appropriately amended to
reflect such adoption in a manner reasonably acceptable to the parties
hereto.
GSCP. See preamble.
Guaranteed Pension Plan. Any employee pension benefit plan within
the meaning of Section 3(2) of ERISA maintained or contributed to by the
Borrowers or any ERISA Affiliate the benefits of which are guaranteed on
termination in full or in part by the PBGC pursuant to Title IV of ERISA,
other than a Multiemployer Plan.
Guarantors. Holdings and the Domestic Subsidiaries of Holdings
(other than HIGI or HDI) which are or become guarantors from time to time
pursuant to Section 29 hereof.
Guaranty. See Section 29.1.
Hazardous Substances. See Section 9.15(b).
HDI. See Section 9.16.
HIGI. See Section 9.16.
Holdings. See preamble.
Hunter. See preamble.
Hunter Acquisition. The acquisition by HDL Acquisition, Inc., a
wholly-owned Subsidiary of Holdings, of substantially all of the outstanding
shares of Hunter Drums Limited.
<PAGE>
Hunter Acquisition Effective Date. The date on which the Hunter
Acquisition took place.
Hunter Assignment of Material Contracts. The Assignment of
Material Contracts, dated as of the Hunter Acquisition Effective Date, by
Hunter.
Hunter Assignment of Insurance Policies. The Assignment of
Insurance Policies, dated as of the Hunter Acquisition Effective Date, by
Hunter.
Hunter Fronting Bank. A bank approved by the Agent and the
Borrowers to act as fronting bank with respect to the Hunter Revolver Loans
which is a bank named in Schedule I or Schedule II to the Bank Act (Canada)
having total assets in excess of C$5,000,000, provided that in the event the
Hunter Fronting Bank is also a Lender, such Person's funding requirements in
its capacity as the Hunter Fronting Bank shall not include its independent
requirement, in its individual capacity, to fund as a Lender.
Hunter Fronting Fee. See Section 2.10.2.
Hunter Line. The Canadian Dollar Equivalent of $15,000,000.
Hunter Revolver Commitment. With respect to each Lender, an amount
equal to such Lender's Commitment Percentage times the Hunter Line which
reflects the amount of such Lender's commitment to purchase a risk
participation from the Hunter Fronting Bank in Hunter Revolver Loans and
Bankers' Acceptances, as the same may be reduced from time to time; or if
such commitment is terminated pursuant to the provisions hereof, zero.
Hunter Revolver Loan Request. See Section 2.6(b).
Hunter Revolver Loans. Revolving credit loans made or to be made
by the Hunter Fronting Bank to Hunter pursuant to Section 2.1(b).
Hunter Risk Participation Fee. See Section 2.10.1.
Hunter Security Agreement. The General Security Agreement, dated
as of the Hunter Acquisition Effective Date, by and among Hunter and its
Subsidiaries and the Agent.
Hunter Share Pledge Agreement. The Share Pledge Agreement, dated
as of Hunter Acquisition Effective Date, by Hunter and HIGI.
Indebtedness. All obligations, contingent and otherwise, that in
accordance with Generally Accepted Accounting Principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should
be made by footnotes thereto, including in any event and whether or not so
classified: (a) all debt and similar monetary obligations, whether direct or
<PAGE>
indirect; (b) all liabilities secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; and (c) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation to supply funds to or in any manner to invest in,
directly or indirectly, the debtor, to purchase indebtedness, or to assure
the owner of indebtedness against loss, through an agreement to purchase
goods, supplies, or services for the purpose of enabling the debtor to make
payment of the indebtedness held by such owner or otherwise, and the
obligations to reimburse the issuer in respect of any letters of credit.
Indemnifiable Taxes. See Section 31(a) hereof.
Interest Charges. For any period, the expenses, whether accrued or
paid, of Holdings and its Subsidiaries for such period for interest on
Indebtedness (including the current portion thereof) (excluding any Interest
Charges taken into account in the computation of Interest Charges for any
prior period and excluding non-cash interest expense), determined in
accordance with Generally Accepted Accounting Principles.
Interest Payment Date. (a) As to any Base Rate Loan or Fixed Rate
Loan, the last day of the calendar quarter which includes the Drawdown Date
thereof and the last day of each calendar quarter subsequent to the Drawdown
Date during which such Base Rate Loan or Fixed Rate Loan remains outstanding;
and (b) as to any Eurodollar Rate Loan in respect of which the Interest
Period is (i) 3 months or less, the last day of such Interest Period, (ii) 6
months or, the date that is 3 months from the first day of such Interest
Period and, in addition, the last day of such Interest Period, and (iii) 12
months, the dates that are 3 months, 6 months and 9 months from the first day
of such Interest Period and, in addition, the last day of such Interest
Period.
Interest Period. With respect to each Revolving Credit Loan or all
or any relevant portion of the Term Loan, (x) initially, the period
commencing on the Drawdown Date of such Loan and ending on the last day of
one of the periods set forth below, as selected by the Borrowers in a
Domestic Revolver Loan Request or Hunter Revolver Loan Request, as
applicable, (i) for any Base Rate Loan or Fixed Rate Loan, the last day of
the calendar quarter; and (ii) for any Eurodollar Rate Loan, 1, 2, 3, 6 or 12
months if available to all of the Lenders; and (y) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable
to such Revolving Credit Loan or all or such portion of the Term Loan and
ending on the last day of one of the periods set forth above, as selected by
the applicable Borrower in a Conversion Request; provided that all of the
foregoing provisions relating to Interest Periods are subject to the
following:
<PAGE>
(a) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such
Interest Period shall end on the immediately preceding Eurodollar
Business Day;
(b) if a Borrower shall fail to give notice as provided in
Section 2.7, such Borrower shall be deemed to have requested a
conversion of the affected Eurodollar Rate Loan to a Base Rate Loan and
the continuance of all Base Rate Loans as Base Rate Loans on the last
day of the then current Interest Period with respect thereto;
(c) any Interest Period relating to any Eurodollar Rate Loan that
begins on the last Eurodollar 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
Eurodollar Business Day of a calendar month; and
(d) any Interest Period relating to any Eurodollar Rate Loan that
would otherwise extend beyond the Revolving Credit Loan Maturity Date
shall end on the Revolving Credit Loan Maturity Date.
Interim Balance Sheet Date. November 30, 1998.
International Standby Practices. With respect to any standby
Letter of Credit, International Standby Practices (ISP98) as promulgated by
the Institute of International Banking Law & Practice, Inc., or any successor
code of standby letter of credit practices among banks adopted by the Agent
in the ordinary course of its business as a standby letter of credit issuer
and in effect at the time of issuance of such Letter of Credit.
Investments. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock, other equity
interests or Indebtedness of, or for loans, advances, capital contributions
or transfers of property to, or in respect of any guaranties (or other
commitments as described under Indebtedness), or obligations of, any Person.
In determining the aggregate amount of Investments outstanding at any
particular time: (a) the amount of any Investment represented by a guaranty
shall be taken at not less than the principal amount of the obligations
guaranteed and still outstanding; (b) there shall be deducted in respect of
each such Investment any amount received as a return of capital (but only by
repurchase, redemption, retirement, repayment, liquidating dividend or
liquidating distribution); (c) there shall not be deducted in respect of any
Investment any amounts received as earnings on such Investment, whether as
dividends, interest or otherwise; and (d) there shall not be deducted from
the aggregate amount of Investments any decrease in the value thereof.
<PAGE>
Investor Group. Vestar/R-S Investment Limited Partnership, Vestar
Capital Partners III, L.P., Vestar Portfolio Partners, L.P., BancBoston
Investments Inc., New York Life Insurance Company and Pacific Corporate Group
(a/k/a Private Market Fund, L.P.) and their respective affiliates.
ISRA. See Section 9.15(a) hereof.
Lenders. BKB and the other lending institutions listed on Schedule
1 hereto and any other Person who becomes an assignee of any rights and
obligations of a Lender pursuant to Section 21.
Letter of Credit. See Section 6.1.1.
Letter of Credit Application. See Section 6.1.1.
Letter of Credit Participation. See Section 6.1.4.
Loan Account. See Section 2.4(b).
Loan Documents. This Credit Agreement, the Notes, the Letter of
Credit Applications, the Letters of Credit, the Bankers' Acceptances and the
Security Documents.
Loans. The Revolving Credit Loans, the Swing Line Loans, and the
Term Loan.
Majority Lenders. As of any date, the Lenders holding at least
fifty-one percent (51%) of the sum of the outstanding principal amount of the
Notes and the unfunded portion of the Revolving Credit Commitments on such
date; and if no such principal is outstanding, the Lenders whose aggregate
Revolving Credit Commitments constitute at least fifty-one percent (51%) of
the Total Revolving Credit Commitment.
Maximum Drawing Amount. The maximum aggregate amount that the
beneficiaries may at any time draw under outstanding Letters of Credit, as
such aggregate amount may be reduced from time to time pursuant to the terms
of the Letters of Credit.
Maximum Swing Line Loan Amount. See Section 2A.1 hereof.
Mortgaged Property. Any Real Estate which is subject to any
Mortgage.
Mortgages. The several mortgages and deeds of trust, dated or to
be dated on or prior to the Closing Date or, in the case of Real Estate or
Subsidiaries acquired after the Closing Date, after the Closing Date, from
Holdings and its Subsidiaries to the Agent with respect to the fee interests
of Holdings and its Subsidiaries in the Real Estate and in form and substance
satisfactory to the Lenders and the Agent.
<PAGE>
Multiemployer Plan. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrowers or any
ERISA Affiliate.
NEC Acquisition. The acquisition by Holdings of all of the capital
stock of NEC, pursuant to the terms of the NEC Purchase Agreement.
NEC Acquisition Documents. The NEC Purchase Agreement and all
other material agreements and documents required to be entered into or
delivered pursuant thereto or in connection with the NEC Acquisition, in each
case in the form delivered to the Agent prior to the Closing Date.
NEC Purchase Agreement. The Stock Purchase Agreement among Vincent
J. Buonanno, NEC, and Holdings dated as of July 21, 1998, in the form
delivered to the Agent prior to the Closing Date.
Notes. The Term Notes, the Revolving Credit Notes and the Swing
Line Note.
Obligations. All indebtedness, obligations and liabilities of any
of the Borrowers and their Subsidiaries to any of the Lenders and the Agent,
individually or collectively, existing on the date of this Credit Agreement
or arising thereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, arising or
incurred under this Credit Agreement or any of the other Loan Documents or in
respect of any of the Loans made or Reimbursement Obligations incurred or
interest rate protection arrangements entered into with any Lender or any of
the Notes, Letter of Credit Application, Letters of Credit, Bankers'
Acceptances or other instruments at any time evidencing any thereof.
Original Credit Agreement. See preamble.
Other Taxes. See Section 31(b) hereof.
Outstanding and outstanding. With respect to the Loans, the
aggregate unpaid principal thereof as of any date of determination. With
respect to outstanding Bankers' Acceptances, the aggregate unpaid amount
owing thereunder at their respective maturity dates.
Overall Percentage. As of any date, with respect to any Lender,
the percentage equal to (a) for each Lender the sum of such Lender's Term
Loan Percentage times the aggregate principal amount outstanding under the
Term Loan plus such Lender's Revolving Credit Commitment divided by (b) the
sum of the aggregate principal amount of the Term Loan and Total Revolving
Credit Commitment, in each case on such date.
<PAGE>
Partnership Assignment. The Collateral Assignment of Partnership
Interests, dated as of November 1, 1998, by and among RSI, RSLPCO and the
Agent, as amended as of the Closing Date.
Patent Assignments. The Russell-Stanley Patent Assignment.
PBGC. The Pension Benefit Guaranty Corporation created by
Section 4002 of ERISA and any successor entity or entities having similar
responsibilities.
Perfection Certificates. The Perfection Certificates as defined in
the Security Agreements.
Permitted Acquisitions. See Section 11.5.1(b).
Permitted Liens. Liens, security interests and other encumbrances
permitted by Section 11.2.
Person. Any individual, corporation, partnership, trust,
unincorporated association, business, or other legal entity, and any
government or any governmental agency or political subdivision thereof.
Pricing Table:
Ratio of Funded Debt to Revolving Credit Revolving Credit
Adjusted EBITDA Loan Margin for Loan Margin for
Base Rate Loans Eurodollar Rate
Loans
------------------------ ---------------- ----------------
Less than 3.25:1.00 0.50% 2.00%
3.25:1.00 or more but less 0.75% 2.25%
than 3.75:1.00
3.75:1.00 or more but less 1.00% 2.50%
than 4.25:1.00
4.25:1.00 or more 1.25% 2.75%
If the Borrowers shall fail to deliver any Compliance Certificate
pursuant to Section 10.4(c) hereof, then for the period commencing on the
Adjustment Date immediately following the date on which such Compliance
Certificate is due, the applicable margin shall be the highest applicable
Margin or Rate, as the case may be, set forth in the Pricing Table, such rate
to be effective until the third Business Day following the date on which such
Compliance Certificate is actually delivered.
<PAGE>
Pro Forma Basis. In connection with any Acquisition or proposed
Permitted Acquisition, the calculation of compliance with the financial
covenants described in Section 12 hereof by Holdings and its Subsidiaries
(including the Person to be acquired) with reference to the audited
historical financial results, if available, or such other management reports
as approved by the Agent, of such Person and Holdings and its Subsidiaries
for the applicable Test Period after giving effect on a pro forma basis to
such Acquisition or Permitted Acquisition in the manner described in (a), (b)
and (c) below; and, following an Acquisition or Permitted Acquisition, the
calculation of compliance with the covenants set forth in Section 12 for the
fiscal quarter in which such Acquisition or Permitted Acquisition occurred
and each of the three fiscal quarters immediately following such fiscal
quarter with reference to the audited historical financial results, if
available, or such other management reports as approved by the Agent, of the
Person so acquired and Holdings and its Subsidiaries for the applicable Test
Period after giving effect on a pro forma basis to such Acquisition or
Permitted Acquisition in the manner described in (a), (b) and (c) below:
(a) all Indebtedness (whether under this Credit Agreement or
otherwise) and any other balance sheet adjustments incurred or made in
connection with the Acquisition or Permitted Acquisition shall be deemed
to have been incurred or made on the first day of the Test Period, and
all Indebtedness of the Person acquired or to be acquired in such
Acquisition or Permitted Acquisition which was or will have been repaid
in connection with the consummation of the Acquisition or Permitted
Acquisition shall be deemed to have been repaid concurrently with the
incurrence of the Indebtedness incurred in connection with the
Acquisition or Permitted Acquisition;
(b) all Indebtedness assumed to have been incurred pursuant to the
preceding clause (a) shall be deemed to have borne interest at (i) one
half of the sum of (A) the Eurodollar Rate for Eurodollar Rate Loans
having an Interest Period of one month in effect on the first day of the
Test Period plus (B) the Eurodollar Rate for Eurodollar Rate Loans
having an Interest Period of one month in effect on the last day of the
Test Period plus (ii) the Eurodollar Rate Margin then in effect (after
giving effect to the Acquisition or Permitted Acquisition on a Pro Forma
Basis); and
(c) other reasonable cost savings, expenses and other income
statement or operating statement adjustments which are attributable to
the change in ownership and/or management resulting from such
Acquisition or Permitted Acquisition as may be reasonably approved by
the Agent in writing shall be deemed to have been realized on the first
day of the Test Period.
Rate Adjustment Period. Each period commencing on an Adjustment
Date through the date immediately preceding the next Adjustment Date.
<PAGE>
Real Estate. All real property at any time owned or leased (as
lessee or sublessee) by Holdings or any of its Subsidiaries.
Record. The grid attached to a Note, or the continuation of such
grid, or any other similar record, including computer records, maintained by
any Lender with respect to any Loan referred to in such Note.
Reimbursement Obligation. The obligation of any Domestic Borrower
to reimburse the Agent and the Lenders on account of any drawing under any
Letter of Credit as provided in Section 6.2.
Refunding Bankers' Acceptance. See Section 2B.2.
Replaced Lender. See Section 7.14.
Replacement Lender. See Section 7.14.
Reset Date. See Section 7.12(a).
Revolving Credit Commitment. With respect to each Lender, the
amount set forth on Schedule 1 hereto as the amount of such Lender's
commitment to make Revolving Credit Loans to, to purchase or participate in
Swing Line Loans as provided in Section 2A.4 hereof, and to participate in
the issuance, extension and renewal of Letters of Credit for the account of,
the Domestic Borrowers, as the same may be reduced from time to time; or if
such commitment is terminated pursuant to the provisions hereof, zero.
Revolving Credit Loan Margin. An annual percentage rate,
determined as of the Closing Date for the period from the Closing Date until
the day immediately prior to the first Adjustment Date, and thereafter
determined as of each Adjustment Date for each Rate Adjustment Period, equal
to the Revolving Credit Loan Margin set forth in the Pricing Table opposite
to the ratio of Funded Debt as at the end of the fiscal quarter of Holdings
ending immediately prior to such Adjustment Date to Adjusted EBITDA for the
period of four fiscal quarters then ended. Notwithstanding anything herein
or in the Pricing Table to the contrary, prior to the Adjustment Date
following the delivery of a Compliance Certificate with respect to the four
fiscal quarters ending June 30, 1999, the Revolving Credit Loan Margin shall
not be less than 1.25% with respect to Base Rate Loans and 2.75% with respect
to Eurodollar Rate Loans.
Revolving Credit Loan Maturity Date. February 10, 2004.
Revolving Credit Loans. Domestic Revolver Loans and the Hunter
Revolver Loans.
Revolving Credit Notes. See Section 2.4(a).
<PAGE>
Revolving Credit Note Record. A Record with respect to a Revolving
Credit Note.
Russell-Stanley. See preamble.
Russell-Stanley Patent Assignment. The Amended and Restated Patent
Collateral Assignment and Security Agreement, dated as of June 12, 1989, as
amended and restated as of April 9, 1990, as further amended as of June 23,
1994, as further amended as of July 23, 1997, as further amended as of
November 7, 1997 and as further amended as of the Closing Date, made by and
among Russell-Stanley and RSI in favor of the Agent.
Russell-Stanley Trademark Assignment. The Trademark Collateral
Security and Pledge Agreement, dated as of September 22, 1994, as amended as
of July 23, 1997, as further amended as of November 7, 1997 and as further
amended as of the Closing Date, made by Russell-Stanley in favor of the
Agent.
SARA. See Section 9.15(a) hereof.
Second Restated Credit Agreement. See preamble.
Security Agreements. The Domestic Security Agreement and the
Hunter Security Agreement.
Security Documents. The Security Agreements, the Stock Pledge
Agreement, the Partnership Assignment, the Patent Assignments, the Trademark
Assignments, the Mortgages, the Hunter Assignment of Material Contracts, the
Hunter Assignment of Insurance Policies and the Hunter Share Pledge Agreement
(and all consents, powers of attorney, acknowledgments and other documents
collateral thereto).
Senior Funded Debt. All Funded Debt of Holdings and its
Subsidiaries other than Senior Subordinated Debt.
Senior Subordinated Debt. Unsecured Indebtedness of Holdings in
respect of the Senior Subordinated Notes and the other Senior Subordinated
Debt Documents that is expressly subordinated and made junior to the payment
and performance in full of the Obligations on the terms set forth in the
Senior Subordinated Debt Documents.
Senior Subordinated Debt Documents. The Senior Subordinated Notes,
the Senior Subordinated Guaranty, the Senior Subordinated Indenture and all
documents, instruments and agreements executed in connection with any of the
foregoing, each in the form delivered to the Agent on or before the Closing
Date.
Senior Subordinated Guaranty. The Senior Subordinated Subsidiary
Guaranty, of even date herewith, by certain Subsidiaries of Holdings pursuant
<PAGE>
to the Senior Subordinated Indenture, each in the form delivered to the Agent
on or before the Closing Date.
Senior Subordinated Indenture. The Indenture, of even date
herewith, among Holdings, certain Subsidiaries of Holdings and The Bank of
New York, as trustee, in the form delivered to the Agent on or before the
Closing Date.
Senior Subordinated Notes. The 10 7/8% Senior Subordinated Notes,
of even date herewith, in the amount of up to $225,000,000, issued by
Holdings, each in the form attached to the Senior Subordinated Indenture.
Smurfit. Smurfit Packaging Corporation, a Delaware corporation.
Smurfit Acquisition. The acquisition by Russell-Stanley on November
7, 1997 of substantially all of the business and assets and assumption of
certain liabilities of the Plastics Division of Smurfit, pursuant to the
Smurfit Acquisition Documents.
Smurfit Acquisition Documents. The Smurfit Purchase Agreement and
all other material agreements and documents required to be entered into or
delivered pursuant to such agreement or in connection with the Smurfit
Acquisition, each in the form delivered to the Agent prior to the Closing
Date.
Smurfit Purchase Agreement. The Purchase and Sale Agreement among
Smurfit, Holdings and Russell-Stanley dated as of October 23, 1997, in the
form delivered to the Agent prior to the Closing Date.
Stay and Performance Payments. The collective reference to (a) the
performance-related payment of $1,000,000 that may be made to Mark E. Daniels
as of December 31, 1998, (b) the three annual "stay payments" to be made to
Mark E. Daniels on the first through third anniversaries of the effective
date of the Third Restated Credit Agreement, each in the amount of $770,000,
(c) the six annual "stay payments" made or to be made to Michael Hunter on
the first through sixth anniversaries of the Hunter Acquisition Effective
Date, the first four of which are each in the amount of C$700,000 and the
last two of which are each in the amount of C$450,000 and (d) any stay or
performance payments approved by the Agent made to a member of the management
of, a director or a shareholder of any target of any Permitted Acquisition
occurring after the Closing Date.
Stock Pledge Agreement. The Fourth Amended and Restated Stock
Pledge Agreement, dated as of the Closing Date, by and among Holdings, its
Subsidiaries (excluding HIGI and HDI), and the Agent.
Subsidiary. Any corporation, association, trust, or other business
entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by
<PAGE>
number of votes) of the outstanding Voting Stock. For purposes of this
definition, RSLP shall be considered a Subsidiary of RSLPCO and RSI.
Swing Line Bank. BKB.
Swing Line Loan. Any loan made by the Swing Line Bank pursuant to
Section 2A.1 hereof.
Swing Line Loan Maturity Date. See Section 2A.2.
Swing Line Loan Request. See Section 2A.2.
Swing Line Note. See Section 2A.5.
Syndication Agent. See preamble.
Swing Line Note Record. A Record with respect to a Swing Line
Note.
Term Loan. The term loan made to the Domestic Borrowers in the
aggregate principal amount of $25,000,000 on the effective date of the Third
Restated Credit Agreement (such term loan referred to as "Term Loan C" in the
Third and Fourth Restated Credit Agreements) and as converted pursuant to
Section 4.1 hereof.
Term Loan Lender. Each Lender with a Term Loan Percentage of
greater than 0% or with any Term Loan outstanding.
Term Loan Maturity Date. June 30, 2007.
Term Loan Percentage. With respect to each Lender, the percentage
set forth on Schedule 1 hereto.
Term Loan Rate. 9.48% per annum.
Term Note Record. A Record with respect to a Term Note.
Term Notes. See Section 4.2.
Test Period. (a) In connection with the calculation of financial
covenant compliance on a Pro Forma Basis as required by Section 11.5.1(b)(v)
with respect to any proposed Permitted Acquisition, the period of four fiscal
quarters most recently ended prior to such Permitted Acquisition for which
financial information is available, and (b) in connection with the
calculation of the covenants set forth in Section 12 hereof following any
Permitted Acquisition, the period of all fiscal quarters (and any portion of
a fiscal quarter) prior to the date of such Permitted Acquisition included in
the calculation of such financial covenant.
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Total Revolving Credit Commitment. At any time of determination,
the aggregate Revolving Credit Commitments, as in effect from time to time.
Trademark Assignments. The Russell-Stanley Trademark Assignment
and the CMS Trademark Assignment.
Type. As to any Revolving Credit Loan or all or any portion of the
Term Loan, its nature as a Base Rate Loan or a Eurodollar Rate Loan or a
Fixed Rate Loan.
Uniform Customs. With respect to any Letter of Credit, the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500 or any successor version thereto
generally adopted by the Agent in the ordinary course of its business as a
letter of credit issuer and in effect at the time of issuance of such Letter
of Credit.
Unpaid Reimbursement Obligation. Any Reimbursement Obligation for
which the applicable Domestic Borrower does not reimburse the Agent and the
Lenders on the date specified in, and in accordance with, Section 6.2.
Unused Commitment. See Section 2.2(a).
Vestar Management Agreement. The Management Agreement dated as of
July 23, 1997, as amended and in effect on the Closing Date between Vestar
Capital Partners, Inc. and the Domestic Borrowers.
Voting Stock. Stock, partnership interests or similar interests,
of any class or classes (however designated), the holders of which are at the
time entitled, as such holders, to vote for the election of a majority of the
directors (or persons performing similar functions) of the corporation,
association, trust, partnership or other business entity involved, whether or
not the right so to vote exists by reason of the happening of a contingency.
1.2 Rules of Interpretation.
(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or supplemented
from time to time in accordance with its terms and the terms of
this Credit Agreement.
(b) The singular includes the plural and the plural includes
the singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
<PAGE>
(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by Generally Accepted Accounting
Principles applied on a consistent basis by the accounting entity
to which they refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by Generally
Accepted Accounting Principles, which terms are defined in the
Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts, have the meanings assigned to them therein, with the
term "instrument" being that defined under Article 9 of the Uniform
Commercial Code.
(h) Reference to a particular "Section " refers to that
section of this Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of
like import shall refer to this Credit Agreement as a whole and not
to any particular section or subdivision of this Credit Agreement.
2. THE REVOLVING CREDIT LOANS.
2.1 Commitments to Lend.
(a) Subject to the terms and conditions set forth in this
Credit Agreement, each of the Lenders having a Revolving Credit
Commitment severally agrees to lend to the Domestic Borrowers and
the Domestic Borrowers may borrow, repay, and reborrow from time to
time between the Closing Date and the Revolving Credit Loan
Maturity Date upon notice by Russell-Stanley to the Agent given in
accordance with Section 2.6, such sums as are requested by
Russell-Stanley on behalf of the Domestic Borrowers up to a maximum
aggregate amount outstanding (after giving effect to all amounts
requested) at any one time equal to such Lender's Revolving Credit
Commitment, minus such Lender's Commitment Percentage of the sum of
the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations, provided that the sum of the outstanding amount of the
Domestic Revolver Loans and Swing Line Loans (after giving effect
to all amounts requested), plus the Dollar Equivalent of the sum of
the outstanding amount of the Hunter Revolver Loans, plus the
Maximum Drawing Amount and all Unpaid Reimbursement Obligations,
plus the Dollar Equivalent of the aggregate face amount of all
outstanding Bankers' Acceptances shall not at any time exceed the
Total Revolving Credit Commitment.
(b) Upon the terms and subject to the conditions of this
Credit Agreement, the Hunter Fronting Bank agrees to lend to Hunter
<PAGE>
in Canadian Dollars the Canadian Dollar Equivalent of such sums
that Hunter may request, from the Closing Date until but not
including the Revolving Credit Loan Maturity Date, upon notice by
Hunter to the Hunter Fronting Bank given in accordance with
Section 2.6 hereof; provided that the outstanding principal amount
of the Hunter Revolver Loans plus the aggregate face amount of all
outstanding Bankers' Acceptances shall not exceed the Hunter Line,
provided further, that the sum of the outstanding amount of the
Domestic Revolver Loans and Swing Line Loans, plus the Dollar
Equivalent of the sum of the outstanding amount of the Hunter
Revolver Loans (after giving effect to all amounts requested), plus
the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations, plus the Dollar Equivalent of the aggregate face
amount of all outstanding Bankers' Acceptances shall not at any
time exceed the Total Revolving Credit Commitment.
(c) The Domestic Revolver Loans shall be made pro rata in
accordance with each Lender's Commitment Percentage. Each request
for a Revolving Credit Loan hereunder shall constitute a
representation and warranty by the applicable Borrower(s) that the
conditions set forth in Section 13 and Section 14 have been
satisfied on the date of such Loan.
(d) Notwithstanding anything to the contrary in this
Section 2.1, each of the Lenders having a Revolving Credit
Commitment will, on one or more occasions prior to the Revolving
Credit Loan Maturity Date, and regardless of whether the conditions
set forth in Sections 13 and 14 are satisfied, make Domestic
Revolver Loans to any Domestic Borrower solely for the purposes of
repaying Swing Line Loans made to such Domestic Borrower pursuant
to Section 2A.4 hereof. Section 2A hereof shall govern the
Domestic Borrowers' joint and several obligations with respect to
Swing Line Loans. In the event that any advances of Revolving
Credit Loans pursuant to this Section 2.1(d) cause the sum of the
aggregate principal amount of Domestic Revolver Loans outstanding
plus the aggregate principal amount of all Swing Line Loans
outstanding plus the aggregate Maximum Drawing Amount of all
Letters of Credit outstanding and all Unpaid Reimbursement
Obligations plus the Dollar Equivalent of the sum of the
outstanding amount of the Hunter Revolver Loans plus the Dollar
Equivalent of the aggregate face amount of all outstanding Bankers'
Acceptances to exceed the Total Revolving Credit Commitment then in
effect, the Domestic Borrowers shall immediately prepay such excess
amount.
2.2 Commitment Fee.
(a) The Domestic Borrowers jointly and severally agree to pay
to the Agent for the accounts of the Lenders that have Revolving
<PAGE>
Credit Commitments in accordance with their respective Commitment
Percentages a commitment fee calculated at the Applicable
Commitment Fee Rate on the average daily amount during each
calendar quarter or portion thereof from Closing Date to the
Revolving Credit Loan Maturity Date by which the Total Revolving
Credit Commitment exceeds the sum of (i) the Maximum Drawing Amount
and all Unpaid Reimbursement Obligations, plus (ii) the outstanding
amount of Swing Line Loans, plus (iii) the Dollar Equivalent of the
outstanding amount of Hunter Revolver Loans, plus (iv) the Dollar
Equivalent of the aggregate face amount of all outstanding Bankers'
Acceptances, plus (v) the outstanding amount of Domestic Revolver
Loans during such calendar quarter (such difference referred to
herein as the "Unused Commitment").
(b) The commitment fees shall be payable quarterly in arrears
on the first day of each calendar quarter for the immediately
preceding calendar quarter commencing on the first such date
following the Closing Date, with a final payment on the Revolving
Credit Loan Maturity Date or any earlier date on which the
Revolving Credit Commitments shall terminate.
2.3 Reduction of Total Revolving Credit Commitment.
(a) The Total Revolving Credit Commitment shall be
automatically reduced in connection with certain mandatory
repayments of the Loans as provided in Section 5.1.
(b) Subject to Section 7.10 hereof, Russell-Stanley shall
have the right at any time and from time to time upon five (5)
Business Days prior written notice to the Agent to reduce by
$500,000 or an integral multiple thereof or terminate entirely the
Total Revolving Credit Commitment, whereupon the Revolving Credit
Commitments of the Lenders shall be reduced pro rata in accordance
with their respective Commitment Percentages of the amount
specified in such notice or, as the case may be, terminated.
Promptly after receiving any notice of Russell-Stanley delivered
pursuant to this Section 2.3(b), the Agent will notify the Lenders
of the substance thereof. Upon the effective date of any such
reduction or termination, the Domestic Borrowers shall pay to the
Agent for the respective accounts of the Lenders having Revolving
Credit Commitments the full amount of any commitment fee then
accrued on the amount of the reduction. No reduction or
termination of the Revolving Credit Commitments may be reinstated.
(c) Subject to Section 7.10 hereof, Russell-Stanley shall
have the right at any time and from time to time upon five (5)
Business Days prior written notice to the Agent to reduce by
$500,000 or an integral multiple thereof or terminate entirely the
Hunter Line. Promptly after receiving any notice of
<PAGE>
Russell-Stanley delivered pursuant to this Section 2.3(c), the
Agent will notify the Lenders of the substance thereof. No
reduction or termination of the Hunter Line may be reinstated.
2.4 Evidence of Revolving Credit Loans.
(a) The Domestic Revolver Loans shall be evidenced by joint
and several promissory notes of the Domestic Borrowers in
substantially the form of Exhibit A hereto (each, a "Revolving
Credit Note"), dated as of the Closing Date and completed with
appropriate insertions. One Revolving Credit Note shall be payable
to the order of each Lender having a Revolving Credit Commitment in
a principal amount equal to such Lender's Revolving Credit
Commitment or, if less, the outstanding amount of all Domestic
Revolver Loans made by such Lender, plus interest accrued thereon,
as set forth below.
(b) The obligations of Hunter to repay all amounts borrowed
by it as Hunter Revolver Loans, all interest thereon and all other
amounts payable by it in respect thereof shall be evidenced by this
Credit Agreement including any recordations made by any Lender or
the Hunter Fronting Bank, as the case may be, in respect of the
date, amount and currency of each Hunter Revolver Loan, each
Interest Period relating thereto, the date and amount of each
payment or prepayment of principal, interest or fees of each Hunter
Revolver Loan made to such Lender or the Hunter Fronting Bank, as
the case may be (collectively, the "Loan Account"), it being the
intention of the parties hereto that Hunter's obligations with
respect to the Hunter Revolver Loans owed by it shall be evidenced
only as stated herein and not by separate promissory notes or other
instruments.
(c) Each applicable Borrower irrevocably authorizes each
Lender and the Hunter Fronting Bank, as the case may be, to make or
cause to be made, at or about the time of the Drawdown Date of any
Revolving Credit Loan or at the time of receipt of any payment of
principal on such Lender's Revolving Credit Note or Loan Account,
as applicable, an appropriate notation on such Lender's or the
Hunter Fronting Bank's Revolving Credit Note Record or Loan
Account, as applicable, reflecting the making of such Revolving
Credit Loan or (as the case may be) the receipt of such payment.
The outstanding amount of the Revolving Credit Loans set forth on
such Lender's or the Hunter Fronting Bank's Revolving Credit Note
Record or Loan Account, as applicable, shall be prima facie
evidence of the principal amount thereof owing and unpaid to such
Lender or the Hunter Fronting Bank, but the failure to record, or
any error in so recording, any such amount on such Lender's or the
Hunter Fronting Bank's Revolving Credit Note Record or Loan Account
shall not limit or otherwise affect the obligations of such
<PAGE>
Borrower hereunder or under any Revolving Credit Note or Loan
Account issued by it to make payments of principal of or interest
on such Revolving Credit Note or Loan Account when due.
2.5 Interest on Revolving Credit Loans. Except as otherwise
provided in Section 7.11,
(a) Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last
day of the Interest Period with respect thereto at the rate equal
to the sum of (i) the Revolving Credit Loan Margin, plus (ii) the
Base Rate (or, in the case of Hunter Revolver Loans, the Canadian
Base Rate).
(b) Each Eurodollar Rate Loan shall bear interest for the
period commencing with the Drawdown Date thereof and ending on the
last day of the Interest Period with respect thereto at the rate
equal to the sum of (i) the Revolving Credit Loan Margin, plus (ii)
the Eurodollar Rate determined for such Interest Period, as
applicable.
(c) Each Domestic Borrower jointly and severally promises to
pay interest on each Revolving Credit Loan in arrears on each
Interest Payment Date with respect thereto. Hunter promises to pay
interest on each Revolving Credit Loan made to it in arrears on
each Interest Payment Date with respect thereto.
(d) The Hunter Revolver Loans shall be Base Rate Loans.
2.6 Requests for Revolving Credit Loans.
(a) Russell-Stanley shall give to the Agent written notice in
the form of Exhibit B hereto (or telephonic notice confirmed in a
writing in the form of Exhibit B hereto) of each Domestic Revolver
Loan requested hereunder by any Domestic Borrower (a "Domestic
Revolver Loan Request") not later than 12:00 Noon (Boston time) on
(i) the Business Day prior to the proposed Drawdown Date of any
Base Rate Loan and (ii) three (3) Eurodollar Business Days prior to
the proposed Drawdown Date of any Eurodollar Rate Loan.
(b) Hunter shall give to the Hunter Fronting Bank (with a
copy to the Agent) written notice in the form of Exhibit C hereto
(or telephonic notice confirmed in a writing in the form of Exhibit
C hereto) of each Hunter Revolver Loan requested hereunder by
Hunter (a "Hunter Revolver Loan Request") not later than 12:00 Noon
(Boston time) on the Business Day prior to the proposed Drawdown
Date of any Hunter Revolver Loan.
<PAGE>
(c) Each such notice shall specify (i) the principal amount
of the Revolving Credit Loan requested, (ii) the proposed Drawdown
Date of such Revolving Credit Loan, (iii) the Interest Period for
such Revolving Credit Loan, (iv) the applicable Borrower(s) and (v)
the Type of such Revolving Credit Loan. Promptly upon receipt of
any such notice, the Agent shall notify each of the Lenders
thereof. Each such Domestic Revolver Loan Request and Hunter
Revolver Loan Request shall be irrevocable and binding on the
applicable Borrower(s) and shall obligate such Borrower(s) to
accept the Revolving Credit Loan requested from the Lenders on the
proposed Drawdown Date. Each Domestic Revolver Loan Request and
Hunter Revolver Loan Request shall be in a minimum aggregate amount
of $500,000 or an integral multiple thereof.
2.7 Conversion Options.
2.7.1 Conversion to Different Type of Revolving Credit Loan.
Any Borrower may elect from time to time to convert any outstanding Revolving
Credit Loan made to it to a Revolving Credit Loan of another Type, provided
that (a) with respect to any such conversion of a Eurodollar Rate Loan to a
Base Rate Loan, Russell-Stanley, on behalf of such Borrower shall give the
Agent at least one (1) Business Day's prior written notice of such election;
(b) with respect to any such conversion of a Base Rate Loan to a Eurodollar
Rate Loan, Russell-Stanley, on behalf of such Borrower, shall give the Agent
at least three (3) Eurodollar Business Days' prior written notice of such
election; (c) with respect to any such conversion of a Eurodollar Rate Loan
into a Revolving Credit Loan of another Type, such conversion shall only be
made on the last day of the Interest Period with respect thereto and (d) no
Revolving Credit Loan may be converted into a Eurodollar Rate Loan following
receipt of notice from the Agent when any Default or Event of Default has
occurred and is continuing. On the date on which such conversion is being
made each Lender shall take such action as is necessary to transfer its
Commitment Percentage of such Revolving Credit Loans to its Domestic Lending
Office or its Eurodollar Lending Office, as the case may be. All or any part
of outstanding Revolving Credit Loans of any Type may be converted into a
Revolving Credit Loan of another Type as provided herein, provided that any
partial conversion shall be in an aggregate principal amount of $500,000 or a
whole multiple thereof. Each Conversion Request relating to the conversion
of a Revolving Credit Loan to a Eurodollar Rate Loan shall be irrevocable.
2.7.2 Continuation of Type of Revolving Credit Loan. Any
Revolving Credit Loan of any Type may be continued as a Revolving Credit Loan
of the same Type upon the expiration of an Interest Period with respect
thereto by compliance by Russell-Stanley on behalf of the applicable Borrower
with the notice provisions contained in Section 2.7.1; provided that no
Eurodollar Rate Loan may be continued as such following receipt of notice
from the Agent when any Default or Event of Default has occurred and is
continuing, but shall be automatically converted to a Base Rate Loan on the
last day of the first Interest Period relating thereto ending during the
<PAGE>
continuance of any Default or Event of Default of which officers of the Agent
active upon such Borrower's account have actual knowledge. In the event that
Russell-Stanley fails to provide any such notice with respect to the
continuation of any Eurodollar Rate Loan of any Borrower as such, then such
Eurodollar Rate Loan shall be automatically converted to a Base Rate Loan on
the last day of the first Interest Period relating thereto. The Agent shall
notify the Lenders, Russell-Stanley and the applicable Borrower promptly when
any such automatic conversion contemplated by this Section 2.7 is scheduled
to occur.
2.7.3 Eurodollar Rate Loans. Any conversion to or from
Eurodollar Rate Loans shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal
amount of all Eurodollar Rate Loans having the same Interest Period shall not
be less than $500,000 or an integral multiple thereof. At no time shall
there be outstanding Eurodollar Rate Loans having more than eight (8)
different Interest Periods.
2.8 Funds for Domestic Revolver Loans.
2.8.1 Funding Procedures. Not later than 11:00 a.m. (Boston
time) on the proposed Drawdown Date of any Domestic Revolver Loans, each of
the Lenders will make available to the Agent, at the Agent's Head Office, in
immediately available funds, the amount of such Lender's Commitment
Percentage of the amount of the requested Domestic Revolver Loans. Upon
receipt from each Lender of such amount, and upon receipt of the documents
required by Sections 13 and 14, and the satisfaction of the other conditions
set forth therein, to the extent applicable, the Agent will make available to
the applicable Borrower(s) the aggregate amount of such Domestic Revolver
Loans made available to the Agent by the Lenders. The failure or refusal of
any Lender to make available to the Agent at the aforesaid time and place on
any Drawdown Date the amount of its Commitment Percentage of the requested
Domestic Revolver Loans shall not relieve any other Lender from its several
obligation hereunder to make available to the Agent the amount of such other
Lender's Commitment Percentage of any requested Domestic Revolver Loans.
2.8.2 Advances by Agent. The Agent may, unless notified to
the contrary by any Lender prior to a Drawdown Date, assume that such Lender
has made available to the Agent on such Drawdown Date the amount of such
Lender's Commitment Percentage, as applicable, of the Domestic Revolver Loans
to be made on such Drawdown Date, and the Agent may (but it shall not be
required to), in reliance upon such assumption, make available to the
applicable Borrower(s) a corresponding amount. If any Lender makes available
to the Agent such amount on a date after such Drawdown Date, such Lender
shall pay to the Agent on demand an amount equal to the product of (a) the
average computed for the period referred to in clause (c) below, of the
weighted average interest rate paid by the Agent for federal funds acquired
by the Agent during each day included in such period, times (b) the amount of
such Lender's Commitment Percentage, of such Domestic Revolver Loans, times
<PAGE>
(c) a fraction, the numerator of which is the number of days that elapse from
and including such Drawdown Date to the date on which the amount of such
Lender's Commitment Percentage, of such Domestic Revolver Loans shall become
immediately available to the Agent, and the denominator of which is 360. A
statement of the Agent submitted to such Lender with respect to any amounts
owing under this paragraph shall be prima facie evidence of the amount due
and owing to the Agent by such Lender. If the amount of such Lender's
Commitment Percentage, as applicable, of such Domestic Revolver Loans is not
made available to the Agent by such Lender within three (3) Business Days
following such Drawdown Date, such Lender shall be deemed to be a Delinquent
Lender hereunder and the provisions of Section 17.5.3 shall apply thereto.
2.9 Funding Procedures for Hunter Revolver Loans. Not later than
11:00 a.m. (Boston time) on the proposed Drawdown Date of any Hunter Revolver
Loans, the Hunter Fronting Bank will make available to Hunter, at the Hunter
Fronting Bank's office shown on Schedule 1 hereof or as otherwise designated
in writing to Hunter by the Hunter Fronting Bank from time to time, in
immediately available funds, the amount of such requested Hunter Revolver
Loans. Promptly following the making of each Hunter Revolver Loan, the
Hunter Fronting Bank shall provide notice to the Agent of the amount thereof.
2.10 Fronting Provisions.
2.10.1 Application of Interest Payments for Hunter Revolver
Loans. As promptly as is practicable following each date upon which the
Hunter Fronting Bank receives a payment of interest under this Credit
Agreement on account of any Hunter Revolver Loans or a payment of the
Acceptance Fee on account of any Bankers' Acceptances, the Hunter Fronting
Bank shall convert into Dollars (based upon the actual exchange rate then
applicable to the Hunter Fronting Bank) the amount equal to (a) the portion
of such interest payment which constitutes the Revolving Credit Loan Margin
thereof, in the case of Hunter Revolver Loans, and (b) the Acceptance Fee, in
the case of Bankers' Acceptances (or, with respect to each Lender which
funded the purchase of a participating interest in such Hunter Revolver Loan
pursuant to Section 2.10.3, such Lender's Commitment Percentage of the full
amount of such interest payment). In consideration of the agreement of the
Lenders to purchase participating interests in the Hunter Revolver Loans and
Bankers' Acceptances, the Hunter Fronting Bank hereby agrees to pay to the
Agent, for the ratable accounts of each Lender, a risk participation fee (the
"Hunter Risk Participation Fee") in an amount equal to the proceeds received
by the Hunter Fronting Bank from such conversion to Dollars (other than any
such proceeds payable for the account of any Delinquent Lender, which
proceeds shall be retained by the Hunter Fronting Bank for its own account)
or, if no such conversion is required, the amount in Dollars which would have
been converted if such interest or Acceptance Fee had been paid in Canadian
Dollars; provided, however, that in the event that any Lender has funded the
purchase of participating interests in the extensions of credit on account of
which such interest was paid pursuant to Section 2.10.3, the Hunter Fronting
Bank shall instead pay to the Agent, for the account of each Lender which has
<PAGE>
so funded such purchase, the amount equal to such Lender's Commitment
Percentage of the proceeds received by the Hunter Fronting Bank from such
conversion. Such amount shall be payable to the Agent in Dollars on the date
upon which the Hunter Fronting Bank receives the proceeds of such conversion.
Should any Bankers' Acceptances be funded by any Lender other than the Hunter
Fronting Bank pursuant to 2.10.3, 2.10.3(a) shall govern the subsequent
conversion of those Bankers' Acceptances into Hunter Revolver Loans.
2.10.2 Payments to Hunter Fronting Bank. Hunter agrees to
pay to the Hunter Fronting Bank with respect to each Hunter Revolving Loan
for its own account a fronting fee (the "Hunter Fronting Fee") with respect
to the period from and including the date of such Hunter Revolver Loan to but
excluding the date of repayment thereof computed at an agreed upon rate per
annum on the average daily principal amount of such Loan outstanding during
the period for which such fee is calculated. The Hunter Fronting Fee shall
be payable on the first day of each month, commencing on the first such date
following the date hereof, and on the Revolving Credit Loan Maturity Date, or
any earlier date on which the Hunter Line has terminated.
2.10.3 Currency Conversions and Contingent Funding Agreement.
(a) Each of the Lenders hereby unconditionally and
irrevocably agrees to purchase (in Dollars) an undivided
participating interest in its ratable share, determined by
reference to its Commitment Percentage, of all Hunter Revolver
Loans made and Bankers' Acceptances accepted and/or purchased by
the Hunter Fronting Bank as the Agent may at any time request,
provided that:
(i) the Agent and the Hunter Fronting Bank hereby agree
that, unless (A) an Event of Default has occurred and is
continuing and (B) all amounts owing with respect to this
Credit Agreement, the Notes and the other Loan Documents and
all Reimbursement Obligations have become immediately due and
payable pursuant to Section 15.1 hereof, such Persons will not
request any such purchase of participating interests; and
(ii) in the event that any Event of Default specified in
Section 15.1(g) or (h) shall have occurred with respect to
Hunter, each Lender shall be deemed to have purchased,
automatically and without request, such participating interest
in (A) the Hunter Revolver Loans made by the Hunter Fronting
Bank to Hunter and (B) the Bankers' Acceptances accepted
and/or purchased by the Hunter Fronting Bank from Hunter.
Any such request shall be made in writing to each Lender and
shall specify the amount of Dollars (based upon the actual exchange
rate at which the Agent anticipates being able to obtain the
relevant amount in Canadian Dollars on the relevant date, with any
<PAGE>
excess payment being refunded to the Lenders and any deficiency
remaining payable by the Lenders) required from such Lender in
order to effect the purchase by such Lender of a participating
interest in the amount equal to (A) its Commitment Percentage times
the aggregate then outstanding principal amount in Canadian Dollars
of the Hunter Revolver Loans plus (B) its Commitment Percentage
times the aggregate face amount of outstanding Bankers' Acceptances
(which participating interest shall thereafter also cover accrued
interest thereon and other amounts owing in connection therewith in
Canadian Dollars). Promptly upon receipt of such request, each
Lender shall deliver to the Agent (in immediately available funds)
the amount so specified by the Agent. The Agent shall convert such
amounts into Canadian Dollars and shall promptly deliver the
proceeds of such conversion to the Hunter Fronting Bank in
immediately available funds. Promptly following receipt thereof,
the Hunter Fronting Bank will deliver to each Lender (through the
Agent) a certificate setting forth the amount of the Hunter
Revolver Loans and Bankers' Acceptances purchased by such Lender,
dated the date of receipt of such funds and in such amount. From
and after such purchase, (i) the outstanding Hunter Revolver Loans
and Bankers' Acceptances shall be deemed to have been converted
into Base Rate Loans denominated in Dollars (with the conversion
constituting, for purposes of Section 7.10, a conversion of a
Revolving Credit Loan of one Type into a Revolving Credit Loan of
another Type prior to the expiration of the relevant Interest
Period or the prepayment of Bankers' Acceptances, as applicable),
(ii) any further Hunter Revolver Loans to be made to Hunter shall
be made in Dollars, with each Lender purchasing a participating
interest therein in the manner described in the foregoing
provisions of this Section 2.10.3 immediately upon the making
thereof in the amount equal to such Lender's Commitment Percentage
thereof (with the Agent hereby agreeing to provide prompt notice to
each such Lender of its receipt from the Hunter Fronting Bank of a
notice of borrowing and of the making of any Hunter Revolver
Loans), (iii) all amounts from time to time accruing, and all
amounts from time to time payable, on account of such Hunter
Revolver Loans (including any interest and other amounts which were
accrued but unpaid on the date of such purchase) shall be payable
in Dollars as if such Hunter Revolver Loans had originally been
made in Dollars and as to Hunter Revolver Loans shall be
distributed by the Hunter Fronting Bank to the Agent, for the
accounts of the Lenders, on account of such participating
interests. Notwithstanding anything to the contrary contained in
this Section 2.10, the failure of any Lender to purchase its
participating interest in any Hunter Revolver Loans or Bankers'
Acceptances shall not relieve any other Lender of its obligations
hereunder to purchase its participating interest in a timely
manner, but no Lender shall be responsible for the failure of any
<PAGE>
other Lender to purchase the participating interest to be purchased
by such other Lenders on any date.
(b) If any amount required to be paid by any Lender pursuant
to Section 2.10.3(a) is paid to the Agent within three (3) Business
Days following the date upon which such Lender receives notice from
the Agent that the Hunter Revolver Loan or Bankers' Acceptance in
which such Lender has purchased a participating interest has been
made, such Lender shall pay to the Agent on demand an amount equal
to the product of (i) such amount, times (ii) the daily average
federal funds rate, as quoted by the Agent, during the period from
and including the date such payment is required to be made to the
date on which such payment is immediately available to the Agent,
times (iii) a fraction the numerator of which is the number of days
that elapse during such period and the denominator of which is 360.
If any such amount required to be paid by any Lender pursuant to
Section 2.10.3(a) is not in fact made available to the Agent within
three (3) Business Days following the date upon which such Lender
receives notice from the Agent that the Hunter Revolver Loan or
Bankers' Acceptance in which such Lender has purchased a
participating interest has been made, the Agent shall be entitled
to recover from such Lender, on demand, such amount with interest
thereon calculated from such due date at the rate per annum
applicable to Hunter Revolver Loans which are Dollar Base Rate
Loans. A certificate from the Agent submitted to any Lender with
respect to any amounts owing under this Section 2.10.3(b) shall be
conclusive in the absence of manifest error. Amounts payable by
any Lender pursuant to this Section 2.10.3(b) shall be paid to the
Agent, for the account of the Hunter Fronting Bank; provided that,
if the Agent (in its sole discretion) has elected to fund on behalf
of such Lender the amounts owing to the Hunter Fronting Bank, then
the amounts shall be paid to the Agent, for its own account.
(c) Whenever, at any time after the Hunter Fronting Bank has
received from any Lender such Lender's participating interest in a
Hunter Revolver Loan or Bankers' Acceptance pursuant to
Section 2.10.3(b) above, the Hunter Fronting Bank receives any
payment on account thereof, such Hunter Fronting Bank will
distribute to the Agent, for the account of such Lender, such
Lender's participating interest in such amount (appropriately
adjusted, in the case of interest payments, to reflect the period
of time during which such Lender's participating interest was
outstanding and funded) in like funds received; provided, however,
that in the event that any such payment received by the Hunter
Fronting Bank is required to be returned, such Lender will return
to the Hunter Fronting Bank any portion thereof previously
distributed by the Hunter Fronting Bank to the Lender in like funds
as such payment is required to be returned by the Hunter Fronting
Bank.
<PAGE>
(d) Pro Rata Treatment of Revolving Credit Loans. Each
Lender's obligation to purchase participating interests pursuant to
this Section 2.10 shall be absolute and unconditional 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 Hunter Fronting Bank, any Borrower or any
other Person for any reason whatsoever; (ii) the occurrence and
continuation of any Default or Event of Default; (iii) any adverse
change in the condition (financial or otherwise) of any Person
party hereto; (iv) any breach of any of the Loan Documents by any
Person; or (v) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing;
provided that no Lender shall be obligated to purchase
participating interests in any Hunter Revolver Loans made or
Bankers' Acceptances accepted and/or purchased by the Hunter
Fronting Bank to the extent that such Hunter Revolver Loans or
Bankers' Acceptances (at the time when made, in the case of such
Loans, or accepted and/or purchased, in the case of such Revolver
Banker's Acceptances) caused the aggregate amount of all Hunter
Revolver Loans then outstanding plus the aggregate face amount of
all outstanding Bankers' Acceptances to exceed the Hunter Line then
in effect.
2.10.4 Resignation of Hunter Fronting Bank. The Hunter
Fronting Bank may resign at any time by giving sixty (60) days prior written
notice thereof to the Lenders, Russell-Stanley and Hunter. Upon any such
resignation, the Majority Lenders shall have the right to appoint a successor
Hunter Fronting Bank. Unless a Default or Event of Default shall have
occurred and be continuing, such successor Hunter Fronting Bank shall be
reasonably acceptable to Hunter and Russell-Stanley. If no successor Hunter
Fronting Bank shall have been so appointed by the Majority Lenders and shall
have accepted such appointment within thirty (30) days after the retiring
Hunter Fronting Bank's giving of notice of resignation, then the retiring
Hunter Fronting Bank may, on behalf of the Lenders, appoint a successor
Hunter Fronting Bank, which shall be a financial institution having a rating
of not less than A or its equivalent by Standard & Poor's Ratings Group.
Upon the acceptance of any appointment as Hunter Fronting Bank hereunder by a
successor Hunter Fronting Bank, such successor Hunter Fronting Bank shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Hunter Fronting Bank, and the retiring
Hunter Fronting Bank shall be discharged from its duties and obligations
hereunder. After any retiring Hunter Fronting Bank's resignation, the
provisions of this Credit Agreement and the other Loan Documents shall
continue in effect for its benefit in respect of any actions taken or omitted
to be taken by it while it was acting as Hunter Fronting Bank.
<PAGE>
2A. THE SWING LINE.
2A.1 The Swing Line Loans. Subject to the terms and conditions
hereinafter set forth, upon notice by Russell-Stanley made to the Swing Line
Bank in accordance with Section 2A.2 hereof, the Swing Line Bank agrees to
lend to the Domestic Borrowers Swing Line Loans on any Business Day prior to
the Revolving Credit Loan Maturity Date in an aggregate principal amount not
to exceed $5,000,000 (the "Maximum Swing Line Loan Amount"). Each Swing Line
Loan shall be in a minimum amount equal to $1,000 or an integral multiple
thereof. Notwithstanding any other provisions of this Credit Agreement and
in addition to the limit set forth above, at no time shall the aggregate
principal amount of all outstanding Swing Line Loans exceed (a) the Total
Revolving Credit Commitment then in effect minus (b) the sum of (i) the
aggregate principal amount of all Revolving Credit Loans outstanding, (ii)
the aggregate Maximum Drawing Amount of all Letters of Credit outstanding,
(iii) all Unpaid Reimbursement Obligations and (iv) the Dollar Equivalent of
the aggregate face amount of all outstanding Bankers' Acceptances; provided
however that subject to the limitations set forth in this Section 2A.1 from
time to time the sum of the aggregate outstanding Swing Line Loans plus all
outstanding Revolving Credit Loans made by the Swing Line Bank may exceed the
Swing Line Bank's Commitment Percentage of the Total Revolving Credit
Commitment then in effect.
2A.2 Notice of Borrowing. When any Domestic Borrower desires the
Swing Line Bank to make a Swing Line Loan, Russell-Stanley, on behalf of such
Domestic Borrower, shall send to the Agent and the Swing Line Bank written
notice in the form of Exhibit D hereto (or telephonic notice confirmed in a
writing in the form of Exhibit D hereto) of each Swing Line Loan requested
hereunder (a "Swing Line Loan Request") not later than 12:00 Noon (Boston
time) on the proposed Drawdown Date of any Swing Line Loan. Each such Swing
Line Loan Request shall set forth the principal amount of the proposed Swing
Line Loan, the applicable Domestic Borrower(s) and the date on which the
proposed Swing Line Loan would mature (the "Swing Line Loan Maturity Date")
which shall in no event be later than Revolving Credit Loan Maturity Date.
Each Swing Line Loan Request shall be irrevocable and binding on the
applicable Domestic Borrower(s) and shall obligate such Domestic Borrower(s)
to borrow the Swing Line Loan from the Swing Line Bank on the proposed
Drawdown Date thereof. Upon satisfaction of the applicable conditions set
forth in this Credit Agreement, on the proposed Drawdown Date the Swing Line
Bank shall make the Swing Line Loan available to such Domestic Borrower(s) no
later than 3:00 p.m. (Boston time) on the proposed Drawdown Date by crediting
the amount of the Swing Line Loan to the relevant account(s) of such Domestic
Borrower(s) maintained with the Agent at the Agent's Head Office; provided
that the Swing Line Bank shall not advance any Swing Line Loans after it has
received notice from any Lender that a Default or Event of Default has
occurred and stating that no new Swing Line Loans are to be made until such
Default or Event of Default has been cured or waived in accordance with the
provisions of this Credit Agreement. The Swing Line Bank shall not be
obligated to make any Swing Line Loans at any time when any Lender is a
Delinquent Lender unless the Swing Line Bank has entered into arrangements
satisfactory to it to eliminate the Swing Line Bank's risk with respect to
<PAGE>
such Delinquent Lender, including by cash collateralizing such Delinquent
Lender's Commitment Percentage of the outstanding Swing Line Loans and any
such additional Swing Line Loans to be made.
2A.3 Interest on Swing Line Loans. Each Swing Line Loan shall be
a Base Rate Loan and, except as otherwise provided in Section 7.11 hereof,
shall bear interest from the Drawdown Date thereof until repaid in full at
the rate per annum equal to the Base Rate plus the Revolving Credit Loan
Margin, which shall be paid on each Interest Payment Date for Base Rate
Loans.
2A.4 Repayment of Swing Line Loans. The Domestic Borrowers shall
repay each outstanding Swing Line Loan on or prior to the Swing Line Loan
Maturity Date. Upon notice by the Swing Line Bank on any Business Day, each
of the Lenders hereby agrees to make Domestic Revolver Loans constituting
Base Rate Loans to any Domestic Borrower having outstanding Swing Line Loans,
on the next succeeding Business Day following such notice, in an amount equal
to such Lender's Commitment Percentage of the aggregate amount of all Swing
Line Loans outstanding to such Domestic Borrower. The proceeds thereof shall
be applied directly to the Swing Line Bank to repay the Swing Line Bank for
such outstanding Swing Line Loans. Each Lender hereby absolutely,
unconditionally and irrevocably agrees to make such Domestic Revolver Loans
upon one Business Day's notice as set forth above, notwithstanding (a) that
the amount of such Domestic Revolver Loan may not comply with the applicable
minimums set forth herein, (b) the failure of the Domestic Borrowers to meet
the conditions set forth in Sections 13 or 14 hereof, (c) the occurrence or
continuance of a Default or an Event of Default hereunder, (d) the date of
such Domestic Revolver Loan, and (e) the Total Revolving Credit Commitment in
effect at such time. In the event that it is impracticable for such Domestic
Revolver Loan to be made for any reason on the date otherwise required above,
then each Lender hereby agrees that it shall forthwith purchase (as of the
date such Domestic Revolver Loan would have been made, but adjusted for any
payments received from the Domestic Borrowers on or after such date and prior
to such purchase) from the Swing Line Bank, and the Swing Line Bank shall
sell to each Lender, such participations in the Swing Line Loans (including
all accrued and unpaid interest thereon) outstanding as shall be necessary to
cause the Lenders to share in such Swing Line Loans pro rata based on their
respective Commitment Percentages (without regard to any termination of the
Total Revolving Credit Commitment hereunder) by making available to the Swing
Line Bank an amount equal to such Lender's participation in the Swing Line
Loans; provided that (x) all interest payable on the Swing Line Loans shall
be for the account of the Swing Line Bank as a funding and administrative fee
until the date as of which the respective participation is purchased, and (y)
at the time any purchase of such participation is actually made, the
purchasing Lender shall be required to pay the Swing Line Bank interest on
the principal amount of the participation so purchased for each day from and
including the date such Domestic Revolver Loan would otherwise have been made
until the date of payment for such participation at the rate of interest in
effect applicable to Base Rate Loans during such period.
<PAGE>
2A.5 The Swing Line Note. The joint and several obligations of
the Domestic Borrowers to repay the Swing Line Loans made pursuant to this
Agreement and to pay interest thereon as set forth in this Agreement shall be
evidenced by a promissory note of the Domestic Borrowers with appropriate
insertions substantially in the form of Exhibit E attached hereto (the "Swing
Line Note"), dated the Closing Date and payable to the order of the Swing
Line Bank in a principal amount stated to be the lesser of (a) the Maximum
Swing Line Loan Amount, or (b) the aggregate principal amount of Swing Line
Loans at any time advanced by the Swing Line Bank and outstanding thereunder.
Each Domestic Borrower irrevocably authorizes the Swing Line Bank to make or
cause to be made, at or about the time of the Drawdown Date of any Swing Line
Loan or at the time of receipt of any payment of principal on the Swing Line
Note, an appropriate notation on the Swing Line Note Record reflecting the
making of such Swing Line Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the Swing Line Loans set forth on such
Swing Line Note Record shall be prima facie evidence of the principal amount
thereof owing and unpaid to the Swing Line Bank, but the failure to record,
or any error in so recording, any such amount on such Swing Line Note Record
shall not limit or otherwise affect the actual amount of the obligations of
the Domestic Borrowers hereunder or under the Swing Line Note to make
payments of principal of or interest on the Swing Line Note when due.
2B. BANKERS' ACCEPTANCES.
2B.1. Acceptance and Purchase. Subject to the terms and
conditions hereof, the Hunter Fronting Bank and any other Lender that,
pursuant to an amendment hereto, agrees to issue Bankers' Acceptances (the
"BA Lenders") agree to accept and purchase Bankers' Acceptances, drawn upon
such BA Lender by Hunter and denominated in Canadian Dollars, provided that
it is understood and agreed that the Applicable BA Discount Rate shall be
that rate calculated for the Business Day of issuance and purchase by such BA
Lender of the requested Bankers Acceptance(s), and not any rate quoted on and
for the date of notice of such request. Hunter shall notify the applicable
BA Lender by irrevocable written notice (each, a "Bankers' Acceptance
Notice") (such notice being addressed to applicable BA Lender with a copy
sent to the Agent) at least one (1) Business Day prior to the date of any
borrowing by way of Bankers' Acceptances. Each borrowing by way of Bankers'
Acceptances shall be in a minimum aggregate undiscounted face amount of
C$100,000 or an integral multiple thereof. The undiscounted face amount of
each Bankers' Acceptance shall be C$100,000 or any integral multiple thereof.
Each request for a Bankers' Acceptance shall constitute a representation and
warranty by Russell-Stanley and by Hunter that the conditions set forth in
Section 13 and 14 have been satisfied on the date of the issuance of such
Bankers' Acceptance. Each Bankers' Acceptance Notice shall be in the form of
Exhibit I. Any Bankers' Acceptances accepted and/or purchased hereunder shall
be accepted and/or purchased, in the first instance, by the Hunter Fronting
Bank (without reference to subsequent transfer). In no event shall the
aggregate face amount of all outstanding Bankers' Acceptances exceed the
Hunter Line minus the outstanding amount of all Hunter Revolver Loans.
<PAGE>
Furthermore, in no event shall the sum of the outstanding amount of the
Domestic Revolver Loans and Swing Line Loans (after giving effect to all
amounts requested), plus the Dollar Equivalent of the sum of the outstanding
amount of the Hunter Revolver Loans, plus the Maximum Drawing Amount and all
Unpaid Reimbursement Obligations, plus the Dollar Equivalent of the aggregate
face amount of all outstanding Bankers' Acceptances at any time exceed the
Total Revolving Credit Commitment.
(a) Term. Each Bankers' Acceptance shall be issued and shall
mature on a Business Day and shall be dated the borrowing date
specified in the Bankers' Acceptance Notice with respect thereto.
Each Bankers' Acceptance shall have a term of not less than 30 and
not more than 180 days. Each Bankers' Acceptance shall mature no
later than one (1) day prior to the Revolving Credit Loan Maturity
Date, and shall be in form and substance reasonably satisfactory to
the Hunter Fronting Bank.
(b) Bankers' Acceptances in Blank. To facilitate the
acceptance of Bankers' Acceptances under this Agreement, Hunter
shall, on the Closing Date and from time to time as required,
provide to each BA Lender bills of exchange, in the form of Exhibit
J, duly executed and endorsed in blank by Hunter in quantities
sufficient for each BA Lender to fulfill its obligations hereunder.
Hunter agrees that the responsibility of each BA Lender with
respect to the safekeeping of the executed blank draft forms of
Bankers' Acceptances shall be limited to the same degree of care
which such BA Lender gives to its own property, provided that such
BA Lender shall not be deemed to be an insurer thereof. In
addition, Hunter hereby irrevocably appoints each BA Lender as its
attorney to sign and endorse on its behalf, in handwriting or by
facsimile or mechanical signature, as and when deemed necessary by
such BA Lender and in accordance with the Bankers' Acceptance
Notices submitted from time to time in accordance with this
Section 2B and signed by officers or employees of Hunter who are
authorized by resolution of the directors of Hunter to so instruct
such BA Lender, blank forms of Bankers' Acceptances. (Hunter shall
provide each BA Lender with a certified copy of such resolution and
such BA Lender may rely upon the same until its acknowledgment of
the receipt from Hunter of a certified copy of a directors'
resolution to the contrary.) Hunter recognizes and agrees that
each Bankers' Acceptance signed and/or endorsed on its behalf by
any BA Lender in accordance with the terms of the respective
Bankers' Acceptance Notices provided to such BA Lender shall bind
Hunter as fully and effectually as if signed in the handwriting of
and duly issued by the proper signing officers of Hunter. Each BA
Lender is hereby authorized to issue on behalf of Hunter, such
Bankers' Acceptances endorsed in blank in such face amounts as may
be specified in the Bankers' Acceptance Notice provided to such BA
Lender with respect thereto provided that the aggregate amount
<PAGE>
thereof is equal to the aggregate amount of Bankers' Acceptances
required to be accepted by such BA Lender pursuant to clause (d)
below. No BA Lender shall be responsible or liable for its failure
to accept a Bankers' Acceptance if the cause of such failure is, in
whole or in part, due to the failure of Hunter to provide duly
executed and endorsed bills of exchange to such BA Lender on a
timely basis nor shall any BA Lender be liable for any damage, loss
or other claim arising by reason of any loss or improper use of any
such instrument except loss or improper use arising by reason of
the negligence or willful misconduct of such BA Lender, its
officers, employees, agents or representatives. Hunter agrees that
no BA Lender shall incur any liability to Hunter in completing such
draft forms of Bankers' Acceptances when acting reasonably in
reliance on Bankers' Acceptance Notices provided to such BA Lender
which such BA Lender believes in good faith to have been signed by
authorized officers or employees of Hunter. Each BA Lender shall
maintain a record with respect to Bankers' Acceptances (i) received
by it from Hunter in blank hereunder, (ii) voided by it for any
reason, (iii) accepted by it hereunder, (iv) purchased by it
hereunder, and (v) canceled at their respective maturities. Each BA
Lender further agrees to retain such records in the manner and for
the statutory periods provided in the various Canadian provincial
or federal statutes and regulations which apply to such BA Lender.
(c) Execution of Bankers' Acceptances. Bills of exchange of
Hunter to be accepted as Bankers' Acceptances hereunder shall be
duly executed by one or more duly authorized officers on behalf of
Hunter as required by 2B.1(a) above. Notwithstanding that any
person whose signature appears on any Bankers' Acceptance as a
signatory for Hunter may no longer be an authorized signatory for
Hunter at the date of issuance (unless, at such date of issuance,
the issuing BA Lender has actual knowledge that such signatory is
no longer an authorized signatory) or at the date of maturity of a
Bankers' Acceptance, such signature shall nevertheless be valid and
sufficient for all purposes as if such authority had remained in
force at the time of such issuance or continued until the date of
maturity, as the case may be, and any such Bankers' Acceptance so
signed shall be binding on Hunter.
(d) Issuance of Bankers' Acceptances. Promptly following
receipt of a Bankers' Acceptance Notice, the aggregate face amount
of Bankers' Acceptances to be accepted by the applicable BA Lender
as set forth on the relevant Bankers' Acceptance Notice pursuant to
the terms of this Credit Agreement shall be issued, except that, if
the face amount of a Bankers' Acceptance, which would otherwise be
accepted by such BA Lender, would not be C$100,000 or an integral
multiple thereof, such face amount shall be reduced by such BA
Lender in its sole and absolute discretion to the nearest integral
multiple of C$100,000.
<PAGE>
(e) Acceptance of Bankers' Acceptances. Each Bankers'
Acceptance to be issued pursuant to this 2B shall be accepted by
the applicable BA Lender at such BA Lender's office shown on
Schedule 1 hereof or as otherwise designated in writing by such BA
Lender to Hunter and the Agent from time to time.
(f) Purchase of Bankers' Acceptances. On the relevant date
of borrowing, each BA Lender agrees to purchase from Hunter, at the
face amount thereof discounted by the Applicable BA Discount Rate,
any Bankers' Acceptance accepted by it and provide to Hunter the BA
Discount Proceeds in respect thereof after deducting therefrom the
amount of the Acceptance Fee payable by Hunter to such BA Lender
under Section 2B.3 in respect of such Bankers' Acceptance. Such BA
Lender shall notify Hunter and Russell-Stanley of the Applicable BA
Discount Rate with respect to any borrowing by way of Bankers'
Acceptances on the date of such borrowing.
(g) Sale of Bankers' Acceptances. Each BA Lender may at any
time and from time to time hold, sell, rediscount or otherwise
transfer, in each case to a financial institution or bank resident
in Canada without the consent of any Borrower, or to any other
Person with the consent of Russell-Stanley (not to be unreasonably
withheld) any or all Bankers' Acceptances accepted and purchased by
it.
(h) Waiver of Presentment and Other Conditions. Hunter
waives presentment for payment, demand, protest and any other
defense to payment of any amounts due to any BA Lender in respect
of a Bankers' Acceptance accepted by such BA Lender pursuant to
this Agreement which might exist solely by reason of such Bankers'
Acceptance being held, at the maturity thereof, by such BA Lender
or any permitted transferee of such Bankers' Acceptance in its own
right. Hunter shall not claim or require any days of grace or
require any BA Lender or any permitted transferee of any Bankers'
Acceptance to claim any days of grace for the payment of any
Bankers' Acceptance.
2B.2. Refunding Bankers' Acceptances. With respect to each
Bankers' Acceptance, Hunter, except during the occurrence and continuation of
an Event of Default, may give irrevocable telephone or written notice (or
such other method of notification as may be agreed upon between the
applicable BA Lender and Hunter) to the applicable BA Lender on the Business
Day prior to the maturity date of such Bankers' Acceptance of Hunter's
intention to issue one or more Bankers' Acceptances on such maturity date
(each a "Refunding Bankers' Acceptance") to provide for the payment of such
maturing Bankers' Acceptance (it being understood that Hunter shall, on the
date of maturity of the maturing Bankers' Acceptances, pay to the applicable
BA Lender an amount equal to the face amount of the maturing Bankers'
Acceptance (a) less the BA Discount Proceeds of the applicable Refunding
<PAGE>
Bankers' Acceptances (b) plus the applicable Acceptance Fee with respect to
such Refunding Bankers' Acceptances). Any funding on account of any maturing
Bankers' Acceptance must be made at or before 12:00 noon (Toronto, Ontario
time) on the maturity date of such Bankers' Acceptance. If Hunter fails to
give such notice and fails to repay such Bankers' Acceptance on the maturity
date thereof, then Hunter shall be irrevocably deemed to have requested and
to have been advanced a Hunter Revolver Loan bearing interest at the Canadian
Base Rate plus the Revolving Credit Loan Margin on the face amount of such
maturing Bankers' Acceptance on the maturity date of such maturing Bankers'
Acceptance from the Hunter Fronting Bank, which Loan shall thereafter bear
interest as such in accordance with the provisions hereof and otherwise shall
be subject to all provisions of this Agreement applicable to Hunter Revolver
Loans until paid in full.
2B.3. Acceptance Fee. An acceptance fee (the "Acceptance Fee")
shall be payable by Hunter to each BA Lender, which shall deduct the amount
of such Acceptance Fee from the BA Discount Proceeds (in the manner specified
in Section 2B.1(f) in respect of each Bankers' Acceptance), said fee to be
calculated at a rate per annum equal to the Applicable Acceptance Fee Rate
calculated on the face amount of such Bankers' Acceptance and computed on the
basis of the number of days in the term of such Bankers' Acceptance and a
year of 365 days.
2B.4. Circumstances Making Bankers' Acceptances Unavailable. If,
by reason of circumstances affecting the money market in Canada generally,
there is no market for Bankers' Acceptances (i) the right of Hunter to
request a borrowing of Bankers' Acceptances shall be suspended until the
circumstances causing a suspension no longer exist, and (ii) any Bankers'
Acceptance Notice which is outstanding shall be canceled and the requested
borrowing shall not be made.
2B.5 Cash Payments with respect to Outstanding Bankers'
Acceptances. In order to induce the BA Lenders to purchase Bankers'
Acceptances and the Lenders to participate therein, Hunter agrees to pay to
the applicable BA Lender, for the account of such BA Lender or (as the case
may be) the Lenders, with respect to each Bankers' Acceptance accepted and/or
purchased by such BA Lender hereunder,
(a) upon the reduction (but not termination) of the Hunter
Line to an amount less than the aggregate face amount of all
outstanding Bankers' Acceptances, an amount equal to such
difference, which amount shall be held by the Hunter Fronting Bank
for the benefit of the Lenders and the Hunter Fronting Bank for all
outstanding Bankers' Acceptances until such difference is not more
than zero, whereupon any amounts remaining with the Hunter Fronting
Bank shall be paid to Hunter so long as no Default or Event of
Default has occurred and is continuing, and
<PAGE>
(b) upon the termination of the Hunter Line, or the
acceleration of the Borrowers' obligations with respect to all
Bankers' Acceptances in accordance with Section 15, on demand by
the Hunter Fronting Bank, an amount with respect to each
outstanding Bankers' Acceptance equal to the total of amounts which
would be required to purchase in the Canadian money market, as of
10:00 a.m. (Eastern time) on the date of payment of such demand,
Government of Canada treasury bills in an aggregate amount equal to
the face amount of such Bankers' Acceptances and having in each
case a term to maturity similar to the period from such demand to
maturity of such Bankers' Acceptance.
Upon payment by Hunter as required under clause (b) above, the
applicable BA Lender shall be responsible for all payments to third parties,
including the respective holders in due course of such Bankers' Acceptances,
under Bankers' Acceptances held by such BA Lender and such BA Lender shall
indemnify Hunter in respect of all amounts which Hunter may be required to
pay under each such Bankers' Acceptances to any party. Each payment under
clauses (a) and (b) above shall be made to the Hunter Fronting Bank at the
Hunter Fronting Bank's office shown on Schedule 1 hereof (or as otherwise
designated in writing from time to time by the Hunter Fronting Bank) in
immediately available funds. Interest on any and all amounts remaining unpaid
by Hunter under clauses (a) or (b) above at any time from the date such
amounts become due and payable (whether as stated in this Section 2B.5, by
acceleration or otherwise) until payment in full (whether before or after
judgment) shall be payable to the Hunter Fronting Bank on demand at the rate
specified in Section 7.11 for Hunter Revolver Loans that are Base Rate Loans.
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
3.1 Maturity.
(a) The Domestic Borrowers jointly and severally promise to
pay on the Revolving Credit Loan Maturity Date, and there shall
become absolutely due and payable on the Revolving Credit Loan
Maturity Date, all of the Domestic Revolver Loans outstanding on
such date, together with any and all accrued and unpaid interest
thereon.
(b) Hunter promises to pay on the Revolving Credit Loan
Maturity Date, and there shall become absolutely due and payable on
the Revolving Credit Loan Maturity Date, all of the Hunter Revolver
Loans outstanding on such date, together with any and all accrued
and unpaid interest thereon.
3.2 Mandatory Repayments of Revolving Credit Loans.
<PAGE>
(a) If at any time the sum of the outstanding amount of the
Domestic Revolver Loans, the Swing Line Loans and the Dollar
Equivalent of the Hunter Revolver Loans, the Maximum Drawing Amount
and all Unpaid Reimbursement Obligations and the Dollar Equivalent
of the aggregate face amount of all outstanding Bankers'
Acceptances exceeds the Total Revolving Credit Commitment, then the
Domestic Borrowers shall immediately pay the amount of such excess
to the Agent for the respective accounts of the Lenders for
application: first, to the payment of any Swing Line Loans
outstanding, second, to any Unpaid Reimbursement Obligations;
third, to the Domestic Revolver Loans; and fourth, to provide to
the Agent cash collateral for Reimbursement Obligations as
contemplated by Section 6.2(b) and (c). Each payment of any Unpaid
Reimbursement Obligations or prepayment of Domestic Revolver Loans
shall be allocated among the Lenders, in proportion, as nearly as
practicable, to each Reimbursement Obligation or (as the case may
be) the respective unpaid principal amount of each Lender's
Revolving Credit Note, with adjustments to the extent practicable
to equalize any prior payments or repayments not exactly in
proportion.
(b) If at any time the outstanding amount of the Hunter
Revolver Loans plus the aggregate face amount of all outstanding
Bankers' Acceptances exceeds the Hunter Line, Hunter shall
immediately pay the amount of such excess, together with all
accrued and unpaid interest thereon, to the Hunter Fronting Bank
for application to the Hunter Revolver Loans. To the extent that
after such repayment in full of all outstanding Hunter Revolver
Loans the Hunter Line is less than the aggregate face amount of all
outstanding Bankers' Acceptances, Hunter shall pay to the Hunter
Fronting Bank an amount equal to such difference as specified in
2B.5(a) hereof.
3.3 Optional Repayments of Revolving Credit Loans. Subject to the
terms and provisions of Section 7.10, the Borrowers shall have the right, at
their election, to repay the outstanding amount of the Revolving Credit
Loans, as a whole or in part, at any time without penalty or premium.
Russell-Stanley, on behalf of the applicable Borrower(s) shall give the
Agent, not later than 12:00 Noon (Boston time) on the day of any proposed
repayment prior written notice of such proposed prepayment pursuant to this
Section 3.3, in each case specifying the proposed date of prepayment of such
Revolving Credit Loans and the principal amount to be prepaid. Each such
partial prepayment of the Revolving Credit Loans shall be in a minimum amount
of $25,000 and be an integral multiple of $5,000 (or the Canadian Dollar
Equivalent thereof in the case of Hunter Revolver Loans) and shall be
applied, in the absence of instruction by Russell-Stanley, on behalf of such
Borrower(s), first to the principal of Base Rate Loans and then to the
principal of Eurodollar Rate Loans, at the Agent's option. Each partial
prepayment shall be allocated among the Lenders, in proportion, as nearly as
<PAGE>
practicable, to the respective unpaid principal amount of each Lender's
Revolving Credit Loans, with adjustments to the extent practicable to
equalize any prior repayments not exactly in proportion.
3.4 Pro Rata Treatment of Revolving Credit Loans. After the
occurrence and during the continuance of an Event of Default, the Hunter
Fronting Bank and all Lenders having a Revolving Credit Commitment agree that
all payments received by the Agent or the Hunter Fronting Bank in respect of
the Hunter Revolver Loans, the Bankers' Acceptances and the Domestic Revolver
Loans shall be applied pro rata to all outstanding obligations in respect of
Revolving Credit Loans and Bankers' Acceptances (with amounts applied in
respect of Bankers' Acceptances to be applied as specified in 2B.5(b)
hereof). In the event that the Revolving Credit Commitments are terminated
for any reason, each Lender which had a Revolving Credit Commitment agrees
that it shall forthwith make such arrangements with the other Lenders which
had Revolving Credit Commitments, whether by purchase of participations or
otherwise, as will result in each Lender which had a Revolving Credit
Commitment sharing pro rata based on their Revolving Credit Commitments in
all outstanding Revolving Credit Loans and Bankers' Acceptances.
4. TERM LOAN.
4.1 Commitments to Lend. Subject to the terms and conditions set
forth in this Credit Agreement, each Term Loan Lender agrees to lend to the
Domestic Borrowers on the Closing Date the amount of its Term Loan Percentage
of the principal amount of $25,000,000.
4.2 The Term Notes. The Term Loan shall be evidenced by separate
promissory notes of the Domestic Borrowers in substantially the form of
Exhibit F hereto (each a "Term Note"), dated and bearing interest from the
Closing Date and completed with appropriate insertions. One Term Note shall
be payable to the order of each Term Loan Lender in a principal amount equal
to such Lender's Term Loan Percentage of the Term Loan and representing the
joint and several obligations of the Domestic Borrowers to pay to such Lender
such principal amount or, if less, the outstanding amount of such Lender's
Term Loan Percentage of the Term Loan, plus interest accrued thereon, as set
forth below, and premium, if any, as hereinafter provided. Each Domestic
Borrower irrevocably authorizes each Term Loan Lender to make or cause to be
made a notation on such Lender's Term Note Record reflecting the original
principal amount of such Lender's Term Loan Percentage of the Term Loan and,
at or about the time of such Lender's receipt of any principal payment on
such Lender's Term Note, an appropriate notation on such Lender's Term Note
Record reflecting such payment. The aggregate unpaid amount set forth on
such Lender's Term Note Record shall be prima facie evidence of the principal
amount thereof owing and unpaid to such Lender, but the failure to record, or
any error in so recording, any such amount on such Lender's Term Note Record
shall not affect the joint and several obligations of the Domestic Borrowers
hereunder or under any Term Note to make payments of principal of, premium,
if any, and interest on any Term Note when due.
<PAGE>
4.3 Schedule of Installment Payments of Principal of Term Loan.
The Domestic Borrowers jointly and severally promise to pay to the Agent for
the account of the Term Loan Lenders the principal amount of the Term Loan in
two equal principal installments, payable on June 30, 2006 and on the Term
Loan Maturity Date.
4.4 Interest Rates. Except as otherwise provided in Section 7.11,
the Term Loan shall bear interest at a fixed rate equal to the Term Loan
Rate.
The Domestic Borrowers jointly and severally promise to pay
interest on the Term Loan in arrears on each Interest Payment Date.
5. ADDITIONAL PROVISIONS RELATING TO THE TERM LOAN
5.1 Mandatory Repayments of the Term Loan.
(a) Upon the sale or disposition of any of the assets of
Holdings or any of its Subsidiaries (other than sales permitted
under Section 11.5.2), the applicable Borrower shall prepay the
Loans in an amount equal to one hundred percent (100%) of the net
proceeds of such sale or disposition, such prepayments to be
applied as set forth in clause (c) hereof. This Section 5.1(a) is
not intended to constitute a consent to any such sales or
dispositions.
(b) Upon the closing of any public offering of Equity
Securities of Holdings or any of its Subsidiaries, the applicable
Borrower shall prepay the Loans in an amount equal to seventy-five
percent (75%) of the net proceeds of the offering, such prepayments
to be applied as set forth in clause (d) hereof.
(c) Each prepayment of the Loans under Section 5.1(a) shall
be applied on a pro rata basis to the outstanding principal amounts
of the Term Loan except as provided in clause (e) below; provided
that if the principal amounts of the Term Loan have been repaid in
full, then the Total Revolving Credit Commitment shall be
automatically reduced on the date on which such prepayment was to
be made by an amount equal to such required prepayment and, to the
extent that the sum of the aggregate principal amount of the
Revolving Credit Loans and Swing Line Loans outstanding plus the
Maximum Drawing Amount plus all Unpaid Reimbursements plus the
Dollar Equivalent of the aggregate face amount of all outstanding
Bankers' Acceptances exceeds the Total Revolving Credit Commitment
as so reduced or if the sum of the aggregate principal amount of
Hunter Revolver Loans plus the aggregate face amount of all
outstanding Bankers' Acceptances exceeds the Hunter Line, the
Borrowers shall repay the Revolving Credit Loans and cash
collateralize the Bankers' Acceptances as required pursuant to
<PAGE>
Section 3.2. Any reduction of the Total Revolving Credit
Commitment under this Section 5.1(c) shall result in a
proportionate reduction in the Hunter Line.
(d) Each prepayment of the Loans under Section 5.1(b) shall
be applied on a pro rata basis to the outstanding principal amounts
of the Term Loan except as provided in clause (e) below; provided
that if the principal amounts of the Term Loan have been repaid in
full, the Borrowers shall pay such amounts to the Agent for the
respective accounts of the Lenders for application, first, to the
payment of any Swing Line Loans outstanding; second, to any Unpaid
Reimbursement Obligations; third, to the Revolving Credit Loans;
and fourth, to cash collateralize the Bankers' Acceptances as
contemplated by Section 2B.5(a). There shall not be any obligation
under this clause (d) to reduce the Total Revolving Credit
Commitment.
(e) Notwithstanding the provisions of clause (c) or (d), any
Lender having outstanding amounts under the Term Loan may, at its
option, elect not to receive prepayments, and if so, the Total
Revolving Credit Commitment shall be automatically reduced by such
amount and/or the Borrowers shall repay the Revolving Credit Loans,
reduce the Hunter Line and cash collateralize the Bankers'
Acceptances as provided in clause (c) or (d) above, as applicable.
(f) Each prepayment of the Loans under this Section 5.1 shall
be accompanied by the payment of accrued interest on the principal
prepaid to the date of prepayment. Each partial prepayment shall be
allocated among the Lenders, in proportion, as nearly as
practicable, to the respective outstanding amount of each Lender's
applicable Loan, with adjustments to the extent practicable to
equalize any prior prepayments not exactly in proportion. Each
prepayment of principal of the Term Loan under this Section 5.1
shall be applied against the scheduled installments of principal
due on such Term Loan pro rata across the remaining installments
thereof and shall include the premium referred to in
Section 5.2(b). If the Borrowers are required to repay the
Revolving Credit Loans and cash collateralize Bankers' Acceptances
pursuant to this Section 5.1, such amounts shall be applied first
to the principal of the Revolving Credit Loans that are Base Rate
Loans, then to the principal of the Revolving Credit Loans that are
Eurodollar Rate Loans, and then to the cash collateralization of
the Banker's Acceptances. Each such payment of the Revolving
Credit Loans under this Section 5.1 shall be without penalty or
premium except any prepayment of a Eurodollar Rate Loan pursuant to
this Section 5.1 made on a date other than the last day of the
Interest Period relating thereto shall be subject to indemnity
payments as provided in Section 7.10.
<PAGE>
5.2 Optional Prepayment of the Term Loan.
(a) Subject to the provisions of Sections 5.2(b) and 7.10,
the Borrowers shall have the right at any time or from time to time
to prepay the Term Notes on or before the Term Loan Maturity Date,
as a whole, or in part, upon prior written notice by
Russell-Stanley, on behalf of such Borrowers, to the Agent by not
later than 12:00 noon on the day of the proposed prepayment,
provided that (i) each partial prepayment shall be in the principal
amount of $500,000 or an integral multiple thereof, and (ii) each
partial prepayment shall be allocated among the Lenders, in
proportion, as nearly as practicable, to the respective outstanding
amount of each Lender's applicable Term Note, with adjustments to
the extent practicable to equalize any prior prepayments not
exactly in proportion. Any prepayment of principal of any of the
Term Loan shall include the premium referred to in Section 5.2(b)
and all interest accrued to the date of prepayment and shall be
applied against the scheduled installments of principal due on such
Term Loan pro rata across the remaining installments thereof. No
amount repaid with respect to any Term Loan may be reborrowed.
(b) Notwithstanding anything herein to the contrary, (i) the
Borrowers may not prepay the Term Notes prior to July 23, 2000 and
(ii) the Borrowers shall pay a premium with respect to each
prepayment of the Term Notes (whether such prepayment be optional
or mandatory) in an amount determined in accordance with the
percentages set forth in the following table opposite the period
during which such prepayment is made provided that upon (x) a
change of control of Holdings (as described in Section 15.1(l)
herein), (y) any initial public offering by the Borrowers, or (z) a
recapitalization of the Borrowers, such premium shall equal 1% of
the amount prepaid:
Period Prepayment Premium
- ------- -------------------
July 23, 2000 through July 22, 2001 6.636% of amount prepaid
July 23, 2001 through July 22, 2002 5.688% of amount prepaid
July 23, 2002 through July 22, 2003 4.740% of amount prepaid
July 23, 2003 through July 22, 2004 3.792% of amount prepaid
<PAGE>
July 23, 2004 through July 22, 2005 2.844% of amount prepaid
July 23, 2005 through July 22, 2006 1.896% of amount prepaid
July 23, 2006 through June 29, 2007 .948% of amount prepaid
Thereafter -0-
6. LETTERS OF CREDIT.
6.1 Letter of Credit Commitments.
6.1.1 Commitment to Issue Letters of Credit. Pursuant to the
Original Credit Agreement, the First Restated Credit Agreement, the Second
Restated Credit Agreement, the Third Restated Credit Agreement and the Fourth
Restated Credit Agreement, the Agent issued certain letters of credit listed
on Schedule 6.1.1 hereto (the "Existing Letters of Credit"). Subject to the
terms and conditions set forth in this Credit Agreement, (1) on the Closing
Date, the Existing Letters of Credit shall be converted to Letters of Credit
hereunder, and (2) upon the execution and delivery by the Domestic Borrowers
of a letter of credit application on the Agent's customary form (a "Letter of
Credit Application"), the Agent on behalf of the Lenders and in reliance upon
the agreement of the Lenders set forth in Section 6.1.4 and upon the
representations and warranties of the Domestic Borrowers contained herein,
agrees, in its individual capacity, to issue, extend and renew for the
account of the Domestic Borrowers one or more standby or documentary letters
of credit (individually, a "Letter of Credit"), in such form as may be
requested from time to time by Russell-Stanley and agreed to by the Agent;
provided, however, that, after giving effect to such request, (a) the sum of
the aggregate Maximum Drawing Amount and all Unpaid Reimbursement Obligations
shall not exceed $5,000,000 at any one time and (b) the sum of (i) the
Maximum Drawing Amount on all Letters of Credit, (ii) all Unpaid
Reimbursement Obligations, and (iii) the amount of all Revolving Credit Loans
and Swing Line Loans outstanding, and (iv) the Dollar Equivalent of the
aggregate face amount of all outstanding Bankers' Acceptances shall not
exceed the Total Revolving Credit Commitment.
6.1.2 Letter of Credit Applications. Each Letter of Credit
Application shall be completed to the satisfaction of the Agent. In the
event that any provision of any Letter of Credit Application shall be
inconsistent with any provision of this Credit Agreement, then the provisions
of this Credit Agreement shall, to the extent of any such inconsistency,
govern.
<PAGE>
6.1.3 Terms of Letters of Credit. Each Letter of Credit issued,
extended or renewed hereunder shall, among other things, (a) provide for the
payment of sight drafts for honor thereunder when presented in accordance
with the terms thereof and when accompanied by the documents described
therein, and (b) have an expiry date no later than the date which is fourteen
(14) days prior to the Revolving Credit Loan Maturity Date. Each Letter of
Credit so issued, extended or renewed shall be subject to the Uniform Customs
or, in the case of a standby Letter of Credit, either the Uniform Customs or
the International Standby Practices.
6.1.4 Reimbursement Obligations of Lenders. Each Lender
severally agrees that it shall be absolutely liable, without regard to the
occurrence of any Default or Event of Default or any other condition precedent
whatsoever, to the extent of such Lender's Commitment Percentage, to
reimburse the Agent on demand for the amount of each draft paid by the Agent
under each Letter of Credit to the extent that such amount is not reimbursed
by the Domestic Borrowers pursuant to Section 6.2 (such agreement for a
Lender being called herein the "Letter of Credit Participation" of such
Lender).
6.1.5 Participations of Lenders. Each such payment made by a
Lender shall be treated as the purchase by such Lender of a participating
interest in the Domestic Borrowers' Reimbursement Obligations under
Section 6.2 in an amount equal to such payment. Each Lender shall share in
accordance with its participating interest in any interest which accrues
pursuant to Section 6.2.
6.2 Reimbursement Obligation of Domestic Borrowers. In order to
induce the Agent to issue, extend and renew each Letter of Credit and the
Lenders to participate therein, the Domestic Borrowers hereby jointly and
severally agree to reimburse or pay to the Agent, for the account of the
Agent or (as the case may be) the Lenders, with respect to each Letter of
Credit issued, extended or renewed by the Agent hereunder,
(a) on each date that any draft presented under such Letter
of Credit is honored by the Agent, or the Agent otherwise makes a
payment with respect thereto, (i) the amount paid by the Agent
under or with respect to such Letter of Credit, and (ii) the amount
of any taxes, fees, charges or other costs and expenses whatsoever
incurred by the Agent in connection with any payment made by the
Agent under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of the Total
Revolving Credit Commitment to an amount less than the Maximum
Drawing Amount, an amount equal to such difference, which amount
shall be held by the Agent for the benefit of the Lenders and the
Agent as cash collateral for all Reimbursement Obligations until
all Letters of Credit have been paid or have expired undrawn
whereupon any amounts remaining with the Agent as cash collateral
<PAGE>
shall be paid to Russell-Stanley for distribution to the applicable
Domestic Borrower so long as no Default or Event of Default has
occurred and is continuing, and
(c) upon the termination of the Total Revolving Credit
Commitment, or the acceleration of the Reimbursement Obligations
with respect to all Letters of Credit in accordance with
Section 15, an amount equal to the then Maximum Drawing Amount on
all Letters of Credit, which amount shall be held by the Agent for
the benefit of the Lenders and the Agent as cash collateral for all
Reimbursement Obligations until all Letters of Credit have been
paid or have expired undrawn whereupon any amounts remaining with
the Agent as cash collateral shall be paid to Russell-Stanley for
distribution to the applicable Domestic Borrower so long as no
Default or Event of Default has occurred and is continuing.
Each such payment shall be made to the Agent at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining
unpaid by any Domestic Borrower under this Section 6.2 at any time from the
date such amounts become due and payable (whether as stated in this
Section 6.2, by acceleration or otherwise) until payment in full (whether
before or after judgment) shall be payable to the Agent on demand at the rate
specified in Section 7.11 for Domestic Revolver Loans that are Base Rate
Loans.
6.3 Letter of Credit Payments. If any draft shall be presented or
other demand for payment shall be made under any Letter of Credit, the Agent
shall notify Russell-Stanley on behalf of the Domestic Borrowers of the date
and amount of the draft presented or demand for payment and of the date and
time when it expects to pay such draft or honor such demand for payment. If
the Domestic Borrowers fail to reimburse the Agent as provided in Section 6.2
on or before the date that such draft is paid or other payment is made by the
Agent, the Agent may at any time thereafter notify the Lenders of the amount
of any such Unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston
time) on the Business Day next following the receipt of such notice, each
Lender shall make available to the Agent, at its Head Office, in immediately
available funds, such Lender's Commitment Percentage of such Unpaid
Reimbursement Obligation, together with an amount equal to the product of (a)
the average, computed for the period referred to in clause (c) below, of the
weighted average interest rate paid by the Agent for federal funds acquired
by the Agent during each day included in such period, times (b) the amount
equal to such Lender's Commitment Percentage of such Unpaid Reimbursement
Obligation, times (c) a fraction, the numerator of which is the number of
days that elapse from and including the date the Agent paid the draft
presented for honor or otherwise made payment to the date on which such
Lender's Commitment Percentage of such Unpaid Reimbursement obligation shall
become immediately available to the Agent, and the denominator of which is
360. The responsibility of the Agent to the Domestic Borrowers and the
Lenders shall be only to determine that the documents (including each draft)
<PAGE>
delivered under each Letter of Credit in connection with such presentment
shall be in conformity in all material respects with such Letter of Credit.
6.4 Obligations Absolute. The Domestic Borrowers' joint and
several obligations under this Section 6 shall be absolute and unconditional
under any and all circumstances and irrespective of the occurrence of any
Default or Event of Default or any condition precedent whatsoever or any
setoff, counterclaim or defense to payment which any of the Domestic
Borrowers may have or have had against the Agent, any Lender or any
beneficiary of a Letter of Credit. The Domestic Borrowers further agree with
the Agent and the Lenders that, except for liability resulting from the
Agent's or such Lender's gross negligence or willful misconduct, the Agent
and the Lenders shall not be responsible for, and the Domestic Borrowers'
Reimbursement Obligations under Section 6.2 shall not be affected by the
validity or genuineness of documents or of any endorsements thereon, even if
such documents should in fact prove to be in any or all respects invalid,
fraudulent or forged (unless the Agent had actual knowledge of such
invalidity, fraud or forgery), or any dispute between or among the Domestic
Borrowers, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred
or any claims or defenses whatsoever of the Domestic Borrowers against the
beneficiary of any Letter of Credit or any such transferee. The Agent and
the Lenders shall not be liable for any error, omission, interruption or
delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, unless resulting from
its gross negligence or willful misconduct. The Domestic Borrowers agree
that any action taken or omitted by the Agent or any Lender under or in
connection with each Letter of Credit and the related drafts and documents,
if done in good faith and in conformity with the Uniform Customs, shall be
binding upon the Domestic Borrowers and shall not result in any liability on
the part of the Agent or any Lender to the Domestic Borrowers.
6.5 Reliance by Issuer. To the extent not inconsistent with
Section 6.4, the Agent shall be entitled to rely, and shall be fully
protected in relying upon, any Letter of Credit, draft, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other document
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, independent accountants and other experts selected by the Agent.
The Agent shall be fully justified in failing or refusing to take any action
under this Agreement unless it shall first have received such advice or
concurrence of the Majority Lenders as it reasonably deems appropriate or it
shall first be indemnified to its reasonable satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in
all cases be fully protected in acting, or in refraining from acting, under
this Agreement in accordance with a request of the Majority Lenders, and such
request and any action taken or failure to act pursuant thereto shall be
<PAGE>
binding upon the Lenders and all future holders of the Revolving Credit Notes
or of a Letter of Credit Participation.
6.6 Letter of Credit Fee. The applicable Domestic Borrower shall,
on the date of issuance or any extension or renewal of any Letter of Credit
and at such other time or times as such charges are customarily made by the
Agent, pay a fee (in each case, a "Letter of Credit Fee") to the Agent (a) in
respect of each standby Letter of Credit equal to the Revolving Credit Loan
Margin for Eurodollar Rate Loans of the Maximum Drawing Amount of such
standby Letter of Credit plus the Agent's customary issuance fee, and (b) in
respect of each documentary Letter of Credit the Agent's customary fees in
connection with issuance, advice, confirmation, negotiation, document
examination, amendment and similar functions with respect thereto, such
Letter of Credit Fee (but not such customary issuance, amendment, negotiation
or related Letter of Credit fees) to be for the accounts of the Lenders in
accordance with their respective Commitment Percentages. The applicable
Domestic Borrower shall also pay to the Agent upon the issuance, extension or
renewal of each Letter of Credit, a fronting fee equal to 0.125% per annum on
the Maximum Drawing Amount of each standby and documentary Letter of Credit.
7. CERTAIN GENERAL PROVISIONS.
7.1 Closing Fee. The Domestic Borrowers jointly and severally
agree to pay to the Agent a closing fee as set forth in the Fee Letter.
7.2 Agent's Fee. The Domestic Borrowers shall pay to the Agent an
Agent's fee as set forth in the Fee Letter.
7.3 Funds for Payments.
7.3.1 Payments to Agent. All payments of principal, interest,
premium, Reimbursement Obligations, commitment fees, Letter of Credit Fees
and any other amounts due hereunder or under any of the other Loan Documents
(with the exception of (i) payments of principal and interest with respect to
the Hunter Revolver Loans, (ii) the repayment of the Bankers' Acceptances on
the maturity date thereof and (iii) any other payments in respect of the
Hunter Revolver Loans and Bankers' Acceptances that are, in accordance with
the terms hereof, to be paid to the Hunter Fronting Bank, all of which shall
be paid to the Hunter Fronting Bank), shall be made to the Agent, for the
respective accounts of the Lenders and the Agent, at the Agent's Head Office
or at such other location in the Boston, Massachusetts, area that the Agent
may from time to time designate, in each case in immediately available funds.
7.3.2 No Offset, etc. All payments by the Borrowers hereunder
and under any of the other Loan Documents shall be made without setoff or
counterclaim.
7.3.3 Currency of Payments. Payments of principal, premium or
interest with respect to any Loan and payments with respect to Bankers'
<PAGE>
Acceptances shall be made in the currency in which such Loan was advanced or
with which such Banker's Acceptance was purchased. Any and all Unpaid
Reimbursement Obligations, payments of principal or interest with respect to
any Swing Line Loan and fees payable hereunder, except as otherwise provided
herein with respect to Bankers' Acceptances and Hunter Revolver Loans, shall
be payable solely in Dollars.
7.3.4 Foreign Lenders.
(a) Each Lender that is not incorporated or organized under
the laws of the United States of America or a state thereof or the
District of Columbia (a "Non-U.S. Lender") agrees that,
prior to the first date on which any payment is due to it
hereunder, it will deliver to Russell-Stanley on behalf of the
Domestic Borrowers and the Agent two duly completed copies of (A)
either United States Internal Revenue Service Form 1001 or 4224 or
successor applicable form, as the case may be, 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 ten percent (10%) shareholder (within the meaning of
Section 871(h)(3)(B) of the Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the
meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such Non-U.S. lender certifying in each case that
such Non-U.S. Lender is entitled to receive payments under this
Credit Agreement and the Notes payable to it, without deduction or
withholding of any United States federal income taxes and (B) an
Internal Revenue Service Form W-8 or W-9 entitling such Non-U.S.
Lender to receive complete exemption from United States backup
withholding tax. Each Non-U.S. Lender that so delivers a Form 1001
or 4224 or Form W-8 or W-9 pursuant to the preceding sentence
further undertakes to deliver to each of Russell-Stanley and the
Agent two further copies of Form 1001 or 4224 or Form W-8 or W-9 or
successor applicable form, or other manner of certification, as the
case may be, on or before the date that any such letter or form
expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by
it to Russell-Stanley, and such extensions or renewals thereof as
may reasonably be requested by Russell-Stanley, certifying in the
case of a Form 1001 or 4224 or Form W-8 or Form W-9 that such
Non-U.S. Lender is entitled to receive payments under this Credit
Agreement and the Notes without deduction or withholding of any
United States federal income taxes, unless in any such case an
event (including, without limitation, any change in treaty, law or
regulation) has occurred prior to the date on which any such
<PAGE>
delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Non-U.S. Lender from duly
completing and delivering any such form with respect to it and such
Non-U.S. Lender advises Russell-Stanley that it is not capable of
receiving payments without any deduction or withholding of United
States federal income tax.
(b) None of the Borrowers shall be required to pay any
additional amounts to any Non-U.S. Lender in respect of United
States Federal withholding tax pursuant to Section 31 to the extent
that (i) the obligation to withhold amounts with respect to United
States Federal withholding tax existed on the date such Non-U.S.
Lender became a party to this Credit Agreement or, with respect to
payments to a different lending office designated by the Non-U.S.
Lender as its applicable lending office (a "New Lending Office"),
the date such Non-U.S. Lender designated such New Lending Office
with respect to a Loan; provided, however, that this clause (i)
shall not apply to any transferee or New Lending Office as a result
of an assignment, transfer or designation made at the request of
any of the Borrowers; and provided further, however, that this
clause (i) shall not apply to the extent the indemnity payment or
additional amounts any transferee, or Lender through a New Lending
Office, 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 or transfer to such transferee, or
Lender making the designation of such New Lending Office, would
have been entitled to receive in the absence of such assignment,
transfer or designation; or (ii) the obligation to pay such
additional amounts would not have arisen but for a failure by such
Non-U.S. Lender to comply with the provisions of paragraph (c)
above.
(c) Notwithstanding the foregoing, each Lender agrees to use
reasonable efforts (consistent with legal and regulatory
restrictions) to change its lending office to avoid or to minimize
any amounts otherwise payable under Section 31 in each case solely
if such change can be made in a manner so that such Lender, in its
sole determination, suffers no legal, economic or regulatory
disadvantage.
7.4 Computations. All computations of interest on Base Rate Loans
shall be based on a 365-day (or 366-day, as the case may be) year and the
actual number of days elapsed. All computations of interest on Eurodollar
Rate Loans, Term Loans and of commitment fees, Letter of Credit Fees or other
fees shall, unless otherwise expressly provided herein, be based on a 360-day
year and paid for the actual number of days elapsed. Except as otherwise
provided in the definition of the term "Interest Period" with respect to
Eurodollar Rate Loans, whenever a payment hereunder or under any of the other
Loan Documents becomes due on a day that is not a Business Day, the due date
<PAGE>
for such payment shall be extended to the next succeeding Business Day, and
interest shall accrue during such extension. The outstanding amount of the
Loans as reflected on the Revolving Credit Note Records, the Swing Line Note
Record and the Term Note Records from time to time shall be prima facie
evidence of the outstanding amount of the Loans.
7.5 Inability to Determine Eurodollar Rate. In the event, prior
to the commencement of any Interest Period relating to any Eurodollar Rate
Loan, the Agent shall determine or be notified by the Majority Lenders that
adequate and reasonable methods do not exist for ascertaining the Eurodollar
Rate that would otherwise determine the rate of interest to be applicable to
any Eurodollar Rate Loan during any Interest Period, the Agent shall
forthwith give notice of such determination (which shall be conclusive and
binding on the Borrowers and the Lenders) to the Borrowers and the Lenders.
In such event (a) any Domestic Revolver Loan Request or Conversion Request
with respect to Eurodollar Rate Loans shall be automatically withdrawn and
shall be deemed a request for Base Rate Loans, (b) each Eurodollar Rate Loan
will automatically, on the last day of the then current Interest Period
relating thereto, become a Base Rate Loan, and (c) the obligations of the
Lenders to make Eurodollar Rate Loans shall be suspended until the Agent or
the Majority Lenders determine that the circumstances giving rise to such
suspension no longer exist, whereupon the Agent shall so notify the Borrowers
and the Lenders.
7.6 Illegality. Notwithstanding any other provisions herein, if
any present or future law, regulation, treaty or directive or interpretation
or application thereof shall make it unlawful for any Lender to make or
maintain Eurodollar Rate Loans, such Lender shall forthwith give notice of
such circumstances to the Borrowers and the other Lenders and thereupon (a)
the commitment of such Lender to make Eurodollar Rate Loans or convert Loans
of another Type to Eurodollar Rate Loans shall forthwith be suspended and (b)
such Lender's Revolving Credit Loans then outstanding as Eurodollar Rate
Loans, if any, shall be converted automatically to Base Rate Loans on the
last day of each Interest Period applicable to such Eurodollar Rate Loans or
within such earlier period as may be required by law. The Domestic Borrowers
jointly and severally with respect to any conversion of Eurodollar Rate Loans
made to any of them, hereby agree promptly to pay the Agent for the account
of such Lender, upon demand by such Lender, any additional amounts necessary
to compensate such Lender for any costs incurred by such Lender in making any
conversion in accordance with this Section 7.6, including any interest or
fees payable by such Lender to lenders of funds obtained by it in order to
make or maintain its Eurodollar Rate Loans hereunder.
7.7 Additional Costs, etc.
(a) Without duplication of any other amounts payable
hereunder, if any change after the Closing Date in any present law
or the interpretation or application thereof or any future
applicable law, which expression, as used herein, includes
<PAGE>
statutes, rules and regulations thereunder and interpretations
thereof by any competent court or by any governmental or other
regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and
notices at any time or from time to time hereafter made upon or
otherwise issued to any Lender or the Agent by any central bank or
other fiscal, monetary or other authority (whether or not having
the force of law) (provided that, with respect to requests,
directives, instructions and notices not having the force of law,
the Lenders shall act in good faith and in a consistent manner with
respect to compliance with any such request, directive, instruction
or notice) (any of the foregoing, a "Change in Law"), shall:
(i) subject any Lender or the Agent to any tax, levy,
impost, duty, charge, fee, deduction or withholding of any
nature with respect to this Credit Agreement, the other Loan
Documents, any Letters of Credit, such Lender's Revolving
Credit Commitment or the Loans (other than taxes based upon or
measured by the income or profits of such Lender or the
Agent), or
(ii) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to any
Lender of the principal of or the interest on any Loans or any
other amounts payable to any Lender or the Agent under this
Credit Agreement or any of the other Loan Documents, or
(iii) impose or increase or render applicable (other
than to the extent specifically provided for elsewhere in this
Credit Agreement) any special deposit, reserve, assessment,
liquidity or other similar requirements (whether or not having
the force of law) against assets held by, or deposits in or
for the account of, or loans by, or letters of credit issued
by, or Bankers' Acceptances accepted and/or purchased by, or
commitments of an office of any Lender, or
(iv) impose on any Lender or the Agent any other
conditions or requirements with respect to this Credit
Agreement, the other Loan Documents, any Letters of Credit,
the Loans, such Lender's Revolving Credit Commitment, or any
class of loans, letters of credit or commitments of which any
of the Loans or such Lender's Revolving Credit Commitment
forms a part, and the result of any of the foregoing is
(A) to increase the cost to any Lender of making,
funding, issuing, renewing, extending, purchasing,
accepting or maintaining any of the Loans or such
Lender's Revolving Credit Commitment or any Letter of
Credit or any Bankers' Acceptances, or
<PAGE>
(B) to reduce the amount of principal, interest,
Reimbursement Obligation or other amount payable to such
Lender or the Agent hereunder on account of such Lender's
Revolving Credit Commitment, any Letter of Credit or any
Bankers' Acceptances or any of the Loans, or
(C) to require such Lender or the Agent to make any
payment or to forego any interest or Reimbursement
Obligation or other sum payable hereunder, the amount of
which payment or foregone interest or Reimbursement
Obligation or other sum is calculated by reference to the
gross amount of any sum receivable or deemed received by
such Lender or the Agent from the Borrowers hereunder,
and, in any such case, the amount is material, then, and in each
such case, in the case of a Change in Law affecting the Domestic
Borrowers, the Domestic Borrowers will, and in the case of a Change
in Law affecting Hunter, Hunter will, in any such case upon demand
made by such Lender or (as the case may be) the Agent at any time
and from time to time and as often as the occasion therefor may
arise, pay to such Lender or the Agent such additional amounts as
will be sufficient to compensate such Lender or the Agent for such
additional cost, reduction, payment or foregone interest or
Reimbursement Obligation or other sum.
(b) Without limiting the generality of the preceding
paragraph (a), for each day that a Eurodollar Rate Loan is
outstanding, the applicable Borrower agrees to pay an amount (the
"Eurocurrency Reserve Charge") equal to the product of (i) the
outstanding principal amount of the Eurodollar Rate Loan, times
(ii) the remainder of (A) a fraction, the numerator of which is the
Eurodollar Rate (expressed as a decimal) and the denominator of
which is one minus the Eurocurrency Reserve Rate, minus (B) the
Eurodollar Rate (expressed as a decimal), times (iii) the fraction,
the numerator of which is one and the denominator of which is three
hundred sixty (360). Eurocurrency Reserve Charges for each
Interest Period shall be paid on the applicable Interest Payment
Date to the Agent for the account of each Lender, in accordance
with certificates delivered by the Agent to the applicable Borrower
pursuant to Section 7.9 hereof, which certificates shall, absent
manifest error, be conclusive.
7.8 Capital Adequacy. If after the date hereof any Lender or the
Agent determines that (a) the adoption of or change in any law, governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) (provided that, with respect to requests, directives,
instructions and notices not having the force of law, the Lenders shall act
in good faith and in a consistent manner with respect to compliance with any
such request, directive, instruction or notice) regarding capital
<PAGE>
requirements for banks or bank holding companies or any change in the
interpretation or application thereof by a court or governmental authority
with appropriate jurisdiction, or (b) compliance by such Lender or the Agent
or any corporation controlling such Lender or the Agent with any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) (provided that, with respect to requests,
directives, instructions and notices not having the force of law, the Lenders
shall act in good faith and in a consistent manner with respect to compliance
with any such request, directive, instruction or notice) of any such entity
regarding capital adequacy, has the effect of reducing the return on such
Lender's or the Agent's commitment with respect to any Loans or Bankers'
Acceptances to a level below that which such Lender or the Agent could have
achieved but for such adoption, change or compliance (taking into
consideration such Lender's or the Agent's then existing policies with
respect to capital adequacy and assuming full utilization of such entity's
capital) by any amount deemed by such Lender or (as the case may be) the
Agent to be material, then such Lender or the Agent may notify the Borrowers
of such fact. To the extent that the amount of such reduction in the return
on capital is not reflected in the Base Rate, Russell-Stanley, on behalf of
the Borrowers and such Lender shall thereafter attempt to negotiate in good
faith, within thirty (30) days of the day on which the Borrowers receive such
notice, an adjustment payable hereunder that will adequately compensate such
Lender in light of these circumstances. If Russell-Stanley and such Lender
are unable to agree to such adjustment within thirty (30) days of the date on
which the Borrowers receive such notice, then commencing on the date of such
notice (but not earlier than the effective date of any such increased capital
requirement), the fees payable hereunder shall increase by an amount that
will, in such Lender's reasonable determination, provide adequate
compensation. Each Lender shall allocate such cost increases among its
customers in good faith and on an equitable basis.
7.9 Certificate. A certificate setting forth in reasonable detail
any additional amounts payable pursuant to Sections 7.7 or 7.8 and a brief
explanation of such amounts which are due, submitted by any Lender or the
Agent to the Borrowers, shall be conclusive, absent manifest error, that such
amounts are due and owing. The Borrowers shall have no obligation to make
payment of any amount under Sections 7.7 or 7.8 which accrued, or relates to
a period of time, more than ninety (90) days prior to the date of receipt of
such certificate or if earlier, the date any notice is given as provided in
Section 7.8.
7.10 Indemnity. Each Borrower agrees to indemnify each Lender and
to hold each Lender harmless from and against any loss, cost or expense
(including loss of anticipated profits) that such Lender may sustain or incur
as a consequence of (a) default by such Borrower in making a borrowing of
Eurodollar Rate Loans or conversion of Eurodollar Rate Loans after
Russell-Stanley, on behalf of such Borrower, has given (or is deemed to have
given) a Domestic Revolver Loan Request with respect thereto, or notice or a
Conversion Request relating thereto in accordance with Section 2.6 or
<PAGE>
Section 2.7 or (b) the making of any payment of a Eurodollar Rate Loan or the
making of any conversion of any such Loan to a Base Rate Loan on a day that
is not the last day of the applicable Interest Period with respect thereto,
including interest or fees payable by such Lender to lenders of funds
obtained by it in order to maintain any such Loans or (c) any Borrower's
prepayment of any Bankers' Acceptance or Hunter's failure to issue any
Bankers' Acceptance after request therefor has been made by means of a
Bankers' Acceptance Notice and in accordance with 2B hereof.
7.11 Interest After Default.
7.11.1 Interest After Default. During the continuance of a
Default or an Event of Default, all overdue amounts outstanding under the
Loan Documents, including all overdue principal (and with respect to the Term
Loan, premium, if any) and (to the extent permitted by applicable law)
interest and all other overdue amounts, shall, until such Default or Event of
Default has been cured, remedied or waived by the Majority Lenders pursuant
to 28, bear interest at a rate per annum equal to two percent (2%) above the
rate of interest otherwise applicable to such Loans or other amounts
outstanding hereunder.
7.11.2 Interest Limitation.
(a) Notwithstanding any other term of this Credit Agreement,
any other Loan Document or any other document referred to herein or
therein, the maximum amount of interest which may be charged to or
collected from any Person liable hereunder or under the Notes by
any Lender shall be absolutely limited to, and shall in no event
exceed, the maximum amount of interest which could lawfully be
charged or collected by such Lender under applicable laws
(including, to the extent applicable, the provisions of
Section 5197 of the Revised Statutes of the United States of
America, as amended, 12 U.S.C. Section 85, as amended, and the
Criminal Code (Canada)).
(b) With respect to Hunter Revolver Loans, whenever interest
is payable hereunder on the basis of a year of 360 days, for the
purposes of the Interest Act (Canada), the yearly rate of interest
which is equivalent to the rate payable hereunder is the rate
payable hereunder multiplied by the actual number of days in the
year and divided by 360. All interest will be calculated using the
nominal rate method and not the effective rate method and the
deemed reinvestment principle shall not apply to such calculations.
7.12 Currency Fluctuations.
(a) Not later than 1:00 p.m. (Boston time) on the last
Business Day of each calendar month (the "Calculation Date"), the
Agent shall determine the Exchange Rate as of such date. The
<PAGE>
Exchange Rate so determined shall become effective on the first
Business Day immediately following such determination (a "Reset
Date") and shall remain effective until the next succeeding Reset
Date.
(b) Not later than 4:00 p.m. (Boston time) on each Reset
Date, the Agent shall determine the Dollar Equivalent (using the
Exchange Rate then effective pursuant to 7.12(a) above) of the
outstanding Hunter Revolver Loans and Bankers' Acceptances.
(c) If, on any Reset Date the aggregate outstanding amount
(expressed in Dollars) of the Hunter Revolver Loans plus the
aggregate face amount of all outstanding Bankers' Acceptances
exceeds the Hunter Line then (i) the Agent shall give notice
thereof to Hunter, Russell-Stanley and the Lenders and (ii) within
two (2) Business Days thereafter, Hunter shall repay or prepay such
Loans in accordance with this Credit Agreement in an aggregate
principal amount such that, after giving effect thereto, the
aggregate outstanding amount (expressed in Dollars) of all such
Loans plus the aggregate face amount of all outstanding Bankers'
Acceptances does not exceed the Hunter Line. To the extent that
after such repayment in full of all outstanding Hunter Revolver
Loans the Hunter Line is less than the aggregate face amount of all
outstanding Bankers' Acceptances, Hunter shall pay to the Hunter
Fronting Bank an amount equal to such difference as specified in
2B.5(a) hereof.
7.13 Change in Lending Office. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of Sections 7.3.2, 7.7,
7.8 or 31 with respect to such Lender, it will, if requested by
Russell-Stanley, on behalf of a Borrower, use reasonable efforts (subject to
overall policy considerations of such Lender) to designate another lending
office for any Loans or Bankers' Acceptances affected by such event, provided
that such designation is made on terms that such Lender and its lending
office, determined in their reasonable discretion, suffer no material
economic, legal or regulatory disadvantage, with the object of avoiding the
consequence of the event giving rise to the operation of any such section.
7.14 Replacement of Lenders. (x) Upon the occurrence of any event
giving rise to the operation of Sections 7.3.2, 7.7, 7.8 or 31 with respect
to any Lender which results in such Lender charging to any Borrower increased
costs, (y) if any Lender becomes a Delinquent Lender, or (z) in the case of a
refusal by a Lender to consent to a proposed change, waiver, discharge or
termination with respect to this Credit Agreement which has been approved by
the Majority Lenders, the Borrowers shall have the right, if no Default or
Event of Default then exists, to replace such Lender (the "Replaced Lender")
with one or more other Eligible Assignees, none of whom shall constitute a
Delinquent Lender at the time of such replacement (collectively, the
"Replacement Lender"), reasonably acceptable to the Agent, provided that (a)
<PAGE>
at the time of any replacement pursuant to this Section 7.14, the Replacement
Lender shall enter into an Assignment and Acceptance pursuant to Section 21
and (b) all obligations of the Borrowers owing to the Replaced Lender (other
than those in respect of which the assignment purchase price has been, or is
concurrently being, paid) shall be paid in full to such Replaced Lender
concurrently with such replacement. Upon the execution of the Assignment and
Acceptance, the payment of amounts referred to therein and in clause (b)
above and, delivery to the Replacement Lender of the appropriate Notes
executed by the applicable Borrower(s), the Replacement Lender shall become a
Lender hereunder and the Replaced Lender shall cease to constitute a Lender
hereunder. Notwithstanding anything herein to the contrary, a Term Loan
Lender may be replaced hereunder only in compliance with Section 5.2(b)
hereof.
8. COLLATERAL SECURITY AND GUARANTIES.
8.1 Security of Borrowers. The Obligations of the Domestic
Borrowers under the Loan Documents shall be secured by a perfected first
priority security interest (subject only to prior Permitted Liens) in
substantially all of the assets of the Domestic Borrowers, whether now owned
or hereafter acquired, pursuant to the terms of the Security Documents to
which the Domestic Borrowers are parties. The Obligations in respect of the
Hunter Revolver Loans and Bankers' Acceptances shall be secured by a
perfected first priority security interest (subject only to prior Permitted
Liens) in substantially all of the assets of Hunter and its material
Subsidiaries, whether now owned or hereafter acquired, pursuant to the terms
of the Security Documents to which Hunter and/or its material Subsidiary is a
party.
8.2 Guaranties and Security of Domestic Borrowers. The
Obligations of Hunter under the Loan Documents shall also be guaranteed by
the Domestic Borrowers and each material Subsidiary of Hunter, and the
Obligations of each Domestic Borrower under the Loan Documents shall also be
guaranteed by each direct and indirect Domestic Subsidiary of each Domestic
Borrower (other than those Domestic Subsidiaries that are Borrowers) pursuant
to the terms of Section 29. The obligations of such Persons under the
Guaranty shall be in turn secured by a perfected first priority security
interest (subject only to prior Permitted Liens) in all of the assets of each
such Person, whether now owned or hereafter acquired, pursuant to the terms
of the Security Documents to which such Person is a party.
8.3 Collateral Notes. In addition to the Term Notes and the
Revolving Credit Notes the Borrowers agree that with respect to any or all of
the real estate interests to be mortgaged by them hereunder, they will
execute and deliver or cause to be executed and delivered to the Agent such
collateral notes (herein called "Collateral Notes") as the Agent and the
Borrowers may agree upon, it being understood, however, that (a) the
aggregate of all payments or recoveries on such Collateral Notes shall not
exceed the amount of the Obligations (exclusive of the Collateral Notes), and
<PAGE>
(b) any payments or recoveries on such Collateral Notes shall be credited to
the unpaid amount of the Obligations and in such order of application as the
Agent may determine. For the avoidance of doubt, the aggregate payments or
recoveries on the Collateral Notes, Term Notes, Revolving Credit Notes,
Bankers' Acceptances, Hunter Revolver Loans and the Collateral shall not
exceed the amount of the Obligations. The Agent agrees that upon payment in
full of all the Obligations, the Agent shall mark all such Collateral Notes
cancelled and promptly return such Collateral Notes to Russell- Stanley.
9. REPRESENTATIONS AND WARRANTIES.
Each Borrower and each Guarantor represents and warrants to the
Lenders and the Agent, solely with respect to itself and its Subsidiaries, as
follows:
9.1 Corporate Authority.
9.1.1 Incorporation; Good Standing. Such Borrower or
Guarantor and its Subsidiaries (a) is a corporation or limited
partnership duly organized, validly existing and in good standing
under the laws of its state or province of incorporation or
organization, except where such failure to be in good standing
could not reasonably be expected to have a materially adverse
effect on the business, assets, liabilities or financial condition
of Holdings, and its Subsidiaries, taken as a whole, (b) has all
requisite corporate or partnership power to own its property and
conduct its business as now conducted and as presently
contemplated, and (c) is in good standing as a foreign corporation
or limited partnership and is duly authorized to do business in
each jurisdiction where such qualification is necessary, except
where a failure to be so qualified, individually or in the
aggregate, could not reasonably be expected to have a materially
adverse effect on the business, assets or financial condition of
Holdings and its Subsidiaries, taken as a whole.
9.1.2 Authorization. The execution, delivery and performance
of this Credit Agreement and the other Loan Documents to which such
Borrower or Guarantor or any of its Subsidiaries is or is to become
a party and the transactions contemplated hereby and thereby (a)
are within the corporate or partnership authority of such Person,
(b) have been duly authorized by all necessary corporate or
partnership proceedings, (c) do not conflict with or result in any
breach or contravention of any provision of law, statute, rule or
regulation to which such Borrower or Guarantor or any of its
Subsidiaries is subject or any judgment, order, writ, injunction,
license or permit applicable to such Borrower or Guarantor or any
of its Subsidiaries, except where such violation or contravention
could not reasonably be expected to have a materially adverse
effect on Holdings and its Subsidiaries, taken as a whole, and
<PAGE>
could not reasonably be expected to have any adverse effect on the
enforceability of the Loan Documents, (d) do not conflict with any
provision of the corporate charter or bylaws or other
organizational documents of such Borrower or Guarantor or any of
its Subsidiaries, and (e) do not conflict with, or result in a
breach of any material term, condition or provision of, or
constitute a default under or result in the creation of any
mortgage, lien, pledge, charge, security interest, or other
encumbrance upon any of its property under, any agreement, trust
deed, indenture, mortgage, or other instrument (including, without
limitation, the Senior Subordinated Debt Documents) to which it is
a party or by which it or any of its property is bound or affected,
the consequences of which could reasonably be expected to have a
materially adverse effect on Holdings and its Subsidiaries, taken
as a whole.
9.1.3 Enforceability. The execution and delivery of this
Credit Agreement and the other Loan Documents to which such
Borrower or such Guarantor or any of its Subsidiaries is or is to
become a party will result in valid and legally binding obligations
of such Person enforceable against it in accordance with the
respective terms and provisions hereof and thereof, except as
limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other laws relating to or affecting
creditors' rights generally, general equitable principles (whether
considered in equity or at law) and an implied covenant of good
faith and fair dealing, and except to the extent that availability
of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding
therefor may be brought.
9.2 Governmental Approvals. The execution, delivery and
performance by such Borrower or such Guarantor and any of its Subsidiaries of
this Credit Agreement and the other Loan Documents to which such Borrower or
such Guarantor or any of its Subsidiaries is or is to become a party and the
transactions contemplated hereby and thereby do not require the approval or
consent of, or filing with, any governmental agency or authority other than
those already obtained or where failure to do so could not reasonably be
expected to result in a materially adverse effect on Holdings and its
Subsidiaries, taken as a whole, and could not reasonably be expected to have
any adverse effect on the enforceability of the Loan Documents.
9.3 Title to Properties; Leases. Except as indicated on Schedule
9.3 hereto, such Borrower and its Subsidiaries own all material property
reflected in the consolidated balance sheet of Holdings and its Subsidiaries
as at the Balance Sheet Date or acquired since that date (except property and
assets sold or otherwise disposed of as permitted under Section 11.5.2
hereof), free and clear of all liens or other encumbrances except Permitted
Liens.
<PAGE>
9.4 Financial Statements; Projections.
9.4.1 Financial Statements. There has been furnished to each
of the Lenders consolidated balance sheets of Holdings and its
Subsidiaries, as at the Balance Sheet Date, and consolidated
statements of income and cash flows of Holdings and its
Subsidiaries, for the fiscal year then ended, certified by Deloitte
& Touche LLP. In addition, there have been furnished to each of
the Lenders consolidated balance sheets of Holdings and its
Subsidiaries dated the Interim Balance Sheet Date and the related
consolidated statements of income and cash flows for the month
ending on the Interim Balance Sheet Date. All audited balance
sheets and statements of income and cash flows have been prepared
in accordance with Generally Accepted Accounting Principles and
fairly present the financial position of Holdings and its
Subsidiaries as at the close of business on the date thereof and
the results of operations for the fiscal year then ended.
9.4.2 Projections. Holdings and its Subsidiaries have
furnished to the Lenders, prior to the Closing Date, projections of
the annual operating budgets, balance sheets and cash flow
statements of Holdings and its Subsidiaries on a consolidated
basis, for the 1999 to 2003 Fiscal Years, and such projections
disclose all assumptions made with respect to general economic,
financial and market conditions used in formulating such
projections.
9.5 No Material Changes, etc. Since the Interim Balance Sheet
Date, there has occurred no materially adverse change in the financial
condition or business of Holdings and its Subsidiaries, taken as a whole, as
shown on or reflected in the respective consolidated balance sheet of
Holdings and its Subsidiaries as at the Interim Balance Sheet Date, or the
respective consolidated statement of income for the fiscal period then ended,
other than changes in the ordinary course of business that have not had any
materially adverse effect either individually or in the aggregate on the
business or financial condition of Holdings and its Subsidiaries, taken as a
whole. Since the Interim Balance Sheet Date, the Borrowers have not made any
Distribution.
9.6 Franchises, Patents, Copyrights, etc. Such Borrower and its
Subsidiaries possess all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others except, with respect to any matter
specified in this Section 9.6, as could not reasonably be expected to result
in a materially adverse effect on Holdings and its Subsidiaries, taken as a
whole, or with respect to matters relating to CMS, as to which
Russell-Stanley has been indemnified by the sellers of CMS.
<PAGE>
9.7 Litigation. Except as set forth in Schedule 9.7 hereto, there
are no actions, suits, proceedings or investigations of any kind pending or,
to the best knowledge of such Borrower, threatened against such Borrower or
any of its Subsidiaries before any court, tribunal or administrative agency
or board that, if adversely determined, could be reasonably be expected to,
either in any case or in the aggregate, materially adversely affect the
properties, assets, financial condition or business of Holdings and its
Subsidiaries taken as a whole.
9.8 Tax Status. Holdings and its Subsidiaries (a) have made or
filed all federal and state income and all other material tax returns,
reports and declarations required by any jurisdiction to which any of them is
subject, (b) have paid all material taxes and other material governmental
assessments and charges shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and by
appropriate proceedings and (c) have set aside on their books reserves
(segregated to the extent required by Generally Accepted Accounting
Principles and practices) reasonably deemed by it to be adequate with respect
thereto.
9.9 No Event of Default. No Default or Event of Default has
occurred and is continuing.
9.10 Holding Company and Investment Company Acts. Neither
Holdings nor any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935; nor
is it an "investment company", or an "affiliated company" or a "principal
underwriter" of an "investment company", as such terms are defined in the
Investment Company Act of 1940.
9.11 Absence of Financing Statements, etc. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover,
affect or give notice of any present or possible future lien on, or security
interest in, any assets or property of Holdings or any of its Subsidiaries or
any rights relating thereto.
9.12 Perfection of Security Interest. All filings, assignments,
pledges and deposits of documents or instruments have been made and all other
actions have been taken that are necessary or advisable, under applicable
law, to establish and perfect the Agent's security interest in the
Collateral.
9.13 Employee Benefit Plans.
9.13.1 In General. Each Employee Benefit Plan has been
maintained and operated in compliance in all material respects with
<PAGE>
the provisions of ERISA and, to the extent applicable, the Code,
including but not limited to the provisions thereunder respecting
prohibited transactions. As of the Closing Date, such Borrower has
heretofore delivered to the Agent the most recently completed
annual report, Form 5500, with all required attachments, and
actuarial statement required to be submitted under Section 103(d)
of ERISA, with respect to each Guaranteed Pension Plan.
9.13.2 Guaranteed Pension Plans. Each contribution required
to be made to a Guaranteed Pension Plan, whether required to be
made to avoid the incurrence of an accumulated funding deficiency,
the notice or lien provisions of Section 302(f) of ERISA, or
otherwise, has been timely made. No waiver of an accumulated
funding deficiency or extension of amortization periods has been
received with respect to any Guaranteed Pension Plan. No liability
to the PBGC (other than required insurance premiums, all of which
have been paid) that could reasonably be expected to have a
material adverse effect on the business or financial condition of
Holdings and its Subsidiaries taken as a whole has been incurred by
such Borrower or any ERISA Affiliate with respect to any Guaranteed
Pension Plan and there has not been any ERISA Reportable Event, or
any other event or condition which presents a material risk of
termination of any Guaranteed Pension Plan by the PBGC where such
termination could reasonably be expected to have a material adverse
effect on the business or financial condition of Holdings and its
Subsidiaries taken as a whole. As of the Closing Date, based on the
latest valuation of each Guaranteed Pension Plan (which in each
case occurred within twelve months of the date of this
representation), and on the actuarial methods and assumptions
employed for that valuation, the aggregate benefit liabilities of
all such Guaranteed Pension Plans within the meaning of
Section 4001 of ERISA did not exceed the aggregate value of the
assets of all such Guaranteed Pension Plans, disregarding for this
purpose the benefit liabilities and assets of any Guaranteed
Pension Plan with assets in excess of benefit liabilities, by more
than $1,000,000.
9.13.3 Multiemployer Plans. Neither such Borrower nor any
ERISA Affiliate has incurred any material liability (including
secondary liability) that could reasonably be expected to have a
material adverse effect on the business or financial condition of
Holdings and its Subsidiaries taken as a whole to any Multiemployer
Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan under Section 4201 of ERISA or as a result of a
sale of assets described in Section 4204 of ERISA. Neither such
Borrower nor any ERISA Affiliate has been notified that any
Multiemployer Plan is in reorganization or insolvent under and
within the meaning of Section 4241 or Section 4245 of ERISA or that
any Multiemployer Plan intends to terminate or has been terminated
<PAGE>
under Section 4041A of ERISA where such termination could
reasonably be expected to have a material adverse effect on the
business or financial condition of Holdings and its Subsidiaries
taken as a whole.
9.14 Regulations U and X. No portion of any Loan and no proceeds
from the sale of any Bankers' Acceptance are to be used, and no portion of
any Letter of Credit is to be obtained, for the purpose of purchasing or
carrying any "margin security" or "margin stock" as such terms are used in
Regulations U and X of the Board of Governors of the Federal Reserve System,
12 C.F.R. Parts 221 and 224.
9.15 Environmental Compliance. To the best knowledge of each
Borrower and its Subsidiaries:
(a) neither such Borrower nor its Subsidiaries is in
violation of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without
limitation, those arising under the Resource Conservation and
Recovery Act ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the
Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, the New Jersey Industrial Site
Rehabilitation Act ("ISRA"), or any state or local statute,
regulation, ordinance, order or decree relating to health or safety
(in each case as relating to the environment) or the environment
(hereinafter "Environmental Laws"), which violation could
reasonably be expected to result in a materially adverse effect on
the business, assets or financial condition of Holdings or any of
its Subsidiaries taken as a whole;
(b) neither such Borrower nor its Subsidiaries has received
written notice from any third party including, without limitation,
any federal, state or local governmental authority, (i) that any
one of them has been identified by the United States Environmental
Protection Agency ("EPA") as a potentially responsible party under
CERCLA with respect to a site listed on the National Priorities
List, 40 C.F.R. Part 300 Appendix B; (ii) that any hazardous waste,
as defined by 42 U.S.C. Section 6903(5), any hazardous substances
as defined by 42 U.S.C. Section 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. Section 9601(33) and any toxic
substances, oil or hazardous materials or other chemicals or
substances regulated by any Environmental Laws ("Hazardous
Substances") which any one of them has generated, transported or
disposed of has been found at any site at which a federal, state or
local agency or other third party has conducted or has ordered that
any Borrower or any of its Subsidiaries conduct a remedial
investigation, removal or other response action pursuant to any
<PAGE>
Environmental Law; or (iii) that it is or shall be a named party to
any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses,
losses or damages of any kind whatsoever in connection with the
release of Hazardous Substances which notification or
identification could, in each case, reasonably be expected to
result in a materially adverse effect on the business, assets or
financial condition of each of Holdings and its Subsidiaries, taken
as a whole;
(c) except as set forth on Schedule 9.15 attached hereto: (i)
no portion of the Real Estate has been used for the handling,
processing, storage or disposal of Hazardous Substances except for
such use in accordance in all material respects with applicable
Environmental Laws; and no underground tank or other underground
storage receptacle for Hazardous Substances is located on any
portion of the Real Estate except for tanks and storage receptacles
maintained in accordance in all material respects with applicable
law and except in each case, for such use or such maintenance which
could not reasonably be expected to result in a materially adverse
effect on the business, assets or financial condition of each of
Holdings and its Subsidiaries, taken as a whole; (ii) in the course
of any activities conducted by any Borrower, its Subsidiaries or
operators of its properties, no Hazardous Substances have been
generated or are being used on the Real Estate except in accordance
in all material respects with applicable Environmental Laws or
where the violation of such law could not reasonably be expected to
have a materially adverse effect on the business, assets or
financial condition of each of Holdings and its Subsidiaries, taken
as a whole; (iii) there have been no releases (i.e. any past or
present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing or dumping)
of Hazardous Substances by such Borrower or any of its Subsidiaries
on, upon, into the properties of such Borrower or its Subsidiaries,
which releases could reasonably be expected to have a materially
adverse effect on the business, assets or financial condition of
such Holdings and its Subsidiaries taken as a whole; (iv) to the
best of such Borrower's knowledge, there have been no releases on,
upon or into any real property in the vicinity of any of the Real
Estate which, through soil or groundwater contamination, may have
come to be located on the Real Estate, and which could reasonably
be expected to have a materially adverse effect on the business,
assets or financial condition of Holdings and its Subsidiaries
taken as a whole; and (v) in addition, to the extent required under
Environmental Laws any Hazardous Substances that have been
generated on any of the Real Estate have been transported offsite
only by carriers having an identification number issued by the EPA,
treated or disposed of only by treatment or disposal facilities
<PAGE>
maintaining valid permits as required under applicable
Environmental Laws, which transporters and facilities have been and
are, to the best of such Borrower's knowledge, operating in
compliance in all material respects with such permits and
applicable Environmental Laws or where the violation thereof could
not reasonably be expected to have a materially adverse effect on
the business, assets or financial condition of each of Holdings and
its Subsidiaries, taken as a whole; and
(d) neither such Borrower nor its Subsidiaries, any Mortgaged
Property or any of the other Real Estate is subject to any
applicable environmental law requiring the performance of Hazardous
Substances site assessments, or the removal or remediation of
Hazardous Substances, or the giving of notice to any governmental
agency or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of the
transactions set forth herein and contemplated hereby, or as a
condition to the recording of any Mortgage or to the effectiveness
of any other transactions contemplated hereby.
9.16 Subsidiaries, etc. Such Borrower has no Subsidiaries other
than as set forth on Schedule 9.16. Except as set forth on Schedule 9.16
hereto, neither such Borrower nor any of its Subsidiaries is engaged in any
joint venture or partnership with any other Person. All domestic
Subsidiaries of Holdings other than Hunter Industrial Group, Inc. ("HIGI"), a
Delaware corporation, and Hunter Drums, Inc. ("HDI"), an Illinois
corporation, are Guarantors hereunder. HIGI and HDI collectively have no
material assets or liabilities and are not material Subsidiaries.
9.17 Chief Executive Offices. The chief executive offices of such
Borrower or such Guarantor, as the case may be, and the offices where all of
the records and books of such Borrower or such Guarantor, as the case may be,
are kept, are located at the locations specified on Schedule 9.17.
9.18 Disclosure. No representation or warranty made by such
Borrower or such Guarantor, as the case may be, in any of the Loan Documents
or any officer's certificates delivered by such Borrower or such Guarantor
pursuant to any of the Loan Documents contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements contained therein, taken as a whole, not misleading in light
of the circumstances in which they are made.
9.19 Fiscal Year. Such Borrower and such Guarantor has a fiscal
year which is the twelve months ending December 31 of each year (a "Fiscal
Year").
9.20 Fair Labor Standards Act. To the best of its knowledge, such
Borrower and its Subsidiaries has at all times operated its business in
material compliance with all applicable provisions of the Fair Labor
<PAGE>
Standards Act of 1938, as amended. None of the inventory of such Borrower
and its Subsidiaries has been produced by employees who are or were employed
in violation of the minimum wage or maximum hour provisions of the Fair Labor
Standards Act (29 U.S.C. Section 206 and 207) or any regulations thereunder,
in each case, as in effect from time to time.
9.21 Status of Loans as Senior Debt. This Credit Agreement is the
"Senior Credit Facility" under the terms of the Senior Subordinated
Indenture, and Indebtedness of each of the Borrowers and their Subsidiaries
to the Lenders and the Agent in respect of the Obligations constitute "Senior
Debt" and "Designated Senior Debt" (or the analogous term used therein) under
the terms of the Senior Subordinated Debt Documents or of any other
instrument evidencing or pursuant to which there is issued Indebtedness which
purports to be Senior Subordinated Debt of any Borrower or any Subsidiary.
9.22 No Other Senior Debt. Holdings (a) has not designated any
Indebtedness of the Company or any of its Subsidiaries as, and has no,
"Designated Senior Debt" for purposes of (and as defined in) the Senior
Subordinated Indenture, other than the Obligations, and (b) has no "Senior
Debt" as such term is defined in the Senior Subordinated Indenture other than
the Obligations and Indebtedness permitted under Section 11.1.
9.23 Delivery of Certain Documents. Holdings has delivered to the
Agent true and complete copies of all of the Senior Subordinated Debt
Documents (including any amendments thereto).
9.24 Year 2000 Problem. The Borrowers and their Subsidiaries (i)
have reviewed the areas within their businesses and operations which could be
adversely affected by failure to become "Year 2000 Compliant" (i.e. that
computer applications, embedded microchips and other systems used by the
Borrowers or any of their Subsidiaries, will be able properly to recognize
and perform properly date-sensitive functions involving certain dates prior
to and any date after December 31, 1999), (ii) have used internal and
external resources to make required modifications to and replacement of
internal systems and test Year 2000 Compliance, (iii) are currently on
schedule to complete the remediation and testing processes for their computer
applications, embedded microchips and other systems by September 1999, (iv)
have contacted the manufacturers of all of their significant hardware with
embedded applications and believe that their significant hardware is Year
2000 Compliant and (v) have sent questionnaires to their significant vendors
to confirm that they are Year 2000 Compliant. Based upon such review, the
Borrowers reasonably believe that the Borrowers and their Subsidiaries will
become "Year 2000 Compliant" in a timely manner except to the extent that
failure to do so will not have any materially adverse effect on the business,
assets or financial condition of the Borrowers and their Subsidiaries taken
as a whole.
9.25 Solvency. Both before and after giving effect to this Credit
Agreement and the other Loan Documents and the Senior Subordinated Debt,
<PAGE>
Holdings on a consolidated basis is Solvent. As used herein, "Solvent" shall
mean that Holdings, on a consolidated basis, (i) has assets having a fair
value in excess of its liabilities, (ii) has assets having a fair value in
excess of the amount required to pay its liabilities on existing debts as
such debts become absolute and matured, and (iii) has, and expects to
continue to have, access to adequate capital for the conduct of their
business and the ability to pay its debts from time to time incurred in
connection with the operation of its business as such debts mature.
10. AFFIRMATIVE COVENANTS.
Each Borrower and Guarantor covenants and agrees that, so long as any
Loan, Unpaid Reimbursement Obligation, Letter of Credit, Bankers' Acceptance
or Note is outstanding or any Lender has any obligation to make any Loans or
accept and/or purchase any Bankers' Acceptances or the Agent has any
obligation to issue, extend or renew any Letters of Credit:
10.1 Punctual Payment. Such Borrower will duly and punctually pay
or cause to be paid the principal, interest and premium (if any) on the
Loans, all Reimbursement Obligations, the Bankers' Acceptances, the Letter of
Credit Fees, the commitment fees, the Agent's fee and all other amounts
provided for in this Credit Agreement and the other Loan Documents to which
such Borrower or any of its Subsidiaries is a party, all in accordance with
the terms of this Credit Agreement and such other Loan Documents.
10.2 Maintenance of Office. If a Domestic Borrower, such Borrower
and each Guarantor will maintain its chief executive offices in Bridgewater,
New Jersey, or at such other place in the United States of America as such
Borrower or Guarantor shall designate upon written notice to the Agent, where
notices, presentations and demands to or upon such Borrower or Guarantor in
respect of the Loan Documents may be given or made. Hunter will maintain its
chief executive offices in Burlington, Ontario, Canada, or at such other
place in Canada as Russell-Stanley, on behalf Hunter, shall designate upon
written notice to the Agent, where notices, presentations and demands to or
upon Hunter in respect of the Loan Documents may be given or made.
10.3 Records and Accounts. Each Borrower and Guarantor will keep,
and cause each of its Subsidiaries to keep, true and accurate records and
books of account in which full, true and correct entries will be made in
accordance with Generally Accepted Accounting Principles.
10.4 Financial Statements, Certificates and Information.
Russell-Stanley will deliver to each of the Lenders:
(a) as soon as practicable, but in any event not later than
one hundred five (105) days after the end of each fiscal year of
Holdings, the consolidated balance sheet of Holdings and its
Subsidiaries as at the end of such year, and the related
consolidated statement of income and consolidated statement of cash
<PAGE>
flow for such year, each setting forth in comparative form the
figures for the previous fiscal year and all such consolidated
statements to be in reasonable detail, prepared in accordance with
Generally Accepted Accounting Principles, and as to the
consolidated statements certified without qualification by Deloitte
& Touche LLP or by other independent certified public accountants
satisfactory to the Agent;
(b) as soon as practicable, but in any event within thirty
(30) days after the end of each month in each fiscal year of
Holdings, unaudited monthly consolidated financial statements of
Holdings and its Subsidiaries for such month, each prepared in
accordance with Generally Accepted Accounting Principles, and each
including a comparison of the current figures with the figures
contained in the Borrowers' business plan for such period, together
with a certification by the principal financial or accounting
officer of Holdings that the information contained in such
financial statements fairly presents the financial condition of
Holdings and its Subsidiaries on the date thereof (subject to
year-end adjustments), provided that for the months of March, June,
September and December, the above described financial statements
shall be delivered within 45 days of the end of such month;
(c) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) (with respect to
the end of each calendar quarter) above, a statement certified by
the principal financial or accounting officer of Holdings in
substantially the form of Exhibit G hereto and setting forth in
reasonable detail computations evidencing compliance with the
covenants contained in Section 12 and (if applicable)
reconciliations to reflect changes in Generally Accepted Accounting
Principles since the Balance Sheet Date;
(d) contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature filed with the
Securities and Exchange Commission or sent to the stockholders of
Holdings; and
(e) from time to time such other financial data and
information (including accountants' management letters of
substance) as the Agent or any Lender may reasonably request.
10.5 Notices.
10.5.1 Defaults. Each Borrower will promptly notify the
Agent in writing within five (5) days of the occurrence of any
Default or Event of Default.
<PAGE>
10.5.2 Environmental Events. Each Borrower will give notice
to the Agent within ten (10) days (a) of any violation of any
Environmental Law that such Borrower or any of its Subsidiaries
reports in writing (or for which any written report supplemental to
any oral report is made) to any federal, state, provincial or local
environmental agency and that, in each case, could reasonably be
expected to have a materially adverse effect on the business,
assets or financial condition of Holdings and its Subsidiaries
taken as a whole, and (b) upon becoming aware thereof, of any
proceeding, investigation or other action made pursuant to
Environmental Laws, including a notice from any agency of potential
environmental liability, of any federal, state, provincial or local
environmental agency or board, that could reasonably be expected to
materially affect the assets, liabilities, financial condition or
operations of any Borrower or any of their Subsidiaries, or the
Agent's mortgages, deeds of trust or security interests pursuant to
the Security Documents, or to have a materially adverse effect on
the business, assets or financial condition of Holdings and its
Subsidiaries taken as a whole.
10.5.3 Notification of Claim against Collateral. Each
Borrower will, within ten (10) days upon becoming aware thereof,
notify the Agent and each of the Lenders in writing of any setoff,
claims (including, with respect to the Real Estate, environmental
claims), withholdings or other defenses to which any of the
Collateral, or the Agent's rights with respect to the Collateral,
are subject and which exceed singly or in the aggregate $1,000,000.
10.5.4 Notice of Litigation and Judgments. Each Borrower
will, and will cause each of its Subsidiaries to, give notice to
the Agent in writing within fifteen (15) days of becoming aware of
any litigation or proceedings threatened in writing or any pending
litigation and proceedings affecting such Borrower or any of its
Subsidiaries or to which such Borrower or any of its Subsidiaries
is or becomes a party involving an uninsured claim against such
Borrower or any of its Subsidiaries that could reasonably be
expected to have a materially adverse effect on such Borrower or
any of its Subsidiaries and stating the nature and status of such
litigation or proceedings. Each Borrower will, and will cause each
of its Subsidiaries to, give notice to the Agent, in writing, in
form and detail satisfactory to the Agent, within ten (10) days of
any judgment not covered by insurance, final or otherwise, against
such Borrower or any of its Subsidiaries in an amount in excess of
$1,000,000.
10.6 Corporate Existence. Each Borrower and Guarantor will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate or partnership existence, rights and franchises and
those of its Subsidiaries (other than HIGI and HDI) and will not, and will
<PAGE>
not cause or permit any of its Subsidiaries to, convert to a limited
liability company. It will, and will cause each of its Subsidiaries to,
continue to engage primarily in the businesses now conducted by them and in
related businesses; provided that nothing in this Section 10.6 shall prevent
any Borrower or Guarantor from discontinuing the operation and maintenance of
any of its properties or any of those of its Subsidiaries if such
discontinuance is, in the judgment of such Borrower or Guarantor, desirable
in the conduct of its or their business and does not, in the aggregate,
materially adversely affect the business of Holdings and its Subsidiaries on
a consolidated basis.
10.7 Insurance. Each Borrower and Guarantor will, and will cause
each of its Subsidiaries to, maintain with financially sound and reputable
insurers insurance with respect to their properties and business against such
casualties and contingencies as shall be in accordance with the general
practices of businesses engaged in similar activities in similar geographic
areas and in amounts, containing such terms, in such forms and for such
periods as may be reasonable and prudent and in accordance with the terms of
the Security Agreements. Each Borrower and Guarantor will, and will cause
each of its Subsidiaries to, maintain insurance on the Mortgaged Properties
in accordance with the terms of the Mortgages.
10.8 Taxes. Each Borrower and Guarantor will, and will cause each
of its Subsidiaries to, duly pay and discharge, or cause to be paid and
discharged, before the same shall become overdue, all material taxes,
assessments and other material governmental charges imposed upon it and its
real properties, sales and activities, or any part thereof, or upon the
income or profits therefrom; provided that any such tax, assessment, charge,
need not be paid if the validity or amount thereof shall currently be
contested in good faith by appropriate proceedings and if such Borrower,
Guarantor or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto in accordance with Generally Accepted
Accounting Principles.
10.9 Inspection of Properties and Books, etc.
10.9.1 General. Each Borrower and each Guarantor shall
permit the Lenders, through the Agent or any of the Lenders' other
designated representatives, to visit and inspect any of the
properties of such Borrower, such Guarantor or any of its
respective Subsidiaries, to examine the books of account of such
Borrower, such Guarantor and its respective Subsidiaries (and to
make copies thereof and extracts therefrom), and to discuss the
affairs, finances and accounts of such Borrower, such Guarantor and
its respective Subsidiaries with, and to be advised as to the same
by, its and their officers, all at such reasonable times and
intervals as the Agent or any Lender may reasonably request and
upon reasonable notice, provided that nothing in this Credit
Agreement shall require any Borrower, any Guarantor or any of its
<PAGE>
respective Subsidiaries to disclose proprietary confidential
information in violation of any confidentiality agreement to which
it is a party. The Lenders agree that they will treat in
confidence all financial information, customer lists and trade
secrets and other proprietary information with respect to each of
the Borrowers and Guarantors and all information obtained during
such inspection which is designated by such Person as confidential
and will not, without the consent of such Person, disclose such
information to any third party and, if any representative or agent
of any Lender shall not be an employee of such Lender or any
affiliate of such Lender, such designee shall be reputable and of
recognized standing and shall agree in writing to treat in
confidence the information obtained during any such inspection and,
without the prior written consent of such Person, not to disclose
such information to any third party or make use of such information
for personal gain. Notwithstanding the foregoing, each of the
Borrowers and Guarantors hereby authorizes the Lenders to disclose
information obtained pursuant to this Credit Agreement (w) to other
banks or financial institutions who are participants or potential
participants in or assignees of the Loans made or to be made or
Banker Acceptances accepted and/or purchased and/or to be accepted
and/or to be purchased hereunder, (x) where required or requested
by any government or regulatory authorities, (y) to effect
compliance with any law, rule, regulation or order or in response
to any subpoena or other legal process, or (z) to the National
Association of Insurance Commissioners or any similar organization
or any nationally recognized rating agency that requires
information about a Lender's investment portfolio; provided that
such banks and financial institutions agree to comply with the
foregoing confidentiality provisions. For purposes of this
Section 10.9.1, the term "confidential information" does not
include information that (a) was publicly known or otherwise known
by such Person prior to the time of such disclosure, (b)
subsequently becomes publicly known through no act or omission by
such Person or any Person acting on its behalf, (c) otherwise
becomes known to such Person other than through disclosure by such
Borrower or any of its Subsidiaries or through disclosure by a
Person known to such Person to be breaching an obligation of
confidentiality to such Borrower or Subsidiary, or (d) constitutes
financial statements delivered to such Person pursuant to this
Credit Agreement that are otherwise publicly available.
10.9.2 Appraisals. If an Event of Default shall have
occurred and be continuing, upon the request of the Agent, the
requested Borrower or Guarantor will obtain and deliver to the
Agent appraisal reports in form and substance and from appraisers
reasonably satisfactory to the Agent, stating (a) the then current
fair market, orderly liquidation and forced liquidation values of
all or any portion of the equipment or real estate owned by such
<PAGE>
Borrower, such Guarantor and its Subsidiaries and (b) the then
current business value of each of such Borrower, such Guarantor and
its Subsidiaries. All such appraisals shall be conducted and made
at the expense of the Borrowers.
10.9.3 Environmental Assessments. The Agent may, upon an
Event of Default in the case of any Mortgaged Property and
regardless of the occurrence or non-occurrence of an Event of
Default in the case of the property formerly operated by NEC along
the Woonasquatucket River in North Providence, Rhode Island (the
"Woonasquatucket Property"), if the Agent reasonably determines
that obtaining an environmental assessment would be prudent having
determined that a set of circumstances exists which could have a
material adverse effect on Holdings and its Subsidiaries, obtain
one or more environmental assessments or audits of a reasonable
scope of a Mortgaged Property or related to the Woonasquatucket
Property prepared by a hydrogeologist, an independent engineer or
other qualified consultant or expert approved by the Agent to
evaluate or confirm (a) whether any Hazardous Materials are present
in the soil or water at such Mortgaged Property or Woonasquatucket
Property, (b) whether the use and operation of such Mortgaged
Property complies with all Environmental Laws or (c) the existence
of any potential environmental liabilities relating to the
Woonasquatucket Property. Environmental assessments may include
without limitation detailed visual inspections of such Mortgaged
Property, including any and all storage areas, storage tanks,
drains, dry wells and leaching areas, and the taking of soil
samples, surface water samples and ground water samples, as well as
such other investigations or analyses as the Agent reasonably deems
appropriate. All such environmental assessments shall be conducted
and made at the expense of the Borrowers.
10.9.4 Communications with Accountants. With the consent of
Russell-Stanley (which shall not be unreasonably withheld), the
Agent may communicate directly with any Borrower's or Guarantor's
independent certified public accountants and authorizes such
accountants to disclose to the Agent and the Lenders any and all
financial statements and other supporting financial documents and
schedules including copies of any management letter of substance
with respect to the business, financial condition and other affairs
of such Borrower or Guarantor or any of its Subsidiaries.
10.10 Compliance with Laws, Licenses, and Permits. Each Borrower
and Guarantor will, and will cause each of its Subsidiaries to, comply with
the applicable laws and regulations wherever its business is conducted,
including all Environmental Laws, noncompliance with which could be
reasonably likely to have a material adverse effect on the business,
operations or financial condition of such Borrower or such Guarantor, as the
case may be, and its Subsidiaries, taken as a whole; provided that it shall
<PAGE>
not be a breach of this Section 10.10 if any such Person fails to comply with
such laws, rules and regulations during any period in which it is in good
faith diligently contesting the validity thereof by appropriate proceedings
reasonably satisfactory to the Agent. If any authorization, consent,
approval, permit or license from any officer, agency or instrumentality of
any government shall become necessary or required in order that such Borrower
or Guarantor or any of its Subsidiaries may fulfill in all material respects
any of its obligations hereunder or any of the other Loan Documents to which
such Borrower, Guarantor or such Subsidiary is a party, such Borrower or
Guarantor will, or (as the case may be) will cause such Subsidiary to,
immediately take or cause to be taken all reasonable steps within the power
of such Borrower, Guarantor or such Subsidiary to obtain such authorization,
consent, approval, permit or license and furnish the Agent with evidence
thereof.
10.11 Employee Benefit Plans. Each Borrower and Guarantor will
(a) upon the request of the Agent promptly upon filing the same with the
Department of Labor or Internal Revenue Service furnish to the Agent a copy
of the most recent actuarial statement required to be submitted under
Section 103(d) of ERISA and Annual Report, Form 5500, with all required
attachments, in respect of each Guaranteed Pension Plan and (b) promptly upon
receipt or dispatch, furnish to the Agent any notice, report or demand sent
or received in respect of a Guaranteed Pension Plan under Sections 302, 4041,
4042, 4043 (except as to events for which the thirty (30) day notice
requirement has been waived pursuant to the regulations), 4063, 4066 and 4068
of ERISA, or in respect of a Multiemployer Plan, under Sections 4041A, 4202,
4219, 4242, or 4245 of ERISA.
10.12 Use of Proceeds. The Borrowers will use the proceeds of the
Loans and the Bankers' Acceptances and the Letters of Credit (a) to convert
the Indebtedness under the Fourth Restated Credit Agreement and pay accrued
interest payable thereunder and (b) for working capital and general corporate
purposes (including, without limitation, Permitted Acquisitions and the
payment of nonrecurring charges incurred in connection with the Acquisitions
or any attempted acquisition that did not actually close).
10.13 Additional Mortgaged Property. If, after the Closing Date,
any Borrower or Guarantor or any of its Subsidiaries acquires real estate
used as manufacturing or warehouse facilities with an aggregate value in
excess of $750,000, such Borrower or Guarantor shall, or shall cause such
Subsidiary to, forthwith deliver to the Agent at the Agent's reasonable
request a fully executed mortgage or deed of trust over such real estate, in
form and substance reasonably satisfactory to the Agent, together with title
insurance policies, surveys, evidences of insurances with the Agent named as
loss payee and additional insured, legal opinions and other documents and
certificates with respect to such real estate as was required for Real Estate
of the Borrowers or such Subsidiaries as of the Closing Date. Each Borrower
and Guarantor further agrees that, following the taking of such actions with
respect to such real estate, the Agent shall have for the benefit of the
<PAGE>
Lenders and the Agent a valid and enforceable first mortgage or deed of trust
over such real estate, free and clear of all defects and encumbrances except
for Permitted Liens.
10.14 Reserves. Each of the Borrowers will maintain appropriate
reserves for depreciation, taxes and other contingent expenses or liabilities
in accordance with Generally Accepted Accounting Principles.
10.15 Certain Transactions. Except for (a) transactions entered
into in connection with the CMS Acquisition, the Hunter Acquisition, the
Smurfit Acquisition and the NEC Acquisition pursuant to the applicable
acquisition documents including, without limitation, payment of the Stay and
Performance Payments and directors' fees to Mark Daniels and Michael Hunter
in the amounts set forth in the applicable acquisition documents, payments
under the Vestar Management Agreement and investment banking fees payable to
Vestar Capital Partners in connection with the recapitalization effected on
the closing date of the Fourth Restated Credit Agreement and the Acquisitions
pursuant to agreements delivered to the Agent prior to the date of the
respective payment, (b) sales by the Borrowers (other than CMS) of drums to
CMS, (c) corporate services provided by one Borrower to another and
reasonably allocated charges in connection therewith, and (d) transactions
pursuant to which Holdings or any of its Subsidiaries makes or receives
payments in the ordinary course of business either (i) only among Holdings,
the Borrowers and the Guarantors, or (ii) otherwise upon terms no less
favorable than Holdings or such Subsidiary could obtain from third parties,
Holdings and its Subsidiaries will not enter into transactions involving
payments to or from the officers, directors, and employees of Holdings or any
of Holdings' Subsidiaries or any corporation, partnership, trust or other
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or such
employee.
10.16 Further Assurances. Each Borrower and Guarantor will, and
will cause each of its Subsidiaries to, cooperate with the Lenders and the
Agent and execute such further instruments and documents as the Lenders or
the Agent shall reasonably request to carry out to their satisfaction the
transactions contemplated by this Credit Agreement and the other Loan
Documents.
11. CERTAIN NEGATIVE COVENANTS.
Each Borrower and Guarantor covenants and agrees that, so long as
any Loan, Unpaid Reimbursement Obligation, Letter of Credit, Bankers'
Acceptance or Note is outstanding or any Lender has any obligation to make
<PAGE>
any Loans or to accept and/or purchase any Bankers' Acceptances or the Agent
has any obligations to issue, extend or renew any Letters of Credit:
11.1 Restrictions on Indebtedness. The Borrowers and Guarantors
will not, and will not permit any of their Subsidiaries to, create, incur,
assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:
(a) Indebtedness to the Lenders and the Agent arising under
any of the Loan Documents;
(b) current liabilities of the Borrowers or any Subsidiary of
the Borrowers incurred in the ordinary course of business not
incurred through (i) the borrowing of money, or (ii) the obtaining
of credit except for credit on an open account basis customarily
extended and in fact extended in connection with normal purchases
of goods and services;
(c) Indebtedness in respect of taxes, assessments,
governmental charges or levies, liabilities under employee benefit
plans, including pension plans and claims for labor, materials and
supplies to the extent that payment therefor shall not at the time
be required to be made in accordance with the provisions of
Section 10.8;
(d) Indebtedness in respect of judgments or awards that have
been in force for less than the applicable period for taking an
appeal so long as execution is not levied thereunder or in respect
of which the applicable Borrower or Subsidiary shall at the time in
good faith be prosecuting an appeal or proceedings for review and
in respect of which a stay of execution shall have been obtained
pending such appeal or review;
(e) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the
ordinary course of business;
(f) obligations under Capitalized Leases not exceeding
$10,000,000 in aggregate amount at any time outstanding;
(g) Indebtedness incurred in connection with the acquisition
after the date hereof of any real or personal property by any
Borrower or any of its respective Subsidiaries, provided that the
aggregate principal amount of such Indebtedness shall not exceed
the aggregate amount of $3,500,000 at any time outstanding and in
no case shall the principal amount of such Indebtedness exceed 100%
of the cost to such Person of the real or personal property so
acquired;
<PAGE>
(h) other Indebtedness existing on the date hereof or
incurred pursuant to credit facilities existing on the date hereof
and listed and described on Schedule 11.1 hereto;
(i) Indebtedness of (i) any Domestic Subsidiary of a Borrower
to such Borrower, (ii) a Borrower to any Domestic Subsidiary of
such Borrower and (iii) any Domestic Subsidiary of a Borrower to
another Domestic Subsidiary of such Borrower;
(j) Indebtedness incurred in connection with the refunding or
refinancing of the Indebtedness described on Schedule 11.1 hereto,
to the extent that the aggregate principal amount thereof is not
thereby increased;
(k) Indebtedness consisting of notes subordinated to the
payment of the Obligations on terms and conditions satisfactory to
the Lenders issued to employees of Russell-Stanley or Holdings or
members of the Board of Directors of Holdings in partial payment of
the purchase price of shares of Russell-Stanley's or Holdings'
common stock repurchased from such employees or directors as
permitted under Section 11.4 hereof in aggregate amount not to
exceed $2,500,000 at any time outstanding;
(l) Indebtedness in respect of the payments under clause (b)
of the definition of Stay and Performance Payments;
(m) additional Indebtedness not in excess of $5,000,000 at
any time outstanding;
(n) Indebtedness of Hunter to Holdings not to exceed
$15,000,000 at any time outstanding, provided that the same is
either evidenced only by open accounts or, if evidenced by a note,
such note is pledged to the Agent as collateral for the
Obligations;
(o) Indebtedness not to exceed the principal amount of
$400,000 at any time outstanding consisting of deferred purchase
price payments described in Section 2(b)(ii) of the Asset Purchase
Agreement, dated as of October 21, 1996, between NEC and Gordon D.
Garratt Co., Inc. (the "Garratt Purchase Price Payments");
(p) Senior Subordinated Debt (including Indebtedness of a
Domestic Borrower pursuant to the Senior Subordinated Guaranty
provided for in the Senior Subordinated Indenture) in aggregate
principal amount not to exceed $150,000,000 at any time
outstanding, provided that Senior Subordinated Debt may be
increased to an aggregate amount of $225,000,000 if (i) such
additional Senior Subordinated Debt is governed by the same terms
as governs the Senior Subordinated Debt incurred on the Closing
<PAGE>
Date, (ii) such additional Senior Subordinated Debt meets the debt
incurrence test contained in the Senior Subordinated Indenture,
(iii) Russell-Stanley has delivered to the Agent Compliance
Certificates demonstrating, both immediately prior to and
immediately after the incurrence of such additional Senior
Subordinated Debt, compliance with the covenants set forth in
Section 12 of this Credit Agreement, (iv) no Default or Event of
Default has occurred and is continuing or would exist after giving
effect thereto; and (v) if, after the incurrence of any Senior
Subordinated Debt in excess of $150,000,000, the ratio of Funded
Debt of the Borrower and its Subsidiaries to Adjusted EBITDA,
calculated on a Pro Forma Basis for the period of four consecutive
fiscal quarters most recently ended, of the Borrower and its
Subsidiaries exceeds 5.00:1.00, the Agent consents to such Senior
Subordinated Debt, such consent not to be unreasonably withheld;
and
(q) Indebtedness consisting of Stay and Performance Payments.
11.2 Restrictions on Liens. The Borrowers and Guarantors will not,
and will not permit any of their Subsidiaries to, create or incur or suffer
to be created or incurred or to exist any mortgage, pledge, security interest
or other lien or encumbrance on any of their property; provided that the
Borrowers and any Subsidiary of the Borrowers may create or incur or suffer
to be created or incurred or to exist:
(a) (i) liens arising from attachments or similar
proceedings, pending litigation, or liens to secure taxes,
assessments and other government charges, in any such event whose
validity or amount is being contested in good faith by appropriate
proceedings and for which adequate reserves are being maintained in
accordance with Generally Accepted Accounting Principles, or in the
case of taxes, assessments or governmental charges, which are not
overdue, or (ii) liens on properties to secure claims for labor,
material or supplies;
(b) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment or other
insurance, old age pensions or other social security obligations
and good faith deposits in connection with tenders, contracts or
leases to which it is a party or deposits to secure, or in lieu of,
surety, penalty or appeal bonds, performance bonds, letters of
credit and other similar public or statutory obligations;
(c) liens on properties in respect of judgments or awards,
the Indebtedness with respect to which is permitted by
Section 11.1(d);
<PAGE>
(d) liens of carriers, warehousemen, mechanics and
materialmen, and other like liens;
(e) encumbrances on Real Estate consisting of easements,
rights of way, zoning restrictions, restrictions on the use of real
property and defects and irregularities in the title thereto,
landlord's or lessor's liens under leases to which any Borrower or
a Subsidiary of a Borrower is a party, and other minor liens or
encumbrances none of which in the opinion of any Borrower
interferes materially with the use of the affected property in the
ordinary conduct of the business of such Borrower and its
Subsidiaries, which defects do not individually or in the aggregate
have a materially adverse effect on the business of Holdings and
its Subsidiaries on a consolidated basis;
(f) other liens existing on the date hereof and listed on
Schedule11.2 hereto;
(g) purchase money security interests in or purchase money
mortgages on real or personal property of any Borrower, Guarantor
or Subsidiary acquired after the date hereof to secure purchase
money Indebtedness of the type and amount permitted by
Section 11.1(g), incurred in connection with the acquisition of
such property, which security interests or mortgages cover only the
real or personal property so acquired;
(h) liens and encumbrances on each Mortgaged Property as and
to the extent permitted by the Mortgage applicable thereto;
(i) liens in favor of the Agent for the benefit of the
Lenders and the Agent under the Loan Documents;
(j) landlord's liens under leases or applicable law;
(k) liens in respect of Capitalized Leases permitted under
Section 11.1(f); and
(l) other liens covering assets having a fair market value
of, or securing Indebtedness having a principal amount of, not more
than $500,000 in the aggregate at any time outstanding.
11.3 Restrictions on Investments. The Borrowers and Guarantors
will not, and will not permit any of their Subsidiaries to, make or permit to
exist or to remain outstanding any Investment except Investments in:
(a) direct or guaranteed obligations of the United States of
America that mature within one (1) year from the date of purchase
by a Borrower or Guarantor;
<PAGE>
(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having total
assets in excess of $1,000,000,000 or of foreign subsidiaries of
such banks and demand or time deposits in such banks and in the
case of any such foreign Subsidiaries, in banks organized under the
laws of any other jurisdiction;
(c) commercial paper or finance company paper which is rated
not less than prime-one or A-1 or their equivalents by Moody's
Investors Service, Inc. or Standard & Poor's Ratings Group or their
successors;
(d) repurchase agreements secured by any one or more of the
foregoing;
(e) Other investments existing on the date hereof and listed
on Schedule11.3 hereto;
(f) Investments with respect to Indebtedness permitted by
Section 11.1(i) or 11.1(n) so long as such entities remain
Subsidiaries of a Borrower;
(g) Investments consisting of the Guaranty or Investments by
a Borrower in Subsidiaries of the Borrowers;
(h) trade or customer accounts or notes receivable for
inventory sold or services rendered in the ordinary course of
business;
(i) acceptance and endorsements of checks or other negotiable
instruments for deposit or collection in the ordinary course of
business;
(k) Investments consisting of promissory notes received as
proceeds of asset dispositions permitted by Section 11.5.2;
(l) Investments consisting of loans and advances to employees
not to exceed $500,000 in the aggregate at any time outstanding and
not to exceed $200,000 to any individual employee outstanding at
any time;
(m) Investments in respect of Permitted Acquisitions;
(n) Investments consisting of Indebtedness permitted under
Section 11.1(k);
(o) Investments in respect of Distributions permitted under
11.4; and
<PAGE>
(p) additional Investments not in excess of $2,500,000 at any
time outstanding.
11.4 Distributions. The Borrowers and Guarantors may not make any
Distributions except that Subsidiaries of Holdings may make Distributions to
Holdings and its Subsidiaries without limitation and, so long as no Default
or Event of Default then exists or would result from such payment, (A)
Holdings may repurchase shares of its common stock from employees of any of
Holdings and its Subsidiaries or members of the Board of Directors of
Holdings upon termination of their employment or service as directors,
provided, that the aggregate amount expended by Holdings for all such
repurchases (net of the amount, if any, received by Holdings in cash upon the
reissuance of shares that were previously repurchased) shall not exceed
$2,500,000 (plus any net proceeds received by any of Holdings and its
Subsidiaries of key-man life insurance policies held by any of Holdings and
its Subsidiaries on the lives of any such employees or directors) in the
aggregate during the term of this Credit Agreement and (B) Holdings may make
payments required under the escrow arrangements referred to in clause (b) of
15.18 of the Third Restated Credit Agreement. It is understood that the
issuance by Holdings of shares of common stock in exchange for (i) shares of
Hunter stock in accordance with the terms of the Hunter Acquisition Documents
previously provided to the Agent and (ii) shares of NEC stock in accordance
with terms of the NEC Acquisition Documents shall not constitute a
"Distribution."
11.5 Merger, Consolidation and Disposition of Assets.
11.5.1 Mergers and Acquisitions.
(a) The Borrowers and Guarantors will not, and will not
permit any of their Subsidiaries to, become a party to any merger
or consolidation, except the merger or consolidation of one or more
of the Subsidiaries of a Borrower with and into such Borrower, or
the merger or consolidation of two or more Subsidiaries of the
Borrowers.
(b) The Borrowers and Guarantors will not, and will not
permit any of their Subsidiaries to, become a party to any
acquisition (other than acquisitions of assets in the ordinary
course of business) other than the acquisition (a "Permitted
Acquisition") (whether of stock or of substantially all of the
assets of a business or business division as a going concern or by
means of a merger or consolidation) of a majority interest in any
other Person (the "Target") provided that (i) the Target is in a
substantially similar or complementary business as the Borrowers,
(ii) no Default or Event of Default has occurred and is continuing
or would exist after giving effect thereto, (iii) if such Borrower,
such Guarantor, or such acquiring Subsidiary merges with the
Target, such Borrower, such Guarantor or such Subsidiary, as the
<PAGE>
case may be, is the surviving party, (iv) if the Target becomes a
Subsidiary of a Borrower, a Guarantor or any of their Subsidiaries,
it shall deliver a guaranty as provided in Section 29 hereof and,
in connection therewith, shall pledge to the Agent for the benefit
of the Lenders a security interest in substantially all of its
assets, (v) Russell-Stanley has delivered to the Agent Compliance
Certificates demonstrating, both immediately prior to and
immediately after such acquisition, compliance on a Pro Forma Basis
with the covenants set forth in Section 12 of this Credit
Agreement, (viii) the board (and shareholders, if required by law)
of the Target shall have approved the acquisition, (ix) the
Borrowers shall notify the Agent and the Lenders of the proposed
acquisition at least 30 days in advance thereof, such notice to
include an information package sufficient for the Lenders to
evaluate such acquisition, (x) the Target and its Subsidiaries
shall have positive Adjusted EBITDA on a Pro Forma Basis for the
period of four consecutive fiscal quarters most recently ended,
(xi) the aggregate amount borrowed in the form of Revolving Credit
Loans at any time (without giving effect to any repayments of such
borrowings) for Permitted Acquisitions shall not exceed $15,000,000
in the aggregate prior to the Revolving Credit Loan Maturity Date,
provided that such limitation may be increased to $20,000,000 (A)
with the consent of the Agent or (B) if the total borrowing for the
proposed acquisition does not exceed 5.5 times the pro forma
Adjusted EBITDA of the Target, (xii) after the proposed acquisition
becomes effective the Borrowers shall own a majority of equity
interests in the Target, shall control a majority of the Voting
Stock in the Target, and shall otherwise control the governance of
the Target, (xiii) the terms of any seller paper or subordinated
debt issued or incurred in connection with the proposed acquisition
shall (A) be in compliance with the limits set forth Section 11.1
(B) contain no financial covenants more restrictive than those
contained in the Senior Subordinated Debt Documents, (C) be
unsecured and (D) be subordinated on terms no more disadvantageous
to the Lenders than the Senior Subordinated Debt; and (xiv) the
Agent shall be satisfied with the environmental due diligence
conducted in connection with the proposed acquisition and shall be
satisfied with the results thereof.
11.5.2 Disposition of Assets. The Borrowers will not, and
will not permit any of their Subsidiaries to, become a party to or
agree to or effect any disposition of assets, other than (a) the
disposition of assets in the ordinary course of business,
consistent with past practices, (b) the disposition of assets that
are uneconomic, obsolete, worn out or no longer useful in their
respective businesses, (c) the disposition of assets from one
Borrower or Guarantor to another Borrower or Guarantor (d) in
addition to dispositions of assets under clauses (a), (b) and (c),
the Borrowers, the Guarantors and their Subsidiaries may dispose of
<PAGE>
assets in sales to third parties on arm's length terms having an
aggregate sale price not to exceed $1,000,000 during the term of
this Credit Agreement, and (e) in addition to dispositions of
assets under clauses (a) through (d), the Borrowers, the Guarantors
and their Subsidiaries may dispose of assets in sales to third
parties on arm's length terms having an aggregate sale price not to
exceed $10,000,000 during the term of this Credit Agreement,
provided that in connection with such sales, (i) the applicable
Borrower or Guarantor delivers to the Agent a certificate
satisfactory to the Agent describing its reinvestment plan for the
proceeds of such disposition prior to such disposition and (ii)
actually reinvests all net proceeds in accordance with such plan
within 365 days of such sale.
11.6 Sale and Leaseback. The Borrowers and Guarantors will not,
and will not permit any of its Subsidiaries to, enter into any arrangement,
directly or indirectly, whereby the Borrowers, any Guarantor or any
Subsidiary of the Borrowers shall sell or transfer any property owned by it
in order then or thereafter to lease such property or lease other property
that the Borrowers, any Guarantor or any Subsidiary of the Borrowers intends
to use for substantially the same purpose as the property being sold or
transferred unless such sale leasebacks are for fair market value and the net
present value of the lease payments under all such lease (discounted at a
rate per annum of 10%) would be permitted under Section 11.1 hereof if the
same was considered to be Indebtedness.
11.7 Compliance with Environmental Laws. The Borrowers will not,
and will use reasonable best efforts to not permit any of their Subsidiaries
to, conduct any activity at any Real Estate or use any Real Estate in any
manner that would violate any Environmental Law or bring such Real Estate
into violation of any Environmental Law that would have a materially adverse
effect on the business, assets or financial condition on Holdings and its
Subsidiaries, taken as a whole.
11.8 Employee Benefit Plans. Neither the Borrowers nor any ERISA
Affiliate will, if such action could reasonably be expected to have a
materially adverse effect on the business, assets or financial condition of
Holdings and its Subsidiaries taken as a whole:
(a) engage in any "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Code which could
result in a material liability for any Borrower or any of their
Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in
Section 302 of ERISA, whether or not such deficiency is or may be
waived; or
<PAGE>
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner
which, could result in the imposition of a lien or encumbrance on
the assets of any Borrower or any of their Subsidiaries pursuant to
Section 302(f) or Section 4068 of ERISA; or
(d) permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of Section 4001 of
ERISA) of all Guaranteed Pension Plans exceeding the value of the
aggregate assets of such Plans, disregarding for this purpose the
benefit liabilities and assets of any such Plan with assets in
excess of benefit liabilities, by more than the amount set forth in
Section 9.13.2.
11.9 Change of Location. None of the Borrowers or Guarantors will
at any time (a) change the location of its chief executive offices, or (b)
change the locations where its records, books of account, or inventory are
kept without, in the case of changes of chief executive office, or locations
where records and books of account are kept, giving at least thirty (30)
days', and in the case of locations where inventory is kept, ten (10) days'
prior written notice to the Agent specifying the new location of such office
or location.
11.10 Change of Fiscal Year. None of the Borrowers or Guarantors
will change its Fiscal Year without the prior written consent of the Agent.
11.11 Payments to Shareholders. Except for (w) payments made in
connection with the Buonanno Agreement to Vincent J. Buonanno not to exceed
$1,000,000 in the aggregate, plus reasonable expense reimbursement, (x)
payments made in connection with the CMS Acquisition, the Hunter Acquisition,
the Smurfit Acquisition or the recapitalization on the closing date of the
Fourth Restated Credit Agreement pursuant to the acquisition documents
related to such Acquisitions including, without limitation, the Stay and
Performance Payments and payments of directors' fees to Mark Daniels and
Michael Hunter in the amounts set forth in the applicable acquisition
documents related to the CMS Acquisition and the Hunter Acquisition, (y) all
other payments permitted under Section 10.15, and (z) the annual management
fees ("Fees") and expenses ("Expenses") payable to Vestar Capital Partners,
Inc. pursuant to the Vestar Management Agreement, provided that such Fees
shall not exceed, in an aggregate amount for any fiscal year, the greater of
(a) $225,000 or (b) 0.25% of the consolidated net sales of Holdings and its
Subsidiaries for such fiscal year, commencing on the date hereof provided
further that such Expenses shall be reasonable, and provided, further, if an
Event of Default referred to in paragraph (a) or (b) of Section 15.1 hereof
has occurred and is continuing or would result after giving effect to the
making of such payment, then the payment of all sums (including all Fees and
Expenses) in excess of $300,000 under the Vestar Management Agreement in any
fiscal year shall be subordinated in right of payment to the prior payment in
full of the Obligations hereunder, none of the Borrowers or Guarantors will
<PAGE>
pay any fees, wages, salary, bonus, commission, contributions to deferred
benefit plans or any other compensation for services to or for any Person
who, or any of whose affiliates, has a beneficial interest in any capital
stock of any of the Borrowers, in excess of the reasonable value of such
services (it being understood and agreed that the prevailing market price of
services rendered by any such person shall be relevant in determining the
value of such services).
11.12 Change of Corporate Name. Each of the Borrowers and
Guarantors shall notify the Agent ten (10) days prior to any change in its
corporate name and will duly execute and deliver appropriate financing
statements and other documents necessary to enable the Agent to maintain
continuously perfected the security interests (including, without limitation,
mortgages) granted under the Security Documents.
11.13 Change in Terms of Capital Stock. None of the Borrowers
or Guarantors shall designate, establish or create any new or additional
series of its capital stock, or issue or permit to be outstanding any shares
of preferred stock, or effect or permit any change in or amendment to its
charter or any other document or instrument pertaining to the terms of its
capital stock, provided that Holdings may amend its Certificate of
Incorporation in order to permit the public or private offering by Holdings
of its common stock. None of the Borrowers or Guarantors will enter into,
incur or permit to exist any obligations to redeem, retire, or repurchase any
of its capital stock.
11.14 Limitation on Issuance of Shares of Subsidiaries;
Disposition of Shares and Indebtedness of Subsidiaries.
(a) None of the Borrowers will permit any of its Subsidiaries
to issue, sell or otherwise dispose of any shares of such
Subsidiary or any securities convertible into or exchangeable for
or carrying rights to subscribe for shares of such Subsidiary,
except (i) to Russell-Stanley or Holdings, or (ii) for the purpose
of qualifying directors. None of the Borrowers will, in any
event, permit any Subsidiary to have outstanding any preferred
shares, other than preferred shares owned by Russell-Stanley or
Holdings and other than preferred stock of Hunter held by Michael
Hunter which is exchangeable into common stock of Holdings.
(b) None of the Borrowers will sell, transfer or otherwise
dispose of any shares (except for the purpose of qualifying
directors) or any Indebtedness of any of its Subsidiaries, or
permit any Subsidiary to sell, transfer or otherwise dispose of
(except to Russell-Stanley or Holdings or for the purpose of
qualifying directors) any shares or any Indebtedness of any other
Subsidiary.
<PAGE>
11.15 Senior Subordinated Debt. The Borrowers will not, and
will not permit any of their Subsidiaries to, amend, supplement or otherwise
modify the terms of any of the Senior Subordinated Debt Documents in a manner
adverse to the Agent or the Lenders or prepay, redeem or repurchase (or offer
to prepay, redeem or repurchase) any of the Senior Subordinated Debt or make
any payment in respect of the Senior Subordinated Debt other than regular
scheduled interest payments not prohibited by the subordination terms of the
Senior Subordinated Indenture.
11.16 Senior Debt. The Borrowers and their Subsidiaries will
not (a) in any manner designate or permit to exist any other Indebtedness of
the Company or any of its Subsidiaries as "Designated Senior Debt" or "Senior
Debt" for purposes (and as defined in) of the Senior Subordinated Indenture,
other than the Indebtedness arising under this Credit Agreement.
12. FINANCIAL COVENANTS OF THE BORROWERS.
For purposes of any relevant calculation under Section 12, please
refer to the following table with respect to the fiscal quarters ending on the
dates specified below:
3/31/98 6/30/98
------- -------
Adjusted EBITDA for NEC $625,000 $625,000
Interest payments of NEC $300,000 $300,000
Cash tax payments of NEC -0- -0-
Each Borrower covenants and agrees that, so long as any Loan,
Unpaid Reimbursement Obligation, Letter of Credit, Bankers' Acceptance or
Note is outstanding or any Lender has any obligation to make any Loans or
accept and/or purchase any Bankers' Acceptances or the Agent has any
obligation to issue, extend or renew any Letters of Credit:
12.1 Minimum Interest Coverage. As of March 31, 1999 and
thereafter, Holdings will not permit, at the end of any of its fiscal
quarters occurring during the periods set forth below, the ratio of Adjusted
EBITDA for the four consecutive fiscal quarters then ended to Interest
Charges for such period to be less than the ratio set forth opposite such
period:
<PAGE>
Period Ratio
-------- -------
Closing Date through March 30, 2000 1.75:1.00
March 31, 2000 and thereafter 2.00:1.00
12.2 Maximum Senior Leverage Ratio. As of March 31, 1999 and
thereafter, Holdings will not permit, at the end of any of its fiscal
quarters ending during the periods set forth in the table below, the ratio of
(a) Senior Funded Debt as of the last day of such fiscal quarter to (b)
Adjusted EBITDA for the four consecutive fiscal quarters then ended, to
exceed the ratio set forth opposite such period in such table:
Period Ratio
-------- -------
Closing through December 31, 2000 2.25:1.00
January 1, 2001 through December 31, 2001 2.00:1.00
January 1, 2002 and thereafter 1.75:1.00
12.3 Maximum Capital Expenditures. Holdings will not permit the
aggregate Capital Expenditures (including Capitalized Leases) of Holdings and
its Subsidiaries, determined on a consolidated basis in accordance with
Generally Accepted Accounting Principles, to exceed, during each of the
periods set forth in the table below, the amount set forth opposite such
period in such table; provided, however, that if, during fiscal year 1999 and
each fiscal year thereafter, the amount of Capital Expenditures permitted for
such fiscal year is not so utilized, such unutilized amount in an amount not
to exceed $7,500,000 may be may be carried over and utilized in the next
succeeding fiscal year (after the amount set forth in the table below for
such succeeding years has been used) but not in any subsequent fiscal year.
Period Amount
-------- --------
Fiscal year 1999 $35,000,000
Fiscal year 2000 $34,000,000
Fiscal year 2001 $34,000,000
<PAGE>
Fiscal year 2002 $35,000,000
Fiscal year 2003 $37,500,000
and thereafter
13. CLOSING CONDITIONS.
The obligations of the Lenders to convert the Loans and Letters of
Credit under the Fourth Restated Credit Agreement and to make the initial
Loans to the Borrowers, the Swing Line Bank to make the initial Swing Line
Loans to the Domestic Borrowers, the Agent to issue any initial Letters of
Credit to the Domestic Borrowers and the BA Lenders to accept and/or purchase
any Bankers' Acceptances from Hunter shall be subject to the satisfaction of
the following conditions precedent:
13.1 Loan Documents. Each of the Loan Documents shall have been
duly executed and delivered by the respective parties thereto, shall be in
full force and effect and shall be in form and substance satisfactory to the
Agent, the Lenders and the Arrangers. Each Arranger and the Agent shall have
received a fully executed copy of each such document.
13.2 Senior Subordinated Debt Documents. Each of the Senior
Subordinated Debt Documents shall have been duly executed and delivered by
the respective parties thereto, shall be in full force and effect and shall
be in form and substance reasonably satisfactory to each of the Agent, the
Lenders and the Arrangers. The Agent and the Lenders shall have received a
fully executed copy of each such document
13.3 Certified Copies of Charter Documents. The Agent, the
Arrangers and the Lenders shall have received from each Borrower and each of
its Subsidiaries a copy, certified by a duly authorized officer of such
Person to be true and complete on the Closing Date, of each of (a) its
charter or other organizational documents as in effect on such date of
certification, and (b) its by-laws as in effect on such date.
13.4 Corporate Action. All corporate or partnership action
necessary for the valid execution, delivery and performance by each Borrower
and each of its Subsidiaries of this Credit Agreement and the other Loan
Documents to which it is or is to become a party shall have been duly and
effectively taken, and evidence thereof satisfactory to the Agent, the
Lenders and the Arrangers shall have been provided to each of the Agent, the
Lenders and the Arrangers.
13.5 Incumbency Certificate. Each of the Agent, the Lenders and
the Arrangers shall have received from each Borrower and each of its
Subsidiaries an incumbency certificate, dated as of the Closing Date, signed
<PAGE>
by a duly authorized officer of such Person, and giving the name and bearing
a specimen signature of each individual who shall be authorized: (a) to sign,
in the name and on behalf of such Person, each of the Loan Documents to which
such Person is to become a party; (b) in the case of Russell Stanley, to make
Domestic Revolver Loan Requests and Conversion Requests, and to apply for
Letters of Credit and Bankers' Acceptances; and (c) to give notices and to
take other action on its behalf under the Loan Documents.
13.6 Validity of Liens. The Security Documents shall be effective
to create in favor of the Agent a legal, valid and enforceable first (except
for prior Permitted Liens) security interest in and lien upon the Collateral.
All filings, recordings, deliveries of instruments and other actions
necessary or desirable in the opinion of the Agent to protect and preserve
such security interests shall have been duly effected. The Agent shall have
received evidence thereof in form and substance reasonably satisfactory to
the Agent.
13.7 Perfection Certificates and UCC Search Results. The Agent
shall have received from each of the Borrowers and each of their Subsidiaries
a completed and fully executed Perfection Certificate and the results of UCC
searches with respect to the Collateral, indicating no liens other than
Permitted Liens and otherwise in form and substance reasonably satisfactory
to the Agent.
13.8 Title Insurance. The Agent shall have received endorsements
in connection with the Title Policies covering each Mortgaged Property from
the Title Insurance Company satisfactory to the Agent.
13.9 Certificates of Insurance. The Agent shall have received a
certificate of insurance from an independent insurance broker dated as of the
Closing Date, identifying insurers, types of insurance, insurance limits, and
policy terms, and otherwise describing the insurance obtained in accordance
with the provisions of the Security Agreements.
13.10 Solvency Opinion. The Agent shall have received an
opinion of Murray, Devine & Co. dated as of the Closing Date as to the
solvency of Holdings and its Subsidiaries following the consummation of the
transactions contemplated herein and in form and substance reasonably
satisfactory to the Agent.
13.11 Opinions of Counsel. Each of the Lenders and the Agent
shall have received favorable legal opinions addressed to the Lenders and the
Agent, dated as of the Closing Date, in form and substance reasonably
satisfactory to the Lenders and the Agent, from (a) Greenbaum, Rowe, Smith,
Ravin, & Davis, (b) Simpson Thacher & Bartlett, (c) Amster, Rothstein &
Ebenstein and (d) Bingham Dana LLP. Each of the Lenders and the Agent shall
also have received local counsel opinions, in form and substance reasonably
satisfactory to the Lenders and the Agent, required pursuant to the Senior
Subordinated Indenture
<PAGE>
13.12 Payment of Fees. The Borrowers shall have paid to the
Agent all fees and expenses due and payable hereunder.
13.13 Disbursement Instructions. The Agent shall have received
a Loan Request and disbursement instructions from the Borrowers, indicating,
in detail, the flow of funds to consummate the transactions referred to
herein.
13.14 Financial Position. The Agent, the Lenders and the
Arrangers shall be reasonably satisfied that the financial statements
referred to in Section 9.4 hereof fairly present the business and financial
position of the Persons covered thereby, as of the respective dates of such
statements. The Agent, the Lenders and the Arrangers shall have received a
reasonably satisfactory pro forma closing balance sheet, adjusted to give
effect to the Senior Subordinated Debt and the other transactions
contemplated hereby. The Agent, the Lenders and the Arrangers shall have
received projections satisfactory to them with respect to the Borrowers and
their Subsidiaries for the fiscal years 1999 through 2003.
13.15 Leverage Ratio; Availability. After giving effect to the
Term Loan, all Domestic Revolver Loan Requests, Hunter Revolver Loan
Requests, Bankers' Acceptance Notices, the conversion of Existing Letters of
Credit to Letters of Credit and all Letter of Credit Applications and the
Senior Subordinated Debt Documents, (a) the ratio of (i) Funded Debt as of
the Closing Date to (ii) Adjusted EBITDA on a pro forma basis for the
Borrowers and their Subsidiaries, for the period of twelve (12) months ended
November 30, 1998, shall not exceed 4.50:1.00, and (b) the Unused Commitment
shall not be less than $55,000,000.
13.16 No Adverse Changes. No material adverse change, in the
judgment of the Agent, the Lenders and the Arrangers, shall have occurred in
the business, assets or financial condition of the Borrowers and their
Subsidiaries, taken as a whole, since the most recent financial statements
provided to the Agent pursuant to Section 9.4.
13.17 No Litigation. As of the Closing Date except as set
forth on Schedule 9.7, there shall be no actions, orders, injunctions, suits,
proceedings or investigations of any kind pending or threatened against
Holdings or any of its Subsidiaries before any court, tribunal or
administrative agency or board in which there is a reasonable possibility of
an adverse determination which could, either in any case or in the aggregate,
materially adversely affect the ability of Holdings or any of its
Subsidiaries to perform under the Loan Documents, the Agent's or the Lenders'
rights in respect thereof or their ability to exercise such rights.
13.18 Senior Subordinated Debt. The Agent, the Lenders and the
Arrangers shall have received evidence reasonably satisfactory to the Agent,
the Lenders and the Arrangers that Holdings shall have received the gross
<PAGE>
proceeds from the Senior Subordinated Notes in an aggregate amount of not
less than $148,872,000.
13.19 Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Credit Agreement, the other Loan
Documents and all other documents incident thereto shall be reasonably
satisfactory in substance and in form to the to the Agent, the Lenders and
the Arrangers and the Agent's and Arrangers' Special Counsel, and the
Lenders, the Agent and such counsel shall have received all information and
such counterpart originals or certified or other copies of such documents as
the Agent may reasonably request.
13.20 Financial Markets. There shall be no material adverse
change or material disruption in the financial, banking or capital markets,
which in the reasonable judgment of the Agent, the Lenders and the Arrangers
would have a material adverse effect on the syndication of the Loans.
14. CONDITIONS TO ALL BORROWINGS.
The obligations (i) of the Lenders to make any Loan, including the
Revolving Credit Loans and the Term Loan, or to accept and/or purchase any
Bankers' Acceptances, (ii) of the Swing Line Bank to make any Swing Line Loan
and (iii) of the Agent to issue, extend or renew any Letter of Credit, in
each case whether on or after the Closing Date, shall also be subject to the
satisfaction of the following conditions precedent:
14.1 Representations True; No Event of Default. Each of the
representations and warranties of any of the Borrowers and their respective
Subsidiaries contained in this Credit Agreement, the other Loan Documents or
in any document or instrument delivered pursuant to or in connection with
this Credit Agreement shall be true at and as of the time of the making of
such Loan or the issuance, extension or renewal of such Letter of Credit, or
the purchase and/or acceptance of such Bankers' Acceptance, with the same
effect as if made at and as of that time (except to the extent of changes
resulting from transactions contemplated or permitted by this Credit
Agreement and the other Loan Documents and changes occurring in the ordinary
course of business that singly or in the aggregate are not materially
adverse, and to the extent that such representations and warranties relate
expressly to an earlier date) and no Default or Event of Default shall have
occurred and be continuing.
15. EVENTS OF DEFAULT; ACCELERATION; ETC.
15.1 Events of Default and Acceleration. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time
or both is required, then, prior to such notice or lapse of time, "Defaults")
shall occur:
<PAGE>
(a) the applicable Borrower shall fail to pay any principal
or premium, if any, of the Loans or any Bankers' Acceptances or any
Reimbursement Obligations when such principal, premium, Bankers'
Acceptances or Reimbursement Obligations shall become due and
payable, whether at the stated date of maturity or any accelerated
date of maturity or at any other date fixed for payment;
(b) the applicable Borrower or any of its Subsidiaries shall
fail to pay any interest on the Loans, the Acceptance Fee, the
commitment fee, any Letter of Credit Fee, the Agent's fee or other
sums due hereunder or under any of the other Loan Documents, within
three (3) days after notice that the same is due and payable;
(c) any Borrower or Guarantor shall fail to comply with any
of its covenants contained in Sections 10.5, 11.1 through 11.6,
11.7, 11.11, 11.15, 11.16 or 12;
(d) any Borrower, Guarantor or any of their Subsidiaries
shall fail to perform in any material respect any term, covenant or
agreement contained herein or in any of the other Loan Documents
(other than those specified elsewhere in this Section 15.1) for
thirty (30) days after written notice of such failure has been
given to the Borrowers by the Agent;
(e) any representation or warranty of the Borrowers, the
Guarantors or any of their Subsidiaries in this Credit Agreement or
any of the other Loan Documents or in any other document or
instrument delivered pursuant to or in connection with this Credit
Agreement shall prove to have been false in any material respect
upon the date when made or deemed to have been made or repeated;
(f) any Borrower, Guarantor or any of their Subsidiaries
shall fail to pay at maturity, or within any applicable period of
grace, any obligation for borrowed money, credit received or
Capitalized Leases, in each case in excess of $1,000,000 in the
aggregate, or fail to observe or perform any material term,
covenant or agreement contained in any agreement by which it is
bound, evidencing or securing borrowed money, credit received or
Capitalized Leases in each case in an amount in excess of
$1,000,000 in the aggregate for such period of time as would permit
(assuming the giving of appropriate notice if required) the holder
or holders thereof or of any obligations issued thereunder to
accelerate the maturity thereof;
(g) any Borrower, Guarantor or any of their Subsidiaries
shall make an assignment for the benefit of creditors, or admit in
writing its inability to pay or generally fail to pay its debts as
they mature or become due, or shall petition or apply for the
appointment of a trustee or other custodian, liquidator or receiver
<PAGE>
of such Borrower, Guarantor or any of their Subsidiaries or of any
substantial part of the assets of such Borrower, Guarantor or any
of their Subsidiaries or shall commence any case or other
proceeding relating to such Borrower, Guarantor or any of their
Subsidiaries under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or
similar law of any jurisdiction, now or hereafter in effect, or
shall take any action to authorize or in furtherance of any of the
foregoing, or if any such petition or application shall be filed or
any such case or other proceeding shall be commenced against any
Borrower, Guarantor or any of their Subsidiaries and such Borrower,
Guarantor or any of their Subsidiaries shall indicate its approval
thereof, consent thereto or acquiescence therein or such petition
or application shall not have been dismissed within sixty (60) days
following the filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating any Borrower,
Guarantor or any of their Subsidiaries bankrupt or insolvent, or
approving a petition in any such case or other proceeding, or a
decree or order for relief is entered in respect of any Borrower,
Guarantor or any of their Subsidiaries in an involuntary case under
federal bankruptcy laws as now or hereafter constituted which
remains undischarged or unstayed for more than thirty (30) days;
(i) there shall remain in force, undischarged, unsatisfied
and unstayed, for more than forty-five (45) days, any final
judgment against any Borrower, Guarantor or any of their
Subsidiaries from which no further appeal may be taken and the
uninsured portion of which, together with the uninsured portion of
other outstanding final judgments, undischarged, against the
Borrowers or any of their Subsidiaries exceeds in the aggregate
$1,000,000;
(j) if any of the Security Documents shall be cancelled,
terminated, revoked or rescinded otherwise than in accordance with
the terms thereof or with the express prior written agreement,
consent or approval of the Lenders, or any action at law, suit or
in equity or other legal proceeding to cancel, revoke or rescind
any of the Security Documents shall be commenced by or on behalf of
any Borrower, Guarantor or any of their Subsidiaries party thereto
or any of their respective stockholders, or any court or any other
governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or issue a judgment,
order, decree or ruling to the effect that, any one or more of the
Security Documents is illegal, invalid or unenforceable;
(k) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Majority Lenders shall
<PAGE>
have determined in their reasonable discretion that such event
reasonably could be expected to result in liability of any Borrower
or any of their Subsidiaries to the PBGC or such Guaranteed Pension
Plan in an aggregate amount exceeding $1,000,000 and such event in
the circumstances occurring reasonably could constitute grounds for
the termination of such Guaranteed Pension Plan by the PBGC or for
the appointment by the appropriate United States District Court of
a trustee to administer such Guaranteed Pension Plan; or a trustee
shall have been appointed by the United States District Court to
administer such Plan; or the PBGC shall have instituted proceedings
to terminate such Guaranteed Pension Plan;
(l) if the Investor Group shall at any time own, in the
aggregate, less than 51% of the outstanding capital stock of
Holdings on a fully diluted basis (giving effect to the exercise of
any outstanding warrants, options, or other similar rights to
subscribe for or purchase capital stock of Holdings, and the
conversion of any securities convertible into such capital stock);
(m) if officers, principals or employees of Vestar Capital
Partners, Inc. shall not at all times constitute a majority of or
control the general partners of Vestar/R-S Investment Limited
Partnership and Vestar Capital Partners III, L.P.; or
(n) the holders of all or any part of the Senior Subordinated
Debt shall accelerate the maturity of all or any part of the Senior
Subordinated Debt or the Senior Subordinated Debt shall be (or
shall be required at such time to be) prepaid, redeemed or
repurchased in whole or in part; or any Borrower or any of their
Subsidiaries shall be or become required under the Senior
Subordinated Indenture to prepay, redeem or repurchase (or shall be
or become required thereunder to offer to prepay, redeem or
repurchase) all or any part of the Senior Subordinated Debt whether
as a result of a "Change of Control" or otherwise;
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Lenders shall, by notice in writing
to the Borrowers declare all amounts owing with respect to this Credit
Agreement, the Notes and the other Loan Documents and all Reimbursement
Obligations to be, and they shall thereupon forthwith become, immediately due
and payable (together with any premium pursuant to Section 15.5) without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrowers; provided that in the event of any
Event of Default specified in Sections 15.1(g) or 15.1(h), all such amounts
shall become immediately due and payable automatically and without any
requirement of notice from the Agent or any Lender.
15.2 Termination of Commitments. If any one or more of the Events
of Default specified in Section 15.1(g) or Section 15.1(h) shall occur, any
<PAGE>
unused portion of the credit hereunder shall forthwith terminate and each of
the Lenders shall be relieved of all further obligations to make Loans to or
to accept and/or purchase Bankers' Acceptances from the Borrowers and the
Agent shall be relieved of all further obligations to issue, extend or renew
Letters of Credit. If any other Event of Default shall have occurred and be
continuing, the Agent may and, upon the request of the Majority Lenders,
shall, by notice to the Borrowers, terminate the unused portion of the credit
hereunder, and upon such notice being given such unused portion of the credit
hereunder shall terminate immediately and each of the Lenders shall be
relieved of all further obligations to make Loans and to accept and/or
purchase Bankers' Acceptances and the Agent shall be relieved of all further
obligations to issue, extend or renew Letters of Credit. No termination of
the credit hereunder shall relieve the Borrowers or any of their Subsidiaries
of any of the Obligations.
15.3 Remedies. In case any one or more of the Events of Default
shall have occurred and be continuing, the Agent may and each Lender, with
the concurrence of the Majority Lenders, but not otherwise, may proceed to
protect and enforce its rights by suit in equity, action at law or other
appropriate proceeding. No remedy herein conferred upon any Lender or the
Agent or the holder of any Note or purchaser of any Letter of Credit
Participation or Bankers' Acceptance is intended to be exclusive of any other
remedy and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or
in equity or by statute or any other provision of law.
15.4 Distribution of Collateral Proceeds. In the event that the
Agent receives any monies in connection with the enforcement of any the
Security Documents, or otherwise with respect to the realization upon any of
the Collateral, such monies shall be distributed for application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable
costs, expenses, disbursements and losses which shall have been
incurred or sustained by the Agent in connection with the
collection of such monies by the Agent, for the exercise,
protection or enforcement by the Agent of all or any of the rights,
remedies, powers and privileges of the Agent under this Credit
Agreement or any of the other Loan Documents or in respect of the
Collateral or in support of any provision of adequate indemnity to
the Agent against any taxes or liens which by law shall have, or
may have, priority over the rights of the Agent to such monies;
(b) Second, to all other Obligations on a pro rata basis,
provided, however, that distributions in respect of such
obligations shall be made (i) pari passu among Obligations with
respect to the Agent's fee payable pursuant to Section 7.2 and all
other Obligations and (ii) pari passu among Obligations owing to
the Lenders and the Hunter Fronting Bank with respect to each type
<PAGE>
of Obligation such as interest, principal, premium, fees and
expenses, shall be made among the Lenders and the Hunter Fronting
Bank pro rata; and provided, further, that the Agent may in its
discretion make proper allowance to take into account any
Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full or other
provisions for payment in full satisfactory to the Lenders and the
Agent of all of the Obligations, to the payment of any obligations
required to be paid pursuant to Section 9-504(1)(c) of the Uniform
Commercial Code of the Commonwealth of Massachusetts; and
(d) Fourth, the excess, if any, shall be returned to the
Borrowers or to such other Persons as are entitled thereto.
15.5 Term Loan Premium. As of the date on which all amounts owing
with respect to this Credit Agreement, the Notes and the other Loan Documents
and all Reimbursement Obligations become immediately due and payable pursuant
to Section 15.1, the Borrowers shall pay a premium with respect to the Term
Notes in an amount determined in accordance with the percentages set forth in
the table in Section 5.2(b) opposite the period during which such payment is
made or, if paid on or prior to July 23, 1999, 8.532%, and if paid after July
23, 1999 and prior to July 23, 2000, 7.584%.
16. SETOFF.
Regardless of the adequacy of any collateral, during the
continuance of any Event of Default, any deposits or other sums credited by
or due from any of the Lenders to the Borrowers and any securities or other
property of the Borrowers in the possession of such Lender may be applied to
or set off by such Lender against the payment of Obligations and any and all
other liabilities, direct, or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, of the Borrowers to such
Lender. Each of the Lenders agrees with each other Lender that (a) if an
amount to be set off is to be applied to Indebtedness of the Borrowers to
such Lender, other than Indebtedness evidenced by the Notes or Bankers'
Acceptances held by such Lender (including the Swing Line Note), or
constituting Reimbursement Obligations owed to such Lender, such amount shall
be applied ratably to such other Indebtedness and to the Indebtedness
evidenced by all such Notes or Bankers' Acceptances held by such Lender
(including the Swing Line Note) or constituting Reimbursement Obligations
owed to such Lender, and (b) if such Lender shall receive from any Borrower,
whether by voluntary payment, exercise of the right of setoff, counterclaim,
cross action, enforcement of the claim evidenced by the Notes or Bankers'
Acceptances held by, or constituting Reimbursement Obligations owed to, such
Lender (including the Swing Line Note) by proceedings against such Borrower
at law or in equity or by proof thereof in bankruptcy, reorganization,
liquidation, receivership or similar proceedings, or otherwise, and shall
retain and apply to the payment of the Notes or Bankers' Acceptances held by,
<PAGE>
or Reimbursement Obligations owed to, such Lender (including the Swing Line
Note) any amount in excess of its ratable portion of the payments received by
all of the Lenders with respect to Notes or Bankers' Acceptances held by, and
Reimbursement Obligations owed to, all of the Lenders (including the Swing
Line Note), such Lender will make such disposition and arrangements with the
other Lenders with respect to such excess, either by way of distribution, pro
tanto assignment of claims, subrogation or otherwise as shall result in each
Lender receiving in respect of the Notes or Bankers' Acceptances held by it
(including the Swing Line Note) or Reimbursement obligations owed it, its
proportionate payment as contemplated by this Credit Agreement; provided that
if all or any part of such excess payment is thereafter recovered from such
Lender, such disposition and arrangements shall be rescinded and the amount
restored to the extent of such recovery, but without interest.
17. THE AGENT.
17.1 Authorization.
(a) The Agent is authorized to take such action on behalf of
each of the Lenders and to exercise all such powers as are
hereunder and under any of the other Loan Documents and any related
documents delegated to the Agent, together with such powers as are
reasonably incident thereto, provided that no duties or
responsibilities not expressly assumed herein or therein shall be
implied to have been assumed by the Agent.
(b) The relationship between the Agent and each of the
Lenders is that of an independent contractor. The use of the term
"Agent" is for convenience only and is used to describe, as a form
of convention, the independent contractual relationship between the
Agent and each of the Lenders. Nothing contained in this Credit
Agreement nor the other Loan Documents shall be construed to create
an agency, trust or other fiduciary relationship between the Agent
and any of the Lenders.
(c) As an independent contractor empowered by the Lenders to
exercise certain rights and perform certain duties and
responsibilities hereunder and under the other Loan Documents, the
Agent is nevertheless a "representative" of the Lenders, as that
term is defined in Article 1 of the Uniform Commercial Code, for
purposes of actions for the benefit of the Lenders and the Agent
with respect to all collateral security and guaranties contemplated
by the Loan Documents. Such actions include the designation of the
Agent as "secured party", "mortgagee" or the like on all financing
statements and other documents and instruments, whether recorded or
otherwise, relating to the attachment, perfection, priority or
enforcement of any security interests, mortgages or deeds of trust
in collateral security intended to secure the payment or
<PAGE>
performance of any of the Obligations, all for the benefit of the
Lenders and the Agent.
17.2 Employees and Agents. The Agent may exercise its powers and
execute its duties by or through employees or agents and shall be entitled to
take, and to rely on, advice of counsel concerning all matters pertaining to
its rights and duties under this Credit Agreement and the other Loan
Documents. The Agent may utilize the services of such Persons as the Agent
in its sole discretion may reasonably determine.
17.3 No Liability. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in
good faith by it or them hereunder or under any of the other Loan Documents,
or in connection herewith or therewith, or be responsible for the
consequences of any oversight or error of judgment whatsoever, except that
the Agent or such other Person, as the case may be, may be liable for losses
due to its willful misconduct or gross negligence.
17.4 No Representations. The Agent shall not be responsible for
the execution or validity or enforceability of this Credit Agreement, the
Notes, the Bankers' Acceptances, the Letters of Credit, any of the other Loan
Documents or any instrument at any time constituting, or intended to
constitute, collateral security for the Notes or the Bankers' Acceptances, or
for the value of any such collateral security or for the validity,
enforceability or collectability of any such amounts owing with respect to
the Notes and the Bankers' Acceptances, or for any recitals or statements,
warranties or representations made herein or in any of the other Loan
Documents or in any certificate or instrument hereafter furnished to it by or
on behalf of the Borrowers or any of their Subsidiaries, or be bound to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, covenants or agreements herein or in any instrument at any time
constituting, or intended to constitute, collateral security for the Notes,
the Bankers' Acceptances or to inspect any of the properties, books or
records of the Borrowers or any of their Subsidiaries. The Agent shall not
be bound to ascertain whether any notice, consent, waiver or request
delivered to it by the Borrowers or any holder of any of the Notes, or any of
the Bankers' Acceptances shall have been duly authorized or is true, accurate
and complete. The Agent has not made nor does it now make any
representations or warranties, express or implied, nor does it assume any
liability to the Lenders, with respect to the credit worthiness or financial
conditions of the Borrowers or any of its Subsidiaries. Each Lender
acknowledges that it has, independently and without reliance upon the Agent
or any other Lender, and based upon such information and documents as it has
deemed appropriate, made its own credit analysis and decision to enter into
this Credit Agreement.
<PAGE>
17.5 Payments.
17.5.1 Payments to Agent. A payment by any Borrower to the
Agent hereunder or any of the other Loan Documents for the account
of any Lender shall constitute a payment to such Lender. The Agent
agrees promptly to distribute to each Lender such Lender's pro rata
share of payments received by the Agent for the account of the
Lenders except as otherwise expressly provided herein or in any of
the other Loan Documents.
17.5.2 Distribution by Agent. If in the opinion of the
Agent the distribution of any amount received by it in such
capacity hereunder, under the Notes, the Bankers' Acceptances or
under any of the other Loan Documents might involve it in
liability, it may refrain from making distribution until its right
to make distribution shall have been adjudicated by a court of
competent jurisdiction. If a court of competent jurisdiction shall
adjudge that any amount received and distributed by the Agent is to
be repaid, each Person to whom any such distribution shall have
been made shall either repay to the Agent its proportionate share
of the amount so adjudged to be repaid or shall pay over the same
in such manner and to such Persons as shall be determined by such
court.
17.5.3 Delinquent Lenders. Notwithstanding anything to the
contrary contained in this Credit Agreement or any of the other
Loan Documents, any Lender that fails (a) to make available to the
Agent its pro rata share of any Loan or to purchase any Letter of
Credit Participation or (b) to comply with the provisions of
Section 16 and Section 33 with respect to making dispositions and
arrangements with the other Lenders, where such Lender's share of
any payment received, whether by setoff or otherwise, is in excess
of its pro rata share of such payments due and payable to all of
the Lenders or (c) to purchase a risk participation in Bankers'
Acceptances, in each case as, when and to the full extent required
by the provisions of this Credit Agreement, shall be deemed
delinquent (a "Delinquent Lender") and shall be deemed a Delinquent
Lender until such time as such delinquency is satisfied. A
Delinquent Lender shall be deemed to have assigned any and all
payments due to it from the Borrowers, whether on account of
outstanding Loans, Bankers' Acceptances, Unpaid Reimbursement
Obligations, interest, fees or otherwise, to the remaining
nondelinquent Lenders for application to, and reduction of, their
respective pro rata shares of all outstanding Loans, Bankers'
Acceptances and Unpaid Reimbursement Obligations. The Delinquent
Lender hereby authorizes the Agent to distribute such payments to
the nondelinquent Lenders in proportion to their respective pro
rata shares of all outstanding Loans, Bankers' Acceptances and
Unpaid Reimbursement Obligations. A Delinquent Lender shall be
deemed to have satisfied in full a delinquency when and if, as a
result of application of the assigned payments to all outstanding
<PAGE>
Loans, Bankers' Acceptances and Unpaid Reimbursement Obligations of
the nondelinquent Lenders, the Lenders' respective pro rata shares
of all outstanding Loans, Bankers' Acceptances and Unpaid
Reimbursement Obligations have returned to those in effect
immediately prior to such delinquency and without giving effect to
the nonpayment causing such delinquency.
17.6 Holders of Notes. The Agent may deem and treat the payee of
any Note or the purchaser of any Letter of Credit Participation or Bankers'
Acceptances as the absolute owner or purchaser thereof for all purposes
hereof until it shall have been furnished in writing with a different name by
such payee or by a subsequent holder, assignee or transferee.
17.7 Indemnity. The Lenders ratably agree hereby to indemnify and
hold harmless the Agent from and against any and all claims, actions and
suits (whether groundless or otherwise), losses, damages, costs, expenses
(including any expenses for which the Agent has not been reimbursed by the
Borrowers as required by Section 18), and liabilities of every nature and
character arising out of or related to this Credit Agreement, the Notes, or
any of the other Loan Documents or the transactions contemplated or evidenced
hereby or thereby, or the Agent's actions taken hereunder or thereunder,
except to the extent that any of the same shall be directly caused by the
Agent's willful misconduct or gross negligence.
17.8 Agent as Lender. In its individual capacity, BKB shall have
the same obligations and the same rights, powers and privileges in respect to
its Commitment and the Loans made by it, and as the holder of any of the
Notes and as the purchaser of any Letter of Credit Participations or
participating interests in Bankers' Acceptances, as it would have were it not
also the Agent.
17.9 Resignation. The Agent may resign at any time by giving sixty
(60) days prior written notice thereof to the Lenders and the Borrowers.
Such resignation shall not be effective until a successor Agent shall have
been appointed. Upon any such resignation, the Majority Lenders shall have
the right to appoint a successor Agent. Unless a Default or Event of Default
shall have occurred and be continuing, such successor Agent shall be
reasonably acceptable to the Borrowers. If no successor Agent shall have
been so appointed by the Majority Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Agent's giving of
notice of resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent, which shall be a financial institution having a
rating of not less than A or its equivalent by Standard & Poor's Ratings
Group. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation, the
provisions of this Credit Agreement and the other Loan Documents shall
<PAGE>
continue in effect for its benefit in respect of any actions taken or omitted
to be taken by it while it was acting as Agent.
17.10 Notification of Defaults and Events of Default. Each
Lender hereby agrees that, upon learning of the existence of a Default or an
Event of Default, it shall promptly notify the Agent thereof. The Agent
hereby agrees that upon receipt of any notice under this Section 17.10 it
shall promptly notify the other Lenders of the existence of such Default or
Event of Default.
17.11 Duties in the Case of Enforcement. In case one or more
Events of Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Agent shall, if (a)
so requested by the Majority Lenders and (b) the Lenders have provided to the
Agent such additional indemnities and assurances against expenses and
liabilities as the Agent may reasonably request, proceed to enforce the
provisions of the Security Documents authorizing the sale or other
disposition of all or any part of the Collateral and exercise all or any such
other legal and equitable and other rights or remedies as it may have in
respect of such Collateral. The Majority Lenders may direct the Agent in
writing as to the method and the extent of any such sale or other
disposition, the Lenders hereby agreeing to indemnify and hold the Agent,
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, provided that the Agent need not
comply with any such direction to the extent that the Agent reasonably
believes the Agent's compliance with such direction to be unlawful or
commercially unreasonable in any applicable jurisdiction.
18. EXPENSES.
Each Borrower agrees to pay (a) the reasonable costs of the Agent
of producing and reproducing this Credit Agreement, the other Loan Documents
and the other agreements and instruments mentioned herein, (b) the reasonable
fees, expenses and disbursements (including reasonable legal fees and
expenses related to due diligence) of the Agent and the Arrangers, including
any such fees and expenses incurred by the Agent's and Arrangers' Special
Counsel or any local counsel to the Agent and Arrangers incurred in
connection with the preparation, negotiation and execution of the Loan
Documents and other instruments mentioned herein, each closing hereunder, the
syndication hereof, and amendments, modifications, approvals, consents, or
waivers hereto or hereunder, provided that prior to the occurrence of a
Default or an Event of Default the Borrowers shall not be required to pay the
fees, expenses and disbursements of local counsel to the Agent with respect
to matters as to which local counsel has been retained by the Borrowers
unless the Agent reasonably determines that the retention of such additional
local counsel is necessary to protect the rights of the Agent and the Lenders
under this Agreement and the other Loan Documents, (c) all engineering and
appraisal charges and charges of other experts reasonably retained by the
Agent in connection with the transactions contemplated hereby, (d) all
<PAGE>
reasonable out-of-pocket expenses (including without limitation reasonable
attorneys' fees and costs, which attorneys may be employees of any Lender or
the Agent, incurred by any Lender or the Agent in connection with (i) the
enforcement of any of the Loan Documents against the Borrowers or any of
their Subsidiaries after the occurrence of a Default or Event of Default and
(ii) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to any Lender's or the Agent's relationship
with the Borrowers or any of their Subsidiaries except any of the foregoing
which result from the gross negligence or willful misconduct of such Lender
or the Agent and (e) all reasonable disbursements of the Agent incurred in
connection with UCC searches, UCC filings or mortgage recordings required
hereunder. The covenants of this Section 18 shall survive payment or
satisfaction of all other Obligations.
19. INDEMNIFICATION.
Each of the Borrowers agrees to jointly and severally indemnify and
hold harmless the Agent, Arrangers, Lenders and the Hunter Fronting Bank as
well as the Agent's, Arrangers', Lenders' and Hunter Fronting Banks'
shareholders, directors, agents, officers, subsidiaries, partners and
affiliates, from and against all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of action, and reasonable
costs and expenses incurred (including settlement costs), suffered, sustained
or required to be paid by an indemnified party by reason of or resulting from
the transactions contemplated hereby, including, without limitation, (a) any
actual or proposed use by such Borrower or any of its Subsidiaries of the
proceeds of any of the Loans or Letters of Credit or Bankers' Acceptances,
(b) the reversal or withdrawal of any provisional credits granted by the
Agent upon the transfer of funds from lock box, bank agency or concentration
accounts or in connection with the provisional honoring of checks or other
items or with any other automated cash management agreements between the
Agent and any Borrower or Guarantor, (c) any actual or alleged infringement
of any patent, copyright, trademark, service mark or similar right of such
Borrower or any of its Subsidiaries comprised in the Collateral, (d) with
respect to such Borrower and its Subsidiaries and their respective properties
and assets, the violation of any Environmental Law by the Borrowers or any of
their Subsidiaries, or the presence, release or threatened release of any
Hazardous Substances except any of the foregoing which result from the gross
negligence or willful misconduct of the indemnified party or its agents or
conduct by the indemnified party or its agents inconsistent with the Asset
Conservation Lender Liability and Deposit Insurance Protection Act of 1996,
provided that any Person whose costs are caused by that Person's own bad
faith, gross negligence or willful misconduct shall not be indemnified with
respect to such costs under this Section 19. In any investigation,
proceeding or litigation, or the preparation therefor, the Hunter Fronting
Bank or such Lender shall be entitled to select its own counsel and, in
addition to the foregoing indemnity, each of the Borrowers agrees to pay
promptly the reasonable fees and expenses of such counsel. The covenants
<PAGE>
contained in this Section 19 shall survive payment or satisfaction in full of
all other Obligations.
20. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made
herein, in the Notes, in any of the other Loan Documents or in any documents
or other papers delivered by or on behalf of the Borrowers or any of their
Subsidiaries pursuant hereto shall be deemed to have been relied upon by the
Lenders and the Agent, notwithstanding any investigation heretofore or
hereafter made by any of them, and shall survive the making by the Lenders of
any of the Loans and the issuance, extension or renewal of any Letters of
Credit and the acceptance and/or purchase of any Bankers' Acceptances, as
herein contemplated, and shall continue in full force and effect so long as
any Letter of Credit or any amount due under this Credit Agreement, the Notes
or any of the other Loan Documents remains outstanding or any Lender has any
obligation to make any Loans or purchase or accept any Bankers' Acceptances
or the Agent has any obligation to issue, extend or renew any Letter of
Credit, and for such further time as may be otherwise expressly specified in
this Credit Agreement.
21. ASSIGNMENT AND PARTICIPATION.
21.1 Conditions to Assignment by Lenders. Except as provided
herein, each Lender may, in compliance with applicable law, assign to one or
more Eligible Assignees all or a portion of its interests, rights and
obligations under this Credit Agreement (including all or a portion of its
Commitment Percentage, Term Loan Percentage, and Revolving Credit Commitment
and the same portion of the Loans at the time owing to it, the Notes held by
it and its participating interest in the risk relating to any Letters of
Credit or Bankers' Acceptance); provided that (a) each of the Agent and,
unless a Default or Event of Default shall have occurred and be continuing,
Russell-Stanley shall have given its prior written consent to such
assignment, each of which consents will not be unreasonably withheld, (b)
each assignment shall be in an amount of not less than $5,000,000 if to a
Lender not party to the Credit Agreement, or, if less, the entire amount of
any Lender's Revolving Credit Commitment and Loans outstanding, provided that
no assignment under this Section 21 shall result in the selling Lender's
Revolving Credit Commitment plus the sum of the outstanding principal amounts
under such Lender's Term Notes, less any portion of such Lender's Revolving
Credit Commitment or Term Note that has been sold as a participation, being
greater than $0 and less than $5,000,000; provided further that nothing in
this clause (b) shall prevent a Lender from assigning or selling a
participation in the entire amount of such Lender's Revolving Credit
Commitment and Loans outstanding (c) the parties to such assignment shall
execute and deliver to the Agent, for recording in the Register (as
hereinafter defined), an Assignment and Acceptance, substantially in the form
of Exhibit H hereto (an "Assignment and Acceptance"), together with any Notes
subject to such assignment. Upon such execution, delivery, acceptance and
<PAGE>
recording, from and after the effective date specified in each Assignment and
Acceptance (x) the assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder, and (y) the assigning Lender shall, to the
extent provided in such assignment and upon payment to the Agent of the
registration fee referred to in Section 21.3, be released from its
obligations under this Credit Agreement.
21.2 Certain Representations and Warranties; Limitations;
Covenants. By executing and delivering an Assignment and Acceptance, the
parties to the assignment thereunder confirm to and agree with each other and
the other parties hereto as follows:
(a) other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned thereby
free and clear of any adverse claim, the assigning Lender makes no
representation or warranty, express or implied, and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Credit Agreement
or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant
hereto or the attachment, perfection or priority of any security
interest or mortgage,
(b) the assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial
condition of the Borrowers and their Subsidiaries or any other
Person primarily or secondarily liable in respect of any of the
Obligations, or the performance or observance by the Borrowers and
their Subsidiaries or any other Person primarily or secondarily
liable in respect of any of the Obligations of any of their
obligations under this Credit Agreement or any of the other Loan
Documents or any other instrument or document furnished pursuant
hereto or thereto;
(c) such assignee confirms that it has received a copy of
this Credit Agreement, together with copies of the most recent
financial statements referred to in Section 9.4 and Section 10.4
and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance;
(d) such assignee will, independently and without reliance
upon the assigning Lender, the 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 decisions in taking or
not taking action under this Credit Agreement;
<PAGE>
(e) such assignee represents and warrants that it is an
Eligible Assignee;
(f) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers
under this Credit Agreement and the other Loan Documents as are
delegated to the Agent by the terms hereof or thereof, together
with such powers as are reasonably incidental thereto;
(g) such assignee agrees that it will perform in accordance
with their terms all of the obligations that by the terms of this
Credit Agreement are required to be performed by it as a Lender;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements
with the assigning Lender satisfactory to such assignee with
respect to its pro rata share of Letter of Credit Fees in respect
of outstanding Letters of Credit.
21.3 Register. The Agent shall maintain a copy of each Assignment
and Acceptance delivered to it and a register or similar list (the
"Register") for the recordation of the names and addresses of the Lenders and
the Commitment Percentage of, and principal amount of the Revolving Credit
Loans owing to and Letter of Credit Participations purchased by, the Lenders
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrowers, the Agent and the Lenders may
treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Credit Agreement. The Register shall be
available for inspection by the Borrowers and the Lenders at any reasonable
time and from time to time upon reasonable prior notice. Upon each such
recordation, the assigning Lender agrees to pay to the Agent a registration
fee in the sum of $3,500, provided that such registration fee shall be
limited to $500 in the case of assignments to any Person who is a Lender or
an affiliate of any Lender prior to the effectiveness of such assignment.
21.4 New Notes. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note subject
to such assignment, the Agent shall (a) record the information contained
therein in the Register, and (b) give prompt notice thereof to the Borrowers
and the Lenders (other than the assigning Lender). Within five (5) Business
Days after receipt of such notice, the Borrowers, at their own expense, shall
execute and deliver to the Agent, in exchange for each surrendered Note, a
new Note to the order of such Eligible Assignee in an amount equal to the
amount assumed by such Eligible Assignee pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained some portion of its
obligations hereunder, a new Note to the order of the assigning Lender in an
amount equal to the amount retained by it hereunder. Such new Notes shall
<PAGE>
provide that they are replacements for the surrendered Notes, shall be in an
aggregate principal amount equal to the aggregate principal amount of the
surrendered Notes, shall be dated the effective date of such in Assignment
and Acceptance and shall otherwise be substantially the form of the assigned
Notes. Within five (5) days of issuance of any new Notes pursuant to this
Section 21.4 and at the request of the Agent, the Borrowers shall deliver an
opinion of counsel, addressed to the Lenders and the Agent, relating to the
due authorization, execution and delivery of such new Notes and the legality,
validity and binding effect thereof, in form and substance satisfactory to
the Lenders. The surrendered Notes shall be cancelled and returned to the
applicable Borrower.
21.5 Participations. Each Lender may sell participations to one or
more banks or other entities in all or a portion of such Lender's rights and
obligations under this Credit Agreement and the other Loan Documents;
provided that (a) each such participation shall be in an amount of not less
than $5,000,000 if to a Lender not party to the Credit Agreement, or, if
less, the entire amount of any Lender's Revolving Credit Commitment and Loans
outstanding, provided that no sale of a participation under this Section 21
shall result in the selling Lender's Revolving Credit Commitment plus the sum
of the outstanding principal amounts under such Lender's Term Notes, less any
portion of such Lender's Revolving Credit Commitment or Term Note that has
been sold as a participation, being greater than $0 and less than $5,000,000;
provided further that nothing in this clause (a) shall prevent a Lender from
assigning or selling a participation in the entire amount of such Lender's
Revolving Credit Commitment and Loans outstanding, (b) any such sale or
participation shall not affect the rights and duties of the selling Lender
hereunder to the Borrowers, (c) the only rights granted to the participant
pursuant to such participation arrangements with respect to waivers,
amendments or modifications of the Loan Documents shall be the rights to
approve waivers, amendments or modifications that would reduce the principal
of or the interest rate on any Loans, reduce the amount payable with respect
to any Bankers' Acceptance on the maturity date thereof, extend the term or
increase the amount of the Revolving Credit Commitment of such Lender as it
relates to such participant, reduce the amount of any commitment fees or
Letter of Credit Fees to which such participant is entitled or extend any
regularly scheduled payment date for principal or interest and (d) all
amounts payable by the Borrowers hereunder shall be determined as if such
Lender had not sold such participation, except that the participant shall be
entitled to the benefits of Sections 7.3.2, 7.7, 7.8 and 32 of this Agreement
but only to the extent that such Lender would be entitled to such benefits if
the participation had not been entered into or sold.
21.6 Disclosure. Each Borrower agrees that in addition to
disclosures made in accordance with standard and customary banking and
insurance company practices any Lender may disclose information obtained by
such Lender pursuant to this Credit Agreement to assignees or participants
and potential assignees or participants hereunder; provided that such
assignees or participants or potential assignees or participants shall agree
<PAGE>
(a) to treat in confidence such information unless such information otherwise
becomes public knowledge, (b) not to disclose such information to a third
party, except as required by law or legal process and (c) not to make use of
such information for purposes of transactions unrelated to such contemplated
assignment or participation.
21.7 Assignee or Participant Affiliated with the Borrowers. If any
assignee Lender is an Affiliate of the Borrowers, then any such assignee
Lender shall have no right to vote as a Lender hereunder or under any of the
other Loan Documents for purposes of granting consents or waivers or for
purposes of agreeing to amendments or other modifications to any of the Loan
Documents or for purposes of making requests to the Agent pursuant to
Section 15.1 or Section 15.2, and the determination of the Majority Lenders
shall for all purposes of this Agreement and the other Loan Documents be made
without regard to such assignee Lender's interest in any of the Loans. If
any Lender sells a participating interest in any of the Loans or
Reimbursement Obligations or Bankers' Acceptances to a participant, and such
participant is a Borrower or an Affiliate of the Borrowers, then such
transferor Lender shall promptly notify the Agent of the sale of such
participation. A transferor Lender shall have no right to vote as a Lender
hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or
modifications to any of the Loan Documents or for purposes of making requests
to the Agent pursuant to Section 15.1 or Section 15.2 to the extent that such
participation is beneficially owned by a Borrower or any Affiliate of the
Borrowers, and the determination of the Majority Lenders shall for all
purposes of this Agreement and the other Loan Documents be made without
regard to the interest of such transferor Lender in the Loans or Bankers'
Acceptances to the extent of such participation.
21.8 Miscellaneous Assignment Provisions. Any assigning Lender
shall retain its rights to be indemnified pursuant to Section 18 with respect
to any claims or actions arising prior to the date of such assignment. If
any assignee Lender is not incorporated under the laws of the United States
of America or any state thereof, it shall, prior to the date on which any
interest or fees are payable hereunder or under any of the other Loan
Documents for its account, deliver to the Borrowers and the Agent
certification as to its exemption from deduction or withholding of any United
States federal income taxes. Anything contained in this Section 21 to the
contrary notwithstanding, any Lender may at any time pledge all or any
portion of its interest and rights under this Credit Agreement (including all
or any portion of its Notes) to any of the twelve Federal Reserve Lenders
organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341.
No such pledge or the enforcement thereof shall release the pledgor Lender
from its obligations hereunder or under any of the other Loan Documents.
21.9 Assignment by Borrowers. No Borrower shall assign or transfer
any of its rights or obligations under any of the Loan Documents without the
prior written consent of each of the Lenders.
<PAGE>
22. NOTICES, ETC.
Except as otherwise expressly provided in this Credit Agreement,
all notices and other communications made or required to be given pursuant to
this Credit Agreement, the Notes or any Letter of Credit Applications shall
be in writing and shall be delivered in hand, mailed by United States
registered or certified first class mail, postage prepaid, sent by overnight
courier, or sent by telegraph, telecopy, facsimile or telex and confirmed by
delivery via courier or postal service, addressed as follows:
(a) if to the Borrowers, at 685 Route 202/206, Bridgewater
08807, Attention: Daniel Miller, or at such other address for
notice as the Borrowers shall last have furnished in writing to the
Person giving the notice;
(b) if to the Agent, at 100 Federal Street, Boston,
Massachusetts 02110, USA, Attention: Mark Forti, Vice President, or
such other address for notice as the Agent shall last have
furnished in writing to the Person giving the notice;
(c) if to the Hunter Fronting Bank, at such address for
notice as such Lender shall have last furnished in writing to the
Person giving the notice with a copy to the Agent; and
(d) if to any Lender, at such Lender's address set forth on
Schedule 1 hereto, or such other address for notice as such Lender
shall have last furnished in writing to the Person giving the
notice.
Any such notice or demand shall be deemed to have been duly given
or made and to have become effective (x) if delivered by hand, overnight
courier or facsimile to a responsible officer of the party to which it is
directed, at the time of the receipt thereof by such officer or the sending
of such facsimile and (y) if sent by registered or certified first-class
mail, postage prepaid, on the third Business Day following the mailing
thereof.
23. GOVERNING LAW.
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY
PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW).
EACH BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF
THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND
CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF
PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWERS BY MAIL AT THE ADDRESS
<PAGE>
SPECIFIED IN Section 22. EACH BORROWER HEREBY WAIVES ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR
THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
24. HEADINGS.
The captions in this Credit Agreement are for convenience of
reference only and shall not define or limit the provisions hereof.
25. COUNTERPARTS.
This Credit Agreement and any amendment hereof may be executed in
several counterparts and by each party on a separate counterpart, each of
which when executed and delivered shall be an original, and all of which
together shall constitute one instrument. In proving this Credit Agreement
it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought.
26. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection
herewith or therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Credit
Agreement nor any term hereof may be changed, waived, discharged or
terminated, except as provided in Section 28.
27. WAIVER OF JURY TRIAL.
No Borrower, Guarantor or any Subsidiary of the Borrowers and the
Guarantors, nor any successor, assign or personal representative of such
Person shall seek a jury trial in any lawsuit, proceeding, counterclaim or
any other litigation procedure based upon or arising out of the Notes, this
Credit Agreement, the Security Documents, the other Loan Documents, or any
related instrument or agreement, any collateral for the payment hereof or the
dealings or the relationship between or among such persons or entities, or
any of them. None of the Borrowers and Guarantors nor any such person or
entity will seek to consolidate any such action, in which a jury trial has
been waived, with any other action in which a jury trial cannot or has not
been waived. The provisions of this Section 27 have been fully discussed by
each of the Borrowers, the Guarantors and the Lenders, and the provisions
hereof shall be subject to no exceptions. No party has in any way agreed
with or represented to any other party that the provisions of this Section 27
will not be fully enforced in all instances.
28. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Any consent or approval required or permitted by this Credit
Agreement to be given by all of the Lenders may be given, and any term of
this Credit Agreement, the other Loan Documents or any other instrument
<PAGE>
related hereto or mentioned herein may be amended, and the performance or
observance by the Borrowers or any of their Subsidiaries of any terms of this
Credit Agreement, the other Loan Documents or such other instrument or the
continuance of any Default or Event of Default may be waived (either
generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Borrowers and
the written consent of the Majority Lenders. Notwithstanding the foregoing,
(a) (i) the rate of interest on the Notes (other than interest accruing
pursuant to Section 7.11 following the effective date of any waiver by the
Majority Lenders of the Default or Event of Default relating thereto) may not
be decreased, (ii) the term of the Notes and the scheduled dates of payment
with respect thereto may not be extended (except for extension as a result of
amendment to the provisions relating to the timing of mandatory prepayments),
(iii) the amount of the Revolving Credit Commitments, and Term Loan
Percentages of the Lenders may not be increased, and (iv) the amount of
commitment fee or Letter of Credit Fees or any premium hereunder, in any case
may not be decreased without the written consent of the Borrowers and the
written consent of each Lender affected thereby; (b)(i) the definition of
Majority Lender and this Section 28 may not be amended, (ii) in any fiscal
year of Holdings collateral having a value of in excess of $3,000,000 may not
be released (except to the extent otherwise provided for in Section 11.5.2),
and (iii) no Guarantor may be released from its Guaranty, in any case without
the written consent of all of the Lenders; (c) the amount of the Agent's Fee
or any Letter of Credit Fees payable for the Agent's account and Section 17
may not be amended without the written consent of the Agent; and (d) the pari
passu nature of the Obligations in respect of Revolving Credit Loans and Term
Loans may not be changed without the consent of each Lender adversely
affected thereby. No waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon. No course of
dealing or delay or omission on the part of the Agent or any Lender in
exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. No notice to or demand upon the Borrowers shall entitle
the Borrowers to other or further notice or demand in similar or other
circumstances. Notwithstanding the foregoing, in any fiscal year of Holdings
the Agent may, in its sole discretion, release collateral having an aggregate
value of up to $3,000,000. If the Agent has notified in writing any Lender of
any Borrower's request for any consent, approval, waiver or amendment
hereunder and such Lender has not responded within ten (10) Business Days
after such notification, such Lender shall have been deemed to have consented
to such request for consent, approval, waiver or amendment.
29. GUARANTY.
29.1 Guaranty. The Obligations of each Domestic Borrower to the
Lenders hereunder shall be guaranteed by each Domestic Subsidiary of each
Domestic Borrower pursuant to this Section 29 and the Obligations of Hunter
to the Lenders hereunder shall be guaranteed by each Domestic Borrower
pursuant to this Section 29 (in both cases, the "Guaranty"); provided that
no Domestic Subsidiary of any Borrower shall be required to guarantee the
<PAGE>
Obligations of any Domestic Borrower if such Domestic Subsidiary is also a
Domestic Borrower.
29.2 Guaranteed Obligations. Each of the Guarantors acknowledges
that such Guarantor and the Borrowers are members of a group of related
companies and that they expect to derive substantial direct and indirect
benefits from the extensions of credit by the Agent and the Lenders to the
Borrowers pursuant hereto. For value received and hereby acknowledged and as
an inducement to the Lenders to make the Loans available to and to accept
and/or purchase Bankers' Acceptances from the Borrowers and for BKB to issue
the Letters of Credit for the account of Russell-Stanley, each of the
Guarantors hereby unconditionally and irrevocably, jointly and severally
guarantee the full punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all obligations of the Borrowers covered by its
guaranty under Section 29.1 now or hereafter existing hereunder and under the
Notes or the other Loan Documents, whether for principal, premium, interest,
fees, expenses, or otherwise (such obligations collectively being the
"Guaranteed Obligations").
29.3 Guaranty Absolute. The Guarantors guarantee that the
Guaranteed Obligations will be paid strictly in accordance with the terms
hereof and of the Notes, and the Bankers' Acceptances regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of the Lenders with respect thereto to the
extent permitted by law. The guaranty provided by each Guarantor hereunder
is a guaranty of payment and not merely of collection. Each Guarantor's
Guaranteed Obligations are independent of, and separate from, the Obligations
of the Borrowers and the Guaranteed Obligations of the other Guarantors, and
shall not be released by, but shall survive as if the same have not been
made, any and all payments by any obligor of the Obligations or Guaranteed
Obligations or the application of any proceeds from or collateral security
for the Obligations or Guaranteed Obligations until all of such obligations
are fully paid and finally discharged. The liability of each Guarantor under
this Guaranty with regard to the Guaranteed Obligations of the Borrowers
shall, to the extent permitted by law, be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of this Credit
Agreement with respect to the Borrowers (with regard to such
Guaranteed Obligations), the Notes of the Borrowers, or any other
agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term, of, all or any of the Guaranteed Obligations or
any other amendment or waiver of or any consent to departure from
any of the terms of the Loan Documents;
(c) any exchange, release or nonperfection of a lien on any
collateral, or any release or amendment or waiver of or consent to
<PAGE>
departure from any other guaranty, for all or any of the Guaranteed
Obligations of the Borrowers;
(d) any change in ownership of the Borrowers;
(e) any acceptance of any partial payment(s) from the
Borrowers; or
(f) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Borrowers in respect
of the Guaranteed Obligations.
This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Guaranteed
Obligations is rescinded or must otherwise be returned by the Lenders upon
the insolvency, bankruptcy or reorganization of the Borrowers or otherwise,
all as though such payment had not been made.
29.4 Authorized Actions. Each Guarantor authorizes the Agent and
the Lenders in their discretion, without notice to such Guarantor,
irrespective of any change in the financial condition of the Borrowers, such
Guarantor or any other Guarantor since the date hereof, and without affecting
or impairing in any way the liability of such Guarantor hereunder, from time
to time to (a) create new Guaranteed Obligations and, either before or after
receipt of notice of revocation, renew, compromise, extend, accelerate or
otherwise change the time for payment or performance of, or otherwise change
the terms of the Guaranteed Obligations or any part thereof, including
increase or decrease of the rate of interest thereon; (b) take and hold
security for the payment or performance of the Guaranteed Obligations and
exchange, enforce, waive or release any such security; (c) apply such
security and direct the order or manner of sale thereof; (d) purchase such
security at public or private sale; (e) otherwise exercise any right or
remedy it may have against the Borrowers, such Guarantor, any other Guarantor
or any security, including, without limitation, the right to foreclose upon
any such security by judicial or non-judicial sale; (f) settle, compromise
with, release or substitute any one or more makers, endorsers or guarantors
of the Guaranteed Obligations; and (g) subject to Section 21, assign the
Guaranteed Obligations, the provisions of this Section 29, or any of the Loan
Documents in whole or in part.
29.5 Effectiveness; Enforcement. The Guaranty herein of the
Guarantors shall be effective and shall be deemed to be made with respect to
each Loan made to the Borrowers as of the time it is made and with respect to
each Letter of Credit issued as of the time of issuance and with respect to
each Banker's Acceptance at the time of acceptance and/or purchase thereof.
No invalidity, irregularity or unenforceability by reason of any bankruptcy
or similar law, or any law or order of any government or agency thereof
purporting to reduce, amend or otherwise affect any liability of the
Borrowers, and no defect in or insufficiency or want of powers of the
<PAGE>
Borrowers or irregular or improperly recorded exercise thereof, shall impair,
affect, be a defense to or claim against this Guaranty. This Guaranty is a
continuing guaranty and shall (a) survive any termination of this Agreement
and (b) remain in full force and effect until payment in full of, and
performance of all Guaranteed Obligations and all other amounts payable under
these guaranties. This Guaranty is made for the benefit of the Agent and the
Lenders and their successors and assigns, and may be enforced from time to
time as often as occasion therefor may arise.
29.6 Waiver. Each Guarantor to the extent permitted by law hereby
waives promptness, diligence, protest, notice of protest, all suretyship
defenses, notice of acceptance and any other notice with respect to any of
the Guaranteed Obligations and this guaranty and any requirement that the
Lenders protect, secure, perfect or otherwise take action to ensure any
security interest or lien or any property subject thereto or exhaust any
right or take any action against the Borrowers or any other Person or any
collateral. Each Guarantor also irrevocably waives, to the fullest extent
permitted by law, all defenses which at any time may be available to it in
respect of the Guaranteed Obligations by virtue of any statute of
limitations, valuation, stay, moratorium law or other similar law now or
hereafter in effect. Further, each Guarantor expressly waives the right to
require the Agent or any Lender first to (a) pursue the Borrowers or any
other Guarantor or any other Person, (b) proceed against or exhaust any
collateral, or any other security or guaranty that may be held for the
Obligations or the Guaranteed Obligations, or to apply any such security or
guaranty to the Obligations or Guaranteed Obligations or (c) pursue any other
remedy in the Agent's or any Lender's power whatsoever, before seeking from
such Guarantor payment in full of its Guaranteed Obligations or proceeding
against such Guarantor for same.
29.7 Subordination; Subrogation Rights. Until the payment and
performance in full of all Obligations, (a) no Guarantor shall exercise any
rights against the Borrowers arising as a result of payment by such Guarantor
hereunder, and no Guarantor will prove any claim in competition with the
Lenders or any affiliate of any Lenders in respect of any payment hereunder
in bankruptcy or insolvency proceedings of any nature; (b) no Guarantor will
claim any set-off or counterclaim against the Borrowers in respect of any
liability of such Guarantor to the Borrowers; and (c) each Guarantor waives
any benefit of and any right to participate in any collateral which may be
held by the Lenders or any affiliate of any Lenders. The payment of any
amounts due with respect to any Indebtedness of the Borrowers now or
hereafter held by any Guarantor is hereby subordinated to the prior payment
in full of the Obligations. Each Guarantor agrees that after the occurrence
of any default Event of Default, such Guarantor will not demand, sue for, or
otherwise attempt to collect any such Indebtedness of the Borrowers to such
Guarantor until the Obligations shall have been paid in full. If,
notwithstanding the foregoing sentence, any Guarantor shall collect or
receive any amounts in respect of such Indebtedness, such amounts shall be
collected and received by such Guarantor as trustee for the Agent for the
<PAGE>
benefit of the Lenders and be paid over to the Agent for the benefit of the
Agent and the Lenders on account of the Obligations without affecting in any
manner the liability of such Guarantor under the other provisions of its
Guaranty. Notwithstanding any other provision of this Section 29, each
Guarantor hereby waives all rights of subrogation against the Borrowers until
such time as the Guaranteed Obligations have been fully paid and performed.
Each Guarantor hereby acknowledges that the waiver contained in the preceding
sentence (the "Subrogation Waiver") is given as an inducement to the Agent
and the Lenders to consummate the transactions contemplated by this Credit
Agreement, the other Loan Documents and any other agreement referred to
herein and, in consideration of the willingness of the Agent and the Lenders
to consummate said transactions, each Guarantor agrees that it shall not in
any way amend or modify the Subrogation Waiver without the prior written
consent of all of the Lenders. The Subrogation Waiver and the provisions of
this section shall survive the expiration or termination of the Credit
Agreement and the other Loan Documents.
29.8 Concerning Joint and Several Liability of the Guarantors.
(a) Each of the Guarantors is accepting joint and several
liability hereunder and under the other Loan Documents to the
extent set for in Section 29.1 in consideration of the financial
accommodations to be provided by the Agent and the Lenders under
this Credit Agreement, for the mutual benefit, directly and
indirectly, of each of the Guarantors and in consideration of the
undertakings of each other Guarantor to accept joint and several
liability for the Guaranteed Obligations.
(b) Each of the Guarantors, jointly and severally, hereby
irrevocably and unconditionally accepts not merely as a surety but
also as a co-debtor, joint and several liability with the Borrowers
and the other Guarantors to the extent set forth in Section 29.1,
with respect to the payment and performance of all of the
Guaranteed Obligations (including, without limitation, any
Guaranteed Obligations arising under this Section 29), it being the
intention of the parties hereto that all the Guaranteed Obligations
shall be the joint and several obligations of each of the Borrowers
and the Guarantors without preferences or distinction among them.
(c) If and to the extent that the Borrowers or any Guarantor
shall fail to make any payment with respect to any of the
Guaranteed Obligations as and when due or to perform any of the
Guaranteed Obligations in accordance with the terms thereof, then
in each such event the other Guarantors will make such payment with
respect to, or perform, such Guaranteed Obligation.
(d) The Guaranteed Obligations of each of the Guarantors
under the provisions of this Section 29 constitute full recourse
obligations of each of the Guarantors enforceable against each
<PAGE>
Guarantor to the full extent of its properties and assets,
irrespective of the validity, regularity or enforceability of this
Credit Agreement or any other circumstance whatsoever.
(e) Except as otherwise expressly provided in this Credit
Agreement, each of the Guarantors hereby waives notice of
acceptance of its joint and several liability, notice of any Loans
made or Letters of Credit issued or Banker's Acceptances accepted
and/or purchased under this Credit Agreement, notice of any action
at any time taken or omitted by the Agent or the Lenders under or
in respect of any of the Guaranteed Obligations, and, generally, to
the extent permitted by applicable law, all demands, notices and
other formalities of every kind in connection with this Credit
Agreement. Each of the Guarantors hereby assents to, and waives
notice of, any extension or postponement of the time for the
payment of any of the Guaranteed Obligations, the acceptance of any
payment of any of the Guaranteed Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or
acquiescence by the Agent or the Lenders at any time or times in
respect of any default by any of the Borrowers or the Guarantors in
the performance or satisfaction of any term, covenant, condition or
provision of this Credit Agreement, any and all other indulgences
whatsoever by the Agent or the Lenders in respect of any of the
Guaranteed Obligations, and the taking, addition, substitution or
release, in whole or in part, at any time or times, of any security
for any of the Guaranteed Obligations or the addition, substitution
or release, in whole or in part, of any of the Borrowers or the
Guarantors. Without limiting the generality of the foregoing, each
of the Guarantors assents to any other action or delay in acting or
failure to act on the part of the Lenders or the Agent with respect
to the failure by any of the Borrowers or the Guarantors to comply
with any of its respective Guaranteed Obligations, including,
without limitation, any failure strictly or diligently to assert
any right or to pursue any remedy or to comply fully with
applicable laws or regulations thereunder, which might, but for the
provisions of this Section 29, afford grounds for terminating,
discharging or relieving any of the Borrowers or the Guarantors, in
whole or in part, from any of its Guaranteed Obligations hereunder,
it being the intention of each of the Guarantors that, so long as
any of the Obligations hereunder remain unsatisfied, the Guaranteed
Obligations of such Guarantors under this Section 29 shall not be
discharged except by performance and then only to the extent of
such performance. The Guaranteed Obligations of each of the
Guarantors under this Section 29 shall not be diminished or
rendered unenforceable by any winding up, reorganization,
arrangement, liquidation, reconstruction or similar proceeding with
respect to any of the Borrowers or the Guarantors or the Lenders or
the Agent. The joint and several liability of the Guarantors
hereunder shall continue in full force and effect notwithstanding
<PAGE>
any absorption, merger, consolidation, amalgamation or any other
change whatsoever in the name, membership, constitution or place of
formation of the Borrowers or any of the Guarantors or any of the
Lenders or the Agent.
(f) Each Guarantor shall be liable under this Credit
Agreement only for the maximum amount of such liabilities that can
be incurred under applicable law without rendering this Credit
Agreement, as it relates to such Guarantor, voidable under
applicable law relating to fraudulent conveyance and fraudulent
transfer, and not for any greater amount. Accordingly, if any
provisions of this Credit Agreement creating any obligation of any
Guarantor in favor of any Lender or the Agent shall be declared to
be invalid or unenforceable in any respect or to any extent, it is
the stated intention and agreement of the Guarantors, the Agent,
and the Lenders that any balance of the obligation created by such
provision and all other obligations of the Guarantors to the
Lenders or the Agent created by other provisions of this Credit
Agreement shall remain valid and enforceable, and that all sums not
in excess of those permitted under applicable law shall remain
fully collectible by the Lenders and the Agent from the Guarantors.
(g) The provisions of this Section 29 are made for the
benefit of the Agent and the Lenders and their successors and
assigns, and may be enforced in good faith by them from time to
time against any or all of the Guarantors as often as occasion
therefor may arise and without requirement on the part of the Agent
or the Lenders first to marshal any of their claims or to exercise
any of their rights against the Borrowers or any other Guarantors
or to exhaust any remedies available to them against the Borrowers
or any other Guarantors or to resort to any other source or means
of obtaining payment of any of the obligations hereunder or to
elect any other remedy. The provisions of this Section 29 shall
remain in effect until all of the Guaranteed Obligations shall have
been paid in full or otherwise fully satisfied and the Revolving
Credit Commitments have expired. If at any time, any payment, or
any part thereof, made in respect of any of the Guaranteed
Obligations, is rescinded or must otherwise be restored or returned
by the Lenders, or the Agent upon the insolvency, bankruptcy or
reorganization of the Borrowers or any of the Guarantors, or
otherwise, the provisions of this Section 29 will forthwith be
reinstated in effect, as though such payment had not been made.
29.9 New Guarantors. In the event that, after the Closing Date,
any of the Borrowers or any Guarantor acquires or initiates the incorporation
or organization of a new Domestic Subsidiary of the Borrowers, such Domestic
Subsidiary shall concurrently with such event or as soon as practicable
thereafter execute and deliver to the Agent an instrument of joinder and
accession, in form and substance satisfactory to the Agent and the Lenders,
<PAGE>
pursuant to which such newlycreated or acquired Domestic Subsidiary shall
join this Credit Agreement, and shall accede to all of the rights and
obligations of a Guarantor hereunder and thereunder, and, pursuant thereto
shall, among other things, guaranty the complete payment and performance of
the Guaranteed Obligations and make the waivers set forth herein (including,
without limitation, those set forth in Section 29.6 hereof), provided that no
consent to such guarantee by the shareholders of such Domestic Subsidiary
other than any Borrower or Guarantor (such consent referred to herein as
"Minority Shareholder Consent") that has not been obtained is required and,
provided further, such Minority Shareholder Consent has not been obtained by
the Borrowers after reasonable efforts. Further, such Domestic Subsidiary
shall grant to the Agent for the benefit of the Lenders a security interest
in substantially all of its assets to secure its obligations under this
Guaranty (including, without limitation, the granting of mortgages on such
Guarantor's Real Estate to the extent required under Section 10.13), and
shall execute and/or deliver to the Agent such other documentation as the
Agent may reasonably request in furtherance of the intent of this
Section 29.9, including, without limitation, documentation of the type
required to be supplied by the initial Guarantors as a condition precedent to
the initial Loans made hereunder pursuant to Section 13 hereof.
30. SEVERABILITY.
The provisions of this Credit Agreement are severable and if any
one clause or provision hereof shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof,
in such jurisdiction, and shall not in any manner affect such clause or
provision in any other jurisdiction, or any other clause or provision of this
Credit Agreement in any jurisdiction.
31. WITHHOLDING TAXES.
The Borrowers hereby agree that:
(a) Any and all payments made by any of the Borrowers hereunder
shall be made free and clear of, and without deduction for, any and all
present or future taxes, levies, fees, duties, imposts, deductions,
charges or withholdings of any nature whatsoever, excluding, in the case
of the Agents or the Lenders or any holder of the Notes or the Bankers'
Acceptances, (i) taxes imposed on, or measured by, its net income or
profits, (ii) franchise taxes imposed on it, (iii) taxes imposed by any
jurisdiction as a direct consequence of it, or any of its affiliates,
having a present or former connection with such jurisdiction, including,
without limitation, being organized, existing or qualified to do
business, doing business or maintaining a permanent establishment or
office in such jurisdiction, and (iv) taxes imposed by reason of its
failure to comply with any applicable certification, identification,
information, documentation or other reporting requirement (all such
<PAGE>
non-excluded taxes being hereinafter referred to as "Indemnifiable
Taxes"). In the event that any withholding or deduction from any
payment to be made by the Borrowers hereunder is required in respect of
any Indemnifiable Taxes pursuant to any applicable law, or governmental
rule or regulation, then the Borrowers will (1) pay to the relevant
taxing authority the full amount required to be so withheld or deducted,
(2) forward to the Agent for delivery to the applicable Lender an
official receipt or other documentation satisfactory to the Agent and
the applicable Lender evidencing such payment to such taxing authority,
and (3) pay to the Agent for the account of the relevant Lenders or to
the Hunter Fronting Bank, as applicable, such additional amount or
amounts as is necessary to ensure that the net amount actually received
by each relevant Lender will equal the full amount such Lender would
have received had no such withholding or deduction (including any
Indemnifiable Taxes on such additional amounts) been required; provided
that the Borrowers shall not be required to pay the additional amounts
described in clause (3) above to the Agent or any Lender if the Agent
and/or such Lender has not complied with the requirements set forth in
Section 7.3.4 of this Credit Agreement. Moreover, if any Indemnifiable
Taxes are directly asserted against the Agent or any Lender with respect
to any payment received by the Agent or such Lender by reason of the
Borrowers' failure to properly deduct and withhold such Indemnifiable
Taxes from such payment, the Agent or such Lender may pay such
Indemnifiable Taxes and the Borrowers will promptly pay all such
additional amounts (including any penalties, interest or reasonable
expenses) as is necessary in order that the net amount received by such
Person after the payment of such Indemnifiable Taxes (including any
Indemnifiable Taxes on such additional amount) shall equal the amount
such Person would have received had not such Indemnifiable Taxes been
asserted. Any such payment shall be made promptly after the receipt by
the Borrowers from the Agent or such Lender, as the case may be, of a
written statement setting forth in reasonable detail the amount of the
Indemnifiable Taxes and the basis of the claim.
(b) The Borrowers shall pay any present or future stamp or
documentary taxes or any other excise or any other similar levies which
arise from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Document ("Other Taxes").
(c) The Borrowers hereby indemnify and hold harmless the Agent and
each Lender for the full amount of Indemnifiable Taxes or Other Taxes
(including, without limitation, any Indemnifiable Taxes or Other Taxes
imposed on amounts payable under this Section 31) paid by the Agent or
such Lender, as the case may be, and any liability (including penalties,
interest and reasonable expenses) arising therefrom or with respect
thereto, by reason of the Borrowers' failure to properly deduct and
withhold Indemnifiable Taxes pursuant to paragraph (a) above or to
properly pay Other Taxes pursuant to paragraph (b) above; provided that
the Borrowers shall not be required to indemnify and hold harmless the
<PAGE>
Agent or any Lender for any Indemnifiable Taxes to the extent such
Indemnifiable Taxes are imposed on the Agent or any Lender as a result
of the Agent's and/or such Lender's failure to comply with the
requirements set forth in Section 7.3.4 of this Credit Agreement. Any
indemnification payment from the Borrowers under the preceding sentence
shall be made promptly after receipt by the Borrowers from the Agent or
Lender of a written statement setting forth in reasonable detail the
amount of such Indemnifiable Taxes or such Other Taxes, as the case may
be, and the basis of the claim, together with copies of official
receipts of other documentation evidencing the payment of such
Indemnification Taxes, as the case may be.
(d) If the Borrowers pay any amount under this Section 31 to the
Agent or any Lender and such payee knowingly receives a refund of any
taxes with respect to which such amount was paid, the Agent or such
Lender, as the case may be, shall pay to the Borrowers the amount of
such refund promptly following the receipt thereof by such payee.
(e) In the event any taxing authority notifies any of the
Borrowers that any of them has improperly failed to deduct or withhold
any taxes (other than Indemnifiable Taxes) from a payment made hereunder
to the Agent or any Lender, the Borrowers shall timely and fully pay
such taxes to such taxing authority.
(f) The Agent or the Lenders shall, upon the request of the
Borrowers, take reasonable measures to avoid or mitigate the amount of
Indemnifiable Taxes required to be deducted or withheld from any payment
made hereunder if such measures reasonably can be taken without such
Person in its reasonable judgment suffering any legal, regulatory or
economic disadvantage.
(g) Without prejudice to the survival of any other agreement of
the parties hereunder, the agreements and obligations of the Borrowers
contained in this Section 31 shall survive the payment in full of the
Obligations.
32. JOINT AND SEVERAL LIABILITY; LIMITATION OF LIABILITY.
(a) Notwithstanding anything herein to the contrary, each of the
Domestic Borrowers covenants and agrees that all Obligations with
respect to all Loans, Reimbursement Obligations and any other
Obligations payable to the Agent or any of the Lenders shall constitute
the joint and several obligation of such Borrower. Each of the Domestic
Borrowers, to the fullest extent permitted by applicable law, is
accepting joint and several liability for the Obligations of the
Borrowers hereunder and under the other Loan Documents in consideration
of the financial accommodation to be provided by the Agent and the
Lenders under this Credit Agreement, for the mutual benefit, directly or
indirectly, of each of the Domestic Borrowers and in consideration of
<PAGE>
the undertakings of each other Domestic Borrower to accept the joint and
several liability for the Obligations of the Borrowers, and hereby
accepts such joint and several liability on the same terms, mutatis
mutandis, as provided in Section 29.8.
(b) Notwithstanding anything herein to the contrary, Hunter shall
have no liability for any Obligations other than obligations with
respect to the Hunter Revolver Loans and Bankers' Acceptances.
33. PARI PASSU TREATMENT.
(a) Notwithstanding anything to the contrary set forth herein,
each payment or prepayment of principal and interest received after the
occurrence of an Event of Default hereunder shall be distributed pari
passu among the Lenders, in accordance with the aggregate outstanding
principal amount of the Obligations owing to each Lender (including its
Letter of Credit Participations and any Reimbursement Obligations owing
to it and including any Bankers' Acceptances) divided by the aggregate
outstanding principal amount of all Obligations (including any
Obligations not then due and payable).
(b) Following the occurrence and during the continuance of any
Event of Default, each Lender agrees that if it shall, through the
exercise of a right of banker's lien, setoff or counterclaim (pursuant
to Section 15 or otherwise), including a secured claim under Section 506
of the Bankruptcy Code or other security or interest arising from or in
lieu of, such secured claim, received by such Lender under any
applicable bankruptcy, insolvency or other similar law or otherwise,
obtain payment (voluntary or involuntary) in respect of the Notes,
Loans, Bankers' Acceptances and other Obligations held by it as a result
of which the unpaid principal portion of the Notes and the Obligations
held by it shall be proportionately less than the unpaid principal
portion of the Notes and Obligations held by any other Lender, it shall
be deemed to have simultaneously purchased from such other Lender a
participation in the Notes and Obligations held by such other Lender, so
that the aggregate unpaid principal amount of the Notes, Obligations and
participations in Notes and Obligations held by each Lender shall be in
the same proportion to the aggregate unpaid principal amount of the
Notes and Obligations then outstanding as the principal amount of the
Notes and other Obligations held by it prior to such exercise of
banker's lien, setoff or counterclaim was to the principal amount of all
Notes and other Obligations outstanding prior to such exercise of
banker's lien, setoff or counterclaim; provided, however, that if any
such purchase or purchases or adjustments shall be made pursuant to this
Section 33 and the payment giving rise thereto shall thereafter be
recovered, such purchase or purchases or adjustments shall be rescinded
to the extent of such recovery and the purchase price or prices or
adjustments restored without interest.
<PAGE>
(c) Following the occurrence and during the continuance of any
Event of Default, each Lender agrees that it shall be deemed to have,
automatically upon the occurrence of such Event of Default, purchased
from each other Lender a participation in the risk associated with the
Notes and Obligations held by such other Lender, so that the aggregate
principal amount of the Notes and Obligations held by each Lender
divided by the aggregate principal amount of all of the Notes and
Obligations then outstanding shall be equal to such Lender's Overall
Percentage as at the date of such Event of Default. Upon demand by the
Agent, made at the request of the Majority Lenders, each Lender that has
purchased such participation shall pay the amount of such participation
to one or more Lender(s) whose outstanding Loans and Letter of Credit
Participations exceed their respective Overall Percentages as at such
date.
(d) The Domestic Borrowers expressly consent to the foregoing
arrangements and agree that any Person holding such a participation in
the Notes and the Obligations deemed to have been so purchased may
exercise any and all rights of banker's lien, setoff or counterclaim
with respect to any and all moneys owing by any Domestic Borrower to
such Person as fully as if such Person had made a Loan directly to such
Domestic Borrower in the amount of such participation.
Section 34. TRANSITIONAL ARRANGEMENTS.
Section 34.1 Fourth Restated Credit Agreement Superseded. This
Credit Agreement shall supersede the Fourth Restated Credit Agreement in its
entirety, except as provided in this Section 34. On the Closing Date, the
rights and obligations of the parties under the Fourth Restated Credit
Agreement and the "Notes" and "Swing Line Note" as defined therein shall be
subsumed within and be governed by this Credit Agreement and the Notes;
provided, however, that each of the "Revolving Credit Loans" (as defined in
the Fourth Restated Credit Agreement) outstanding under the Fourth Restated
Credit Agreement on the Closing Date shall, for purposes of this Credit
Agreement, be included as Revolving Credit Loans (as defined herein) and each
of the "Letters of Credit" (as defined in the Fourth Restated Credit
Agreement) outstanding under the Fourth Restated Credit Agreement on the
Closing Date shall be Letters of Credit (as defined herein). The rights and
obligations of each Lender under the Fourth Restated Credit Agreement in
respect of its "Commitment Percentage" and "Domestic Revolver Commitment"
under the Fourth Restated Credit Agreement (as such "Commitment Percentage"
and "Domestic Revolver Commitment" are set forth on Schedule 1 thereto) shall
be replaced with such Lender's rights and obligations in respect of its
Commitment Percentage and Revolving Credit Commitment hereunder (as such
Commitment Percentages and Revolving Credit Commitments are set forth on
Schedule 1 hereto), and the Lenders with Revolving Credit Commitments
hereunder shall make any appropriate adjustments among themselves to effect
such reallocations.
<PAGE>
Section 34.2 Return and Cancellation of Notes. Upon its receipt
of the Notes to be delivered hereunder on the Closing Date, each Bank will
promptly return to the Borrowers, marked "Exchanged" or "Cancelled", as
applicable, the Notes and Swing Line Note of the Borrowers held by such Bank
pursuant to the Fourth Restated Credit Agreement, if any.
Section 34.3 Interest and Fees Under Superseded Agreement. All
interest and all commitment and other fees and expenses owing or accruing
under or in respect of the Fourth Restated Credit Agreement shall be
calculated as of the Closing Date (prorated in the case of any fractional
periods), and shall be paid on the Closing Date.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
RUSSELL-STANLEY HOLDINGS, INC.
By: /s/ Daniel W. Miller
--------------------------------
Name: Daniel W. Miller
Title: Executive Vice
President and Chief
Financial Officer
RUSSELL-STANLEY CORP. (successor by
merger to Vestar/R-S Holdings
Corporation)
By: /s/ Daniel W. Miller
--------------------------------
Name: Daniel W. Miller
Title: Executive Vice
President and Chief
Financial Officer
RUSSELL-STANLEY, INC. (f/k/a
Russell-Stanley Midwest, Inc.,
successor by merger to
Russell-Stanley West, Inc.,
Russell-Stanley Southwest, Inc. and
R-S Southwest Realty, Inc.)
By: /s/ Daniel W. Miller
--------------------------------
Name: Daniel W. Miller
Title: Executive Vice
President and Chief
Financial Officer
<PAGE>
RSLPCO, INC.
By: /s/ Daniel W. Miller
--------------------------------
Name: Daniel W. Miller
Title: Executive Vice
President and Chief
Financial Officer
RUSSELL-STANLEY, L.P.
By: Russell-Stanley, Inc., its
General Partner
By: /s/ Daniel W. Miller
--------------------------------
Name: Daniel W. Miller
Title: Executive Vice
President and Chief
Financial Officer
CONTAINER MANAGEMENT SERVICES, INC.
(successor by merger to CMS
Acquisition, Inc.)
By: /s/ Daniel W. Miller
--------------------------------
Name: Daniel W. Miller
Title: Executive Vice
President and Chief
Financial Officer
HUNTER DRUMS LIMITED (successor by
amalgamation of HDL Acquisition,
Inc.)
By: /s/ Daniel W. Miller
--------------------------------
Name: Daniel W. Miller
Title: Executive Vice
President and Chief
Financial Officer
<PAGE>
NEW ENGLAND CONTAINER CO., INC.
By: /s/ Daniel W. Miller
--------------------------------
Name: Daniel W. Miller
Title: Executive Vice
President and Chief
Financial Officer
BANKBOSTON, N.A. (f/k/a The First
National Bank of Boston),
individually and as Agent
By: /s/ Mark J. Forti
--------------------------------
Name: Mark J. Forti
Title: Vice President
GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually and as Syndication Agent
By: /s/ Stephen B. King
--------------------------------
Name: Stephen B. King
Title: Authorized Signatory
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Steven M. Benevento
--------------------------------
Name: Steven M. Benevento
Title: Director
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION
By: NEW YORK LIFE INSURANCE
COMPANY
By: /s/ Steven M. Benevento
--------------------------------
Name: Steven M. Benevento
Title: Director
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY
By: /s/ Patricia W. Wilson
--------------------------------
Name: Patricia W. Wilson
Title: Authorized Signatory
By: /s/ Daniel C. Leimbach
--------------------------------
Name: Daniel C. Leimbach
Title: Authorized Signatory
COMERICA BANK
By: /s/ Kimberly S. Kersten
--------------------------------
Name: Kimberly S. Kersten
Title: Vice President
SUMMIT BANK
By: /s/ Seiji P. Nakamura
--------------------------------
Name: Seiji P. Nakamura
Title: Assistant Vice
President Summit Bank
THE BANK OF NOVA SCOTIA
By: /s/ Stephen Lockhart
--------------------------------
Name: Stephen Lockhart
Title: Vice President
BHF-BANK AKTIENGESELLSCHAFT
By: /s/ Hans J. Scholz
--------------------------------
Name: Hans J. Scholz
Title: Assistant Vice
President
By: /s/ Anthony Heyman
--------------------------------
Name: Anthony Heyman
Title: Assistant Vice
President
<PAGE>
THE FIRST NATIONAL BANK OF MARYLAND,
a division of FNB Bank
By: /s/ John C. Acker
--------------------------------
Name: John C. Acker
Title: Vice President
EXHIBIT 10.2
EXECUTION COPY
STOCK PURCHASE AGREEMENT
Among
VINCENT J. BUONANNO,
NEW ENGLAND CONTAINER CO., INC.
and
RUSSELL-STANLEY HOLDINGS, INC.
dated as of
July 21, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
ARTICLE I
<S> <C> <C>
PURCHASE AND SALE OF SHARES.......................................................................................1
1.1 Transfer by Seller of Shares...............................................................1
1.2 Consideration..............................................................................1
1.3 The Closing................................................................................1
1.4 Minimum Amount of Net Working Capital......................................................4
1.5 Further Assurances.........................................................................5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER..........................................................................5
2.1 Corporate Organization.....................................................................5
2.2 Capitalization.............................................................................6
2.3 Ownership of Stock.........................................................................6
2.4 Authorization, Etc.........................................................................6
2.5 Financial Statements.......................................................................7
2.6 No Undisclosed Liabilities.................................................................7
2.7 No Approvals or Conflicts..................................................................7
2.8 Compliance with Law; Governmental Authorizations...........................................7
2.9 Litigation.................................................................................8
2.10 Assets....................................................................................8
2.11 Absence of Certain Changes................................................................8
2.12 Taxes.....................................................................................8
2.13 Employee Benefits........................................................................10
2.14 Labor Relations..........................................................................11
2.15 Patents, Trademarks, Trade Names, Etc....................................................12
2.16 Contracts................................................................................12
2.17 Environmental Matters....................................................................13
2.18 Insurance................................................................................14
2.19 Transactions with Affiliates.............................................................14
2.20 Material Customers and Suppliers.........................................................14
2.21 Real Property............................................................................14
2.22 Investment Company Act Status............................................................16
2.23 Product Liability........................................................................16
2.24 Books and Records........................................................................16
2.25 No Brokers' or Other Fees................................................................17
2.26 Specialty Disability and Life Insurance..................................................17
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE III
<S> <C> <C>
REPRESENTATIONS AND WARRANTIES OF BUYER....................................17
3.1 Organization..............................................................................17
3.2 Authorization Etc.........................................................................17
3.3 No Approvals or Conflicts.................................................................17
3.4 Capitalization............................................................................18
3.5 No Brokers' or Other Fees.................................................................18
3.6 Stockholders' Agreements..................................................................18
ARTICLE IV
CONDITIONS TO SELLER'S OBLIGATIONS.......................................18
4.1 Representations and Warranties............................................................18
4.2 Performance...............................................................................19
4.3 Officer's Certificate.....................................................................19
4.4 HSR Act...................................................................................19
4.5 Injunctions...............................................................................19
4.6 Letter Agreements.........................................................................19
4.7 Investor Agreement........................................................................19
ARTICLE V
CONDITIONS TO BUYER'S OBLIGATION........................................19
5.1 Representations and Warranties............................................................19
5.2 Performance...............................................................................19
5.3 Officers' Certificate.....................................................................20
5.4 Resignation of Directors..................................................................20
5.5 HSR Act...................................................................................20
5.6 Injunctions...............................................................................20
5.7 Consents..................................................................................20
5.8 Affiliate Agreements......................................................................20
5.9 Existing Indebtedness and Other Obligations...............................................20
5.10 Employment/Noncompetition Agreements.....................................................21
5.11 Investor Agreement.......................................................................21
5.12 IRS Form.................................................................................21
ARTICLE VI
COVENANTS AND AGREEMENTS............................................21
6.1 Conduct of Business by Company............................................................21
6.2 Access to Books and Records; Cooperation..................................................22
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
6.3 Filings and Consents......................................................................23
6.4 Tax Matters...............................................................................23
6.5 WARN Act..................................................................................29
6.6 No Negotiation............................................................................29
6.7 Covenant to Satisfy Conditions............................................................29
6.8 Disability Insurance......................................................................29
6.9 Environmental Insurance Policy. .........................................................30
ARTICLE VII
TERMINATION..................................................30
7.1 Termination...............................................................................30
7.2 Procedure and Effect of Termination.......................................................30
ARTICLE VIII
INDEMNIFICATION................................................31
8.1 Indemnification...........................................................................31
ARTICLE IX
MISCELLANEOUS.................................................34
9.1 Fees and Expenses.........................................................................34
9.2 Governing Law.............................................................................34
9.3 Amendment.................................................................................35
9.4 No Assignment.............................................................................35
9.5 Waiver....................................................................................35
9.6 Notices...................................................................................35
9.7 Complete Agreement........................................................................36
9.8 Counterparts..............................................................................37
9.9 Publicity.................................................................................37
9.10 Headings.................................................................................37
9.11 Severability.............................................................................37
9.12 Third Parties............................................................................37
9.13 CONSENT TO JURISDICTION AND SERVICE OF PROCESS...........................................37
9.14 WAIVER OF JURY TRIAL.....................................................................38
</TABLE>
-iii-
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "AGREEMENT"), dated as of
July 21, 1998, is entered into by and among Vincent J. Buonanno (the "SELLER"),
New England Container Co., Inc, a Rhode Island corporation (the "COMPANY"), and
Russell-Stanley Holdings, Inc., a Delaware corporation (the "BUYER").
WHEREAS, the Seller owns, beneficially and of record, an
aggregate of 8,857 (all such shares collectively, the "SHARES") of common stock,
$.01 par value per share (the "COMMON STOCK"), of the Company, which constitute
all of the issued and outstanding equity securities of the Company;
WHEREAS, the Buyer desires to purchase from the Seller, and
the Seller desires to sell to the Buyer, all of the Shares upon the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants contained herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 TRANSFER BY SELLER OF SHARES. On the Closing Date (as
defined in Section 1.3 hereof) and subject to the terms and conditions set forth
in this Agreement, the Seller will sell, assign, transfer and deliver to the
Buyer the Shares, free and clear of all options, pledges, mortgages, security
interests, liens, restrictions on voting or transfer or other encumbrances of
any nature ("ENCUMBRANCES"), other than the restrictions imposed by Federal and
state securities laws.
1.2 CONSIDERATION. On the Closing Date and subject to the
terms and conditions set forth in this Agreement, in reliance on the
representations, warranties, covenants and agreements of the parties contained
herein and in consideration of the sale, assignment, transfer and delivery of
the Shares, the Buyer will pay the consideration set forth in Section 1.3(b)
hereof (the "PURCHASE PRICE").
1.3 THE CLOSING. Unless this Agreement shall have been
terminated and the transactions contemplated herein shall have been abandoned
pursuant to Article VII hereof, the closing (the "CLOSING") of the transactions
contemplated by this Agreement shall take place at the offices of Simpson
Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017, as soon as
practicable following the satisfaction or waiver of all of the conditions set
forth in Articles IV and V hereof (the "CLOSING DATE"), or at such other place
and time as may be agreed upon by the Seller and the Buyer.
(a) DELIVERIES BY SELLER. At or prior to the Closing, the
Seller shall deliver or cause to be delivered to the Buyer the following:
<PAGE>
2
(i) certificates evidencing the Shares, which certificates
shall be properly endorsed for transfer or accompanied by duly executed stock
powers, in either case executed in blank or in favor of the Buyer, and otherwise
in a form acceptable for transfer on the books of the Company;
(ii) resignations of the members of the Board of Directors of
the Company as contemplated by Section 5.4 hereof; and
(iii) all other previously undelivered documents required by
this Agreement to be delivered by the Seller to the Buyer at or prior to the
Closing Date in connection with the transactions contemplated hereby.
(b) DELIVERIES BY THE BUYER. At or prior to the Closing, the
Buyer shall deliver or cause to be delivered to or for the benefit of the Seller
the following:
(i) an aggregate amount equal to:
(t) $14,000,000; MINUS
(u) $1,290,595 plus interest thereon at a
per diem rate of $293.52 from July 1, 1998
through the Closing Date (the "CITIZENS
LIBOR TERM LOAN PAYOFF AMOUNT"); MINUS
(v) $788,611 plus interest thereon at a per
diem rate of $179.19 from July 1, 1998
through the Closing Date (the "CITIZENS
PRIME RATE TERM LOAN PAYOFF AMOUNT"); MINUS
(w) $370,446.50 (the "RBB DEFERRED PURCHASE
PRICE PAYMENT"); MINUS
(x) $429,355 (such reduction representing
consideration for the Buyer's agreement to
have the Company to continue to be obligated
to make the deferred purchase price payments
pursuant to Section 2(b)(ii) of the Asset
Purchase Agreement dated October 21, 1996
between the Company and Gordon D. Garratt
Co., Inc.); MINUS
(y) the Estimated Adjustment Amount (as
defined in Section 1.3(c); PLUS
(z) an amount equal to all cash and cash
equivalents of the Company as shown on the
general ledger of the Company on the date of
Closing in accordance with GAAP (including
without limitation any cash in the petty
cash and payroll accounts of the Company as
of the Closing), net of the aggregate amount
of all outstanding checks of the Company,
by wire transfer of immediately available funds to the
account designated by the Seller
<PAGE>
3
in writing at least two business days prior to the Closing Date or, if no such
account has been designated, by bank check;
(ii) certificates representing 24,243 fully paid and
nonassessable shares of common stock, par value $0.01 per share, of the Buyer
(the "Buyer Common Stock"); and
(iii) all other previously undelivered documents required by
this Agreement to be delivered by the Buyer to the Seller at or prior to the
Closing Date in connection with the transactions contemplated hereby.
(c) At least two business days prior to the Closing Date, the
Company shall deliver to the Buyer its good faith estimate of the Adjustment
Amount (as defined in Section 1.4) (such estimated amount, the "ESTIMATED
ADJUSTMENT AMOUNT"). The Estimated Adjustment Amount shall be prepared not later
than two business days prior to the Closing Date in consultation with the Buyer
and its representatives. The parties shall use their reasonable best efforts to
resolve in good faith any disagreement between them concerning the computation
of the Estimated Adjustment Amount; provided, however that, if the parties are
unable to resolve any such disagreement, the Estimated Adjustment Amount shall
be the estimate prepared by the Company.
(d) Section 1.3(d) of the Disclosure Schedule specifies the
payment instructions of the Seller and the Company with respect to the Citizens
LIBOR Term Loan Payoff Amount, the Citizens Prime Rate Term Loan Payoff Amount
and the RBB Deferred Purchase Price Payment. The Seller hereby requests, and the
Company hereby agrees, that, pursuant to the instructions of the Seller and the
Company set forth in Section 1.3(d) of the Disclosure Schedule, on the Closing
Date, the Buyer shall first make the payments with respect to the Citizens LIBOR
Term Loan Payoff Amount, the Citizens Prime Rate Term Loan Payoff Amount and the
RBB Deferred Purchase Price Payment. After the above-mentioned payments have
been made and confirmation thereof with respect to the Citizens LIBOR Term Loan
Payoff Amount and the Citizens Prime Rate Term Loan Payoff Amount has been
received by the Buyer and the Company in a form reasonably satisfactory to each
of the Buyer and the Company, the Buyer shall then make payment and delivery to
the Seller in accordance with Sections 1.3(b)(i) and 1.3(b)(ii).
(e) All instruments and documents executed and delivered to
the Buyer pursuant hereto shall be in form and substance, and shall be executed
in a manner, reasonably satisfactory to the Buyer. All instruments and documents
executed and delivered to the Seller pursuant hereto shall be in form and
substance, and shall be executed in a manner, reasonably satisfactory to the
Seller.
1.4 MINIMUM AMOUNT OF NET WORKING CAPITAL.
(a) MINIMUM AMOUNT OF NET WORKING CAPITAL. As of the Closing,
the Company shall have a minimum amount of Net Working Capital of $2.15 million.
"NET WORKING CAPITAL" means (i) the sum of (A) accounts receivable, (B)
inventories and (C) prepaid expenses less (ii) the sum of (A) accounts payable
and (B) accrued liabilities, determined with such amounts calculated in
accordance with generally accepted accounting principles ("GAAP") and on a basis
<PAGE>
4
consistent with the past accounting practices of the Company (to the extent in
accordance with GAAP); provided that (I) any liabilities relating to the bonus
payments totalling $875,000 to be paid by the Company immediately prior to the
Closing (the "BONUS PAYMENTS") shall not be taken into account in determining
Net Working Capital and (II) any receivable or other right or asset of the
Company pertaining to the Company's claims against, or obligations due to the
Company from, Goodman Bros. Steel Drum Co., Inc. or either of Irving Goodman or
Simon Goodman shall not be taken into account as an "account receivable" in
determining Net Working Capital. In accordance with the provisions of this
Section 1.4, the Seller shall pay the Buyer the excess, if any, of (i) the
amount, if any, by which the Net Working Capital of the Company as of the
Closing Date is finally determined, accepted, deemed accepted or agreed pursuant
to Section 1.4(c) below to be less than $2.15 million (the "Adjustment Amount")
less (ii) the Estimated Adjustment Amount (the "Additional Net Working Capital
Amount"). Such payment shall be made as set forth in Section 1.4(d) below.
(b) CLOSING WORKING CAPITAL. Within forty-five (45) days
after the Closing, the Buyer will cause the Company to prepare and deliver to
Seller a statement of the working capital of the Company showing the Net Working
Capital as of the close of business on the Closing Date in accordance with GAAP
(the "CLOSING STATEMENT").
(c) CLOSING CALCULATION. The Seller shall be entitled to full
access to the relevant records and, upon execution and delivery of a customary
accountants' access letter, working papers prepared by or for the Company in
connection with its review of the calculation of the Net Working Capital set
forth on the Closing Statement. If the Seller believes that the Net Working
Capital calculation (hereinafter the "CLOSING CALCULATION") has not been
properly calculated in accordance with this Section 1.4, it shall, within thirty
(30) days after its receipt of the Closing Calculation, give written notice (the
"SELLER'S OBJECTION") to the Buyer, setting forth the basis of the Seller's
Objection in reasonable detail and the adjustments to the Closing Calculation
which the Seller believes should be made. Failure to so notify the Buyer within
such time frame shall constitute acceptance and approval of the Closing
Calculation. If the Buyer agrees that any change proposed by Seller is
appropriate, the change shall be made to the Closing Calculation. If the
proposed change is disputed by the Buyer, then the Buyer and Seller shall
negotiate in good faith to resolve such dispute as expeditiously as possible.
If, after a period of ten business days following the date on
which Seller delivers the Seller's Objection, any adjustment to the Closing
Calculation proposed by Seller remains disputed, a nationally recognized "Big
Five" accounting firm not employed by any of the Seller, the Buyer or any of
their affiliates and mutually acceptable to the Buyer and the Seller (the
"NEUTRAL ACCOUNTING FIRM") shall be engaged by the Buyer and the Seller to
resolve any remaining disputes. The Neutral Accounting Firm shall act as an
arbitrator to determine, based solely on presentations by the Seller and the
Buyer, and not by independent review, only those issues still in dispute. The
Neutral Accounting Firm's determination shall be (i) based upon the provisions
of this Section 1.4, (ii) made as promptly as practicable, (iii) set forth in a
written statement delivered to the Seller and the Buyer, and (iv) final, binding
and conclusive on the parties. The fees and expenses of the Neutral Accounting
Firm shall be shared equally by the Seller and the Buyer. If a party does not
comply with the procedures and time requirements contained herein or such other
procedures or time requirements as the parties otherwise mutually agree upon in
<PAGE>
5
writing, the Neutral Accounting Firm shall render a decision based solely on the
evidence it receives which was submitted in accordance with such procedures and
time requirements.
(d) ADDITIONAL NET WORKING CAPITAL PAYMENT. Payment of any Additional Net
Working Capital Amount pursuant to this Section 1.4 shall be made by wire
transfer to an account designated by the Buyer, in United States dollars, in
immediately available funds, within three (3) business days after (i) the
Closing Calculation has been determined, accepted or deemed accepted by the
Seller pursuant to Section 1.4(c) hereof or (ii) any proposed change made by the
Seller has been agreed upon by the parties or finally determined by the Neutral
Accounting Firm as described in Section 1.4(c), as applicable, in each case,
together with interest from the Closing Date to the date of payment at the "base
rate" of BankBoston or, if not available from BankBoston, as quoted in the WALL
STREET JOURNAL on the Closing Date, based on a 360-day year.
1.5 FURTHER ASSURANCES. After the Closing, each party hereto
shall from time to time, at the request of the other party and without further
cost or expense to such other party, execute and deliver such other instruments
of conveyance and transfer and take such other actions as such other party may
reasonably request in order to more effectively consummate the transactions
contemplated hereby and to vest in the Buyer good and valid title to the Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller hereby represents and warrants to the Buyer as
follows:
2.1 CORPORATE ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Rhode Island. The Company has full corporate power and authority to own its
assets and to carry on its business as now being conducted and is duly qualified
or licensed to do business as a foreign corporation in good standing in the
jurisdictions in which the ownership of its property or the conduct of its
business requires such qualification or license, except jurisdictions in which
the failure to be so qualified or licensed would not, individually or in the
aggregate, cause either the Seller or the Company to suffer a loss or pay a
claim in excess of $25,000 (hereinafter referred to as a "MATERIAL ADVERSE
EFFECT"). The Seller has delivered to the Buyer complete and correct copies of
the Articles of Incorporation (the "ARTICLES") and all amendments thereto, the
Bylaws as presently in effect and the minute books, stock transfer records and
stock ledger of the Company. Except as set forth in Section 2.1 of the
Disclosure Schedule, the Company does not own or have any option or right to
acquire, directly or indirectly, any capital stock or other equity securities
of, or have any direct or indirect equity or ownership interest or debt
investment in, any corporation, association, partnership, joint venture or other
business.
2.2 CAPITALIZATION. The authorized capital stock of the
Company consists of 20,000 shares of Common Stock, of which 8,857 shares of
Common Stock are issued and outstanding, and no other shares of any other class
or series of capital stock of the Company or securities exercisable or
convertible into or exchangeable for capital stock of the Company
<PAGE>
6
("CAPITAL STOCK EQUIVALENTS") are authorized, issued or outstanding. There are
no subscriptions, options, warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
transfer or voting of any shares, whether issued or unissued, of capital stock
of the Company or Capital Stock Equivalents, including any rights of issuance,
conversion or exchange under any outstanding securities or other instruments,
other than restrictions imposed by Federal and state securities laws. All of the
Shares are validly issued, outstanding and fully paid, nonassessable and free of
preemptive rights. The Company does not have any outstanding debt securities or
other indebtedness or guarantees, except as specifically disclosed in the
Financial Statements (as defined in Section 2.5 hereof) which, except for those
debt securities and the other indebtedness or guarantees expressly set forth in
Section 2.2 of the Disclosure Schedule as not being repaid or cancelled in
connection with the Closing, the Seller shall cause to be fully repaid or
cancelled at or prior to the Closing.
2.3 OWNERSHIP OF STOCK. The Seller is the record and
beneficial owner of 8,857 shares of Common Stock, constituting all of the issued
and outstanding capital stock of the Company. The Shares are owned free and
clear of all Encumbrances, other than the restrictions imposed by Federal and
state securities laws. Upon the consummation of the transactions contemplated
hereby, the Buyer will acquire title to the Shares free and clear of all
Encumbrances, other than the restrictions imposed by Federal and state
securities laws and Encumbrances arising as a result of any action taken by the
Buyer or any of its affiliates ("AFFILIATES") as defined in Rule 12b-2 of the
regulations promulgated pursuant to the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT").
2.4 AUTHORIZATION, ETC. Each of the Seller and the Company
has full power and authority to execute and deliver this Agreement and to carry
out the transactions contemplated hereby. The execution and delivery by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly approved and authorized by all
necessary corporate action of the Company and no other proceedings of the
Company are necessary to approve and authorize the execution and delivery by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby. This Agreement has been duly and validly
executed by each of the Seller and the Company and, assuming this Agreement
constitutes the legal, valid and binding agreement of the Buyer, constitutes a
legal, valid and binding agreement of each of the Seller and the Company,
enforceable against each of the Seller and the Company in accordance with its
terms, except that (i) the enforcement hereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
2.5 FINANCIAL STATEMENTS. The Seller has previously delivered
to the Buyer the audited balance sheet of the Company as of December 31, 1997
and the related audited statements of income, stockholders' equity and cash
flows for the fiscal year then ended, and the notes thereto (the "FINANCIAL
STATEMENTS"). The Financial Statements present fairly the assets, liabilities,
financial position, results of operations and cash flows of the Company as of
the dates and for the period indicated, and have been prepared in accordance
with GAAP consistently applied by the Company.
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7
2.6 NO UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations, whether accrued, absolute, contingent, matured or
unmatured, that are required to be reflected, accrued or reserved for in an
audited balance sheet of the Company or the notes thereto prepared in accordance
with GAAP, other than (i) liabilities and obligations that are reflected,
accrued or reserved for in the balance sheet included in the Financial
Statements (the "1997 BALANCE SHEET"), (ii) liabilities and obligations incurred
in the ordinary course of business and consistent with past practice since the
date of the 1997 Balance Sheet and (iii) liabilities and obligations which in
the aggregate would not have a Material Adverse Effect.
2.7 NO APPROVALS OR CONFLICTS. The execution, delivery and
performance by each of the Seller and the Company of this Agreement and the
consummation by each of the Seller and the Company of the transactions
contemplated hereby will not (i) violate, conflict with or result in a breach by
the Seller or the Company of any provision of the Articles or Bylaws of the
Company, (ii) violate, conflict with or result in a breach of any provision of,
or constitute a default by the Seller or the Company (or an event which, with
notice or lapse of time or both, would constitute a default) or give rise to any
right of termination, cancellation or acceleration under, or result in the
creation of any Encumbrance upon any of the properties of the Company or on the
Seller's interest in the Shares under, any note, bond, mortgage, indenture, deed
of trust, license, franchise, permit, lease, contract, agreement or other
instrument to which the Seller, the Company or any of their respective
properties may be bound, (iii) violate or result in a breach of any order,
injunction, judgment, ruling, law or regulation of any court or governmental
authority applicable to the Seller, the Company or any of their respective
properties or (iv) require any order, consent, approval or authorization of, or
notice to, or declaration, filing, application, qualification or registration
with, any governmental or regulatory authority, excluding from the foregoing
clauses (ii) and (iii) above, such violations, conflicts and breaches which,
individually or in the aggregate, would not have a Material Adverse Effect.
2.8 COMPLIANCE WITH LAW; GOVERNMENTAL AUTHORIZATIONS. The
Company is not in violation of any order, injunction, judgment, ruling, law or
regulation of any court or governmental authority applicable to the property or
business of the Company. The Company has, and is in compliance in all material
respects with, all material licenses, permits and other governmental
authorizations reasonably necessary to conduct its business as currently
conducted and, to the knowledge of the Seller and the Senior Managers, such
licenses, permits and authorizations are valid and in full force and effect. As
used in this Agreement, "SENIOR MANAGERS" means Gerard DiSchino, Eugene
D'Onofrio, Richard Costa, Richard Thompson, Robert Degenhardt and Donald
Garratt.
2.9 LITIGATION. As of the date hereof, there are no suits,
actions, proceedings or investigations pending or, to the knowledge of the
Seller and the Senior Managers, threatened against the Company or the
transactions contemplated by this Agreement before any arbitrator, court or
governmental or regulatory authority or body, which, if decided unfavorably to
the Company, would have a Material Adverse Effect. Neither the Seller nor the
Senior Managers have received any notice that the Company or any of its assets
is subject to any decree, order or judgment which would have a Material Adverse
Effect.
<PAGE>
8
2.10 ASSETS. On December 31, 1997, the Company had and,
except with respect to assets disposed of or acquired in the ordinary course of
business and consistent with past practice since such date, the Company now has,
good and valid title to, or holds by valid and existing lease or license, all
the assets reflected as assets of the Company on the 1997 Balance Sheet or which
would have been reflected on the 1997 Balance Sheet if acquired prior to such
date, free and clear of all Encumbrances of any nature, except for: (i)
Encumbrances which secure indebtedness or obligations which are properly
reflected on the 1997 Balance Sheet; (ii) liens for Taxes (as defined in Section
2.12 herein) not yet payable or being contested in good faith; (iii) liens
arising as a matter of law in the ordinary course of business, provided that the
obligations secured by such liens are not delinquent or are being contested in
good faith; and (iv) such imperfections of title and Encumbrances which,
individually or in the aggregate, would not have a Material Adverse Effect.
Except as disclosed on Section 2.10 of the Disclosure Schedule, the Company
owns, or has valid leasehold interests in, all material tangible assets
necessary for the operation or conduct of the Company's business as currently
conducted and all such assets are in good maintenance, operating condition and
repair, normal wear and tear excepted, other than machinery and equipment under
repair or out of service in the ordinary course of the Company's business.
2.11 ABSENCE OF CERTAIN CHANGES. Except as otherwise provided
herein, since December 31, 1997, (i) the business of the Company has been
conducted only in the ordinary course and consistent with past practice in all
material respects, (ii) there has not been any event or development prior to the
date hereof which, if it had occurred or existed after the date hereof, would be
a violation of Section 6.1(c) hereof and (iii) there has not been any change,
event or development which, individually or in the aggregate, has had or would
have a Material Adverse Effect.
2.12 TAXES. (a) The Company has timely filed or caused to be
timely filed all Tax Returns (including estimated Tax Returns) required to be
filed by the Company. All Tax Returns are complete and accurate in all material
respects. All Taxes required to be shown on such Tax Returns or otherwise due or
payable and all additional assessments of any such Taxes received prior to the
date hereof have been paid in full on the due date for payment thereof, or there
are adequate reserves for such Taxes on the Financial Statements of the Company.
The Company is not required to file any income or franchise tax returns in any
jurisdiction other than the United States and the States of Rhode Island,
Connecticut, Massachusetts, Virginia, Pennsylvania and Maryland. The amounts set
up as accruals for Taxes on the Financial Statements are sufficient for the
payment of all Taxes due and owing (but not paid) by the Company, whether or not
disputed, for all periods ended on and prior to the respective dates thereof. In
addition, the amounts set up as accruals for Taxes on the financial books of the
Company on the Closing Date are and will be sufficient for the payment of all
Taxes of the Company, whether or not disputed, for all periods ended on and
prior to the Closing Date. There are no audits, proceedings or claims relating
to the federal, state or local income tax returns of the Company. No deficiency
in the payment of Taxes by the Company for any period has been asserted or
threatened against the Company or the Seller by any Tax Authority and remains
unsettled as of the date of this Agreement. All Taxes required to be withheld,
collected or deposited by the Company have been timely withheld, collected or
deposited and, to the extent required, have been paid to the relevant Tax
Authorities. The Company does not owe any amount pursuant to any written or
unwritten Tax sharing agreement
<PAGE>
9
or arrangement, or will have any liability after the date hereof in respect of
any written or unwritten Tax sharing agreement or arrangement executed or agreed
prior to the date hereof. There are no Tax liens on any of the assets of the
Company, other than liens for current Taxes which are not yet due or payable.
Neither the Seller nor the Company have made any agreement, waiver or other
arrangement providing for an extension of time with respect to the assessment or
collection of any Tax against the Company. The Company is, and has been at all
times since January 1, 1997, an "S corporation" within the meaning of Section
1361(a) of the Internal Revenue Code of 1986, as amended (the "CODE"). A valid
election under Section 1362 of the Code has been in effect with respect to the
Company at all times since January 1, 1997 and the Company will be an S
corporation up to and including the Closing Date. A valid S corporation or
similar election has been in effect with respect to the Company in the States of
Rhode Island, Massachusetts, Connecticut, Virginia, Pennsylvania and Maryland
since January 1, 1997. Except as disclosed on Section 2.12 of the Disclosure
Schedule, the Company has not been, and will not be, subject to Tax under
Section 1374 or Section 1375 of the Code for any taxable year ending on or prior
to the Closing Date. Neither the Company nor the Seller has filed a consent with
the Internal Revenue Service pursuant to Section 341(f) of the Code or with any
other Tax Authority to any similar effect or made an election under Section 338
of the Code other than as provided for in the terms of this Agreement. The
Company has not made any material payments, is not obligated to make any
material payments, and is not a party to any agreement that under certain
circumstances could obligate it to make any material payments that would not be
deductible under Section 280G of the Code. The Company has not been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(b) For purposes of this Agreement, the term "Tax" or "Taxes"
shall mean all federal, state, local, foreign and other net income, gross
income, gross receipts, gains, ad valorem, profits, license, stamp, premium,
service, leasing, occupation, excise, property, sales and use, transfer,
franchise, payroll, withholding, social security or other taxes, fees, duties,
assessments or other similar charges of any kind, including any interest,
penalties or additions attributable thereto.
(c) For purposes of this Agreement, the term "Tax Return"
shall mean any return, declaration, report, information return, statement or
other document (including any related or supporting information) filed or
required to be filed with any Tax Authority with respect to Taxes.
(d) For purposes of this Agreement, the term "Tax Authority"
shall mean the Internal Revenue Service and any similar state, local or foreign
authority having jurisdiction over Taxes.
(e) The Seller is not a foreign person as defined in Section
1445(f)(3) of the Code and Buyer is not required to withhold Tax on the purchase
of the Shares by reason of Section 1445 of the Code and the treasury regulations
thereunder.
<PAGE>
10
2.13 EMPLOYEE BENEFITS. (a) Section 2.13 of the Disclosure
Schedule contains a true and complete list of each "employee benefit plan"
(within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), including, without limitation, multiemployer
plans within the meaning of ERISA Section 3(37)), stock purchase, stock option,
severance, employment, change-in-control, fringe benefit, collective bargaining,
bonus, incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject to
ERISA (including any funding mechanism therefor now in effect or required in the
future as a result of the transactions contemplated by this Agreement or
otherwise), whether formal or informal, oral or written, legally binding or not,
under which any employee or former employee of the Company has any present or
future right to benefits or under which the Company has any present or future
liability. All such plans, agreements, programs, policies and arrangements shall
be collectively referred to as the "COMPANY PLANS".
(b) With respect to each Company Plan, the Seller has
delivered to the Buyer a current, accurate and complete copy (or, to the extent
no such copy exists, an accurate description) thereof and, to the extent
applicable: (i) any related trust agreement or other funding instrument; (ii)
the most recent determination letter, if applicable; (iii) any summary plan
description and other written communications (or a description of any oral
communications) by the Company to its employees concerning the extent of the
benefits provided under a Company Plan; and (iv) for the three most recent years
(A) the Form 5500 and attached schedules, (B) audited financial statements, (C)
actuarial valuation reports and (D) attorney's response to an auditor's request
for information.
(c) (i) Each Company Plan has been established and
administered in accordance with its terms, and in substantial compliance with
the applicable provisions of ERISA, the Code and other applicable laws, rules
and regulations; (ii) each Company Plan which is intended to be qualified within
the meaning of Code section 401(a) is so qualified and has received a favorable
determination letter as to its qualification, and to the knowledge of the Seller
and the Senior Managers, nothing has occurred, whether by action or failure to
act, that could reasonably be expected to cause the loss of such qualification;
(iii) no event has occurred and no condition exists that would subject the
Company or its Subsidiaries, either directly or by reason of their affiliation
with any member of their "Controlled Group" (defined as any organization which
is a member of a controlled group of organizations within the meaning of Code
sections 414(b), (c), (m) or (o)), to any tax, fine, lien, penalty or other
liability imposed by ERISA, the Code or other applicable laws, rules and
regulations; (iv) for each Company Plan with respect to which a Form 5500 has
been filed, no material change has occurred with respect to the matters covered
by the most recent Form since the date thereof; (v) no "reportable event" (as
such term is defined in ERISA section 4043), "prohibited transaction" (as such
term is defined in ERISA section 406 and Code section 4975) or "accumulated
funding deficiency" (as such term is defined in ERISA section 302 and Code
section 412 (whether or not waived)) has occurred with respect to any Company
Plan; and (vi) no Company Plan provides retiree welfare benefits, except as
required under Section 4980B, Section 601 ET SEQ. of ERISA or by any other
federal or state law and neither the Company nor its Subsidiaries have any
obligations to provide any retiree welfare benefits, except as required under
Code Section 4980B, Section 601 ET SEQ. of ERISA or by any other federal or
state law.
<PAGE>
11
(d) No Company Plan maintained by the Seller or any member of
its Controlled Group is a plan subject to Title IV of ERISA.
(e) No Company Plan is a multiemployer plan within the
meaning of Section 4001(a)(3) of ERISA. Neither the Seller nor any subsidiary of
Seller nor any member of its Controlled Group has ever contributed to or had an
obligation to contribute to any multiemployer plan.
(f) With respect to any Company Plan, (i) no actions, suits
or claims (other than routine claims for benefits in the ordinary course) are
pending or, to the knowledge of the Seller and the Senior Managers, threatened,
and (ii) to the knowledge of the Seller and the Senior Managers, no facts or
circumstances exist that could give rise to any such actions, suits or claims.
(g) No Company Plan exists that could result in the payment
to any present or former employee of the Company of any money or other property
or accelerate or provide any other rights or benefits to any present or former
employee of the Company as a result of the transactions contemplated by this
Agreement, whether or not such payment would constitute an excess parachute
payment within the meaning of Code Section 280G.
2.14 LABOR RELATIONS. Except as set forth in Section 2.14 of
the Disclosure Schedule, (i) the Company is not a party to any collective
bargaining agreement applicable to employees of the Company, nor is any such
contract or agreement presently being negotiated; (ii) the Company is not a
party to any employment agreement or consulting agreement with any person or
entity obligating the Company to make payments in excess of $25,000 per year,
nor is any such contract or agreement presently being negotiated; (iii) there is
no unfair labor practice charge or complaint pending or, to the knowledge of the
Seller and the Senior Managers, threatened against or otherwise affecting the
Company which, if adversely determined, would result in a liability having a
Material Adverse Effect; (iv) there is no labor strike, slowdown, work stoppage,
or lockout in effect, or, to the knowledge of the Seller and the Senior
Managers, threatened against or otherwise affecting the Company, and the Company
has not experienced any such labor controversy within the past three years; (v)
the Company is not a party to, or otherwise bound by, any consent decree with,
or citation by, any governmental authority relating to employees or employment
practices; (vi) the Company will not have any material liability under any
benefit or severance policy, practice, agreement, plan, or program which exists
or arises, or may be deemed to exist or arise, under any applicable law or
otherwise, as a result of the transactions contemplated hereunder; (vii) the
Company is in compliance with its obligations pursuant to the Worker Adjustment
and Retraining Notification Act of 1988 ("WARN ACT"), and all other notification
and bargaining obligations arising under any collective bargaining agreement,
statute or otherwise and (viii) or any other Section of the Disclosure Schedule
and except for the unwritten employment arrangements of the Company undertaken
in the ordinary course of business, there are no agreements or arrangements
between the Company and any employee of the Company. To the knowledge of the
Seller and the Senior Managers, there is no effort to organize employees of the
Company which is pending or threatened.
2.15 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Other than common
law rights which may exist relating to the Company's use of the names "New
England Container" and "Richmond Barrel & Box," there are no patents,
trademarks, trade names, copyrights and pending applications therefor used or
owned by the Company nor any licenses and other agreements relating thereto.
<PAGE>
12
2.16 CONTRACTS. The contracts and agreements listed in
Section 2.16 of the Disclosure Schedule constitute each contract, instrument,
lease, deed or agreement which is material to the business or operations of the
Company, and include the Letter of Intent (as defined in Section 6.1(a) hereof)
and any amendments thereto (the "CONTRACTS"). Complete copies (or, if oral,
written summaries) of each Contract have been made available to the Buyer,
including all of the following Contracts: (i) any indenture, note, mortgage,
installment obligation, or other instrument for or relating to any borrowing of
money; (ii) any guaranty of any obligation; (iii) any agreement, contract,
commitment or arrangement containing any covenant limiting the ability of the
Company to engage in any line of business or to compete with any business or
person; (iv) any agreement, contract, commitment or arrangement relating to
capital expenditures with respect to the Company and involving future payments
which exceed $25,000 in any 12-month period; (v) any agreement, contract,
commitment or arrangement relating to the acquisition or disposition of assets
or any capital stock of any business enterprise; (vi) any real property or
personal property lease; (vii) any agreement, contract, commitment or
arrangement which requires payments in excess of $25,000 in any 12-month period,
to the extent such contract, commitment, agreement or arrangement is not
terminable within 30 days without payment of premium or penalty; and (viii) any
agreement, contract, commitment or arrangement with any director, stockholder or
affiliate of the Company. Each Contract is in full force and effect, and is a
legal, valid and binding obligation of the Company and, to the knowledge of the
Seller and the Senior Managers, each of the other parties thereto, enforceable
in accordance with its terms, except that (x) enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (y) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought. No condition exists or event has
occurred which (whether with or without notice or lapse of time or both, or the
happening or occurrence of any other event) would constitute a default by the
Company or, to the knowledge of the Seller and the Senior Managers, any other
party thereto under, or result in a right in termination of, any Contract by any
other party thereto. To the best knowledge of the Seller and the Senior
Managers, no party to any Contract intends (x) to terminate such Contract or
materially amend the terms thereof, (y) to refuse to renew such Contract upon
expiration thereof or (z) to renew such Contract upon expiration thereof on
terms and conditions which are materially more onerous to the Company than those
pertaining to such existing Contract.
2.17 ENVIRONMENTAL MATTERS. Except as set forth in Section
2.17 of the Disclosure Schedule, (i) the Company has not, as of the date hereof,
received any notice, complaint, direction or order alleging the material
violation by the Company of, or any material actual or potential liability of
the Company relating to, any applicable Federal, state or local statutes, laws,
regulations, rules, decrees, orders, judgments, ordinances, or common law
related to the protection of human health or the environment, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act, the Emergency Planning and Community Right-To-Know Act, the Solid Waste
Disposal Act, the Resource Conservation and Recovery Act, the Clean Air Act, the
Water Pollution Control Act, the Toxic Substances Control Act, the Hazardous
Materials Transportation Act, and the Occupational Safety and Health Act, each
as amended and supplemented, and any regulations promulgated pursuant to such
laws, and any similar state or local statutes or regulations ("ENVIRONMENTAL
LAWS"), which violation or
<PAGE>
13
liability has not been resolved and, to the knowledge of the Seller and the
Senior Managers, no such notice, complaint, direction or order is threatened or
otherwise expected, (ii) the Company is and has been in material compliance with
all applicable Environmental Laws and, to the knowledge of the Seller and the
Senior Managers, there is no condition that could prevent or materially
interfere with such compliance in the future, (iii) the Company has obtained and
is and has been in material compliance with all required governmental
environmental permits, registrations and authorizations ("ENVIRONMENTAL
PERMITS") with respect to the business of the Company as currently conducted and
no modification, revocation, reissuance, alteration, transfer, or amendment of
the Environmental Permits, or any review by, or approval of, any third party of
the Environmental Permits is required in connection with the execution or
delivery of this Agreement or the consummation of the transactions contemplated
hereby or the continuation of the business of the Company following such
consummation, (iv) no hazardous waste, substance, material, or chemical,
including, without limitation, petroleum and petroleum products, asbestos and
any other material regulated under, or that can result in liability under,
applicable Environmental Laws ("HAZARDOUS MATERIALS"), has been transported,
stored, treated, disposed of or arranged to be disposed of by the Company on the
real estate owned, operated or otherwise used by the Company or at any other
location, except as would not result in material liability under any applicable
Environmental Laws, (v) the Company has not assumed, contractually or by
operation of law, any liabilities, potential liabilities or obligations of any
other person or entity under any applicable Environmental Laws, (vi) the Company
has not entered into, agreed to, or is subject to any judgment, decree, order or
other similar requirement of any governmental authority under any Environmental
Laws, (vii) there are no (w) underground or aboveground storage tanks, (x)
surface impoundments, (y) landfills or (z) sewer or septic systems currently or,
to knowledge of the Seller or the Senior Managers, formerly present at or about
any of the properties or facilities currently or, to the knowledge of the Seller
or the Senior Managers, formerly owned, operated or otherwise used by the
Company that could result in material liability to the Company under any
applicable Environmental Laws, and (viii) there are no actions, activities,
events, conditions or circumstances occurring or existing relating to the
Company's current operations or properties or, to the knowledge of the Seller or
the Senior Managers, former operations or properties, including without
limitation the release, threatened release, emission, discharge, generation,
treatment, presence, storage or disposal of Hazardous Materials, that could
result in any material liability or obligation of the Company under or relating
to any Environmental Laws.
2.18 INSURANCE. Section 2.18 of the Disclosure Schedule lists
all insurance policies of the Company covering the assets, employees and
operations of the Company as of the date hereof. All such policies are in full
force and effect, all premiums due thereon have been paid by the Company and the
Company has complied in all material respects with the provisions of such
policies and has not received any notice from any of its insurance brokers or
carriers that such broker or carrier will not be willing or able to renew their
existing coverage.
<PAGE>
14
2.19 TRANSACTIONS WITH AFFILIATES. Except as listed on
Section 2.19 of the Disclosure Schedule, there are no Contracts, agreements or
arrangements between the Company, on the one hand, and the Seller or any
affiliate of the Seller or the Company, on the other hand. For purposes of this
Agreement "any affiliate of the Seller or the Company" shall mean (i) any
director, officer or stockholder of the Company, (ii) any immediate family
member of the Seller, including spouse, parents, children, siblings, mothers-
and fathers-in-law, sons- and daughters-in law and brothers- and sisters-in-law
or (iii) any Affiliate of the Seller or the Company.
2.20 MATERIAL CUSTOMERS AND SUPPLIERS. Section 2.20 of the
Disclosure Schedule sets forth the names of the ten suppliers of the Company to
whom the Company paid the greatest sum of money in respect of products and
materials sold to the Company and the ten customers of the Company from whom the
Company received the greatest sum of money in respect of products or services
provided by the Company, in each case, between January 1, 1996 and December 31,
1997.
2.21 REAL PROPERTY. (a) Section 2.21(a) of the Disclosure
Schedule sets forth the municipal address of all of the real property owned by
the Company (the "OWNED PROPERTY").
(b) The Company is the beneficial owner of the Owned
Property, together with all plants, buildings, structures, erections,
improvements, appurtenances and fixtures situate on or forming part thereof, in
fee simple.
(c) To the knowledge of the Seller and the Senior Managers,
there are no agreements, undertakings or other documents which affect or relate
to the title to, or ownership of, such Owned Property, except as registered
against title to such Owned Property.
(d) Except as disclosed by the registered title of the Owned
Property, no person or entity has any right to purchase any of the Owned
Property, and no person or entity other than the Company is using or has any
right to use, as tenant, or is in possession or occupancy of, any part of such
Owned Property.
(e) The Company has not granted any option, right of first
refusal or other contractual rights with respect to any of the Owned Property
other than to the Buyer pursuant to this Agreement.
(f) The Company has not entered into any agreement to sell,
transfer, encumber, or otherwise dispose of or impair the Company's right, title
and interest in and to the Owned Property or the air, density and easement
rights relating to the Owned Property other than as listed in Section 2.21(f) of
the Disclosure Schedule.
(g) Section 2.21(g) of the Disclosure Schedule provides
details on the most up-to-date surveys, prepared by registered land surveyors,
relating to the Owned Property, which are available, and such surveys have been
delivered or made available to the Buyer.
(h) The Company has not received any notification of, and
none of the Seller or any Senior Manager has any knowledge of, any outstanding
or incomplete work orders in respect of any of the buildings, improvements or
other structures constructed on the Owned Property or of any current
non-compliance with applicable statutes and regulations or building and zoning
by-laws and regulations.
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15
(i) All accounts for work and services performed or materials
placed or furnished upon or in respect of the construction and completion of any
of the buildings, improvements or other structures constructed on the Owned
Property have been fully paid and no one is entitled to claim a lien under
applicable legislation for such work performed by or on behalf of the Company.
(j) Except as disclosed in Section 2.21(j) of the Disclosure
Schedule, the Company has not made application for a rezoning of any of the
Owned Property and none of the Seller or any Senior Manager has any knowledge of
any proposed or pending change to any zoning affecting the Owned Property.
(k) To the knowledge of the Seller and the Senior Managers,
no expropriation or condemnation or similar proceeding is pending or threatened
against the Owned Property or any part of the Owned Property.
(l) There are no matters affecting the right, title and
interest of the Company in and to the Owned Property, which, individually or in
the aggregate, would materially and adversely affect the ability of the Company
to carry on its business upon the Owned Property.
(m) The leases and subleases listed in Section 2.16 of the
Disclosure Schedule constitute all the real property leases and subleases
relating to real property occupied by the Company or used in the conduct of the
business of the Company as it is presently being conducted and/or to which the
Company is a party (the "LEASES", and such property, the "LEASED PROPERTY"). To
the knowledge of the Seller and the Senior Managers, all of the Leased Property
conforms in all material respects to all zoning laws, ordinances and
regulations. All interests held by the Company as lessee under the Leases are
free and clear of all Encumbrances of any nature and kind whatsoever.
(n) Since December 31, 1997, the Company has not sold,
assigned, transferred or otherwise disposed of, or granted any security interest
in or lien on, any Lease. All payments due and owing by the Company pursuant to
the Leases have been duly paid and the Company is not otherwise in default in
meeting its obligations under any of the Leases.
(o) To the knowledge of the Seller and the Senior Managers,
none of the landlords under each of the Leases is in default in meeting any of
its material obligations under its respective Leases.
(p) To the knowledge of the Seller and the Senior Managers,
no event exists which, but for the passing of time or the giving of notice, or
both, would constitute a default by any party to any of the Leases and no party
to any Lease is claiming any such default or taking any action purportedly based
upon any such default.
(q) The Company has not waived, or omitted to take any
action in respect of, any substantial rights under any of the Leases where the
loss of such right would have a Material Adverse Effect.
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16
(r) The Company is not a party to any lease or sublease
relating to real property as lessor.
(s) No third-party consent or approval under any Lease is
required for the consummation of the transactions contemplated herein.
2.22 INVESTMENT COMPANY ACT STATUS. The Company is not an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940.
2.23 PRODUCT LIABILITY. Except as disclosed on Section 2.23
of the Disclosure Schedule, since January 1, 1995, the Company has not received
written notice of any claim or threatened claim against the Company for product
liability, nor, to the knowledge of the Seller and the Senior Managers, has the
Company received oral notice of any claim or threatened claim against the
Company for product liability.
2.24 BOOKS AND RECORDS. The financial books and records
pertaining to the business of the Company are complete and correct in all
material respects, have been maintained in accordance with good business
practice, and reflect the basis for the financial condition and results of
operations of the Company set forth in the Financial Statements.
2.25 NO BROKERS' OR OTHER FEES. Except for Riparian Partners,
no broker, finder or investment banker is entitled to any fee or commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of the Seller or the Company.
2.26 SPECIALTY DISABILITY AND LIFE INSURANCE. The Company has
obtained and maintains in effect a life insurance policy and disability
insurance policy with respect to each of Donald Garratt and Richard Thompson in
amounts sufficient to comply with the obligations of the Company under Section
2(f) of its Employment Agreements, each dated October 21, 1996, with each of
Donald Garratt and Richard Thompson.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer hereby represents and warrants to the Seller as
follows:
3.1 ORGANIZATION. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
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17
3.2 AUTHORIZATION ETC. The Buyer has full corporate power and
authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby to be carried out by it. The execution and
delivery by the Buyer of this Agreement and the consummation by the Buyer of the
transactions contemplated hereby have been duly approved and authorized by all
necessary corporate action on the part of the Buyer, and no other proceedings on
the part of the Buyer are necessary to approve and authorize the execution and
delivery by the Buyer of this Agreement and the consummation by the Buyer of the
transactions contemplated hereby. This Agreement has been duly and validly
executed by the Buyer and, assuming this Agreement constitutes the legal, valid
and binding agreement of the other parties hereto, constitutes a legal, valid
and binding agreement of the Buyer, enforceable against the Buyer in accordance
with its terms, except that (i) the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
3.3 NO APPROVALS OR CONFLICTS. Except as set forth in Section
3.3 of the Disclosure Schedule, the execution, delivery and performance by the
Buyer of this Agreement and the consummation by the Buyer of the transactions
contemplated hereby to be consummated by it will not (i) violate, conflict with
or result in a breach by the Buyer of any provision of the Certificate of
Incorporation or By-laws of the Buyer, (ii) violate, conflict with or result in
a breach of any provision of, or constitute a default by the Buyer (or an event
which, with notice or lapse of time or both, would constitute a default) or give
rise to any right of termination, cancellation or acceleration under, or result
in the creation of any lien, security interest, charge or encumbrance upon any
of the Buyer's properties under, any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, lease, contract, agreement or other
instrument to which the Buyer or any of its properties may be bound, (iii)
violate or result in a breach of any order, injunction, judgment, ruling, law or
regulation of any court or governmental authority applicable to the Buyer or any
of its properties, or (iv) except for applicable requirements of the HSR Act,
require any order, consent, approval or authorization of, or notice to, or
declaration, filing, application, qualification or registration with, any
governmental or regulatory authority, excluding from the foregoing clauses (ii)
and (iii) above, such violations, conflicts and breaches which, individually or
in the aggregate, would not reasonably be likely to have a material adverse
effect on the ability of the Buyer to consummate the transactions contemplated
hereby to be consummated by it or cause the Buyer to suffer a loss or pay a
claim in excess of $25,000.
3.4 CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Buyer consists of 3,000,000 shares of Buyer Common Stock,
of which 2,180,521 shares are outstanding. As of the date hereof, except as
contemplated by this Agreement and except for options to purchase an aggregate
of 264,085 shares of Buyer Common Stock, no securities exercisable or
convertible into or exchangeable for shares of Buyer Common Stock are
authorized, issued or outstanding. As of the Closing Date, a sufficient number
of authorized shares of Buyer Common Stock will be reserved for issuance of all
shares of Buyer Common Stock to be issued hereunder to Seller. As of the Closing
Date, the shares of Buyer Common Stock to be issued pursuant to the terms of
this Agreement will be validly issued, fully paid and nonassessable and free of
preemptive rights under the Delaware General Corporation Law.
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18
3.5 NO BROKERS' OR OTHER FEES. No broker, finder or
investment banker (other than Vestar Capital Partners) is entitled to any fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Buyer.
3.6 STOCKHOLDERS' AGREEMENTS. Attached hereto as Exhibits
3.6(a), 3.6(b) and 3.6(c) are complete and correct copies as of the date hereof
of the Registration Rights Agreement, the Amended and Restated Stockholders
Transfer Rights Agreement and the Amended and Restated Voting Agreement referred
to in the Investor Agreement to be executed and delivered pursuant to Section
4.7 and such agreements are in a form identical to the agreements entered into
by shareholders of the Buyer similarly situated to the Seller.
ARTICLE IV
CONDITIONS TO SELLER'S OBLIGATIONS
The obligation of the Seller to effect the Closing under this
Agreement is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions, unless validly waived in writing by the Seller.
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Buyer in this Agreement shall be true on and as of the
Closing Date as though such representations and warranties were made on such
date, except that any representations and warranties that are made as of a
specified date shall be true as of such date.
4.2 PERFORMANCE. The Buyer shall have performed and complied
in all material respects with all agreements and obligations required by this
Agreement to be so performed or complied with by it prior to the Closing.
4.3 OFFICER'S CERTIFICATE. The Buyer shall have delivered to
the Seller a certificate, dated as of the Closing Date and executed by the
President or a Vice President of the Buyer, certifying to the fulfillment of the
conditions specified in Sections 4.1 and 4.2 hereof.
4.4 HSR ACT. All applicable waiting periods under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
4.5 INJUNCTIONS. On the Closing Date, there shall be no
injunction, writ, preliminary restraining order or other order in effect of any
nature issued by a United States federal or state court or governmental
authority of competent jurisdiction directing that the transactions provided for
herein not be consummated as provided herein.
4.6 LETTER AGREEMENTS. The Buyer shall have executed and
delivered to (a) Gerard DiSchino the letter agreement in substantially the form
of Exhibit 4.6(a) hereto and (b) Eugene D'Onofrio the letter agreement in
substantially the form of Exhibit 4.6(b) hereto.
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19
4.7 INVESTOR AGREEMENT. The Buyer shall have executed and
delivered to the Seller the Investor Agreement in substantially the form of
Exhibit 4.7.
ARTICLE V
CONDITIONS TO BUYER'S OBLIGATION
The obligation of the Buyer to effect the Closing under this
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions, unless validly waived in writing by the Buyer.
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Seller in this Agreement shall be true on and as of the
Closing Date as though such representations and warranties were made on such
date, except that any representations and warranties that are made as of a
specified date shall be true as of such date.
5.2 PERFORMANCE. The Seller shall have performed and complied
in all material respects with all agreements and obligations required by this
Agreement to be so performed or complied with by the Seller prior to the
Closing.
5.3 OFFICERS' CERTIFICATE. The Seller shall have delivered to
the Buyer a certificate, dated as of the Closing Date and executed by the
President of the Company and by the Seller, certifying to the fulfillment of the
conditions specified in Sections 5.1 and 5.2 hereof.
5.4 RESIGNATION OF DIRECTORS. The Seller shall have delivered
to the Buyer the written resignations of all directors of the Company, effective
as of the Closing Date.
5.5 HSR ACT. All applicable waiting periods under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
5.6 INJUNCTIONS. On the Closing Date, there shall be no
injunction, writ, preliminary restraining order or other order in effect of any
nature issued by a United States federal or state court or governmental
authority of competent jurisdiction directing that the transactions provided for
herein not be consummated as provided herein.
5.7 CONSENTS. All orders, consents, approvals, permits,
authorizations, notices, declarations, filings, applications, qualifications and
registrations necessary to effect the Closing or continue the business of the
Company after the Closing shall have been obtained.
5.8 AFFILIATE AGREEMENTS. The Buyer shall have received
evidence satisfactory to it that all agreements listed on Section 2.19 of the
Disclosure Schedule have been terminated or are otherwise no longer in effect
without any penalty to the Company.
5.9 EXISTING INDEBTEDNESS AND OTHER OBLIGATIONS. (a) Any
holder of any outstanding indebtedness for borrowed money of the Company (or
beneficiary of any guarantee made by the Company of the indebtedness of any
other person) shall have released and discharged the same and any lien securing
the same against payment by or on behalf of the Company of the outstanding
balance of such indebtedness and any related obligations without premium or
penalty, and the Buyer shall have received written evidence satisfactory to it
of the foregoing.
<PAGE>
20
(b) The agreements listed in Section 5.9 of the Disclosure
Schedule shall have been terminated and the Company shall not have any
obligations pursuant thereto, and the Buyer shall have received written evidence
satisfactory to Buyer of the foregoing.
(c) The Company shall have paid to Charles M. Borton
("BORTON") any payments that may be due to him pursuant to the letter agreements
(the "BORTON LETTER AGREEMENTS") dated as of April 20, 1998 and July 9, 1998
among the Company, Borton and RBB Corporation ("RBB").
(d) All obligations of the Company pursuant to the
Noncompetition Agreement between Bay Colony Container Co., Inc. and Leroy
Boudreaux dated December 29, 1988 (the "BOUDREAUX NONCOMPETITION AGREEMENT")
(including any obligation of the Company to make any deferred payments to Leroy
Boudreaux with respect thereto) shall have been assigned to and assumed by the
Seller and the Buyer shall have received written evidence satisfactory to the
Buyer of the foregoing.
5.10 EMPLOYMENT/NONCOMPETITION AGREEMENTS. (a) Gerard
DiSchino shall have executed and delivered to the Buyer the letter agreement in
substantially the form of Exhibit 4.6(a) hereto, (b) Eugene D'Onofrio shall have
executed and delivered to the Buyer the letter agreement in substantially the
form of Exhibit 4.6(b) hereto and (c) Seller shall have executed and delivered
to the Buyer the Noncompetition Agreement in substantially the form of Exhibit
5.10(a) hereto.
5.11 INVESTOR AGREEMENT. The Seller shall have executed and
delivered to the Buyer the Investor Agreement in substantially the form of
Exhibit 4.7 hereto.
5.12 IRS FORM. The Seller shall have delivered to the Buyer
an IRS Form 8023 duly signed by the Seller.
ARTICLE VI
COVENANTS AND AGREEMENTS
6.1 CONDUCT OF BUSINESS BY COMPANY. The Seller covenants
that, except (i) as otherwise expressly contemplated by this Agreement, (ii) as
set forth on Section 6.1 of the Disclosure Schedule or (iii) as consented to by
the Buyer in writing, from and after the date of this Agreement and until the
Closing Date, the Seller shall cause the Company to:
(a) use all reasonable efforts consistent with good business
judgment to (i) preserve intact the present business organization of the Company
and purchase inventory, pay payables and other accrued liabilities and collect
receivables in a manner consistent with past practice and otherwise operate the
Company in the ordinary and regular course of business consistent with past
practice; (ii) maintain the Company's books and records in accordance with past
practices; (iii) keep available the services of the Company's officers and
employees; (iv) maintain satisfactory relationships with licensors, suppliers,
creditors, distributors, customers and others having business relationships with
the Company; and (v) consult with Buyer concerning the
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21
Letter of Intent dated March 17, 1998 between the Company and Kaplan Container
Corporation, as amended (the "Letter of Intent");
(b) notify the Buyer of any change in the normal course of
business or operations of the Company and of any governmental complaints,
investigations or hearings of which the Seller or the Company are notified (or
communications received by the Seller or the Company indicating that the same
may be contemplated), or the institution or settlement of litigation, in each
case involving the Company, and to keep the Buyer informed of such events;
(c) not (i) cause to be issued or sold any shares of capital
stock or debt or equity securities of the Company or issue, grant or enter into
any options, warrants, rights, subscription agreements or commitments of any
kind with respect thereto; (ii) directly or indirectly cause to be purchased,
redeemed or otherwise acquired or disposed of any shares of capital stock of the
Company; (iii) declare, set aside or pay any dividend or other distribution,
except that (so long as after giving effect thereto (A) the condition set forth
in Section 5.9 of this Agreement is satisfied, (B) the Net Working Capital of
the Company as of the Closing Date is not less than $2.15 million and (C) as of
the Closing Date, cash shall be maintained in each of the petty cash and payroll
accounts, net of the aggregate amount of all outstanding checks of the Company,
at a level no less than those previously maintained by the Company consistent
with its past practices in the ordinary course of business) the Company may
dividend or distribute to the Seller (1) an aggregate amount of cash not to
exceed the total amount of all cash on hand and in the bank accounts of the
Company immediately prior to Closing and (2) any amounts permitted under Section
6.4(f) of this Agreement; (iv) permit or allow the Company to borrow or agree to
borrow any funds or incur, whether directly or by way of guarantee, any
obligation for borrowed money, other than in the ordinary course of business and
consistent with past practice; (v) subject any of the assets of the Company
(real, personal or mixed, tangible or intangible) to any Encumbrance or
otherwise permit or allow the sale, lease, transfer or disposition of any assets
of the Company (real, personal or mixed, tangible or intangible), other than in
the ordinary course of business and consistent with past practice; (vii) assume,
guarantee, or otherwise become responsible for the obligations of, or make any
loans or advances to, any other individual, firm or corporation; (viii) waive or
release any rights of material value, or cancel, compromise, release or assign
any material indebtedness owed to it or any material claims held by it; (ix)
except for capital expenditures not to exceed $25,000, make any investment or
expenditure of a capital nature either by purchase of stock or securities,
contributions to capital, property transfer or otherwise, or by the purchase of
any property or assets of any other individual, firm or corporation; (x) cancel
or terminate any insurance policy naming it as a beneficiary or a loss payable
payee; (xi) enter into any collective bargaining agreements; (xii) increase the
compensation or fringe benefits of any of its officers or, other than in
accordance with past practice, effect any material general increase in the
compensation or fringe benefits of its employees or pay or agree to pay any
pension, retirement allowance, or other benefit not required by any existing
employee benefit plan or compensation plan or program to any such officers or
employees, commit itself to any employment agreement or employee benefit plan or
compensation plan or program with or for the benefit of any of its officers or
employees or any other person, or alter, amend, terminate in whole or in part,
or curtail or permanently discontinue contributions to, any pension plan or any
other employee benefit plan or compensation plan or program; (xiii) except for a
paving contract for paving of the Company's parking lot and driveways during the
month of July 1998 and the renegotiation of certain tractor
<PAGE>
22
leases that are scheduled to expire on October 23, 1998, enter into any
contract, commitment, agreement or arrangement which requires payments in excess
of $25,000 in any 12-month period and which is not terminable by the Company
within 30 days without payment of premium or penalty; (xiv) amend its Article or
Bylaws; (xv) terminate the Letter of Intent or abandon any transaction provided
for in the Letter of Intent; or (xvi) agree to do any of the foregoing; and
(d) comply in all material respects with all applicable laws,
including, without limitation, applicable Environmental Laws.
6.2 ACCESS TO BOOKS AND RECORDS; COOPERATION.
(a) Except as otherwise provided in Section 6.4, the Buyer
agrees that from the Closing Date and until the first anniversary of the Closing
Date subsequent to the expiration of all statutes of limitation with respect to
Seller, during normal business hours upon reasonable advance notice, it shall
permit, at no cost to the Buyer and its Affiliates and without disruption of the
business of the Buyer and its Affiliates, the Seller and its counsel,
accountants and other authorized representatives to have access to the officers,
directors, employees, accountants and other advisors and agents, properties,
books, records and contracts of the Company, and the right to make copies and
extracts from such books, records and contracts, in each case to the extent
necessary to investigate and defend any threatened or actual litigation and in
connection with any Tax matters involving the Company.
(b) The Buyer agrees not to, and to cause its subsidiaries
not to, destroy at any time any files or records which are subject to Section
6.2(a) without giving written notice to the Seller, and giving the Seller 30
days following receipt of such notice to request in writing that all or a
portion of the records intended to be destroyed be delivered to the Seller at
the Seller's expense.
(c) During the period commencing on the date hereof and
ending on the Closing Date, the Company will, and the Seller will cause the
Company to, afford to the Buyer and its counsel, accountants and other
authorized representatives access at all reasonable times upon reasonable
advance notice to the officers, directors, employees, accountants and other
advisors and agents, properties, books, records and contracts, of the Company,
and the right to make copies and extracts from such books, records and
contracts, and to furnish the Buyer with all financial, operating and other data
and information concerning the Company as Buyer and its advisors may reasonably
request.
6.3 FILINGS AND CONSENTS. Each of the Seller and the Company,
on the one hand, and the Buyer, on the other hand, shall use all reasonable
efforts to obtain and to cooperate in obtaining any consent, approval,
authorization or order of, and in making any registration or filing with, any
governmental agency or body or other third party required in connection with the
execution, delivery or performance of this Agreement. The parties agree to cause
to be made any further appropriate filings under the HSR Act as soon as
practicable and to diligently pursue early termination of the waiting period
under such act.
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23
6.4 TAX MATTERS.
(a) CODE SECTION 338(H) (10) ELECTION. Buyer shall notify the
Seller in writing (the "338(h)(10) Notification"), on or prior to the 120th day
following the Closing, of its intention to make an election under Sections
338(g) and 338(h)(10) of the Code, with respect to the Company and Buyer shall
attach a copy of the Allocation (as defined in (b) below) to the 338(h)(10)
Notification. The Seller shall determine, or shall cause to be determined, the
Tax Election Amount (as defined in 6.4(c) below) within 30 days of its receipt
of the 338(h)(10) Notification. After the Tax Election Amount has been finally
agreed, or determined, in accordance with Section 6.4(d) below, Buyer shall have
30 days from the date of such determination to notify the Seller as to whether
it will make the Code Section 338(h)(10) Election described herein. If Buyer
notifies the Seller that it will make the Code Section 338(h)(10) Election,
Buyer shall file the IRS Form, which has been duly signed by the Seller and
provided to Buyer pursuant to Section 5.12 of this Agreement, with the Internal
Revenue Service and the Seller hereby agrees that it shall join with Buyer in
timely making a joint Code Section 338(h)(10) election and any similar election
as may be available under applicable state or local law (collectively, the "CODE
SECTION 338(H)(10) ELECTION") and that it shall take all steps necessary to
effectuate the same.
(b) DETERMINATION AND ALLOCATION OF THE MODIFIED AGGREGATE
DEEMED SALE PRICE. If a Code Section 338(h)(10) Election is made, the "modified
aggregate deemed sale price" ("MADSP") shall be determined and allocated in
accordance with Section 338 of the Code and the applicable treasury regulations
promulgated thereunder. For purposes of making the Code Section 338(h)(10)
Election, the Buyer shall determine the value of the Company's tangible and
intangible assets and shall provide the Seller with a copy of the Buyer's
allocation of its "adjusted grossed-up basis" (within the meaning of the
treasury regulations promulgated under Section 338 of the Code) to such assets
(the "ALLOCATION"). The Allocation shall be binding upon the Seller and the
Buyer for purposes of allocating the MADSP among such assets, and none of the
parties hereto shall file, or cause to be filed, any Tax Return, or take a
position with any Tax Authority, that is inconsistent with the Allocation.
(c) The Buyer shall pay to the Seller as additional Purchase
Price such amount (the "TAX ELECTION AMOUNT"), if any, as shall equal the excess
of (A) the amount of federal, state and local income and franchise taxes
actually incurred by the Seller as a result of the deemed sale of the assets of
the Company pursuant to the Code Section 338(h)(10) Election as a result of
making the Code Section 338(h)(10) Election, including any tax incurred by the
Seller as a result of any additional amount of Purchase Price that may be
payable by the Buyer under this subsection 6.4(c) (and including any increase in
tax liability resulting from any audit by any Tax Authority) (the "ACTUAL
SECTION 338(H)(10) TAX LIABILITY"), over (B) the amount of federal, state and
local income and franchise taxes that would have been incurred by the Seller
solely as a result of a transaction in which the Shares actually being sold by
the Seller were sold without making a Section 338(h)(10) Election.
<PAGE>
24
(d) The Tax Election Amount shall be determined by the Seller
and an accounting firm selected by the Seller; PROVIDED, HOWEVER, that the Tax
Election Amount shall be subject to the right of review by the Buyer and its
accounting firm. The Seller shall provide to the Buyer no later than the 25th
day following the effective date of the Buyer's initial request the calculation
of the Tax Election Amount. In the event the Buyer or its accounting firm
disagrees with such calculation, the Buyer shall give the Seller written notice
thereof within 15 days of the date the Seller provided such calculation. The
Buyer shall pay to the Seller the portion of the Tax Election Amount that the
Buyer does not dispute (the "UNDISPUTED AMOUNT") at least three days prior to
the due date of the Seller's tax return for the federal income tax period that
includes the Closing Date. If the Seller and the Buyer are unable to settle or
compromise such dispute within fifteen days after the Buyer's notice of
disagreement, Seller's and Buyer's accounting firms shall jointly select a third
independent "Big Five" accounting firm to determine the Tax Election Amount and
the determination of such third firm shall be final. The Buyer shall bear all
costs of such third accounting firm.
(e) SELLER'S INDEMNITY FOR TAXES. From and after the Closing
Date, the Seller shall indemnify and hold harmless the Buyer Indemnified Persons
(as defined in Section 8.1(a)(1)) against the following Taxes (except to the
extent such Taxes, other than deferred Taxes, have been reserved or otherwise
accrued or reflected on the Closing Statement as a liability (provided that any
such liability shall be included as an accrued liability for purposes of
calculating Net Working Capital)) and, against any loss, damage, liability or
expense, including, but not limited to, reasonable fees for attorneys and other
outside consultants, incurred in contesting or otherwise in connection with any
such Taxes: (i) Taxes imposed on the Seller or the Company with respect to
taxable years or periods ending on or before the Closing Date; (ii) with respect
to taxable years or periods beginning before the Closing Date and ending after
the Closing Date (an "INTERIM PERIOD"), Taxes imposed on the Seller or the
Company which are allocable, pursuant to Section 6.4(g) below, to the portion of
such taxable year or period ending on the Closing Date (a "PRE-CLOSING PERIOD");
(iii) Taxes imposed on any member of any affiliated group (other than the
Company) with which the Seller or the Company files or has filed a Tax Return on
a consolidated, combined or unitary basis for a taxable year or period ending on
or before the Closing Date; (iv) Taxes required to be paid or reimbursed by the
Seller under Section 6.4(i) or Section 6.4(j) hereof (to the extent such Taxes
have not been paid by the Seller); (v) Taxes or additional Taxes imposed on any
Buyer Indemnified Person as a result of a breach of the representations and
warranties set forth in Section 2.12 of this Agreement or of the covenants
contained in this Section 6.4; or (vi) Taxes or other payments required to be
made after the date hereof by the Company to any party under any Tax sharing,
indemnity or allocation agreement (whether or not written).
(f) COMPANY LIABILITY FOR TAXABLE PERIODS COMMENCING AFTER
CLOSING DATE; DISTRIBUTION IN RESPECT OF PRE-CLOSING PERIOD TAXES. The Company
and Buyer shall be jointly and severally liable for, and shall indemnify and
hold the Seller and any of its Affiliates harmless against each of the
following: (i) any and all Taxes of, or payable by, the Company for any taxable
year or taxable period commencing after the Closing Date; (ii) with respect to
taxable years or periods beginning before and ending after the Closing Date,
Taxes imposed on the Buyer or the Company which are allocable, pursuant to
Section 6.4(g) below, to the portion of such taxable year or period beginning on
the Closing Date (a "POST-CLOSING PERIOD"); (iii) any Taxes relating to
operations, acts or omissions of the Company or any of its Affiliates that occur
after the Closing; and (iv) any costs or expenses attributable to any item in
clauses (i), (ii) and (iii) above. The Company shall make a distribution to the
Seller on or prior to the Closing Date in an amount
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25
equal to the aggregate amount of the United States federal, state and local
income taxes that will be imposed on the Seller with respect to the taxable
income of the Company allocated to the Seller for the period beginning after
December 31, 1997 through the Closing Date. The amount of such taxes, if any
(and, therefore, the amount of such distribution), shall be determined by the
Seller and an accounting firm selected by the Seller at least 15 days prior to
the Closing Date; PROVIDED, HOWEVER, that such determination shall be subject to
the right of review by the Buyer and its accounting firm.
(g) APPORTIONMENT OF TAXES. In order to apportion
appropriately any Taxes relating to any taxable year or period that includes an
Interim Period, the parties hereto shall, to the extent permitted under
applicable law, elect with the relevant Tax Authority to treat for all purposes,
the Closing Date as the last day of the taxable year or period of the Company,
and such Interim Period shall be divided into a Pre-Closing Period and a
Post-Closing Period for purposes of this Section 6.4. In any case where
applicable law does not permit the Company to treat the Closing Date as the last
day of the taxable year or period of the Company with respect to Taxes that are
payable with respect to an Interim Period, the portion of any such Tax that is
allocable to the Pre-Closing Period and the Post-Closing Period shall be deemed
to be:
(x) in the case of Taxes that are either (1) based upon or
related to income or receipts, or (2) imposed in connection with any
sale or other transfer or assignment of property (real or personal,
tangible or intangible) (other than conveyances pursuant to this
Agreement, which are covered under Section 6.4(j)), (i) for the
Pre-Closing Period, an amount equal to the amount which would be
payable if the taxable year or period ended on the Closing Date (except
that, solely for purposes of determining the marginal tax rate
applicable to income or receipts during such period in a jurisdiction
in which such tax rate depends upon the level of income or receipts,
annualized income or receipts may be taken into account, if
appropriate, for an equitable sharing of such Taxes) and (ii) for the
Post-Closing Period, an amount equal to the entire amount of Taxes for
the Interim Period less any Taxes allocated to the Pre-Closing Period;
and
(y) in the case of Taxes not described in subparagraph (x)
above that are imposed on a periodic basis and measured by the level of
any item, (i) for the Pre-Closing Period, an amount equal to the amount
of such Taxes for the entire period (or, in the case of such Taxes
determined on an arrears basis, the amount of such Taxes for the
immediately preceding period) multiplied by a fraction the numerator of
which is the number of calendar days in the Interim Period ending on
the Closing Date and the denominator of which is the number of calendar
days in the entire relevant period and (ii) for the Post-Closing
Period, an amount equal to the entire amount of Taxes for the Interim
Period less any Taxes allocated to the Pre-Closing Period.
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26
(h) TERMINATION OF THE COMPANY'S S CORPORATION STATUS AND
TAXABLE YEAR. The transactions contemplated by this Agreement will cause the
Company to terminate its status as an S corporation, effective as of the Closing
Date. Pursuant to Section 1362(e)(1) of the Code, the Company shall have two
short taxable years for United States federal income tax purposes for the year
that includes the Closing Date, an "S short year" beginning January 1 of such
year and ending on the day before the Closing Date and a "C short year"
beginning on the Closing Date and ending on the next succeeding close of the
Buyer's consolidated return taxable year. The Seller shall cause the Company to
elect and shall consent, pursuant to Section 1362(e)(3) of the Code, to allocate
Tax items to the Company's S short year and C short year pursuant to normal Tax
accounting rules (i.e., the "closing of the books method"). The allocation of
such items shall be done on a basis consistent with the Company's past
accounting practice and in a manner satisfactory to the Buyer.
(i) PREPARATION OF TAX RETURNS. The Seller shall prepare and
file or otherwise furnish to the appropriate party (or cause to be prepared and
filed or so furnished) in a timely manner the United States federal income tax
return of the Company for the Company's S short year. In addition, the Seller
shall prepare and file, or cause to be prepared and filed, any and all other Tax
Returns required to be filed by the Company (after giving effect to any valid
extensions of the due date for filing any such Tax Returns) on or prior to the
Closing Date. All such Tax Returns shall be prepared in a manner consistent with
the prior Tax Returns of the Company, unless otherwise required under applicable
law. The Seller shall timely pay (or cause to be timely paid) all Taxes shown as
due and owing on all such Tax Returns. The Buyer shall prepare and file, or
cause to be prepared and filed, any and all other Tax Returns required to be
filed by the Company. Subject to its right to indemnification under this Section
6.4, the Buyer shall pay (or cause to be paid) all Taxes shown as due and owing
on all such Tax Returns. The Seller, the Company and Buyer shall reasonably
cooperate, and shall cause their respective Affiliates, officers, employees,
agents, auditors and other representatives reasonably to cooperate, in preparing
and filing all Tax Returns, including maintaining and making available to each
other all records necessary in connection with Taxes and in resolving all
disputes and audits with respect to all taxable periods relating to Taxes. The
Buyer and the Seller recognize that the Seller and Seller's agents and other
representatives will need access, from time to time, after the Closing Date, to
certain accounting and Tax records and information held by the Company to the
extent such records and information pertain to events occurring prior to the
Closing Date; therefore, each of the Buyer and the Company agrees (i) to use all
reasonable efforts to properly retain and maintain such records until such time
as the Seller agrees that such retention and maintenance is no longer necessary
(but in no event longer than the applicable statute of limitations) and (ii) to
allow the Seller and Seller's agents and other representatives, at times and
dates mutually acceptable to the parties, to inspect, review and make copies of
such records as the Seller, its agents and other representatives may deem
necessary or appropriate from time to time, such activities to be conducted
during normal business hours and at the Seller's expense.
(j) TRANSFER AND CONVEYANCE TAXES. The Seller shall be liable
for and shall pay all applicable sales, transfer, recording, deed, stamp and
other similar taxes, including, without limitation, any real property transfer
or gains taxes (if any), resulting from the consummation of the transactions
contemplated by this Agreement, except for any stock transfer taxes in excess of
$500 imposed solely by reason of the Closing being in the State of New York.
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27
(k) CONTESTS. The Buyer shall promptly notify the Seller in
writing of any written notice of a proposed assessment or claim in an audit or
administrative or judicial proceeding involving the Company which, if determined
adversely to the taxpayer, would be grounds for indemnification under this
Section 6.4; PROVIDED, HOWEVER, that a failure to give such notice will not
affect the Buyer's right to indemnification hereunder, except to the extent, if
any, that, but for such failure, the Seller could have avoided the Tax liability
in question. In the case of an audit or administrative or judicial proceeding
that relates to any Pre-Closing Period, PROVIDED that within 30 days after the
Seller receives the written notice from the Buyer required under this Section
6.4(k) and prior to taking any action with respect to such audit or
administrative or judicial proceeding, the Seller acknowledges in writing the
Seller's liability under this Section 6.4 to hold the Buyer and the Company
harmless against the full amount of any adjustment which may be made as a result
of such audit or proceeding, the Seller shall have the right at his own expense
to control the conduct of such audit or proceeding; PROVIDED, HOWEVER, that the
Seller shall not settle or otherwise compromise any issue or matter without the
Buyer's prior written consent if such issue or matter will have a material
affect on the Tax liability of the Buyer or the Company for a Post-Closing
taxable year or period (or for an Interim Period). The Buyer also may
participate in any such audit or proceeding at its own expense and, if the
Seller does not assume the defense of any such audit or proceeding, the Buyer
may, without any effect to its or the Company's right to indemnification under
this Section 6.4, defend the same in such manner as it may deem appropriate,
including, but not limited to, settling such audit or proceeding. Except as
provided otherwise in this Section 6.4(k), the Buyer shall control at its own
expense any and all audit, administrative and judicial proceedings related to
the Company or the Company's Taxes.
(l) TIME OF PAYMENT. Payment of any amounts due under this
Section 6.4 in respect of Taxes shall be made by the Seller at least three
business days before the due date of the applicable estimated or final Tax
Return required to be filed by the Buyer on which is required to be reported
income for an Interim Period for which the Seller is responsible under Sections
6.4(g) or (j) of this Agreement without regard to whether the Tax Return shows
overall net income or loss for such period, or, with respect to indemnity
payments due under Section 6.4(e) of this Agreement, within three business days
following a settlement or compromise of an assessment of a Tax by a Tax
Authority or a "determination" as defined in Section 1313(a) of the Code. If
liability under this Section 6.4 is in respect of costs or expenses other than
Taxes, payment by the Seller of any amounts due under this Section 6.4 shall be
made within five business days after the date that the Seller has been notified
by the Buyer that the Seller has a liability for a determinable amount under
this Section 6.4 and is provided with calculations or other materials supporting
such liability. Payment of any amounts due under Section 6.4(f) shall be made by
the Company or Buyer within five business days after the date in which the
liability under which such indemnity arose is due to the appropriate Tax
Authority.
(m) TERMINATION OF SELLER'S INDEMNITY OBLIGATIONS FOR TAXES.
Notwithstanding any provision herein to the contrary, the obligations of the
Seller to indemnify and hold harmless the Buyer and the Company pursuant to this
Section 6.4 and the obligations of the Buyer and the Company to indemnify and
hold harmless the Seller pursuant to this Section 6.4 shall terminate at the
close of business on the 90th day following the expiration of the applicable
statute of limitations with respect to the Tax liabilities in question (giving
effect to any waiver, mitigation or extension thereof).
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28
(n) TAX ELECTIONS. From and after the date hereof, the Seller
shall not, without the prior written consent of the Buyer (which may not
unreasonably withhold such consent), make or revoke, or cause or permit to be
made or revoked, any Tax election, or adopt or change any method of accounting,
that would adversely affect the Company.
(o) RESOLUTION OF DISAGREEMENTS. If the Seller and the Buyer
disagree as to the amount for which the Buyer or the Company and the Seller are
liable under this Section 6.4, the Seller and the Buyer shall promptly consult
with each other in an effort to resolve such dispute. If any such point of
disagreement cannot be resolved within 30 days of the date of consultation, such
dispute shall be submitted to a "Big-Five" accounting firm which is mutually
acceptable to the Buyer and the Seller to act as an arbitrator to resolve all
points of disagreement concerning Tax accounting matters with respect to this
Agreement.
(p) The Company and Seller will not revoke the Company's
election to be taxed as an S corporation within the meaning of Sections 1361 and
1362 of the Code prior to the Closing Date. The Company and Seller will not take
or allow any action that would result in the termination of the Company's status
as a validly electing S corporation within the meaning of Sections 1361 and 1362
of the Code prior to the Closing Date.
6.5 WARN ACT. The Buyer and the Seller and the Company agree
that for purposes of the WARN Act, the Closing Date shall be the "effective
date" as such term is used in the WARN Act. The Buyer acknowledges and
represents that it has no present intent to engage in or permit a "mass layoff"
or "plant closing" with respect to the Company as defined in the WARN Act. The
Buyer agrees that from and after the Closing Date the Company shall be
responsible for any notification required under the WARN Act with respect to the
Company. The Seller and the Company agree that between the date hereof and the
Closing Date, they will not effect or permit a "plant closing" or "mass layoff"
as these terms are defined in the WARN Act with respect to the Company without
notifying the Buyer in advance and without complying with the notice
requirements and all other provisions of the WARN Act.
6.6 NO NEGOTIATION. Neither the Seller nor the Company will,
directly or indirectly, through any director, employee, representative,
affiliate or agent of the Seller or the Company, or otherwise (i) solicit,
initiate, encourage or assist in the submission of any inquiries, proposals or
offers from any corporation, partnership, person or other entity or group
relating to any acquisition or purchase of any assets of, or any equity interest
in, the Company or any form of recapitalization transaction, merger,
consolidation, business combination, spin-off, liquidation or similar
transaction involving, directly or indirectly, the Company (each an "ACQUISITION
PROPOSAL"), (ii) participate in any discussions or negotiations regarding any
Acquisition Proposal or furnish to any person or entity any information
concerning the Company or any Acquisition Proposal or (iii) otherwise cooperate
in any way with, or assist or participate in, facilitate or encourage, any
effort or attempt by any other person to make or enter into an Acquisition
Proposal. The Seller agrees not to pledge, encumber or dispose of the Shares or
any other securities of the Company beneficially owned by him prior to the
Closing. If the Company or the Seller receives any inquiry, proposal or offer to
enter into any transaction of any type referred to above, such party agrees to
inform the Buyer promptly of the terms thereof and the identity of the party
making such inquiry, proposal or offer.
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29
6.7 COVENANT TO SATISFY CONDITIONS. Each party hereto agrees
to use all reasonable efforts to insure that the conditions set forth in Article
IV and Article V hereof are satisfied, insofar as such matters are within the
control of such party.
6,8 DISABILITY INSURANCE. After the Closing, the Buyer shall
cause the Company to continue to include each of Donald Garratt and Richard
Thompson within the coverage of the Company's standard disability insurance
policy for its employees so long as Donald Garratt and Richard Thompson remain
as employees of the Company pursuant to their respective Employment Agreements
dated October 21, 1996.
6.9 ENVIRONMENTAL INSURANCE POLICY. The Company may elect to
assist the Seller in obtaining an environmental insurance policy covering
potential Losses which may be suffered or incurred by the Company and which may
be indemnifiable under Section 8.1(a)(1) hereof. The parties agree that all
requests from the Seller for any such assistance by the Company shall be
exclusively directed to the Chief Financial Officer of the Company who shall
decide at his sole discretion what assistance, if any, the Company may provide
to the Seller. The Seller agrees to pay for all costs related to such
environmental insurance coverage (including any premium payments that are or may
become due), and agrees to indemnify the Company against any costs of any kind
(including, but not limited to, any deductions or retentions) in connection with
such environmental insurance coverage.
ARTICLE VII
TERMINATION
7.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by the mutual consent of the Seller and the Buyer;
(b) by the Buyer if the Closing has not occurred on or before
the thirtieth day following the execution and delivery of this Agreement by the
parties hereto (the "Termination Date"), unless the failure of such consummation
shall be due to the failure of the Buyer to comply in all material respects with
the representations, warranties, agreements and covenants contained herein to be
performed by the Buyer on or before the Termination Date.
(c) by the Seller if the Closing has not occurred on or
before the Termination Date, unless the failure of such consummation shall be
due to the failure of the Seller to comply in all material respects with the
representations, warranties, agreements and covenants contained herein to be
performed by the Seller on or before the Termination Date; or
(d) by either the Seller or the Buyer if any court or
governmental authority of competent jurisdiction shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby and such order, decree or
ruling or other action shall have become final and nonappealable.
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30
7.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby by the Seller or the Buyer pursuant to Section 7.1 hereof,
written notice thereof shall forthwith be given to the other parties. If this
Agreement is terminated and the transactions contemplated by this Agreement are
abandoned as provided herein, no party to this Agreement will have any liability
under this Agreement to any other, except (i) that nothing herein shall relieve
any party from any liability for any breach of any of the representations,
warranties, covenants and agreements set forth in this Agreement and (ii) as
contemplated by Section 9.1.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION. (1) INDEMNIFICATION BY THE SELLER.
Subject to the limits set forth in this Section 8.1, the Seller agrees to
indemnify, defend and hold the Buyer and its Affiliates (including, after the
Closing Date, the Company) and their respective officers, directors, partners,
stockholders, employees, agents and representatives (the "BUYER INDEMNIFIED
PERSONS") harmless from and in respect of any and all losses, damages, costs and
reasonable expenses (including, without limitation, reasonable fees and expenses
of counsel) (collectively, "LOSSES"), that they may incur arising: (i) out of or
due to any inaccuracy of any representation or the breach of any warranty,
covenant, undertaking or other agreement of the Seller contained in this
Agreement or the Disclosure Schedule; (ii) under any Environmental Laws
regarding conditions or events existing or occurring on or prior to the Closing
Date; (iii) under the WARN Act for "plant closings" or "mass layoffs" which
occur or have occurred on or prior to the Closing Date with respect to the
Company; (iv) out of or due to any payments required to be made by the Company
following the termination of employment with the Company or contingent upon the
termination of employment with the Company (including but not limited to
payments of base salary and/or bonus or the providing of any benefits of any
kind) of either Donald Garratt or Richard Thompson, including, but not limited
to, those payments pursuant to Sections 3 and/or 4 of the Employment Agreements
dated October 21, 1996 between the Company and each of Donald Garratt and
Richard Thompson, respectively, or out of the maintenance by the Company or the
failure by the Company to maintain any disability or life insurance policy
(other than as required by Section 6.8 hereof) referred to in such employment
agreements or any payments made under such policy, in excess of any amount, net
of any applicable Taxes paid or payable thereon by the Company or any of its
Affiliates, actually received by the Company upon the death of either Donald
Garratt or Richard Thompson pursuant to any disability or life insurance policy
referred to in such employment agreements; (v) out of or due to the failure by
the Issuer, the Lender, the Authority and the Company to consummate the transfer
of the Project by the Issuer to the Lessee, the termination of the Lease
Agreement, the release of any mortgage liens and security interests securing the
obligations of the Issuer and/or the Lessee under the Note and the consummation
of all other transactions contemplated by that certain letter agreement dated
June 2, 1998 among the Company, the Rhode Island Industrial Facilities
Corporation, as successor-in-interest to the Trustees of The Industrial
Foundation of Rhode Island, Citizens Bank of Rhode Island, f/k/a Citizens
Savings Bank, and Rhode Island Industrial Building Authority (capitalized terms
used in this clause (v) and not defined in this Agreement have the meanings
ascribed to them in the above-referenced letter agreement); (vi) in connection
with the issuance by the Company of shares of its common stock to Vincent J.
Buonanno in exchange for shares of common stock of The City Barrel Company on or
about January 1993, as provided in that certain Unanimous Written Consent of the
Directors of the Company dated as of January 28, 1993; (vii) from any obligation
of the Company to make any payment pursuant to (A) the Borton Letter Agreements,
(B) the Boudreaux Noncompetition Agreement, (C) Section 2.3 of the Asset
Purchase Agreement dated August 29, 1997 among the Company, Richmond Barrel &
Box Co., Inc. and Borton and (D) the Bonus Payments or any similar obligation of
the Company to make any similar type of bonus payment to any employee of the
Company in connection with the transactions contemplated by this Agreement;
(viii) under the Loan Agreement dated August 29, 1997 between the Company and
Citizens Bank of Rhode Island, other than payment of the Citizens LIBOR Term
Loan Payoff Amount and the Citizens Prime Rate Term Loan Payoff Amount referred
to in Section 1.3(b)(i)hereof; and (ix) under any of the agreements listed on
Section 5.9 of the Disclosure Schedule. Anything (other than the last sentence
of this Section 8.1 (a)(1)) to the contrary contained herein notwithstanding,
(x) none of the Buyer Indemnified Persons shall be entitled to recover from the
Seller for any claims for indemnity with respect to any inaccuracy or breach of
any representations or warranties (other than recovery for claims predicated
upon the inaccuracy or breach of Sections 2.2, 2.3, 2.4, 2.17, 2.19, 2.25 and
2.26 and the first sentence of Section 2.1), unless and until the total of all
such claims in respect of Losses pursuant to Section 8.1 (a)(1)(i) exceeds
$100,000 (provided that, if such total exceeds $100,000, the first $100,000 as
well as all losses in excess of such amount shall be indemnifiable), (y) the
Buyer Indemnified Parties shall not be entitled to recover more than an
aggregate of $1,600,000 from the Seller for any claims for indemnity with
respect to inaccuracies or breaches of representations or warranties (other than
recovery for claims predicated upon the inaccuracy or breach of Sections 2.2,
2.3, 2.4, 2.17, 2.19, 2.25 and 2.26 and the first sentence of Section 2.1) and
(z) the Buyer Indemnified Parties shall not be entitled to recover more than an
aggregate of $2,000,000 from the Seller for any claims for indemnity under
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31
Section 8.1(a)(1)(ii) or with respect to inaccuracies or breaches of Section
2.17. Notwithstanding any provision herein to the contrary, or any disclosure
included in Section 2.17 of the Disclosure Schedule, Seller shall, without any
limitation or deduction, indemnify, defend and hold harmless the Buyer
Indemnified Persons regarding any and all Losses under or relating to
Environmental Laws with respect to the Bayonne Barrel & Drum site or otherwise
relating to the Bayonne Barrel & Drum site.
(2) Buyer acknowledges that the Seller is in the process of
obtaining and may obtain an environmental insurance policy covering potential
Losses which may be suffered or incurred by the Company and which may be
indemnifiable under Section 8.1(a)(1) ("ENVIRONMENTAL CLAIMS"). Notwithstanding
anything to the contrary contained herein, if such environmental insurance
policy is obtained, in the event of any Environmental Claim against the Company
which, in the reasonable judgment of the Company, is within the scope of said
environmental insurance policy, Buyer shall cause the Company to use its
reasonable best efforts to seek to recover all Losses incurred by the Company
with respect to such Environmental Claims from such environmental insurance
policy, provided, however that if and to the extent any such Losses are not paid
reasonably promptly pursuant to such insurance policy, Buyer shall have the
right to seek indemnification from Seller hereunder on the terms and subject to
the conditions of the indemnification provisions contained in this Agreement,
provided, further, that Seller shall have the right to require the Company to
grant Seller full rights of subrogation with respect to any claim for recovery
of such Losses under said environmental insurance policy, to the extent that the
Company is able to grant such rights.
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32
(b) INDEMNIFICATION BY THE COMPANY. Subject to the limits set
forth in this Section 8.1, the Buyer and the Company agree that after the
Closing the Buyer and the Company shall jointly and severally indemnify, defend
and hold the Seller and his Affiliates and their respective agents and
representatives (the "SELLER INDEMNIFIED PERSONS") harmless from and in respect
of any and all Losses that they may incur arising (i) out of or due to any
inaccuracy of any representation or the breach of any warranty, covenant,
undertaking or other agreement of the Buyer contained in this Agreement or (ii)
under the WARN Act for "plant closings" or "mass layoffs" which occur after the
Closing Date with respect to the Company. Anything to the contrary contained
herein notwithstanding, (x) none of the Seller Indemnified Persons shall be
entitled to recover from the Company for any claims for indemnity with respect
to any inaccuracy or breach of any representations or warranties, unless and
until the total of all such claims in respect of Losses pursuant to Section
8.1(b)(i) exceeds $100,000 (provided that, if such total exceeds $100,000, the
first $100,000 as well as all losses in excess of such amount shall be
indemnifiable) and (y) the Seller Indemnified Parties shall not be entitled to
recover more than an aggregate of $1,600,000 from the Company for any claims for
indemnity with respect to inaccuracies or breaches of representations or
warranties.
(c) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties contained in this Agreement or in
any instrument delivered pursuant hereto will survive the Closing Date and will
remain in full force and effect thereafter until the first anniversary of the
Closing Date, provided that (i) the representations and warranties set forth in
Sections 2.2, 2.3, 2.4, 2.12, 2.19 and 2.25 and the first sentence of Section
2.1 will survive the Closing Date and will remain in full force and effect until
the ninetieth (90th) day following the expiration of the applicable statute of
limitations (after giving effect to waiver, mitigation or extension thereof) and
(ii) the representations and warranties set forth in Sections 2.17 and 2.26 will
survive the Closing Date and will remain in full force and effect until the
second anniversary of the Closing Date; PROVIDED, FURTHER, that such
representations or warranties shall survive (if at all) beyond such period with
respect to any inaccuracy therein or breach thereof, written notice of which
shall have been duly given within such applicable period in accordance with
Section 8.1 (d) hereof.
(d) NOTICE AND OPPORTUNITY TO DEFEND. If there occurs an
event which a party asserts is an indemnifiable event pursuant to Section
8.1(a)(1) or 8.1(b), the party seeking indemnification shall notify the other
party obligated to provide indemnification (the "INDEMNIFYING PARTY") promptly.
If such event involves (i) any claim or (ii) the commencement of any action or
proceeding by a third person, the party seeking indemnification will give such
Indemnifying Party prompt written notice of such claim or the commencement of
such action or proceeding; PROVIDED, HOWEVER, that the failure to provide prompt
notice as provided herein will relieve the Indemnifying Party of its obligations
hereunder only to the extent that such failure prejudices the Indemnifying Party
hereunder. In case any such action shall be brought against any party seeking
indemnification and it shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate therein or,
following the delivery by the Indemnifying Party to the party seeking
indemnification of the Indemnifying Party's acknowledgement in writing that the
relevant Loss is an indemnified liability hereunder and that the Indemnifying
Party, in its good faith judgment, will be able to pay any award of money
damages against the indemnified party in connection with such action, to assume
the defense
<PAGE>
33
thereof, with counsel reasonably satisfactory to such party seeking
indemnification and, after notice from the Indemnifying Party to such party
seeking indemnification of such election so to assume the defense thereof, the
Indemnifying Party shall not be liable to the party seeking indemnification
hereunder for any legal expenses of other counsel or any other expenses
subsequently incurred by such party in connection with the defense thereof. The
Indemnifying Party and the party seeking indemnification agree to cooperate
fully with each other and their respective counsel in connection with the
defense, negotiation or settlement of any such action or asserted liability. The
party seeking indemnification shall have the right to participate at its own
expense in the defense of such action or asserted liability. If the Indemnifying
Party assumes the defense of an action (a) no settlement or compromise thereof
may be effected (i) by the Indemnifying Party without the written consent of the
indemnified party (which consent shall not be unreasonably withheld or delayed)
unless (x) there is no finding or admission of any violation of law or any
violation of the rights of any person by any indemnified party and no adverse
effect on any other claims that may be made against any indemnified party and
(y) all relief provided is paid or satisfied in full by the Indemnifying Party
or (ii) by the indemnified party without the consent of the Indemnifying Party
and (b) the indemnified party may subsequently assume the defense of such action
if a court of competent jurisdiction determines that the Indemnifying Party is
not vigorously defending such action. In no event shall an Indemnifying Party be
liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld or delayed).
(e) PAYMENT. On each occasion that any indemnified party
shall be entitled to indemnification or reimbursement under this Section 8.1,
the Indemnifying Party shall, at each such time, promptly pay the amount of such
indemnification or reimbursement. If any indemnified party shall be entitled to
indemnification under this Section 8.1, the Indemnifying Party shall pay the
indemnified party's costs and expenses arising as a result of a proceeding
directly relating to an indemnifiable Loss (including, without limitation, any
reasonable fees paid to witnesses), periodically as incurred.
(f) TAX INDEMNITY. Notwithstanding anything to the contrary
in this Section 8.1, indemnification with respect to Taxes shall be governed
solely by Section 6.4.
ARTICLE IX
MISCELLANEOUS
9.1 FEES AND EXPENSES. Except as otherwise provided in this
Agreement, the Seller shall bear his own expenses and the expenses of his
Affiliates (including the Company) and the Buyer shall bear its own expenses in
connection with the preparation and negotiation of this Agreement and the
consummation of the transactions contemplated by this Agreement. Each of the
Seller and the Buyer shall bear the fees and expenses of any broker or finder
retained by such party and its or his respective Affiliates (including, in the
case of the Seller, the Company) in connection with the transactions
contemplated herein.
<PAGE>
34
9.2 GOVERNING LAW. This Agreement shall be construed under
and governed by the laws of the State of New York applicable to contracts made
and to be performed therein.
9.3 AMENDMENT. This Agreement may not be amended, modified or
supplemented except upon the execution and delivery of a written agreement
executed by the Buyer and the Seller.
9.4 NO ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the Buyer, in the case of assignment by the
Seller, and the Seller, in the case of any assignment by the Buyer; PROVIDED
that the Buyer may assign its rights and interests under this Agreement to any
of its subsidiaries.
9.5 WAIVER. Any of the terms or conditions of this Agreement
which may be lawfully waived may be waived in writing at any time by each party
which is entitled to the benefits thereof. Any waiver of any of the provisions
of this Agreement by any party hereto shall be binding only if set forth in an
instrument in writing signed on behalf of such party. No failure to enforce any
provision of this Agreement shall be deemed to or shall constitute a waiver of
such provision and no waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
9.6 NOTICES. Any notice, demand, or communication required or
permitted to be given by any provision of this Agreement shall be deemed to have
been sufficiently given or served for all purposes if (a) personally delivered,
(b) mailed by registered or certified first-class mail, prepaid with return
receipt requested, (c) sent by a nationally recognized overnight courier
service, to the recipient at the address below indicated or (d) delivered by
facsimile which is confirmed in writing by sending a copy of such facsimile to
the recipient thereof pursuant to clause (a) or (c) above:
If to the Buyer:
Russell-Stanley Holdings, Inc.
685 Route 202-206
Bridgewater, New Jersey 08807
Attn: President
(908) 203-1940 (telecopier)
(908) 203-9500 (telephone)
With copies to:
Vestar Capital Partners III, L.P.
245 Park Avenue, 41st Floor
New York, New York 10167
Attn: Robert L. Rosner
(212) 808-4922 (telecopier)
<PAGE>
35
(212) 949-6500 (telephone)
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Peter J. Gordon
(212) 455-2502 (telecopier)
(212) 455-2605 (telephone)
If to the Seller:
Temple Steel Co.
5215 Old Orchard Road
Skokie, Illinois 60077
Attn: Vincent J. Buonanno
(847) 581-9024 (telecopier)
(847) 581-9400 (telephone)
With a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, Rhode Island 02903
Attn: Bernard V. Buonanno, Jr.
(401) 276-6611 (telecopier)
(401) 274-9200 (telephone)
or to such other address as any party hereto may, from time to time, designate
in a written notice given in like manner.
Except as otherwise provided herein, any notice under this
Agreement will be deemed to have been given (x) on the date such notice is
personally delivered or delivered by facsimile, (y) four days after the date of
mailing if sent by certified or registered mail or (z) the next succeeding
business day after the date such notice is delivered to the overnight courier
service if sent by overnight courier; PROVIDED that in each case notices
received after 4:00 p.m. (local time of the recipient) shall be deemed to have
been duly given on the next business day.
9.7 COMPLETE AGREEMENT. This Agreement, the Confidentiality
Letter dated April 24, 1998 between Riparian Partners, Ltd. and Russell-Stanley
Corp., the Confidentiality Letter dated May 15, 1998 between the Company and
Russell-Stanley Corp. and the other documents and writings referred to herein or
delivered pursuant hereto contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect
<PAGE>
36
to the subject matter hereof and thereof. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
9.8 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
9.9 PUBLICITY. The Seller, the Company and the Buyer will
consult with each other and will mutually agree upon any publication or press
release of any nature with respect to this Agreement or the transactions
contemplated hereby and shall not issue any such publication or press release
prior to such consultation and agreement, except in each case as may be required
by applicable law, in which case the party proposing to issue such publication
or press release shall make all reasonable efforts to consult in good faith with
the other party or parties before issuing any such publication or press release
and shall provide a copy thereof to the other party or parties prior to such
issuance.
9.10 HEADINGS. The headings contained in this Agreement are
for reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
9.11 SEVERABILITY. Any provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.
9.12 THIRD PARTIES. Except as specifically set forth or
referred to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or corporation, other than the
parties hereto and their permitted successors or assigns, any rights or remedies
under or by reason of this Agreement.
9.13 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE
PARTIES HERETO HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE AREA ENCOMPASSED BY THE SOUTHERN DISTRICT OF THE STATE OF NEW
YORK AND IRREVOCABLY AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS. THE PARTIES HERETO
EACH ACCEPT FOR ITSELF AND HIMSELF, AS THE CASE MAY BE, AND IN CONNECTION WITH
ITS OR HIS, AS THE CASE MAY BE, RESPECTIVE PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION AND VENUE OF THE AFORESAID COURTS
AND WAIVE ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREE TO BE BOUND
BY ANY NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT. THE SELLER DESIGNATES THE MANAGING PARTNER OF THE NEW YORK OFFICE OF
EDWARDS & ANGELL, LLP WHO HAS IRREVOCABLY AGREED IN WRITING TO SO SERVE AS AGENT
FOR THE SELLER TO RECEIVE ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT,
SUCH SERVICE BEING HEREBY
<PAGE>
37
ACKNOWLEDGED BY THE PARTIES HERETO TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. THE BUYER DESIGNATES ROBERT L. ROSNER AT HIS BUSINESS ADDRESS SET FORTH
IN Section 9.6 AND SUCH OTHER PERSON AS MAY HEREINAFTER BE SELECTED BY THE BUYER
WHO IRREVOCABLY AGREES IN WRITING TO SO SERVE AS AGENT FOR THE BUYER TO RECEIVE
ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY THE PARTIES HERETO TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL
TO THE PARTIES HERETO, AS PROVIDED HEREIN, EXCEPT THAT UNLESS OTHERWISE PROVIDED
BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY
OF SERVICE OF PROCESS.
9.14 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
LAW, THE PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE
PARTIES HERETO ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH
MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ANY OF THE OTHER PARTIES. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS,
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
38
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE
PARTIES HERETO ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER
INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN
ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER
IN THEIR RELATED FUTURE DEALINGS. THE PARTIES HERETO FURTHER WARRANT AND
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS OR HIS, AS THE CASE MAY
BE, LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS OR HIS, AS
THE CASE MAY BE, JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR
IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
IN WITNESS WHEREOF, the Seller has executed this Agreement,
and each of the Company and the Buyer has caused this Agreement to be executed
by its duly authorized officer, in each case as of the day and year first above
written.
/S/ VINCENT J. BUONANNO
VINCENT J. BUONANNO
NEW ENGLAND CONTAINER CO., INC.
By: /S/ GERARD C. DISCHINO
Name: Gerard C. Dischino
Title: President
RUSSELL-STANLEY HOLDINGS, INC.
By: /S/ ROBERT L. SINGLETON
Name: Robert L. Singleton
Title: President & CEO
CONSENTED TO:
/S/ LINDA S. BUONANNO
MRS. VINCENT J. BUONANNO
EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
Among
MARK E. DANIELS,
ROBERT E. DANIELS,
MARK E. DANIELS IRREVOCABLE FAMILY TRUST,
R.E. DANIELS IRREVOCABLE FAMILY TRUST,
CONTAINER MANAGEMENT SERVICES, INC.
and
RUSSELL-STANLEY CORP.
dated as of
July 1, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
PURCHASE AND SALE OF SHARES...............................................1
1.1 Transfer by Sellers of Shares..............................................1
1.2 Consideration..............................................................1
1.3 The Closing................................................................1
1.4 Contingent Consideration...................................................3
1.5 Further Assurances.........................................................3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS.................................3
2.1 Corporate Organization...............................................3
2.2 Capitalization.......................................................4
2.3 Ownership of Stock...................................................4
2.4 Authorization, Etc...................................................4
2.5 Financial Statements.................................................5
2.6 No Undisclosed Liabilities...........................................5
2.7 No Approvals or Conflicts............................................5
2.8 Compliance with Law; Governmental Authorizations.....................6
2.9 Litigation...........................................................6
2.10 Assets...............................................................6
2.11 Absence of Certain Changes...........................................7
2.12 Taxes................................................................7
2.13 Employee Benefits....................................................8
2.14 Labor Relations......................................................9
2.15 Patents, Trademarks, Trade Names, Etc...............................10
2.16 Contracts...........................................................10
2.17 Environmental Matters...............................................11
2.18 Insurance...........................................................12
2.19 Transactions with Affiliates........................................12
2.20 Material Customers and Suppliers....................................12
2.21 Real Property.......................................................12
2.22 Investment Company Act Status.......................................13
2.23 Product Liability...................................................13
2.24 Books and Records...................................................13
2.25 No Brokers' or Other Fees...........................................13
<PAGE>
PAGE
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER..................................13
3.1 Organization.........................................................13
3.2 Authorization Etc....................................................13
3.3 No Approvals or Conflicts............................................14
3.4 Financing............................................................14
3.5 No Brokers' or Other Fees............................................14
ARTICLE IV
CONDITIONS TO SELLERS' OBLIGATIONS.......................................14
4.1 Representations and Warranties.......................................14
4.2 Performance..........................................................15
4.3 Officer's Certificate................................................15
4.4 HSR Act..............................................................15
4.5 Injunctions..........................................................15
4.6 Consents.............................................................15
4.7 Employment/Noncompetition, Option and Stay-Pay Agreements............15
4.8 Equity Agreements....................................................15
ARTICLE V
CONDITIONS TO BUYER'S OBLIGATION.........................................15
5.1 Representations and Warranties.......................................15
5.2 Performance..........................................................16
5.3 Officer's Certificate................................................16
5.4 Resignation of Directors.............................................16
5.5 HSR Act..............................................................16
5.6 Injunctions..........................................................16
5.7 Consents.............................................................16
5.8 Affiliate Agreements.................................................16
5.9 Existing Indebtedness................................................16
5.10 Financing............................................................16
5.11 Employment/Noncompetition and Option Agreements......................17
5.12 Equity Agreements....................................................17
5.13 IRS Form.............................................................17
<PAGE>
PAGE
ARTICLE VI
COVENANTS AND AGREEMENTS.................................................17
6.1 Conduct of Business by Company.......................................17
6.2 Access to Books and Records; Cooperation.............................18
6.3 Filings and Consents.................................................19
6.4 Tax Matters..........................................................19
6.5 WARN Act.............................................................25
6.6 No Negotiation.......................................................25
6.7 Covenant to Satisfy Conditions.......................................25
ARTICLE VII
TERMINATION..............................................................26
7.1 Termination..........................................................26
7.2 Procedure and Effect of Termination..................................26
ARTICLE VIII
INDEMNIFICATION..........................................................26
8.1 Indemnification......................................................26
ARTICLE IX
MISCELLANEOUS............................................................29
9.1 Fees and Expenses....................................................29
9.2 Governing Law........................................................29
9.3 Amendment............................................................29
9.4 No Assignment........................................................29
9.5 Waiver...............................................................29
9.6 Notices..............................................................30
9.7 Complete Agreement...................................................31
9.8 Counterparts.........................................................31
9.9 Publicity............................................................31
9.10 Headings.............................................................32
9.11 Severability.........................................................32
9.12 Third Parties........................................................32
9.13 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.......................32
9.14 WAIVER OF JURY TRIAL.................................................33
9.15 Sellers' Representative..............................................33
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "AGREEMENT"), dated as
of July 1, 1997, is entered into by and among Mark E. Daniels, Robert E.
Daniels, Mark E. Daniels Irrevocable Family Trust and R.E. Daniels Irrevocable
Family Trust (each such individual and trust is referred to herein as a "SELLER"
and all such individuals and trusts are referred to herein collectively as the
"SELLERS"), Container Management Services, Inc., a South Carolina corporation
(the "COMPANY"), and Russell-Stanley Corp., a New Jersey corporation (the
"BUYER").
WHEREAS, the Sellers collectively own, beneficially and of
record, an aggregate of 90,000 shares (all such shares collectively, the "CLASS
A SHARES") of Class A common stock, no par value (the "CLASS A COMMON STOCK"),
and 10,000 shares (all such shares collectively, the "CLASS B SHARES"; together
with the Class A Shares, the "SHARES") of Class B common stock, par value $1.00
per share (the "CLASS B COMMON STOCK"; together with the Class A Common Stock,
the "COMMON STOCK"), of the Company, which constitute all of the issued and
outstanding equity securities of the Company;
WHEREAS, the Buyer desires to purchase from the Sellers, and
the Sellers desire to sell to the Buyer, all of the Shares upon the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants contained herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 TRANSFER BY SELLERS OF SHARES. On the Closing Date (as
defined in Section 1.3) and subject to the terms and conditions set forth in
this Agreement, the Sellers will sell, assign, transfer and deliver to the Buyer
the Shares, free and clear of all options, pledges, mortgages, security
interests, liens, restrictions on voting or transfer or other encumbrances of
any nature ("ENCUMBRANCES"), other than the restrictions imposed by Federal and
state securities laws.
1.2 CONSIDERATION. On the Closing Date and subject to the
terms and conditions set forth in this Agreement, in reliance on the
representations, warranties, covenants and agreements of the parties contained
herein and in consideration of the sale, assignment, transfer and delivery of
the Shares, the Buyer will pay the consideration set forth in Section 1.3(b)
hereof (the "PURCHASE PRICE").
1.3 THE CLOSING. Unless this Agreement shall have been
terminated and the transactions contemplated herein shall have been abandoned
pursuant to Article VII, subject to Articles IV and V, the closing (the
"CLOSING") of the transactions contemplated by this Agreement shall take place
at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York,
New York 10017, as soon as practicable following the satisfaction or waiver of
all of the conditions set forth in Articles IV and V hereof (the "CLOSING
DATE"), or at such other place and
<PAGE>
2
time as may be agreed upon by the Sellers' Representative
(as defined in Section 9.15) and the Buyer.
(a) DELIVERIES BY SELLERS. At or prior to the Closing, the
Sellers shall deliver or cause to be delivered to the Buyer the following:
(i) certificates evidencing the Shares, which certificates
shall be properly endorsed for transfer or accompanied by duly executed stock
powers, in either case executed in blank or in favor of the Buyer, and otherwise
in a form acceptable for transfer on the books of the Company;
(ii) resignations of directors of the Company as
contemplated by Section 5.4 hereof; and
(iii) all other previously undelivered documents required by
this Agreement to be delivered by the Sellers to the Buyer at or prior to the
Closing Date in connection with the transactions contemplated hereby.
(b) DELIVERIES BY THE BUYER. At or prior to the Closing, the
Buyer shall deliver or cause to be delivered to or for the benefit of the
Sellers the following:
(i) to Carolina First Bank ("CFB"), an amount in cash equal
to the principal amount of all indebtedness of the Company and the Sellers owed
to CFB as of the Closing Date, all accrued and unpaid interest thereon through
the Closing Date and all other obligations of the Company and the Sellers owed
to CFB, by wire transfer of immediately available funds to an account designated
by CFB in writing at least three business days prior to the Closing Date;
(ii) to each of William F. Dixon, Gerald McGee, Sam Moore
and David L. Dixon (the "FORMER STOCKHOLDERS"), an amount in cash equal to the
principal amount of all indebtedness of the Company and the Sellers owed to each
such Former Stockholder as of the Closing Date, all accrued and unpaid interest
thereon through the Closing Date and all other obligations of the Company and
the Sellers owed to such Former Stockholder, by wire transfer of immediately
available funds to an account designated by Leatherwood Walker Todd & Mann,
P.C., as agent for Mark E. Daniels, in writing at least two business days prior
to the Closing Date, which amounts shall be immediately sent by wire transfer by
such agent to accounts designated by the Former Stockholders to such agent;
(iii) to the Sellers, an aggregate amount equal to
$32,500,000 minus the total amount delivered pursuant to Sections 1.3(b)(i) and
(ii), by wire transfer of immediately available funds to the accounts designated
by the Sellers in writing at least two business days prior to the Closing Date
or, if no such account has been designated, by bank check, which amount shall be
allocated among the Sellers and their respective designated accounts in
accordance with Exhibit 1.3(b)(iii) hereto; and
<PAGE>
3
(iv) all other previously undelivered documents required by
this Agreement to be delivered by the Buyer to the Sellers at or prior to the
Closing Date in connection with the transactions contemplated hereby.
(c) All instruments and documents executed and delivered to
the Buyer pursuant hereto shall be in form and substance, and shall be executed
in a manner, reasonably satisfactory to the Buyer. All instruments and documents
executed and delivered to the Sellers pursuant hereto shall be in form and
substance, and shall be executed in a manner, reasonably satisfactory to the
Sellers.
1.4 CONTINGENT CONSIDERATION. As additional consideration
for the Shares, the Company shall pay the Sellers (i) an aggregate amount equal
to $1,000,000 if the net income of the Company for the fiscal year ended
December 31, 1997 equals or exceeds $5,000,000 and (ii) an aggregate amount
equal to $1,000,000 if the net income of the Company for the fiscal year ended
December 31, 1998 equals or exceeds $8,000,000. For the purposes of this Section
1.4, "net income" shall mean the net income of the Company as reflected on the
relevant unaudited year-end financial statements of the Company, which shall be
prepared in accordance with generally accepted accounting principles in
existence as of the Closing Date and prior to any purchase accounting
adjustments consistently applied by the Company. Any amounts payable under this
Section 1.4 shall be paid within 10 business days after the date on which the
relevant financial statements have become available by wire transfer of
immediately available funds to the accounts designated by the Sellers in writing
at least two business days prior to the relevant payment date or, if no such
account has been designated, by bank check, and such amounts shall be allocated
among the Sellers and their respective designated accounts in accordance with
Exhibit 1.3(b)(iii) hereto.
1.5 FURTHER ASSURANCES. After the Closing, each party hereto
shall from time to time, at the request of the other party and without further
cost or expense to such other party, execute and deliver such other instruments
of conveyance and transfer and take such other actions as such other party may
reasonably request in order to more effectively consummate the transactions
contemplated hereby and to vest in the Buyer good and valid title to the Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers, jointly and severally, hereby represent and
warrant to the Buyer as follows:
2.1 CORPORATE ORGANIZATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of South Carolina. The Company has full corporate power and authority to
own its assets and to carry on its business as now being conducted and is duly
qualified or licensed to do business as a foreign corporation in good standing
in the jurisdictions in which the ownership of its property or the conduct of
its business requires such qualification or license, except jurisdictions in
which the failure to be so qualified or licensed would not, individually or in
the aggregate, reasonably be expected to cause
<PAGE>
4
either the Sellers or the Company to suffer a loss or pay a claim in excess of
$50,000 (hereinafter referred to as a "MATERIAL ADVERSE EFFECT"). The Sellers
have delivered to the Buyer complete and correct copies of the Certificate of
Incorporation and all amendments thereto, the Bylaws as presently in effect and
the minute books and stock transfer records of the Company. The Company does not
own or have any option or right to acquire, directly or indirectly, any capital
stock or other equity securities of, or have any direct or indirect equity or
ownership interest or debt investment in, any corporation, association,
partnership, joint venture or other business.
2.2 CAPITALIZATION. The authorized capital stock of the
Company consists of 240,000 shares of Class A Common Stock and 10,000 shares of
Class B Common Stock, of which 90,000 shares of Class A Common Stock and 10,000
shares of Class B Common Stock are issued and outstanding, and no other shares
of any other class or series of capital stock of the Company or securities
exercisable or convertible into or exchangeable for capital stock of the Company
("CAPITAL STOCK EQUIVALENTS") are authorized, issued or outstanding. Except as
set forth in Section 2.2 of the Disclosure Schedule, there are no subscriptions,
options, warrants, calls, rights, contracts, commitments, understandings,
restrictions or arrangements relating to the issuance, sale, transfer or voting
of any shares, whether issued or unissued, of capital stock of the Company or
Capital Stock Equivalents, including any rights of issuance, conversion or
exchange under any outstanding securities or other instruments, other than
restrictions imposed by Federal and state securities laws. All of the Shares are
validly issued, outstanding and fully paid, nonassessable and free of preemptive
rights. The Company does not have any outstanding debt securities or other
indebtedness or guarantees, except as specifically disclosed in the Financial
Statements (as defined in Section 2.5) (which, except for those debt securities
and the other indebtedness or guarantees expressly set forth in Section 2.2 of
the Disclosure Schedule, the Sellers shall cause to be fully repaid or cancelled
at or prior to the Closing without the expenditure of any funds of the Company).
2.3 OWNERSHIP OF STOCK. Each Seller is the record and
beneficial owner of the number of shares of Class A Common Stock and Class B
Common Stock set forth opposite such Seller's name in Section 2.3 of the
Disclosure Schedule. The Shares are owned free and clear of all Encumbrances,
other than the restrictions imposed by Federal and state securities laws and the
pledge securing the obligations referred to in Section 1.3(b)(i) (which the
Sellers shall cause to be fully released at or prior to the Closing). Upon the
consummation of the transactions contemplated hereby, the Buyer will acquire
title to the Shares free and clear of all Encumbrances, other than the
restrictions imposed by Federal and state securities laws and Encumbrances
arising as a result of any action taken by the Buyer or any of its affiliates
("AFFILIATES") as defined in Rule 12b-2 of the regulations promulgated pursuant
to the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT").
2.4 AUTHORIZATION, ETC. Each Seller has full power and
authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. This Agreement has been duly and validly
executed by each Seller and, assuming this Agreement constitutes the legal,
valid and binding agreement of the other parties hereto, constitutes a legal,
valid and binding agreement of each Seller, enforceable against such Seller in
accordance with its terms, except that (i) the enforcement hereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii) the
<PAGE>
5
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
2.5 FINANCIAL STATEMENTS. The Sellers have previously
delivered to the Buyer the audited balance sheet of the Company as of December
31, 1996 and the related audited statements of income, stockholders' equity and
cash flows for the fiscal year then ended, and the notes thereto (the "FINANCIAL
STATEMENTS"). The Financial Statements present fairly the assets, liabilities,
financial position, results of operations and cash flows of the Company as of
the dates and for the period indicated, and have been prepared in accordance
with United States generally accepted accounting principles ("GAAP")
consistently applied by the Company.
2.6 NO UNDISCLOSED LIABILITIES. Except as disclosed in
Section 2.6 of the Disclosure Schedule, the Company has no liabilities or
obligations, whether accrued, absolute, contingent, matured or unmatured, that
are required to be reflected, accrued or reserved for in an audited balance
sheet of the Company or the notes thereto prepared in accordance with GAAP,
other than (i) liabilities and obligations that are reflected, accrued or
reserved for in the balance sheet included in the Financial Statements (the
"1996 BALANCE SHEET"), (ii) liabilities and obligations incurred in the ordinary
course of business and consistent with past practice since the date of the 1996
Balance Sheet and (iii) liabilities and obligations which in the aggregate would
not have a Material Adverse Effect.
2.7 NO APPROVALS OR CONFLICTS. (a) Except as set forth in
Section 2.7(a) of the Disclosure Schedule, the execution, delivery and
performance by the Sellers of this Agreement and the consummation by the Sellers
of the transactions contemplated hereby will not (i) violate, conflict with or
result in a breach by the Sellers or the Company of any provision of the
Certificate of Incorporation or Bylaws of the Company, (ii) violate, conflict
with or result in a breach of any provision of, or constitute a default by the
Sellers or the Company (or an event which, with notice or lapse of time or both,
would constitute a default) or give rise to any right of termination,
cancellation or acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties of the
Company or on the Sellers' interest in the Shares under, any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, lease, contract,
agreement or other instrument to which any of the Sellers, the Company or any of
their respective properties may be bound, (iii) violate or result in a breach of
any order, injunction, judgment, ruling, law or regulation of any court or
governmental authority applicable to any of the Sellers, the Company or any of
their respective properties or (iv) require any order, consent, approval or
authorization of, or notice to, or declaration, filing, application,
qualification or registration with, any governmental or regulatory authority,
excluding from the foregoing clauses (ii) and (iii) above, such violations,
conflicts and breaches which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(b) The following information has been and will be relied
upon by Buyer in making its determination as to the notification and disclosure
requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"): (i) the audited balance sheet of the Company at
December 31, 1997 reflects that the total assets of the Company as of that date
are $7,433,079; (ii) the internally prepared balance sheet of the Company at May
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6
31, 1997, which is the last regularly prepared balance sheet of the Company,
reflects that the total assets of the Company as of that date are $8,354,774.99;
(iii) the personal financial statement of Mark E. Daniels prepared for CFB dated
December 19, 1995, which has heretofore been delivered to counsel for Buyer, is
the last regularly prepared balance sheet of Mark E. Daniels and reflects that
the total assets of Mark E. Daniels as of that date are $5,688,000 (including
his ownership interest in the Company as of that date); and (iv) Mark E. Daniels
does not own investment assets, other than his interest in the Company, with a
value of in excess of $1,000,000.
2.8 COMPLIANCE WITH LAW; GOVERNMENTAL AUTHORIZATIONS. The
Company is not in violation of any order, injunction, judgment, ruling, law or
regulation of any court or governmental authority applicable to the property or
business of the Company. The Company has all material licenses, permits and
other governmental authorizations reasonably necessary to conduct its business
as currently conducted and such licenses, permits and authorizations are valid
and in full force and effect.
2.9 LITIGATION. Except as set forth in Section 2.9 of the
Disclosure Schedule, as of the date hereof, there are no suits, actions,
proceedings or investigations pending or, to the best knowledge of the Sellers
and the Senior Managers, threatened against the Company or the transactions
contemplated by this Agreement before any arbitrator, court or governmental or
regulatory authority or body, which, if decided unfavorably to the Company,
would have a MATERIAL ADVERSE EFFECT. Except as set forth in Section 2.9 of the
Disclosure Schedule, neither the Sellers nor the Senior Managers have received
any notice that the Company or any of its assets is subject to any decree, order
or judgment which would have a Material Adverse Effect. As used in this
Agreement, "SENIOR MANAGERS" means George Todd, Ron Rakey, Pat Irwin, Earl
Buzzell and Mark Daniels.
2.10 ASSETS. Except as set forth in Section 2.10 of the
Disclosure Schedule, on December 31, 1996, the Company had and, except with
respect to assets disposed of or acquired in the ordinary course of business and
consistent with past practice since such date, the Company now has, good and
valid title to, or holds by valid and existing lease or license, all the assets
reflected as assets of the Company on the 1996 Balance Sheet or which would have
been reflected on the 1996 Balance Sheet if acquired prior to such date, free
and clear of all Encumbrances of any nature except for: (i) Encumbrances which
secure indebtedness or obligations which are properly reflected on the 1996
Balance Sheet; (ii) liens for Taxes (as defined in Section 2.12) not yet payable
or being contested in good faith; (iii) liens arising as a matter of law in the
ordinary course of business, provided that the obligations secured by such liens
are not delinquent or are being contested in good faith; and (iv) such
imperfections of title and Encumbrances which, individually or in the aggregate,
would not have a Material Adverse Effect. Except as set forth in Section 2.10 of
the Disclosure Schedule, the Company owns, or has valid leasehold interests in,
all material tangible assets necessary for the operation or conduct of the
Company's business as currently conducted and all such assets are in reasonably
good maintenance, operating condition and repair, normal wear and tear excepted,
other than machinery and equipment under repair or out of service in the
ordinary course of the Company's business.
2.11 ABSENCE OF CERTAIN CHANGES. Except as disclosed in
Section 2.11 of the Disclosure Schedule and as otherwise provided herein, since
December 31, 1996, (i) the business
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7
of the Company has been conducted only in the ordinary course and consistent
with past practice in all material respects, (ii) there has not been any event
or development prior to the date hereof which, if it had occurred or existed
after the date hereof, would be a violation of Section 6.1(c); and (iii) there
has not been any change, event or development which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
2.12 TAXES. (a) The Company has filed or caused to be filed
all Tax Returns (including estimated Tax Returns) required to be filed by the
Company. To the best knowledge of the Sellers and the Senior Managers, all Tax
Returns are complete and accurate in all material respects. All Taxes required
to be shown on such Tax Returns or otherwise due or payable and all additional
assessments of any such Taxes received prior to the date hereof have been paid
in full on the due date for payment thereof. The Company is not required to file
any income or franchise tax returns in any jurisdiction other than the United
States and the State of South Carolina. The amounts set up as accruals for Taxes
on the Financial Statements are sufficient for the payment of all Taxes of the
Company, whether or not disputed, for all periods ended on and prior to the
respective dates thereof. In addition, the amounts set up as accruals for Taxes
on the financial books of the Company on the date hereof are and will be
sufficient for the payment of all Taxes of the Company, whether or not disputed,
for all periods ended on and prior to the Closing Date. Except as disclosed in
Section 2.12 of the Disclosure Schedule, the United States federal, state and
local income tax returns of the Company have been audited by the Internal
Revenue Service or other Tax Authority or are closed and, to the best knowledge
of the Sellers and the Senior Managers, there are no proceedings or claims
relating thereto or any facts that could give rise to the reopening thereof. No
deficiency in the payment of Taxes by the Company for any period has been
asserted or, to the best knowledge of the Sellers and the Senior Managers,
threatened against the Company or any Seller by any Tax Authority and remains
unsettled as of the date of this Agreement. All Taxes required to be withheld,
collected or deposited by the Company have been timely withheld, collected or
deposited and, to the extent required, have been paid to the relevant Tax
Authorities. The Company does not owe any amount pursuant to any written or
unwritten Tax sharing agreement or arrangement, or will have any liability after
the date hereof in respect of any written or unwritten Tax sharing agreement or
arrangement executed or agreed prior to the date hereof. There are no Tax liens
on any of the assets of the Company, other than liens for current Taxes which
are not yet due or payable. Except as set forth in Section 2.12 of the
Disclosure Schedule, neither the Sellers nor the Company have made any
agreement, waiver or other arrangement providing for an extension of time with
respect to the assessment or collection of any Tax against the Company. The
Company is, and has been at all times, an "S corporation" within the meaning of
Section 1361(a) of the Internal Revenue Code of 1986, as amended (the "CODE"). A
valid election under Section 1362 of the Code has been in effect with respect to
the Company at all times since its incorporation. A valid S corporation or
similar election has been in effect with respect to the Company at all times in
the State of South Carolina and the State of New Jersey. Each Seller has filed
in a timely fashion with the Internal Revenue Service a consent to such S
corporation election with respect to the Company. The Company has not been, and
will not be, subject to Tax under Section 1374 or Section 1375 of the Code for
any taxable year ending on or prior to the Closing Date. Neither the Company nor
the Sellers has filed a consent with the Internal Revenue Service pursuant to
Section 341(f) of the Code or with any other Tax Authority to any similar effect
or made an election under Section 338 of the Code other than as provided for in
the terms of this Agreement.
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8
(b) For purposes of this Agreement, the term "Tax" or
"Taxes" shall mean all taxes, charges, fees, levies, penalties or other
assessments imposed by any United States federal, state, local or foreign Tax
Authority, including, but not limited to, income, service, leasing, occupation,
excise, property, sales and use, transfer, franchise, payroll, withholding,
social security or other taxes, including any interest, penalties or additions
attributable thereto.
(c) For purposes of this Agreement, the term "Tax Return"
shall mean any return, report, information return or other document (including
any related or supporting information) filed or required to be filed with any
Tax Authority with respect to Taxes.
(d) For purposes of this Agreement, the term "Tax Authority"
shall mean the Internal Revenue Service and any similar state, local or foreign
authority having jurisdiction over Taxes.
2.13 EMPLOYEE BENEFITS. (a) Section 2.13 of the Disclosure
Schedule contains a true and complete list of each "employee benefit plan"
(within the meaning of section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), including, without limitation, multiemployer
plans within the meaning of ERISA section 3(37)), stock purchase, stock option,
severance, employment, change-in-control, fringe benefit, collective bargaining,
bonus, incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject to
ERISA (including any funding mechanism therefor now in effect or required in the
future as a result of the transaction contemplated by this Agreement or
otherwise), whether formal or informal, oral or written, legally binding or not,
under which any employee or former employee of the Company has any present or
future right to benefits or under which the Company has any present or future
liability. All such plans, agreements, programs, policies and arrangements shall
be collectively referred to as the "COMPANY PLANS".
(b) With respect to each Company Plan, the Sellers have
delivered to the Buyer a current, accurate and complete copy (or, to the extent
no such copy exists, an accurate description) thereof and, to the extent
applicable: (i) any related trust agreement or other funding instrument; (ii)
the most recent determination letter, if applicable; (iii) any summary plan
description and other written communications (or a description of any oral
communications) by the Company to its employees concerning the extent of the
benefits provided under a Company Plan; and (iv) for the three most recent years
(A) the Form 5500 and attached schedules, (B) audited financial statements, (C)
actuarial valuation reports and (D) attorney's response to an auditor's request
for information.
(c) None of the Company Plans is an "employee benefit plan"
(within the meaning of section 3(3) of the ERISA).
(d) (i) Each Company Plan has been established and
administered in accordance with its terms, and in compliance with the applicable
provisions of ERISA, the Code and other applicable laws, rules and regulations;
and (ii) no event has occurred and no condition exists that would subject the
Company either directly or by reason of its affiliation with any member of its
"Controlled Group" (defined as any organization which is a member of a
controlled group of
<PAGE>
9
organizations within the meaning of Code sections 414(b), (c), (m) or (o)), to
any tax, fine, lien or penalty imposed by ERISA, the Code or other applicable
laws, rules and regulations.
(e) With respect to any multiemployer plan (within the
meaning of ERISA section 4001(a)(3)) to which the Company or any member of its
Controlled Group has any liability or contributes (or has at any time
contributed or had an obligation to contribute): (i) none of the Company or any
member of its Controlled Group has incurred any withdrawal liability under Title
IV of ERISA or would be subject to such liability if, as of the Closing Date,
the Company or any member of its Controlled Group were to engage in a complete
withdrawal (as defined in ERISA section 4203) or partial withdrawal (as defined
in ERISA section 4205) from any such multiemployer plan; and (ii) no such
multiemployer plan is in reorganization or insolvent (as those terms are defined
in ERISA sections 4241 and 4245, respectively).
(f) With respect to any Company Plan, (i) no actions, suits
or claims (other than routine claims for benefits in the ordinary course) are
pending or threatened, and (ii) no facts or circumstances exist that could give
rise to any such actions, suits or claims.
(g) Except as set forth in Section 2.13 of the Disclosure
Schedule, no Company Plan exists that could result in the payment to any present
or former employee of the Company of any money or other property or accelerate
or provide any other rights or benefits to any present or former employee of the
Company as a result of the transactions contemplated by this Agreement, whether
or not such payment would constitute a parachute payment within the meaning of
Code section 280G.
2.14 LABOR RELATIONS. Except as set forth in Section 2.14 of
the Disclosure Schedule, (i) the Company is not a party to any collective
bargaining agreement applicable to employees of the Company, nor is any such
contract or agreement presently being negotiated; (ii) the Company is not a
party to any employment agreement or consulting agreement with any person or
entity obligating the Company to make payments in excess of $50,000 per year,
nor is any such contract or agreement presently being negotiated; (iii) there is
no unfair labor practice charge or complaint pending or, to the best knowledge
of the Sellers and the Senior Managers, threatened against or otherwise
affecting the Company which, if adversely determined, would reasonably be likely
to result in a liability having a Material Adverse Effect; (iv) there is no
labor strike, slowdown, work stoppage, or lockout in effect, or, to the best
knowledge of the Sellers and the Senior Managers, threatened against or
otherwise affecting the Company, and the Company has not experienced any such
labor controversy within the past three years; (v) the Company is not a party
to, or otherwise bound by, any consent decree with, or citation by, any
governmental authority relating to employees or employment practices; (vi) the
Company will not have any material liability under any benefit or severance
policy, practice, agreement, plan, or program which exists or arises, or may be
deemed to exist or arise, under any applicable law or otherwise, as a result of
the transactions contemplated hereunder; and (vii) the Company is in compliance
with its obligations pursuant to the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN ACT"), and all other notification and bargaining
obligations arising under any collective bargaining agreement, statute or
otherwise. To the best knowledge of the Sellers and the Senior Managers, there
is no effort to organize employees of the Company which is pending or
threatened.
<PAGE>
10
2.15 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Section 2.15 of
the Disclosure Schedule contains a true and complete list of all patents,
trademarks, trade names, copyrights and pending applications therefor
(collectively, the "INTELLECTUAL PROPERTY") used or owned by the Company and a
list of all licenses and other agreements (collectively, the "LICENSE
AGREEMENTS") relating thereto. Except as set forth in Section 2.15 of the
Disclosure Schedule, (i) the consummation of the transactions contemplated by
this Agreement will not materially impair any right to use the Intellectual
Property or the License Agreements, (ii) all Intellectual Property and Licensing
Agreements are valid, in good standing and free and clear of liens or other
security interests, and (iii) the Company has not received written or, to the
best knowledge of the Sellers and the Senior Managers, oral, notice of any
claims by any person to the use of any such Intellectual Property, or
challenging or questioning the validity or effectiveness of any such License
Agreement.
2.16 CONTRACTS. The contracts and agreements listed in
Section 2.16 of the Disclosure Schedule constitute each contract, instrument,
lease, deed or agreement which is material to the business or operations of the
Company (the "CONTRACTS"). Complete copies (or, if oral, written summaries) of
each Contract have been made available to the Buyer, including all of the
following Contracts: (i) any indenture, note, mortgage, installment obligation,
or other instrument for or relating to any borrowing of money; (ii) any guaranty
of any obligation; (iii) any agreement, contract, commitment or arrangement
containing any covenant limiting the ability of the Company to engage in any
line of business or to compete with any business or person; (iv) any agreement,
contract, commitment or arrangement relating to capital expenditures with
respect to the Company and involving future payments which exceed $50,000 in any
12-month period; (v) any agreement, contract, commitment or arrangement relating
to the acquisition of assets or any capital stock of any business enterprise;
(vi) any real property lease; (vii) any contract, commitment, agreement or
arrangement which requires payments in excess of $50,000 in any 12-month period,
to the extent such contract, commitment, agreement or arrangement is not
terminable within 30 days without payment of premium or penalty; and (viii) any
contract, commitment, agreement or arrangement with any director, stockholder or
affiliate of the Company. Each Contract is in full force and effect, and is a
legal, valid and binding obligation of the Company and, to the best knowledge of
the Sellers and the Senior Managers, each of the other parties thereto,
enforceable in accordance with its terms, except that (x) enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and (y)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. No condition exists or
event has occurred which (whether with or without notice or lapse of time or
both, or the happening or occurrence of any other event) would constitute a
default by the Company or, to the best knowledge of the Sellers and the Senior
Managers, any other party thereto under, or result in a right in termination of,
any Contract, by any other party thereto. To the best knowledge of the Sellers
and the Senior Managers, no party to any Contract intends (x) to terminate such
Contract or materially amend the terms thereof, (y) to refuse to renew such
Contract upon expiration thereof or (z) to renew such Contract upon expiration
thereof on terms and conditions which are materially more onerous to the Company
than those pertaining to such existing Contract.
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11
2.17 ENVIRONMENTAL MATTERS. Except as set forth in Section
2.17 of the Disclosure Schedule, (i) the Company has not, as of the date hereof,
received any notice alleging the material violation of, or any material actual
or potential liability relating to, any applicable Federal, state or local
statutes, laws, regulations, rules, decrees, orders, judgments, ordinances, or
common law related to the protection of human health or the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, the Emergency Planning and Community
Right-To-Know Act, the Solid Waste Disposal Act, the Resource Conservation and
Recovery Act, the Clean Air Act, the Water Pollution Control Act, the Toxic
Substances Control Act, the Hazardous Materials Transportation Act, and the
Occupational Safety and Health Act, each as amended and supplemented, and any
regulations promulgated pursuant to such laws, and any similar state or local
statutes or regulations ("ENVIRONMENTAL LAWS"), which violation has not been
resolved and, to the best knowledge of the Sellers and the Senior Managers, no
such notice is threatened or otherwise expected, (ii) the Company is and has
been in material compliance with all applicable Environmental Laws and, to the
best knowledge of the Sellers and the Senior Managers, there is no condition
that could prevent or materially interfere with such compliance in the future,
(iii) the Company has obtained and is and has been in material compliance with
all required governmental environmental permits, registrations and
authorizations with respect to the business of the Company as currently
conducted, (iv) no hazardous waste, substance, material, or chemical, including,
without limitation, petroleum and petroleum products, asbestos and any other
material regulated under, or that can result in liability under, applicable
Environmental Laws ("HAZARDOUS MATERIALS"), has been transported, stored,
treated or disposed of by the Company on the real estate owned, operated or
otherwise used by the Company or at any other location, except as would not
result in material liability under any applicable Environmental Laws, (v) the
Company has not assumed, contractually or by operation of law, any liabilities,
potential liabilities or obligations of any other person or entity under any
applicable Environmental Laws, (vi) the Company has not entered into, agreed to,
or is subject to any judgment, decree, order or other similar requirement of any
governmental authority under any Environmental Laws, (vii) there are no (w)
underground or aboveground storage tanks, (x) surface impoundments, (y)
landfills or (z) sewer or septic systems currently or formerly present at or
about any of the properties or facilities currently or, to the best knowledge of
the Sellers and the Senior Managers, formerly owned, operated or otherwise used
by the Company that could result in material liability to the Company under any
applicable Environmental Laws, and (viii) there are no actions, activities,
events, conditions or circumstances occurring or, to the best knowledge of the
Sellers and the Senior Managers, existing during the time of the Company's
operations and ownership of its properties or, to the best knowledge of the
Sellers and the Senior Managers, prior to such time, including without
limitation the release, threatened release, emission, discharge, generation,
treatment, storage or disposal of Hazardous Materials, that could result in any
material liability or obligation of the Company under or relating to any
Environmental Laws.
2.18 INSURANCE. Section 2.18 of the Disclosure Schedule
lists all insurance policies of the Company covering the assets, employees and
operations of the Company as of the date hereof. All such policies are in full
force and effect, all premiums due thereon have been paid by the Company and the
Company has complied in all material respects with the provisions of such
policies and has not received any notice from any of its insurance brokers or
carriers that such broker or carrier will not be willing or able to renew their
existing coverage.
<PAGE>
12
2.19 TRANSACTIONS WITH AFFILIATES. Except as disclosed in
Section 2.19 of the Disclosure Schedule, there are no Contracts, agreements or
arrangements between the Company and any Seller (or any affiliate of a Seller).
2.20 MATERIAL CUSTOMERS AND SUPPLIERS. Section 2.20 of the
Disclosure Schedule sets forth the names of the ten suppliers of the Company
whom the Company paid the greatest sum of money in respect of products and
materials sold to the Company and the ten customers of the Company from whom the
Company received the greatest sum of money in respect of products or services
provided by the Company between January 1, 1996 and April 30, 1997.
2.21 REAL PROPERTY. (a) The Company does not own any real
property. The leases listed in Section 2.16 of the Disclosure Schedule
constitute all the real property leases which are used in the conduct of the
business of the Company as it is presently being conducted and/or to which the
Company is a party (the "LEASES", and such property, "LEASED PROPERTY"). To the
best knowledge of the Sellers and the Senior Managers, all of the Leased
Property conforms in all material respects to all zoning laws, ordinances and
regulations. The Leased Property are all of the real property which is used for
the conduct of the business of the Company as it is presently conducted.
(b) Since December 31, 1996, the Company has not sold,
assigned, transferred or otherwise disposed of, or granted any security interest
in or lien on, any Lease. With respect to each Lease, (i) all accrued and
payable rents required by each Lease to be paid by the Company have been paid or
adequate provision for such payment has been made, and (ii) no written notice of
default or termination has been given or received by the Company, and, to the
best knowledge of the Sellers and the Senior Managers, no material event of
default has occurred, no condition exists and no event has occurred that, with
the giving of notice or the lapse of time, would become a material default or
permit early termination, under the Lease. Except as set forth in Section 2.21
of the Disclosure Schedule, no third-party consent or approval under any Lease
is required for the consummation of the transactions contemplated herein.
2.22 INVESTMENT COMPANY ACT STATUS. The Company is not an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940.
2.23 PRODUCT LIABILITY. Except as set forth in Section 2.23
of the Disclosure Schedule, the Company has not received written notice of any
claim or threatened claim against the Company for product liability, nor, to the
best knowledge of the Sellers and the Senior Managers, has the Company received
oral notice of any claim or threatened claim against the Company for product
liability.
2.24 BOOKS AND RECORDS. The financial books and records
pertaining to the business of the Company are complete and correct in all
material respects, have been maintained in accordance with good business
practice, and reflect the basis for the financial condition and results of
operations of the Company set forth in the financial statements referred to in
Section 2.5 hereto.
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13
2.25 NO BROKERS' OR OTHER FEES. No broker, finder or
investment banker is entitled to any fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Sellers or the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer hereby represents and warrants to the Sellers as
follows:
3.1 ORGANIZATION. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey.
3.2 AUTHORIZATION ETC. The Buyer has full corporate power
and authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby to be carried out by it. The execution and
delivery by the Buyer of this Agreement and the consummation by the Buyer of the
transactions contemplated hereby have been duly approved and authorized by all
necessary corporate action on the part of the Buyer, and no other proceedings on
the part of the Buyer are necessary to approve and authorize the execution and
delivery by the Buyer of this Agreement and the consummation by the Buyer of the
transactions contemplated hereby. This Agreement has been duly and validly
executed by the Buyer and, assuming this Agreement constitutes the legal, valid
and binding agreement of the other parties hereto, constitutes a legal, valid
and binding agreement of the Buyer, enforceable against the Buyer in accordance
with its terms, except that (i) the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
3.3 NO APPROVALS OR CONFLICTS. Except as set forth in
Section 3.3 of the Disclosure Schedule, the execution, delivery and performance
by the Buyer of this Agreement and the consummation by the Buyer of the
transactions contemplated hereby to be consummated by it will not (i) violate,
conflict with or result in a breach by the Buyer of any provision of the
Certificate of Incorporation or By-laws of the Buyer, (ii) violate, conflict
with or result in a breach of any provision of, or constitute a default by the
Buyer (or an event which, with notice or lapse of time or both, would constitute
a default) or give rise to any right of termination, cancellation or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the Buyer's properties under, any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, lease, contract,
agreement or other instrument to which the Buyer or any of its properties may be
bound, (iii) violate or result in a breach of any order, injunction, judgment,
ruling, law or regulation of any court or governmental authority applicable to
the Buyer or any of its properties, or (iv) except for applicable requirements
of the HSR Act, require any order, consent, approval or authorization of, or
notice to, or declaration, filing, application, qualification or registration
with, any governmental or regulatory authority, excluding from the foregoing
clauses (ii) and (iii) above, such violations, conflicts and breaches which,
individually or in the aggregate, would not reasonably be likely to have a
material adverse effect on the ability of
<PAGE>
14
the Buyer to consummate the transactions contemplated hereby to be consummated
by it or cause the Buyer to suffer a loss or pay a claim in excess of $50,000.
3.4 FINANCING. The Buyer has obtained written commitments to
provide the financing required to pay the cash Purchase Price and all
contemplated fees and expenses of the Buyer related to the transactions
contemplated hereby. The Buyer has provided the Sellers' Representative with
true and complete copies of such written commitments.
3.5 NO BROKERS' OR OTHER FEES. No broker, finder or
investment banker (other than Vestar Capital Partners) is entitled to any fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Buyer.
ARTICLE IV
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of the Sellers to effect the Closing under
this Agreement are subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, unless validly waived in writing by the
Sellers' Representative.
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Buyer in this Agreement shall be true on and as of the
Closing Date as though such representations and warranties were made on such
date, except that any representations and warranties that are made as of a
specified date shall be true as of such date.
4.2 PERFORMANCE. The Buyer shall have performed and complied
in all material respects with all agreements and obligations required by this
Agreement to be so performed or complied with by it prior to the Closing.
4.3 OFFICER'S CERTIFICATE. The Buyer shall have delivered to
the Sellers a certificate, dated as of the Closing Date and executed by the
President or a Senior Vice President of the Buyer, certifying to the fulfillment
of the conditions specified in Sections 4.1 and 4.2 hereof.
4.4 HSR ACT. All applicable waiting periods under the HSR
Act with respect to the transactions contemplated hereby shall have expired or
been terminated.
4.5 INJUNCTIONS. On the Closing Date there shall be no
injunction, writ, preliminary restraining order or other order in effect of any
nature issued by a United States federal or state court or governmental
authority of competent jurisdiction directing that the transactions provided for
herein not be consummated as provided herein.
4.6 CONSENTS. All orders, consents, approvals, permits,
authorizations, notices, declarations, filings, applications, qualifications and
registrations identified in Section 3.3 of the Disclosure Schedule and necessary
to effect the Closing shall have been obtained.
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15
4.7 EMPLOYMENT/NONCOMPETITION, OPTION AND STAY-PAY
AGREEMENTS. Russell- Stanley Holdings, Inc. shall have executed and delivered to
Mark E. Daniels (a) the Employment/Noncompetition Agreement in substantially the
form of Exhibit 4.7(a) hereto, (b) the Option Agreement in substantially the
form of Exhibit 4.7(b) hereto and (c) the Stay-Pay Agreement in substantially
the form of Exhibit 4.7(c) hereto.
4.8 EQUITY AGREEMENTS. Russell-Stanley Holdings, Inc. shall
have executed and delivered to Mark E. Daniels the CMS Management Investors'
Agreement, the Registration Rights Agreement, the Amended and Restated
Stockholders Transfer Rights Agreement and the Amended and Restated Voting
Agreement in substantially the forms of Exhibits 4.8(a), 4.8(b), 4.8(c) and
4.8(d) hereto.
ARTICLE V
CONDITIONS TO BUYER'S OBLIGATION
The obligation of the Buyer to effect the Closing under this
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions, unless validly waived in writing by the Buyer.
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Sellers in this Agreement shall be true on and as of the
Closing Date as though such representations and warranties were made on such
date, except that any representations and warranties that are made as of a
specified date shall be true as of such date.
5.2 PERFORMANCE. The Sellers shall have performed and
complied in all material respects with all agreements and obligations required
by this Agreement to be so performed or complied with by the Sellers prior to
the Closing.
5.3 OFFICER'S CERTIFICATE. The Sellers shall have delivered
to the Buyer a certificate, dated as of the Closing Date and executed by the
President of the Company and by the Sellers' Representative, certifying to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 hereof.
5.4 RESIGNATION OF DIRECTORS. The Sellers shall have
delivered to the Buyer the written resignations of all directors of the Company
other than Mark E. Daniels, effective as of the Closing Date.
5.5 HSR ACT. All applicable waiting periods under the HSR
Act with respect to the transactions contemplated hereby shall have expired or
been terminated.
5.6 INJUNCTIONS. On the Closing Date there shall be no
injunction, writ, preliminary restraining order or other order in effect of any
nature issued by a United States federal or state court or governmental
authority of competent jurisdiction directing that the transactions provided for
herein not be consummated as provided herein.
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16
5.7 CONSENTS. All orders, consents, approvals, permits,
authorizations, notices, declarations, filings, applications, qualifications and
registrations identified in Section 2.7 of the Disclosure Schedule and necessary
to effect the Closing or continue the business of the Company after the Closing
shall have been obtained.
5.8 AFFILIATE AGREEMENTS. The Buyer shall have received
evidence satisfactory to it that all agreements between the Company, on the one
hand, and the affiliates of the Company, on the other hand, have been terminated
without any penalty to the Company.
5.9 EXISTING INDEBTEDNESS. CFB, each Former Stockholder and
any other holder of any outstanding indebtedness for borrowed money of the
Company (or beneficiary of any guarantee made by the Company of the indebtedness
of any other person) (except the debt securities and other indebtedness and
guarantees expressly set forth in Section 2.2 of the Disclosure Schedule) shall
have released and discharged the same and any lien securing the same against
payment by or on behalf of the Sellers of the outstanding balance of such
indebtedness and any related obligations without premium or penalty, and the
Buyer shall have received written evidence satisfactory to it of the foregoing.
Leatherwood Walker Todd & Mann, P.C., as agent for Mark E. Daniels, shall
confirm in writing to the Buyer the transmission of funds by wire transfer to
the accounts of the Former Stockholders of the amounts sufficient to satisfy the
indebtedness of Mark E. Daniels to the Former Stockholders.
5.10 FINANCING. The Buyer shall have received or otherwise
have available, on terms and conditions reasonably satisfactory to the Buyer,
financing sufficient to pay the cash Purchase Price and all fees and expenses
incurred by the Buyer in connection with the transactions contemplated hereby
and to satisfy the ongoing working capital requirements of the Company.
5.11 EMPLOYMENT/NONCOMPETITION AND OPTION AGREEMENTS. Mark
E. Daniels and the Company shall have executed and delivered to Russell-Stanley
Holdings, Inc. (a) the Employment/Noncompetition Agreement in substantially the
form of Exhibit 4.7(a) hereto, (b) the Option Agreement in substantially the
form of Exhibit 4.7(b) hereto and (c) the Stay-Pay Agreement in substantially
the form of Exhibit 4.7(c) hereto.
5.12 EQUITY AGREEMENTS. Mark E. Daniels shall have executed
and delivered to Russell-Stanley Holdings, Inc. the CMS Management Investors'
Agreement, the Registration Rights Agreement, the Amended and Restated
Stockholders Transfer Rights Agreement and the Amended and Restated Voting
Agreement in substantially the forms of Exhibits 4.8(a), 4.8(b), 4.8(c) and
4.8(d) hereto.
5.13 IRS FORM. The Sellers' Representative shall have
delivered to the Buyer an IRS Form 8023 which has been signed by each Seller.
<PAGE>
17
ARTICLE VI
COVENANTS AND AGREEMENTS
6.1 CONDUCT OF BUSINESS BY COMPANY. The Sellers, jointly and
severally, covenant that, except (i) as otherwise expressly contemplated by this
Agreement or (ii) as consented to by the Buyer in writing, from and after the
date of this Agreement and until the Closing Date the Sellers shall cause the
Company to:
(a) use all reasonable efforts consistent with good business
judgment to (i) preserve intact the present business organization of the Company
and pay payables and collect receivables in a manner consistent with past
practice and otherwise operate the Company in the ordinary and regular course of
business consistent with past practice; (ii) maintain the Company's books and
records in accordance with past practices; (iii) keep available the services of
the Company's officers and employees; and (iv) maintain satisfactory
relationships with licensors, suppliers, creditors, distributors, customers and
others having material business relationships with the Company;
(b) notify the Buyer of any change in the normal course of
business or operations of the Company and of any governmental complaints,
investigations or hearings of which the Sellers or the Company are notified (or
communications received by the Sellers or the Company indicating that the same
may be contemplated), or the institution or settlement of litigation, in each
case involving the Company, and to keep the Buyer informed of such events;
(c) not (i) cause to be issued or sold any shares of capital
stock or debt or equity securities of the Company or issue, grant or enter into
any options, warrants, rights, subscription agreements or commitments of any
kind with respect thereto; (ii) directly or indirectly cause to be purchased,
redeemed or otherwise acquired or disposed of any shares of capital stock of the
Company; (iii) declare, set aside or pay any dividend or other distribution,
except that the Company may make dividends and other distributions (A) to
stockholders of the Company after December 31, 1996 in an aggregate amount not
to exceed (1) the sum of (X) $1,173,716 (all cash on hand of the Company as
reflected on the 1996 Balance Sheet as of December 31, 1996) and (Y) $355,783 of
accounts receivable reflected on the 1996 Balance Sheet collected by the Company
on or before January 3, 1997, (2) minus $150,000 and (B) to the extent permitted
under Section 6.4(f) of this Agreement; (iv) permit or allow the Company to
borrow or agree to borrow any funds or incur, whether directly or by way of
guarantee, any obligation for borrowed money, other than in the ordinary course
of business and consistent with past practice; (v) subject any of the assets of
the Company (real, personal or mixed, tangible or intangible) to any Encumbrance
or otherwise permit or allow the sale, lease, transfer or disposition of any
assets of the Company (real, personal or mixed, tangible or intangible), other
than in the ordinary course of business and consistent with past practice; (vii)
assume, guarantee, or otherwise become responsible for the obligations of, or
make any loans or advances to, any other individual, firm or corporation; (viii)
waive or release any rights of material value, or cancel, compromise, release or
assign any material indebtedness owed to it or any material claims held by it;
(ix) except for capital expenditures not to exceed $50,000, make any investment
or expenditure of a capital nature either by purchase of stock or securities,
contributions to capital, property transfer or otherwise, or by
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18
the purchase of any property or assets of any other individual, firm or
corporation; (x) cancel or terminate any insurance policy naming it as a
beneficiary or a loss payable payee; (xi) enter into any collective bargaining
agreements; (xii) increase the compensation or fringe benefits of any of its
officers or, other than in accordance with past practice, effect any material
general increase in the compensation or fringe benefits of its employees or pay
or agree to pay any pension, retirement allowance, or other benefit not required
by any existing employee benefit plan to any such officers or employees, commit
itself to any employment agreement or employee benefit plan with or for the
benefit of any of its officers or employees or any other person, or alter,
amend, terminate in whole or in part, or curtail or permanently discontinue
contributions to, any pension plan or any other employee benefit plan; (xiii)
amend its certificate of incorporation or by-laws; or (xiv) agree to do any of
the foregoing; and
(d) comply in all material respects with all applicable
laws, including, without limitation, applicable Environmental Laws.
6.2 ACCESS TO BOOKS AND RECORDS; COOPERATION.
(a) Except as otherwise provided in Section 6.4, the Buyer
agrees that from the Closing Date and until the fifth anniversary of the Closing
Date, during normal business hours upon reasonable advance notice, it shall
permit, at no cost to the Buyer and its affiliates and without disruption of the
business of the Buyer and its affiliates, the Sellers and their respective
counsel, accountants and other authorized representatives to have access to the
officers, directors, employees, accountants and other advisors and agents,
properties, books, records and contracts of the Company, and the right to make
copies and extracts from such books, records and contracts, in each case to the
extent necessary to investigate and defend any threatened or actual litigation
and in connection with any Tax matters involving the Company.
(b) The Buyer agrees not to, and to cause its subsidiaries
not to, destroy at any time any files or records which are subject to Section
6.2(a) without giving written notice to the Sellers' Representative, and giving
the Sellers' Representative 30 days following receipt of such notice to request
in writing that all or a portion of the records intended to be destroyed be
delivered to the Sellers' Representative at the Sellers' expense.
(c) During the period commencing on the date hereof and
ending on the Closing Date, the Company will, and the Sellers will cause the
Company to, afford to the Buyer and its counsel, accountants and other
authorized representatives access at all reasonable times upon reasonable
advance notice to the officers, directors, employees, accountants and other
advisors and agents, properties, books, records and contracts, of the Company,
and the right to make copies and extracts from such books, records and
contracts, and to furnish the Buyer with all financial, operating and other data
and information concerning the Company as Buyer and its advisors may reasonably
request.
(d) During the period commencing on the date hereof and
ending on the Closing Date, the Buyer will afford to the Company and its
counsel, accountants and other authorized representatives access at all
reasonable times upon reasonable advance notice to the officers, directors,
employees, accountants and other advisors and agents, books, records and
contracts of
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19
the Buyer, and the right to make copies and extracts from such books, records
and contracts, and to furnish the Company with all financial, operating and
other data and information concerning the Buyer as the Company may reasonably
request.
6.3 FILINGS AND CONSENTS. Each of the Sellers and the
Company, on the one hand, and the Buyer, on the other hand, shall use all
reasonable efforts to obtain and to cooperate in obtaining any consent,
approval, authorization or order of, and in making any registration or filing
with, any governmental agency or body or other third party required in
connection with the execution, delivery or performance of this Agreement. The
parties agree to cause to be made all appropriate filings under the HSR Act
within three business days of the date of this Agreement and to diligently
pursue early termination of the waiting period under such act.
6.4 TAX MATTERS.
(a) CODE SECTION 338(H) (10) ELECTION. Buyer shall notify
the Sellers' Representative in writing (the "338(h)(10) Notification"), on or
prior to the 120th day following the Closing, of its intention to make an
election under Sections 338(g) and 338(h)(10) of the Code, with respect to the
Company and Buyer shall attach a copy of the Allocation (as defined in (b)
below) to the 338(h)(10) Notification. The Sellers' Representative shall
determine, or shall cause to be determined, the Tax Election Amount (as defined
in 6.4(c) below) for each Seller within 30 days of its receipt of the 338(h)(10)
Notification. After the Tax Election Amount has been finally agreed, or
determined, in accordance with Section 6.4(d) below, Buyer shall have 30 days
from the date of such determination to notify the Sellers' Representative as to
whether it will make the Code Section 338(h)(10) Election described herein. If
Buyer notifies the Sellers' Representative that it will make the Code Section
338(h)(10) Election, Buyer shall file the IRS Form , which has been signed by
each Seller and provided to Buyer pursuant to Section 5.16 of this Agreement,
with the Internal Revenue Service and each Seller hereby agrees that such Seller
shall join with Buyer in timely making a joint Code Section 338(h)(10) election
and any similar election as may be available under applicable state or local law
(collectively, the "CODE SECTION 338(H)(10) ELECTION") and that each Seller
shall take all steps necessary to effectuate the same.
(b) DETERMINATION AND ALLOCATION OF THE MODIFIED AGGREGATE
DEEMED SALE PRICE. If a Code Section 338(h)(10) Election is made, the "modified
aggregate deemed sale price" ("MADSP") shall be determined and allocated in
accordance with Section 338 of the Code and the applicable treasury regulations
promulgated thereunder. For purposes of making the Code Section 338(h)(10)
Election, the Buyer shall determine the value of the Company's tangible and
intangible assets and shall provide the Sellers' Representative with a copy of
the Buyer's allocation of its "adjusted grossed-up basis" (within the meaning of
the treasury regulations promulgated under Section 338 of the Code) to such
assets (the "ALLOCATION"). The Allocation shall be binding upon the Sellers and
the Buyer for purposes of allocating the MADSP among such assets, and none of
the parties hereto shall file, or cause to be filed, any Tax Return, or take a
position with any Tax Authority, that is inconsistent with the Allocation.
(c) The Buyer shall pay to each Seller as additional
Purchase Price such amount (the "TAX ELECTION AMOUNT"), if any, as shall equal
the excess of (A) the amount of federal, state and local income and franchise
taxes actually incurred by such Seller as a result of the deemed sale
<PAGE>
20
of the assets of the Company pursuant to the Code Section 338(h)(10) Election,
including any additional amount of Purchase Price that may be payable by the
Buyer under this subsection 6.4(c) (the "ACTUAL SECTION 338(H)(10) TAX
LIABILITY"), over (B) the amount of federal, state and local income and
franchise taxes that would have been incurred by such Seller solely as a result
of a transaction in which the Shares actually being sold by such Seller were
sold without making a Section 338(h)(10) Election; PROVIDED, HOWEVER, that the
calculation of the Tax Election Amount shall not take into consideration any
Taxes imposed on a Seller as a result of such Seller not being eligible for
installment sale treatment under Section 453 of the Code (or similar state,
local or foreign provisions) or any Taxes imposed by any jurisdiction other than
the United States, South Carolina and New Jersey.
(d) The Tax Election Amount shall be determined by the
Sellers and an accounting firm selected by the Sellers' Representative,
PROVIDED, HOWEVER, that the Tax Election Amount shall be subject to the right of
review by the Buyer and its accounting firm. The Sellers' Representative shall
provide to the Buyer no later than the 25th day following the effective date of
the Buyer's initial request the calculation of the Tax Election Amount. In the
event the Buyer or its accounting firm disagrees with such calculation, the
Buyer shall give the Sellers' Representative written notice thereof within 15
days of the date the Sellers' Representative provided such calculation. The
Buyer shall pay to each Seller the portion of the Tax Election Amount that the
Buyer does not dispute (the "UNDISPUTED AMOUNT") at least three days prior to
the due date of such Seller's tax return for the federal income tax period that
includes the Closing Date. If the Sellers and the Buyer are unable to settle or
compromise such dispute within fifteen days after the Buyer's notice of
disagreement, Sellers' and Buyer's accounting firms shall jointly select a third
independent "Big Six" accounting firm to determine the Tax Election Amount and
the determination of such third firm shall be final. In the event it is
determined that the Buyer owes any Seller any portion of the Disputed Amount,
the Buyer shall bear the portion of the costs of the third accounting firm
determined by multiplying such costs by a fraction, the numerator of which is
the additional amount that such third accounting firm determines that the Buyer
owes such Seller (or Sellers) and the denominator of which is the Disputed
Amount, and the Buyer shall pay to such Seller (or Sellers) any such additional
amount plus interest thereon at the "overpayment rate" as defined in Section
6621(a) of the Code from the due date of such Seller's return to the date of
payment. The relevant Seller (or Sellers) shall bear all costs of the third
accounting firm that are not paid by the Buyer pursuant to the preceding
sentence.
(e) SELLERS' INDEMNITY FOR TAXES. From and after the Closing
Date, each Seller shall jointly and severally indemnify and hold harmless the
Buyer Indemnified Persons (as defined in Section 8.1(a)) against the following
Taxes and, against any loss, damage, liability or expense, including, but not
limited to, reasonable fees for attorneys and other outside consultants,
incurred in contesting or otherwise in connection with any such Taxes: (i) Taxes
imposed on the Sellers or the Company with respect to taxable years or periods
ending on or before the Closing Date; (ii) with respect to taxable years or
periods beginning before the Closing Date and ending after the Closing Date,
Taxes imposed on the Sellers or the Company which are allocable, pursuant to
Section 6.4(f) below, to the portion of such taxable year or period ending on
the Closing Date (an "INTERIM PERIOD") (Interim Periods and any taxable years or
periods that end on or prior to the Closing Date being referred to collectively
hereinafter as "PRE-CLOSING PERIODS"); (iii) Taxes imposed on any member of any
affiliated group (other than the Company) with which the Sellers
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21
or the Company files or has filed a Tax Return on a consolidated, combined or
unitary basis for a taxable year or period ending on or before the Closing Date;
(iv) Taxes required to be paid or reimbursed by the Sellers under Section 6.4(i)
or Section 6.4(j) hereof (to the extent such Taxes have not been paid by the
Sellers); (v) Taxes or additional Taxes imposed on any Buyer Indemnified Person
as a result of a breach of the representations and warranties set forth in
Section 2.12 of this Agreement or of the covenants contained in this Section
6.4; (vi) Taxes or other payments required to be made after the date hereof by
the Company to any party under any Tax sharing, indemnity or allocation
agreement (whether or not written); or (vii) any United States federal, state or
local income or franchise taxes imposed on the Company under Section 1374(a) of
the Code (or any similar state or local income or franchise tax provision) as a
result of making the Code Section 338(h)(10) Election.
(f) COMPANY LIABILITY FOR TAXABLE PERIODS COMMENCING AFTER
CLOSING DATE; DISTRIBUTION IN RESPECT OF PRE-CLOSING PERIOD TAXES. The Company
shall be liable for, and shall indemnify and hold the Sellers and any of their
affiliates harmless against each of the following: (i) any and all Taxes of, or
payable by, the Company for any taxable year or taxable period commencing after
the Closing Date, (ii) any Taxes relating to operations, acts or omissions of
the Company or any of its affiliates that occur after the Closing and (iii) any
costs or expenses attributable to any item in clauses (i) or (ii) above. The
Company shall make a distribution to each Seller on or prior to the Closing Date
in an amount equal to the aggregate amount of the United States federal, state
and local income taxes that will be imposed on such Seller with respect to the
taxable income of the Company allocated to such Seller for the period beginning
after December 31, 1996 through the Closing Date. The amount of such taxes, if
any (and, therefore, the amount of such distribution), shall be determined by
the Sellers and an accounting firm selected by the Sellers' Representative at
least 15 days prior to the Closing Date; PROVIDED, HOWEVER, that such
determination shall be subject to the right of review by the Buyer and its
accounting firm.
(g) APPORTIONMENT OF TAXES. In order to apportion
appropriately any Taxes relating to any taxable year or period that includes an
Interim Period, the parties hereto shall, to the extent permitted under
applicable law, elect with the relevant Tax Authority to treat for all purposes,
the Closing Date as the last day of the taxable year or period of the Company,
and such Interim Period shall be treated as a short taxable year and a
Pre-Closing Period for purposes of this Section 6.4. In any case where
applicable law does not permit the Company to treat the Closing Date as the last
day of the taxable year or period of the Company with respect to Taxes that are
payable with respect to an Interim Period, the portion of any such Tax that is
allocable to the portion of the Interim Period ending on the Closing Date shall
be:
(x) in the case of Taxes that are either (1) based upon or
related to income or receipts, or (2) imposed in connection with any sale or
other transfer or assignment of property (real or personal, tangible or
intangible) (other than conveyances pursuant to this Agreement, which are
covered under Section 6.4(j)), deemed equal to the amount which would be payable
if the taxable year or period ended on the Closing Date (except that, solely for
purposes of determining the marginal tax rate applicable to income or receipts
during such period in a jurisdiction in which such tax rate depends upon the
level of
<PAGE>
22
income or receipts, annualized income or receipts may be
taken into account, if appropriate, for an equitable sharing of such Taxes); and
(y) in the case of Taxes not described in subparagraph (x)
above that are imposed on a periodic basis and measured by the level of any
item, deemed to be the amount of such Taxes for the entire period (or, in the
case of such Taxes determined on an arrears basis, the amount of such Taxes for
the immediately preceding period) multiplied by a fraction the numerator of
which is the number of calendar days in the Interim Period ending on the Closing
Date and the denominator of which is the number of calendar days in the entire
relevant period.
(h) TERMINATION OF THE COMPANY'S S CORPORATION STATUS AND
TAXABLE YEAR. The transactions contemplated by this Agreement will cause the
Company to terminate its status as an S corporation, effective as of the Closing
Date. Pursuant to section 1362(e)(1) of the Code, the Company shall have two
short taxable years for United States federal income tax purposes for the year
that includes the Closing Date, an "S short year" beginning January 1 of such
year and ending on the day before the Closing Date and a "C short year"
beginning on the Closing Date and ending on the next succeeding close of the
Buyer's consolidated return taxable year. The Sellers shall cause the Company to
elect and shall consent, pursuant to section 1362(e)(3) of the Code, to allocate
Tax items to the Company's S short year and C short year pursuant to normal Tax
accounting rules (i.e., the "closing of the books method"). The allocation of
such items shall be done on a basis consistent with the Company's past
accounting practice and in a manner satisfactory to the Buyer.
(i) PREPARATION OF TAX RETURNS. The Sellers' Representative
shall prepare and file or otherwise furnish to the appropriate party (or cause
to be prepared and filed or so furnished) in a timely manner the United States
federal income tax return of the Company for the Company's S short year. In
addition, the Sellers' Representative shall prepare and file, or cause to be
prepared and filed, any and all other Tax Returns required to be filed by the
Company (after giving effect to any valid extensions of the due date for filing
any such Tax Returns) on or prior to the Closing Date. All such Tax Returns
shall be prepared in a manner consistent with the prior Tax Returns of the
Company, unless otherwise required under applicable law. The Sellers shall
timely pay (or cause to be timely paid) all Taxes shown as due and owing on all
such Tax Returns. The Buyer shall prepare and file, or cause to be prepared and
filed any and all other Tax Returns required to be filed by the Company. Subject
to its right to indemnification under this Section 6.4, the Buyer shall pay (or
cause to be paid) all Taxes shown as due and owing on all such Tax Returns. The
Sellers, the Company and Buyer shall reasonably cooperate, and shall cause their
respective affiliates, officers, employees, agents, auditors and other
representatives reasonably to cooperate, in preparing and filing all Tax
Returns, including maintaining and making available to each other all records
necessary in connection with Taxes and in resolving all disputes and audits with
respect to all taxable periods relating to Taxes. The Buyer and the Sellers
recognize that the Sellers and Sellers' agents and other representatives will
need access, from time to time, after the Closing Date, to certain accounting
and Tax records and information held by the Company to the extent such records
and information pertain to events occurring prior to the Closing Date;
therefore, each of the Buyer and the Company agrees (i) to use all reasonable
efforts to properly retain and maintain such records until such time as the
Sellers' Representative agrees that such
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23
retention and maintenance is no longer necessary (but in no event longer than
six years after the Closing Date) and (ii) to allow the Sellers and Sellers'
agents and other representatives, at times and dates mutually acceptable to the
parties, to inspect, review and make copies of such records as the Sellers,
their agents and other representatives may deem necessary or appropriate from
time to time, such activities to be conducted during normal business hours and
at the Sellers' expense.
(j) TRANSFER AND CONVEYANCE TAXES. The Sellers shall be
liable for and shall pay all applicable sales, transfer, recording, deed, stamp
and other similar taxes, including, without limitation, any real property
transfer or gains taxes (if any), resulting from the consummation of the
transactions contemplated by this Agreement.
(k) CONTESTS. The Buyer shall promptly notify the Sellers'
Representative in writing of any written notice of a proposed assessment or
claim in an audit or administrative or judicial proceeding involving the Company
which, if determined adversely to the taxpayer, would be grounds for
indemnification under this Section 6.4; PROVIDED, HOWEVER, that a failure to
give such notice will not affect the Buyer's right to indemnification hereunder,
except to the extent, if any, that, but for such failure, the Sellers'
Representative could have avoided the Tax liability in question. In the case of
an audit or administrative or judicial proceeding that relates to any
Pre-Closing Period, PROVIDED that within 30 days after the Sellers'
Representative receives the written notice from the Buyer required under this
Section 6.4(k) and prior to taking any action with respect to such audit or
administrative or judicial proceeding, the Sellers' Representative acknowledges
in writing the Sellers' liability under this Section 6.4 to hold the Buyer and
the Company harmless against the full amount of any adjustment which may be made
as a result of such audit or proceeding, the Sellers' Representative shall have
the right at his, her or its own expense to control the conduct of such audit or
proceeding; PROVIDED, HOWEVER, that the Sellers' Representative shall not settle
or otherwise compromise any issue or matter without the Buyer's prior written
consent if such issue or matter will have a material affect on the Tax liability
of the Buyer or the Company for a post-Closing taxable year or period (or for an
Interim Period). The Buyer also may participate in any such audit or proceeding
at its own expense and, if the Sellers' Representative does not assume the
defense of any such audit or proceeding, the Buyer may, without any effect to
its or the Company's right to indemnification under this Section 6.4, defend the
same in such manner as it may deem appropriate, including, but not limited to,
settling such audit or proceeding. Except as provided otherwise in this Section
6.4(k), the Buyer shall control at its own expense any and all audit,
administrative and judicial proceedings related to the Company or the Company's
Taxes.
(l) TIME OF PAYMENT. Payment of any amounts due under this
Section 6.4 in respect of Taxes shall be made by the Sellers at least three
business days before the due date of the applicable estimated or final Tax
Return required to be filed by the Buyer on which is required to be reported
income for an Interim Period for which the Sellers are responsible under
Sections 6.4(i) or (j) of this Agreement without regard to whether the Tax
Return shows overall net income or loss for such period, or, with respect to
indemnity payments due under Section 6.4(e) of this Agreement, within three
business days following a settlement or compromise of an assessment of a Tax by
a Tax Authority or a "determination" as defined in Section 1313(a) of the Code.
If liability under this Section 6.4 is in respect of costs or expenses other
than Taxes, payment by the Sellers of any amounts due under this Section 6.4
shall be made within five
<PAGE>
24
business days after the date that the Sellers' Representative has been notified
by the Buyer that the Sellers have a liability for a determinable amount under
this Section 6.4 and is provided with calculations or other materials supporting
such liability.
(m) TERMINATION OF SELLERS' INDEMNITY OBLIGATIONS FOR TAXES.
Notwithstanding any provision herein to the contrary, the obligations of the
Sellers to indemnify and hold harmless the Buyer and the Company pursuant to
this Section 6.4 shall terminate at the close of business on the 120th day
following the expiration of the applicable statute of limitations with respect
to the Tax liabilities in question (giving effect to any waiver, mitigation or
extension thereof).
(n) TAX ELECTIONS. From and after the date hereof, the
Sellers shall not, without the prior written consent of the Buyer (which may not
unreasonably withhold such consent), make or revoke, or cause or permit to be
made or revoked, any Tax election, or adopt or change any method of accounting,
that would adversely affect the Company.
(o) TAX SHARING AGREEMENTS. As of the Closing Date, any and
all Tax sharing, indemnity or allocation agreements shall terminate as between
the Company on the one hand, and the Sellers and/or any affiliate of the
Sellers, on the other hand, and, after the date hereof, no Taxes or other
amounts shall be paid or reimbursed by the Company under any such agreement,
regardless of the taxable year or period for which such Taxes are imposed, and
the provisions of this Section 6.4 shall govern thereafter.
(p) RESOLUTION OF DISAGREEMENTS. If the Sellers and the
Buyer disagree as to the amount for which the Buyer or the Company and the
Sellers are liable under this Section 6.4, the Sellers' Representative and the
Buyer shall promptly consult with each other in an effort to resolve such
dispute. If any such point of disagreement cannot be resolved within 30 days of
the date of consultation, such dispute shall be submitted to a big-six
accounting firm which is mutually acceptable to the Buyer and the Sellers's
Representative to act as an arbitrator to resolve all points of disagreement
concerning Tax accounting matters with respect to this Agreement.
6.5 WARN ACT. The Buyer and the Sellers and the Company
agree that for purposes of the WARN Act, the Closing Date shall be the
"effective date" as such term is used in the WARN Act. The Buyer acknowledges
and represents that it has no present intent to engage in or permit a "mass
layoff" or "plant closing" with respect to the Company as defined in the WARN
Act. The Buyer agrees that from and after the Closing Date the Company shall be
responsible for any notification required under the WARN Act with respect to the
Company. The Sellers and the Company agree that between the date hereof and the
Closing Date, they will not effect or permit a "plant closing" or "mass layoff"
as these terms are defined in the WARN Act with respect to the Company without
notifying the Buyer in advance and without complying with the notice
requirements and all other provisions of the WARN Act.
6.6 NO NEGOTIATION. Neither the Company nor any of the
Sellers will, directly or indirectly, through any director, employee,
representative, affiliate or agent of the Sellers or the Company, or otherwise
(i) solicit, initiate, encourage or assist in the submission of any inquiries,
proposals or offers from any corporation, partnership, person or other entity or
group relating to any acquisition or purchase of any assets of, or any equity
interest in, the Company or any form of
<PAGE>
25
recapitalization transaction, merger, consolidation,
business combination, spin-off, liquidation or similar transaction involving,
directly or indirectly, the Company (each an "ACQUISITION PROPOSAL"), (ii)
participate in any discussions or negotiations regarding any Acquisition
Proposal or furnish to any person or entity any information concerning the
Company or any Acquisition Proposal or (iii) otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other person to make or enter into an Acquisition Proposal. The
Sellers agree not to pledge, encumber or dispose of the Shares or any other
securities of the Company beneficially owned by them prior to the Closing. If
the Company or any Seller receives any inquiry, proposal or offer to enter into
any transaction of any type referred to above, such party agrees to inform the
Buyer promptly of the terms thereof and the identity of the party making such
inquiry, proposal or offer.
6.7 COVENANT TO SATISFY CONDITIONS. Each party hereto agrees
to use all reasonable efforts to insure that the conditions set forth in Article
IV and Article V hereof are satisfied, insofar as such matters are within the
control of such party.
ARTICLE VII
TERMINATION
7.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by the mutual consent of the Sellers' Representative and
the Buyer;
(b) by the Buyer if the Closing has not occurred on or
before July 31, 1997, unless the failure of such consummation shall be due to
the failure of the Buyer to comply in all material respects with the
representations, warranties, agreements and covenants contained herein to be
performed by the Buyer on or before July 31, 1997;
(c) by the Sellers' Representative if the Closing has not
occurred on or before July 31, 1997, unless the failure of such consummation
shall be due to the failure of the Sellers to comply in all material respects
with the representations, warranties, agreements and covenants contained herein
to be performed by the Sellers on or before July 31, 1997; or
(d)by either the Sellers' Representative or the Buyer if any
court or governmental authority of competent jurisdiction shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby and such order,
decree or ruling or other action shall have become final and nonappealable.
7.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby by the Sellers' Representative or the Buyer pursuant to
Section 7.1 hereof, written notice thereof shall forthwith be given to the other
parties. If this Agreement is terminated and the transactions contemplated
<PAGE>
26
by this Agreement are abandoned as provided herein, no party to this Agreement
will have any liability under this Agreement to any other except (i) that
nothing herein shall relieve any party from any liability for any breach of any
of the representations, warranties, covenants and agreements set forth in this
Agreement and (ii) as contemplated by Section 9.1.
ARTICLE VII
INDEMNIFICATION
8.1 INDEMNIFICATION.(a) INDEMNIFICATION BY SELLERS. Subject
to the limits set forth in this Section 8.1, the Sellers agree, jointly and
severally, to indemnify, defend and hold the Buyer and its affiliates
(including, after the Closing Date, the Company) and their respective officers,
directors, partners, stockholders, employees, agents and representatives (the
"BUYER INDEMNIFIED PERSONS") harmless from and in respect of any and all losses,
damages, costs and reasonable expenses (including, without limitation,
reasonable fees and expenses of counsel) (collectively, "LOSSES"), that they may
incur arising: (i) out of or due to any inaccuracy of any representation or the
breach of any warranty, covenant, undertaking or other agreement of the Sellers
contained in this Agreement or the Disclosure Schedule; (ii) under any
Environmental Laws regarding conditions or events existing or occurring on or
prior to the Closing Date; or (iii) under the WARN Act for "plant closings" or
"mass layoffs" which occur or have occurred on or prior to the Closing Date with
respect to the Company. Anything to the contrary contained herein
notwithstanding, (x) none of the Buyer Indemnified Persons shall be entitled to
recover from the Sellers for any claims for indemnity with respect to any
inaccuracy or breach of any representations or warranties (other than recovery
for claims predicated upon the inaccuracy or breach of Sections 2.2, 2.3, 2.4,
2.7(b), 2.19 and 2.25 and the first sentence of Section 2.1), unless and until
the total of all such claims in respect of Losses pursuant to Section 8.1(a)(i)
and (ii) exceeds $250,000 (the "DEDUCTIBLE") and then only for the amount by
which such claims exceed such amount, (y) the Buyer Indemnified Parties shall
not be entitled to recover more than an aggregate of $2,500,000 from the Sellers
for any claims for indemnity with respect to inaccuracies or breaches of
representations or warranties (other than recovery for claims predicated upon
the inaccuracy or breach of Sections 2.2, 2.3, 2.4, 2.7(b), 2.17, 2.19 and 2.25
and the first sentence of Section 2.1) and (z) the Buyer Indemnified Parties
shall not be entitled to recover more than an aggregate of $1,500,000 from the
Sellers for any claims for indemnity under Section 8.1(a)(ii) or with respect to
inaccuracies or breaches of Section 2.17 (collectively, "INDEMNIFIABLE
ENVIRONMENTAL LOSSES") provided that (A) the Sellers shall be solely responsible
for the first $1,000,000 of Indemnifiable Environmental Losses in excess of the
unused Deductible, (B) the Sellers, on the one hand, and the Buyer, on the other
hand, shall share responsibility on a 50-50 basis for the next $1,000,000 of
Indemnifiable Environmental Losses and (C) the Buyer shall be solely responsible
for any additional Indemnifiable Environmental Losses.
(b) INDEMNIFICATION BY THE COMPANY. Subject to the limits
set forth in this Section 8.1, the Buyer and the Company agree that after the
Closing the Company shall indemnify, defend and hold the Sellers and their
respective agents and representatives (the "SELLER INDEMNIFIED PERSONS")
harmless from and in respect of any and all Losses that they may incur arising:
(i) out of or due to any inaccuracy of any representation or the breach of any
warranty, covenant, undertaking or other agreement of the Buyer contained in
this Agreement; (ii) as a result of the
<PAGE>
27
conduct of business of the Company after the Closing Date; or (iii) under the
WARN Act for "plant closings" or "mass layoffs" which occur after the Closing
Date with respect to the Company. Anything to the contrary contained herein
notwithstanding, (x) none of the Seller Indemnified Persons shall be entitled to
recover from the Company for any claims for indemnity with respect to any
inaccuracy or breach of any representations or warranties, unless and until the
total of all such claims in respect of Losses pursuant to Section 8.1(b)(i)
exceeds $250,000, and then only for the amount by which such claims exceed such
amount and (y) the Seller Indemnified Parties shall not be entitled to recover
more than an aggregate of $2,500,000 from the Company for any claims for
indemnity with respect to inaccuracies or breaches of representations or
warranties.
(c) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties contained in this Agreement or in
any instrument delivered pursuant hereto will survive the Closing Date and will
remain in full force and effect thereafter until the 18 month anniversary of the
Closing Date, provided that (i) the representations and warranties set forth in
Sections 2.2, 2.3, 2.4, 2.7(b), 2.12, 2.19 and 2.25 and the first sentence of
Section 2.1 will survive the Closing Date and will remain in full force and
effect until the expiration of the applicable statute of limitations (after
giving effect to waiver, mitigation or extension thereof) and (ii) the
representations and warranties set forth in Section 2.17 will survive the
Closing Date and will remain in full force and effect until the third
anniversary of the Closing Date; PROVIDED, FURTHER, that such representations or
warranties shall survive (if at all) beyond such period with respect to any
inaccuracy therein or breach thereof, written notice of which shall have been
duly given within such applicable period in accordance with Section 8.1 (d)
hereof.
(d) NOTICE AND OPPORTUNITY TO DEFEND. If there occurs an
event which a party asserts is an indemnifiable event pursuant to Section 8.1(a)
or 8.1(b), the party or parties seeking indemnification shall notify the other
party or parties obligated to provide indemnification (the "INDEMNIFYING PARTY")
promptly. If such event involves (i) any claim or (ii) the commencement of any
action or proceeding by a third person, the party seeking indemnification will
give such Indemnifying Party prompt written notice of such claim or the
commencement of such action or proceeding; PROVIDED, HOWEVER, that the failure
to provide prompt notice as provided herein will relieve the Indemnifying Party
of its obligations hereunder only to the extent that such failure prejudices the
Indemnifying Party hereunder. In case any such action shall be brought against
any party seeking indemnification and it shall notify the Indemnifying Party of
the commencement thereof, the Indemnifying Party shall be entitled to
participate therein or, following the delivery by the Indemnifying Party to the
party or parties seeking indemnification of the Indemnifying Party's
acknowledgement in writing that the relevant Loss is an indemnified liability
hereunder and that the Indemnifying Party, in its good faith judgment, will be
able to pay any award of money damages against the indemnified party in
connection with such action, to assume the defense thereof, with counsel
reasonably satisfactory to such party or parties seeking indemnification and,
after notice from the Indemnifying Party to such party or parties seeking
indemnification of such election so to assume the defense thereof, the
Indemnifying Party shall not be liable to the party or parties seeking
indemnification hereunder for any legal expenses of other counsel or any other
expenses subsequently incurred by such party or parties in connection with the
defense thereof. The Indemnifying Party and the party seeking indemnification
agree to cooperate fully with each other and their respective counsel in
connection with the defense, negotiation or settlement of any
<PAGE>
28
such action or asserted liability. The party or parties seeking indemnification
shall have the right to participate at their own expense in the defense of such
action or asserted liability. If the Indemnifying Party assumes the defense of
an action (a) no settlement or compromise thereof may be effected (i) by the
Indemnifying Party without the written consent of the indemnified party (which
consent shall not be unreasonably withheld or delayed) unless (x) there is no
finding or admission of any violation of law or any violation of the rights of
any person by any indemnified party and no adverse effect on any other claims
that may be made against any indemnified party and (y) all relief provided is
paid or satisfied in full by the Indemnifying Party or (ii) by the indemnified
party without the consent of the Indemnifying Party and (b) the indemnified
party may subsequently assume the defense of such action if a court of competent
jurisdiction determines that the Indemnifying Party is not vigorously defending
such action. In no event shall an Indemnifying Party be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld or delayed). If more than one Seller is an Indemnifying
Party with respect to any matter, the Sellers' Representative shall have the
authority to exercise all rights of the Indemnifying Party afforded by this
Section 8.1(d).
(e) PAYMENT. On each occasion that any indemnified party
shall be entitled to indemnification or reimbursement under this Section 8.1,
the Indemnifying Party shall, at each such time, promptly pay the amount of such
indemnification or reimbursement. If any indemnified party shall be entitled to
indemnification under this Section 8.1, the Indemnifying Party shall pay the
indemnified party's costs and expenses arising as a result of a proceeding
directly relating to an indemnifiable Loss (including, without limitation, any
reasonable fees paid to witnesses), periodically as incurred.
(f) TAX INDEMNITY. Notwithstanding anything to the contrary
in this Section 8.1, indemnification with respect to Taxes shall be governed
solely by Section 6.4.
ARTICLE IX
MISCELLANEOUS
9.1 FEES AND EXPENSES. Except as otherwise provided in this
Agreement, the Sellers shall bear their own expenses and the expenses of their
respective affiliates (including the Company) and the Buyer shall bear its own
expenses in connection with the preparation and negotiation of this Agreement
and the consummation of the transactions contemplated by this Agreement. Each of
the Sellers and the Buyer shall bear the fees and expenses of any broker or
finder retained by such party or parties and their respective affiliates
(including, in the case of the Sellers, the Company) in connection with the
transactions contemplated herein.
9.2 GOVERNING LAW. This Agreement shall be construed under
and governed by the laws of the State of New York applicable to contracts made
and to be performed therein.
9.3 AMENDMENT. This Agreement may not be amended, modified
or supplemented except upon the execution and delivery of a written agreement
executed by the Buyer and the Sellers' Representative.
<PAGE>
29
9.4 NO ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the Buyer, in the case of assignment by any
Seller, and the Sellers' Representative, in the case of any assignment by the
Buyer; PROVIDED that the Buyer may assign its rights and interests under this
Agreement to any of its Affiliates.
9.5 WAIVER. Any of the terms or conditions of this Agreement
which may be lawfully waived may be waived in writing at any time by each party
which is entitled to the benefits thereof; PROVIDED, HOWEVER, that the Sellers'
Representative is authorized to make any such waiver on behalf of any and all
the Sellers. Any waiver of any of the provisions of this Agreement by any party
hereto shall be binding only if set forth in an instrument in writing signed on
behalf of such party. No failure to enforce any provision of this Agreement
shall be deemed to or shall constitute a waiver of such provision and no waiver
of any of the provisions of this Agreement shall be deemed to or shall
constitute a waiver of any other provision hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.
9.6 NOTICES. Any notice, demand, or communication required
or permitted to be given by any provision of this Agreement shall be deemed to
have been sufficiently given or served for all purposes if (a) personally
delivered, (b) mailed by registered or certified first-class mail, prepaid with
return receipt requested, (c) sent by a nationally recognized overnight courier
service, to the recipient at the address below indicated or (d) delivered by
facsimile which is confirmed in writing by sending a copy of such facsimile to
the recipient thereof pursuant to clause (a) or (c) above:
If to the Buyer:
Russell-Stanley Corp.
230 Half Mile Road
Red Bank, New Jersey 07701
Attn: President
(908) 741-4913 (telecopier)
(908) 741-6366 (telephone)
With copies to:
Vestar Capital Partners III, L.P.
245 Park Avenue, 41st Floor
New York, New York 10167
Attn: Robert L. Rosner
(212) 949-6500 (telecopier)
(212) 808-4922 (telephone)
<PAGE>
30
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Peter J. Gordon
(212) 455-2502 (telecopier)
(212) 455-2605 (telephone)
If to the Sellers' Representative or any Seller:
Container Management Services, Inc.
P.O. Box 1148
1071 Holland Road
Simpsonville, South Carolina 29681
Attn: Mark E. Daniels
(864) 987-0075 (telecopier)
(864) 987-0777 (telephone)
With a copy to:
Leatherwood Walker Todd & Mann, P.c.
100 East Coffee Street
Post Office Box 87
Greenville, South Carolina 29602
Attn: Richard Few
(864) 421-0477 (telecopier)
(864) 242-6440 (telephone)
or to such other address as any party hereto may, from time to time, designate
in a written notice given in like manner.
Except as otherwise provided herein, any notice under this
Agreement will be deemed to have been given (x) on the date such notice is
personally delivered or delivered by facsimile, (y) four days after the date of
mailing if sent by certified or registered mail or (z) the next succeeding
business day after the date such notice is delivered to the overnight courier
service if sent by overnight courier; PROVIDED that in each case notices
received after 4:00 p.m. (local time of the recipient) shall be deemed to have
been duly given on the next business day.
9.7 COMPLETE AGREEMENT. This Agreement, the Confidentiality,
Non-Use and Non-Solicitation Agreement, dated March 3, 1997, between the Company
and the Buyer (the "CONFIDENTIALITY AGREEMENT") and the other documents and
writings referred to herein or delivered pursuant hereto contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and thereof.
This Agreement shall
<PAGE>
31
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
9.8 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
9.9 PUBLICITY. The Sellers' Representative and the Buyer
will consult with each other and will mutually agree upon any publication or
press release of any nature with respect to this Agreement or the transactions
contemplated hereby and shall not issue any such publication or press release
prior to such consultation and agreement except as may be required by applicable
law or by obligations pursuant to any listing agreement with any securities
exchange or any securities exchange regulation, in which case the party
proposing to issue such publication or press release shall make all reasonable
efforts to consult in good faith with the other party or parties before issuing
any such publication or press release and shall provide a copy thereof to the
other party or parties prior to such issuance.
9.10 HEADINGS. The headings contained in this Agreement are
for reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
9.11 SEVERABILITY. Any provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.
9.12 THIRD PARTIES. Except as specifically set forth or
referred to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or corporation, other than the
parties hereto and their permitted successors or assigns, any rights or remedies
under or by reason of this Agreement.
9.13 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE
PARTIES HERETO HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE AREA ENCOMPASSED BY THE SOUTHERN DISTRICT OF THE STATE OF NEW
YORK AND IRREVOCABLY AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS. THE PARTIES HERETO
EACH ACCEPT FOR ITSELF AND HIMSELF, AS THE CASE MAY BE, AND IN CONNECTION WITH
ITS OR HIS, AS THE CASE MAY BE, RESPECTIVE PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION AND VENUE OF THE AFORESAID COURTS
AND WAIVE ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREE TO BE BOUND
BY ANY NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT. THE SELLERS EACH DESIGNATE CT CORPORATION SYSTEM AND SUCH OTHER
PERSON AS MAY HEREINAFTER BE SELECTED BY THE SELLERS' REPRESENTATIVE WHO
IRREVOCABLY AGREES IN WRITING TO SO SERVE AS
<PAGE>
32
AGENT FOR THE SELLERS TO RECEIVE ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE PARTIES HERETO TO BE
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. THE BUYER DESIGNATES ROBERT L.
ROSNER AT HIS BUSINESS ADDRESS SET FORTH IN SECTION 9.6 AND SUCH OTHER PERSON AS
MAY HEREINAFTER BE SELECTED BY THE BUYER WHO IRREVOCABLY AGREES IN WRITING TO SO
SERVE AS AGENT FOR THE BUYER TO RECEIVE ALL PROCESS IN ANY SUCH PROCEEDINGS IN
ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE PARTIES HERETO TO
BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO
SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE PARTIES HERETO, AS PROVIDED
HEREIN, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO
MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS.
9.14 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED
BY LAW, THE PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR
ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION.
THE PARTIES HERETO ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND
WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ANY OF THE OTHER PARTIES. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE PARTIES HERETO
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. THE PARTIES HERETO FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS OR HIS, AS THE CASE MAY BE, LEGAL COUNSEL, AND
THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS OR HIS, AS THE CASE MAY BE, JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
9.15 SELLERS' REPRESENTATIVE. Each of the Sellers hereby
irrevocably makes, constitutes and appoints Mark E. Daniels as his, her or its
attorney-in-fact (the "SELLERS' REPRESENTATIVE") with full power to act in his,
her or its place and stead to compromise any claim
<PAGE>
33
or take any other action, including, without limitation, pursuant to Section 6.4
or 8.1, with respect to this Agreement. Each of the Sellers hereby agrees and
acknowledges that any obligations or liabilities of any Seller under this
Agreement shall be joint and several obligations or liabilities of all Sellers.
<PAGE>
34
IN WITNESS WHEREOF, each of the Sellers has executed this
Agreement, and each of the Company and the Buyer has caused this Agreement to be
executed by its duly authorized officer, in each case as of the day and year
first above written.
/s/ MARK E. DANIELS
------------------------------
MARK E. DANIELS
/s/ ROBERT E. DANIELS
------------------------------
ROBERT E. DANIELS
MARK E. DANIELS IRREVOCABLE
FAMILY TRUST
By: /s/ RICHARD L. FEW, JR.
----------------------------
Name: Richard L. Few, Jr.
Title: Trustee
R.E. DANIELS IRREVOCABLE
FAMILY TRUST
By: /S/ RICHARD L. FEW, JR.
------------------------------
Name: Richard L. Few, Jr.
Title: Trustee
<PAGE>
35
CONTAINER MANAGEMENT
SERVICES, INC.
By: /S/ MARK E. DANIELS
------------------------------
Name: Mark E. Daniels
Title: President
RUSSELL-STANLEY CORP.
By: /S/ ROBERT L. SINGLETON
------------------------------
Name: Robert L. Singleton
Title: President & CEO
CONSENTED TO:
/s/ SARAH D. DANIELS
- -------------------------
/s/ MARGARET M. DANIELS
- -------------------------
EXHIBIT 10.4
SHARE PURCHASE AGREEMENT
Among
MICHAEL W. HUNTER
JOHN D. HUNTER
MICHAEL W. HUNTER HOLDINGS INC.
JOHN D. HUNTER HOLDINGS INC.
HUNTER HOLDINGS INC.
373062 ONTARIO LIMITED
HUNTER DRUMS LIMITED
RUSSELL-STANLEY HOLDINGS, INC.
and
HDL ACQUISITION, INC.
dated as of
October 24, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
ARTICLE I
PURCHASE AND SALE OF SHARES..........................1
<S> <C> <C>
1.1 Transfer by Sellers of Shares.........................................1
1.2 Consideration.........................................................1
1.3 The Closing...........................................................2
1.4 Closing Adjustment....................................................3
1.5 Amalgamation..........................................................5
1.6 Further Assurances....................................................5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS...................5
2.1 Corporate Organization................................................6
2.2 Capitalization........................................................6
2.3 Ownership of Shares...................................................6
2.4 Authorization, Etc....................................................7
2.5 Financial Statements..................................................7
2.6 No Undisclosed Liabilities............................................7
2.7 No Approvals or Conflicts.............................................8
2.8 Compliance with Law; Governmental Authorizations......................8
2.9 Litigation............................................................8
2.10 Assets................................................................9
2.11 Absence of Certain Changes............................................9
2.12 Tax Matters..........................................................10
2.13 Employee Benefits....................................................11
2.14 Labor Relations......................................................14
2.15 Patents, Trademarks, Trade Names, Etc................................15
2.16 Contracts............................................................15
2.17 Environmental Matters................................................16
2.18 Insurance............................................................17
2.19 Transactions with Affiliates.........................................18
2.20 Material Customers and Suppliers.....................................18
2.21 Real Property........................................................18
2.22 Real Property Leases.................................................19
2.23 Product Liability....................................................20
2.24 Books and Records....................................................20
2.25 No Brokers' or Other Fees............................................20
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER................20
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3.1 Organization......................................................20
3.2 Authorization Etc.................................................21
3.3 No Approvals or Conflicts.........................................21
3.4 Financing.........................................................22
3.5 Capitalization....................................................22
3.6 No Brokers' or Other Fees.........................................22
3.7 Financial Statements..............................................22
ARTICLE IV
CONDITIONS TO SELLERS' OBLIGATIONS...................22
4.1 Representations and Warranties....................................22
4.2 Performance.......................................................23
4.3 Officer's Certificate.............................................23
4.4 Injunctions.......................................................23
4.5 Consents..........................................................23
4.6 Employment and Stay-Pay Agreements................................23
4.7 Equity Agreements.................................................23
4.8 Mutual Release....................................................23
4.9 Exchangeable Share Agreements.....................................23
ARTICLE V
CONDITIONS TO BUYER'S OBLIGATION....................24
5.1 Representations and Warranties....................................24
5.2 Performance.......................................................24
5.3 Officer's Certificate.............................................24
5.4 Resignations......................................................24
5.5 Injunctions.......................................................24
5.6 Consents..........................................................24
5.7 Affiliate Agreements..............................................24
5.8 Existing Indebtedness.............................................25
5.9 Financing.........................................................25
5.10 Employment and Stay-Pay Agreements................................25
5.11 Equity Agreements.................................................25
5.12 Mutual Release....................................................25
5.13 Shareholder Consent...............................................25
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ARTICLE VI
COVENANTS AND AGREEMENTS........................25
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6.1 Conduct of Business by Company....................................25
6.2 Access to Books and Records; Cooperation..........................27
6.3 Filings and Consents..............................................28
6.4 Tax Matters.......................................................28
6.5 No Negotiation....................................................31
6.6 Covenant to Satisfy Conditions....................................32
6.7 Nondisclosure of Confidential Information; Non-Competition.......32
6.8 Certain Payments..................................................34
ARTICLE VII
TERMINATION..............................35
7.1 Termination.......................................................35
7.2 Procedure and Effect of Termination...............................35
ARTICLE VIII
INDEMNIFICATION............................35
8.1 Indemnification...................................................35
ARTICLE IX
MISCELLANEOUS.............................39
9.1 Fees and Expenses.................................................39
9.2 Governing Law.....................................................39
9.3 Amendment.........................................................39
9.4 No Assignment.....................................................39
9.5 Waiver............................................................39
9.6 Notices...........................................................39
9.7 Complete Agreement................................................41
9.8 Counterparts......................................................41
9.9 Publicity.........................................................41
9.10 Headings..........................................................42
9.11 Severability......................................................42
9.12 Third Parties.....................................................42
9.13 CONSENT TO JURISDICTION AND SERVICE OF PROCESS....................42
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9.14 WAIVER OF JURY TRIAL..............................................42
9.15 Sellers' Representative...........................................43
9.16 Obligations Guarantee.............................................43
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SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (this "AGREEMENT"), dated as of
October 24, 1997, is entered into by and among Michael W. Hunter, John D.
Hunter, Michael W. Hunter Holdings Inc., John D. Hunter Holdings Inc., Hunter
Holdings Inc. and 373062 Ontario Limited (each such individual and entity is
referred to herein as a "SELLER" and all such individuals and entities are
referred to herein collectively as the "SELLERS"), Hunter Drums Limited, an
Ontario corporation (the "COMPANY"), Russell-Stanley Holdings, Inc., a Delaware
corporation ("RUSSELL-STANLEY"), and HDL Acquisition, Inc., an Ontario
corporation and a wholly-owned subsidiary of Russell-Stanley (the "BUYER").
WHEREAS, the Sellers now collectively own, beneficially and
of record, all of the issued and outstanding equity securities of the Company;
WHEREAS, the Sellers collectively own, beneficially and of
record, an aggregate of 900 Class A Common Shares, 8,800 Class A Special Shares,
9,000 Class B Common Shares, 200 Class B Special Shares and 1,200 Class C
Special Shares of the Company (all such shares, collectively, the "SHARES"),
which constitute all of the issued and outstanding equity securities of the
Company;
WHEREAS, the Buyer desires to purchase from the Sellers, and
the Sellers desire to sell to the Buyer, all of the Shares (other than 285 Class
A Common Shares of the Company to be retained by each of John D. Hunter and
Michael W. Hunter subject to Section 1.5 hereof (the "RETAINED SHARES")) upon
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants contained herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 TRANSFER BY SELLERS OF SHARES. On the Closing Date (as
defined in Section 1.3) and subject to the terms and conditions set forth in
this Agreement, the Sellers will sell, assign, transfer and deliver to the Buyer
the Shares (other than the Retained Shares), free and clear of all options,
pledges, mortgages, security interests, liens, restrictions on voting or
transfer or other encumbrances of any nature ("ENCUMBRANCES"), other than the
restrictions imposed by provincial securities laws and the restrictions on the
transfer of the Shares imposed by the Letters Patent of the Company.
1.2 CONSIDERATION. On the Closing Date and subject to the
terms and conditions set forth in this Agreement, in reliance on the
representations, warranties, covenants and agreements of the parties contained
herein and in consideration of the sale, assignment, transfer and delivery of
the Shares (other than the Retained Shares), the Buyer will pay the
consideration set forth in Section 1.3(b) hereof, as adjusted pursuant to
Section 1.4 hereof (the "PURCHASE PRICE").
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2
1.3 THE CLOSING. Unless this Agreement shall have been
terminated and the transactions contemplated herein shall have been abandoned
pursuant to Article VII, subject to Articles IV and V, the completion of the
transactions contemplated by this Agreement (the "CLOSING") shall take place at
the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New
York 10017,, at 10:00 a.m. (New York time) on the later of October 30, 1997 and
that Business Day on or after the date of satisfaction or waiver of all of the
conditions required to be satisfied in Articles IV and V hereof (the "CLOSING
DATE"), which Closing shall be effective 11:59 p.m. on the Business Day
preceding the Closing Date, or at such other place and time as may be agreed
upon by the Sellers' Representative (as defined in Section 9.15) and the Buyer.
For the purposes of this Agreement, "BUSINESS DAY" means any day of the year,
other than a Saturday, Sunday or any day on which banks are required or
authorized to close in Toronto, Ontario or New York City.
(a) DELIVERIES BY SELLERS. At or prior to the
Closing, the Sellers shall deliver or cause to be delivered to the
Buyer the following:
(i) certificates evidencing the Shares (other
than the Retained Shares), which certificates shall be
properly endorsed for transfer or accompanied by duly executed
stock powers, in either case executed in blank or in favor of
the Buyer, and otherwise in a form acceptable for transfer on
the books of the Company;
(ii) resignations of directors of the Company
as contemplated by Section 5.4 hereof; and
(iii) all other previously undelivered
documents required by this Agreement to be delivered by the
Sellers to the Buyer at or prior to the Closing Date in
connection with the transactions contemplated hereby.
(b) DELIVERIES BY THE BUYER. At or prior to the
Closing, the Buyer shall deliver or cause to be delivered to or for the
benefit of the Sellers the following:
(i) to the Sellers, an aggregate amount equal
to Cdn $33,300,000 MINUS the Estimated Adjustment Amount (as
defined in Section 1.3(c)), by wire transfer of immediately
available funds to the accounts designated by the Sellers in
writing at least five Business Days prior to the Closing Date
or, if no such account has been designated, by bank check,
drawn on a Canadian bank in immediately available funds, which
amount shall be allocated among the Sellers and their
respective designated accounts in accordance with Exhibit
1.3(b)(i) hereto; and
(ii) all other previously undelivered documents
required by this Agreement to be delivered by the Buyer to the
Sellers at or prior to the Closing Date in connection with the
transactions contemplated hereby.
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3
(c) Prior to Closing, the Company shall deliver to
Russell-Stanley its good faith estimate of the Adjustment Amount (as
defined in Section 1.4) (such estimated amount, the "ESTIMATED
ADJUSTMENT AMOUNT"). The Estimated Adjustment Amount shall be prepared
as far in advance of the Closing Date as practicable in consultation
with Russell-Stanley and its representatives. The parties shall use
their reasonable best efforts to resolve in good faith any disagreement
between them concerning the computation of the Estimated Adjustment
Amount; provided, however that, if the parties are unable to resolve
any such disagreement, the Estimated Adjustment Amount shall be the
estimate prepared by the Company.
(d) All instruments and documents executed and
delivered to the Buyer pursuant hereto shall be in form and substance,
and shall be executed in a manner, reasonably satisfactory to the
Buyer. All instruments and documents executed and delivered to the
Sellers pursuant hereto shall be in form and substance, and shall be
executed in a manner, reasonably satisfactory to the Sellers.
1.4 CLOSING ADJUSTMENT. (a) As used in this Agreement,
"ADJUSTMENT AMOUNT" shall mean the amount equal to the sum of (i) the excess, if
any, of (1) Cdn $5,000,000 over (2) the Company's and the Subsidiaries' (as
defined in Section 2.1) shareholders' equity as of the close of business on the
Business Day immediately preceding the Closing Date as determined from the Final
Statements, PLUS (ii) the aggregate amount of any liabilities for salaries,
bonuses, expenses, dividends or other payments owed by the Company and the
Subsidiaries to (or on behalf of) any Seller or any family member of any Seller
as of the close of business on the Business Day immediately preceding the
Closing Date (excluding amounts owed in the ordinary course of business to or on
behalf of Michael Hunter for salary and benefits which would otherwise be
payable to Michael Hunter under the Employment Agreement had the Employment
Agreement then been in effect), PLUS (iii) any indebtedness for borrowed money
(including interest, prepayment penalties or premiums, and any other obligations
with respect thereto, but excluding any outstanding checks) of the Company and
the Subsidiaries as of the close of business on the Business Day immediately
preceding the Closing Date, PLUS (iv) any capitalized lease obligations of the
Company and the Subsidiaries (excluding leases listed on Exhibit 1.4(a) hereto)
as of the close of business on the Business Day immediately preceding the
Closing Date.
(b) Within 60 days following the Closing Date, the
Buyer shall cause the Company to prepare on a consolidated basis and deliver to
the Sellers' Representative (i) draft financial statements of the Company and
the Subsidiaries consisting of a balance sheet, a statement of operations and
retained earnings and a statement of changes in financial position for the
period from (and including) January 1, 1997 to (and including) and as of the
close of business on the Business Day immediately preceding the Closing Date
(collectively, the "CLOSING DATE STATEMENTS") (such financial statements shall
be prepared in accordance with Canadian generally accepted accounting principles
("GAAP") consistently applied with the 1996 Financial Statements (as defined in
Section 2.5), except that the Closing Date Statements shall be consolidated but
shall not include footnotes); and (ii) a draft statement of calculation of the
Adjustment Amount, which calculation shall be based on the Closing Date
Statements (the "Calculation").
<PAGE>
4
(c) The Sellers' Representative shall have 30 days
to review the Closing Date Statements and the Calculation after receipt thereof.
The Sellers' Representative shall have the right, if he disputes either the
Closing Date Statements or the Calculation provided to the Sellers'
Representative to review the relevant financial records of the Company and the
Subsidiaries. Unless the Sellers' Representative delivers written notice to
Russell-Stanley on or prior to the 30th day after its receipt of the Closing
Date Statements and the Calculation of its objection to the Closing Date
Statements or the Calculation and specifying in reasonable detail all disputed
items and the reason therefor, the Sellers shall be deemed to have accepted and
agreed to the Closing Date Statements and the Calculation. If the Sellers'
Representative so notifies Russell-Stanley of its objection to either the
Closing Date Statements or the Calculation, Russell-Stanley and the Sellers'
Representative shall, within 30 days of such notice (the "RESOLUTION PERIOD"),
attempt to resolve their differences and any resolution by them as to any
disputed amounts shall be final, binding and conclusive.
(d) If, at the conclusion of the Resolution Period,
any amounts remain in dispute, then all such amounts remaining in dispute shall
be submitted to one of the "big six" accounting firms which shall be mutually
agreeable to Russell-Stanley and the Sellers' Representative and, failing such
agreement within a period of five Business Days after the conclusion of the
Resolution Period, such firm shall be Ernst & Young (Canada) or if it is unable
to act it shall be KPMG Peat Marwick (Canada) (the "NEUTRAL AUDITOR"). Each
party agrees to execute, if requested by the Neutral Auditor, a reasonable
engagement letter. All fees and expenses relating to the work to be performed by
the Neutral Auditor shall be borne 50% by the Sellers and 50% by
Russell-Stanley. The Neutral Auditor shall act as an expert and not an
arbitrator to determine, based solely on presentations by or on behalf of the
Sellers' Representative and Russell-Stanley, and not by independent review, only
those issues still in dispute. The presentation by or on behalf of the Sellers'
Representative shall be submitted to the Neutral Auditor (with a copy to
Russell-Stanley) within 20 Business Days of the appointment of the Neutral
Auditor and the presentation by or on behalf of Russell-Stanley shall be
submitted to the Neutral Auditor (with a copy to the Sellers' Representative)
within 15 Business Days of receipt by Russell-Stanley of the presentation
submitted by or on behalf of the Sellers' Representative or, if no such
presentation is submitted, within 35 Business Days of the appointment of the
Neutral Auditor. The Sellers' Representative shall have the right to submit
another presentation within 5 Business Days of its receipt of Russell-Stanley's
presentation for the sole purpose of rebutting any of the arguments made by
Russell-Stanley in its presentation, and Russell-Stanley shall subsequently have
the right to submit another presentation within 5 Business Days of its receipt
of such rebuttal presentation for the sole purpose of rebutting any of the
arguments made by Sellers' Representative in its rebuttal presentation. The
Neutral Auditor's determination shall be made within 30 days of the final
submission as provided above; provided that, if only one party submits a
presentation to the Neutral Auditor, the presentation of such party shall be
accepted without opposition and the determination of the Neutral Auditor shall
be based on that presentation alone, and if both parties fail to provide
presentations to the Neutral Auditor, the Closing Date Statements and the
Calculation as delivered to the Sellers' Representative shall be deemed to be
accepted and agreed. The determination shall be set forth in a written statement
delivered to the Sellers' Representative and Russell-Stanley and shall be final,
binding and conclusive. The term "Final Statements" shall mean the definitive
Closing Date Statements and the term "Final Calculation" shall mean the
definitive Calculation, in each case deemed to be accepted and agreed by the
Sellers or agreed
<PAGE>
5
to by Russell-Stanley and the Sellers' Representative in accordance with Section
1.4(c) or the definitive Closing Date Statements or the definitive Calculation
resulting from the determinations made by the Neutral Auditor in accordance with
Section 1.4(d) (in addition to those items theretofore agreed to by the Sellers'
Representative and Russell-Stanley).
(e) If the Adjustment Amount as reflected on the Final
Calculation exceeds the Estimated Adjustment Amount, the Sellers shall pay the
Buyer the amount of such excess. The obligation of the Sellers to make such
payment shall be joint and several. If the Estimated Adjustment Amount exceeds
the Adjustment Amount as reflected on the Final Calculation, the Buyer shall pay
the Sellers an amount (allocated in accordance with Exhibit 1.3(b)(i)) equal to
the lesser of (i) the amount of such excess and (ii) the Estimated Adjustment
Amount. Any payments pursuant to this Section 1.4(e) shall be made within five
Business Days after the Final Statements and the Final Calculation become
available by wire transfer of immediately available funds to the account(s)
designated by the applicable payee in writing at least two Business Days prior
to the date of payment or, if payable to the Sellers and no such account has
been designated, by bank check drawn on a Canadian bank in immediately available
funds.
1.5 AMALGAMATION. Immediately after the Closing, the Buyer
shall be amalgamated with the Company, and the Retained Shares shall be
converted in such amalgamation into 27,778 Class B non-voting shares of the
amalgamated company (the "CLASS B SHARES") having the rights, privileges, terms
and conditions set forth in Exhibit 1.5(a) hereto. Immediately following the
amalgamation, Russell-Stanley shall cause the amalgamated company to file
articles of amendment providing for the exchange of each Class B Share for one
exchangeable non-voting share of the amalgamated company having the rights,
privileges, terms and conditions set forth in Exhibit 1.5(b) hereto (the
"EXCHANGEABLE SHARE").
1.6 FURTHER ASSURANCES. After the Closing, each party hereto
shall from time to time, at the request of any other party and without further
cost or expense to such other party, execute and deliver such other instruments
of conveyance and transfer and take such other actions as such other party may
reasonably request in order to more effectively consummate the transactions
contemplated hereby and to vest in the Buyer good and valid title to the Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers, jointly and severally, hereby represent and
warrant to the Buyer as follows:
2.1 CORPORATE ORGANIZATION. (a) The Company is a corporation
duly organized and validly existing under the laws of the Province of Ontario.
The Company has full corporate power and authority to own its assets and to
carry on its business as now being conducted and is duly qualified or licensed
to do business as a foreign corporation in good standing in the jurisdictions in
which the ownership of its property or the conduct of its business requires such
qualification or license, except jurisdictions in which the failure to be so
qualified or licensed would not, individually or in the aggregate, reasonably be
expected to cause the Company to
<PAGE>
6
suffer a loss or pay a claim in excess of Cdn $100,000 (hereinafter referred to
as a "MATERIAL ADVERSE EFFECT"). The Sellers have delivered to the Buyer
complete and correct copies of the Letters Patent and all amendments thereto,
the Bylaws as presently in effect and the minute books and share transfer
records of the Company. Other than Hunter Industrial Group, Inc., a Delaware
corporation ("HIGI"), and Hunter Drums, Inc., an Illinois corporation ("HDI";
together with HIGI, the "SUBSIDIARIES"), the Company does not own or have any
option or right to acquire, directly or indirectly, any capital stock or other
equity securities of, or have any direct or indirect equity or ownership
interest or debt investment in, any corporation, association, partnership, joint
venture or other business. Neither Subsidiary has (i) any shareholders other
than the Company, (ii) conducted any business since the date of its
incorporation or (iii) any assets or liabilities; other than, in the case of
clauses (ii) and (iii), as specifically set forth on Section 2.1 of the
Disclosure Schedule.
2.2 CAPITALIZATION. The authorized share capital of the
Company consists of an unlimited number of Class A Common Shares, an unlimited
number of Class A Special Shares, an unlimited number of Class B Common Shares,
200 Class B Special Shares and an unlimited number of Class C Special Shares. Of
such authorized shares, only the Shares are issued and outstanding and no other
shares (of any other class or series) of the Company or securities exercisable
or convertible into or exchangeable for shares of the Company ("CAPITAL STOCK
EQUIVALENTS") are authorized, issued or outstanding. Except as set forth in
Section 2.2 of the Disclosure Schedule, there are no subscriptions, options,
warrants, calls, rights, contracts, commitments, understandings, restrictions or
arrangements relating to the issuance, sale, transfer or voting of any shares,
whether issued or unissued, of the Company or Capital Stock Equivalents,
including any rights of issuance, conversion or exchange under any outstanding
securities or other instruments, other than restrictions imposed by provincial
securities laws and the restrictions on the transfer of the Shares imposed by
the Letters Patent of the Company. All of the Shares have been validly issued
and are outstanding and fully paid, nonassessable and free of preemptive rights.
The Company does not have any outstanding debt securities or other indebtedness
for borrowed money or guarantees, except as specifically disclosed in the 1996
Financial Statements (as defined in Section 2.5(a)) or in Section 2.2 of the
Disclosure Schedule.
2.3 OWNERSHIP OF SHARES. Each Seller is the record and
beneficial owner of the number and class of Shares set forth opposite such
Seller's name in Section 2.3 of the Disclosure Schedule. The Shares are owned
free and clear of all Encumbrances, other than the restrictions imposed by
provincial securities laws and the restrictions on the transfer of the Shares
imposed by the Letters Patent of the Company. Upon the consummation of the
transactions contemplated hereby, the Buyer will acquire title to the Shares
(other than the Retained Shares) free and clear of all Encumbrances, other than
the restrictions imposed by provincial securities laws, restrictions on the
transfer of the Shares imposed by the Letters Patent of the Company and
Encumbrances arising as a result of any action taken by, or failure to act of,
the Buyer or any of its affiliates ("AFFILIATES") as defined in Rule 12b-2 of
the regulations promulgated pursuant to the U.S. Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT").
2.4 AUTHORIZATION, ETC. Each of the Sellers and the Company
has full power and authority to execute and deliver this Agreement and to carry
out the transactions contemplated hereby. The execution and delivery by the
Sellers and the Company of this Agreement and the
<PAGE>
7
consummation by the Sellers and the Company of the transactions contemplated
hereby have been duly approved and authorized by all necessary corporate action
on the part of the Sellers which are corporations and the Company, and no other
proceedings on the part of the Sellers and the Company are necessary to approve
and authorize the execution and delivery by the Sellers and the Company of this
Agreement and the consummation by the Sellers and the Company of the
transactions contemplated hereby. This Agreement has been duly and validly
executed by each of the Sellers and the Company and, assuming this Agreement
constitutes the legal, valid and binding agreement of the other parties hereto,
constitutes a legal, valid and binding agreement of such party, enforceable
against such party in accordance with its terms, except that (i) the enforcement
hereof may be limited by bankruptcy, insolvency, arrangement or other similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
2.5 FINANCIAL STATEMENTS. The Sellers have previously
delivered to the Buyer (i) the audited balance sheet of the Company as of
December 31, 1996 and the related audited statements of operations and retained
earnings and changes in financial position for the fiscal year then ended, and
the notes thereto and (ii) the unaudited balance sheets of each Subsidiary as of
December 31, 1996 and the related unaudited statement of income and retained
earnings for the fiscal year then ended for HDI, and the notes thereto
(collectively, the "1996 FINANCIAL STATEMENTS"). The 1996 Financial Statements
present fairly in all material respects the financial position of each of the
Company and each Subsidiary as at December 31, 1996 and the results of its
operations and the changes in its financial position for the year then ended and
have been prepared in accordance with GAAP consistently applied, except that (x)
no statement of income and retained earnings for HIGI is included in the 1996
Financial Statements and (y) the 1996 Financial Statements referred to in clause
(i) above do not cover the Company and its Subsidiaries on a consolidated basis.
2.6 NO UNDISCLOSED LIABILITIES. Except as disclosed in
Section 2.6 of the Disclosure Schedule, the Company and the Subsidiaries have no
liabilities or obligations, whether accrued, absolute, contingent, matured or
unmatured, including, without limitation, such liabilities or obligations under
Environmental Laws (as defined in Section 2.17), that are required to be
reflected, accrued or reserved for in an audited balance sheet of the Company or
the notes thereto prepared in accordance with GAAP, other than (i) liabilities
and obligations that are reflected, accrued or reserved for in the balance
sheets and notes thereto included in the 1996 Financial Statements (the "1996
BALANCE SHEET"), (ii) liabilities and obligations incurred in the ordinary
course of business and consistent with past practice since the date of the 1996
Balance Sheet and (iii) liabilities and obligations which in the aggregate would
not have a Material Adverse Effect.
2.7 NO APPROVALS OR CONFLICTS. Except as set forth in Section
2.7 of the Disclosure Schedule, the execution, delivery and performance by the
Sellers of this Agreement and the consummation by the Sellers of the
transactions contemplated hereby will not (i) violate, conflict with or result
in a breach
<PAGE>
8
by the Sellers or the Company of any provision of the Letters Patent, as
amended, or Bylaws of the Company, (ii) violate, conflict with or result in a
breach of any provision of, or constitute a default by the Sellers or the
Company (or an event which, with notice or lapse of time or both, would
constitute a default) or give rise to any right of termination, cancellation or
acceleration under, or result in the creation of any Encumbrance upon any of the
properties of the Company or the Subsidiaries or on the Sellers' interest in the
Shares under, any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, lease, contract, agreement or other instrument to which any
of the Sellers, the Company, the Subsidiaries or any of their respective
properties may be bound, (iii) violate or result in a breach of any order,
injunction, judgment, ruling, law or regulation of any Governmental Authority
(as defined in Section 2.12) applicable to any of the Sellers, the Company, the
Subsidiaries or any of their respective properties or (iv) require the Sellers
or the Company or any Subsidiary to obtain or make any order, consent, approval
or authorization of, or notice to, or declaration, filing, application,
qualification or registration with, any Governmental Authority, excluding from
the foregoing clauses (ii) and (iii) above, such violations, conflicts,
breaches, defaults, rights of termination, cancellation or acceleration or
creation of Encumbrances, which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
2.8 COMPLIANCE WITH LAW; GOVERNMENTAL AUTHORIZATIONS. Except
as set forth in Section 2.8 of the Disclosure Schedule, the Company and the
Subsidiaries are not, and have not been, in any material respect in violation of
any order, injunction, judgment, ruling, law or regulation of any Governmental
Authority applicable to the property or business of the Company and the
Subsidiaries. Except as set forth in Section 2.8 of the Disclosure Schedule, the
Company and the Subsidiaries have and are in material compliance with all
material licenses, permits and other governmental authorizations reasonably
necessary to conduct its business as currently conducted (including, without
limitation, any such material licenses, permits and authorizations under
Environmental Laws) and such material licenses, permits and authorizations are
valid and in full force and effect in all material respects.
2.9 LITIGATION. Except as set forth in Section 2.9 of the
Disclosure Schedule, as of the date hereof, there are no suits, actions,
proceedings or investigations that have been commenced or, to the best knowledge
of the Sellers and the Senior Managers, threatened against the Company, the
Subsidiaries or the transactions contemplated by this Agreement before any
arbitrator, court or governmental or regulatory authority or body, which, if
decided unfavorably to the Company or the Subsidiaries, would have a Material
Adverse Effect. Except as set forth in Section 2.9 of the Disclosure Schedule,
neither the Sellers nor the Senior Managers have received any notice that the
Company, any Subsidiary or any of their assets is subject to any decree, order
or judgment which would have a Material Adverse Effect. As used in this
Agreement, "SENIOR MANAGERS" means Robert Moser, Ed Gunn, Wayne Gow, Tom Garrow,
James Irwin and Joe Lekhram. For purposes of this Agreement, "to the best
knowledge of the Sellers and the Senior Managers" means the actual knowledge of
the Sellers and the Senior Managers without any additional inquiry.
2.10 ASSETS. Except as set forth in Section 2.10 of the
Disclosure Schedule and except with respect to the Owned Property and the Real
Property Leases, on December 31, 1996, the Company and the Subsidiaries had and,
except with respect to assets disposed of or acquired in the ordinary course of
business and consistent with past practice since such date, the Company and the
Subsidiaries now have, good and valid title to, or hold by valid and existing
lease or
<PAGE>
9
license, all the assets reflected as assets of the Company or the Subsidiaries
on the 1996 Balance Sheet or which would have been reflected on the 1996 Balance
Sheet if acquired prior to such date, free and clear of all Encumbrances of any
nature except for: (i) Encumbrances which secure indebtedness or obligations
which are properly reflected on the 1996 Balance Sheet; (ii) liens for Taxes (as
defined in Section 2.12) not yet payable or being contested in good faith; (iii)
liens arising as a matter of law in the ordinary course of business, provided
that the obligations secured by such liens are not delinquent or are being
contested in good faith; and (iv) such imperfections of title and Encumbrances
which, individually or in the aggregate, would not have a Material Adverse
Effect. Except as set forth in Section 2.10 of the Disclosure Schedule, the
Company owns, or has valid leasehold interests in, all material tangible assets
necessary for the operation or conduct of the Company's business as currently
conducted and all such material tangible assets are, in the reasonable judgment
of the Sellers, in reasonable good operating condition in all material respects,
normal wear and tear excepted, other than machinery and equipment under repair
or out of service in the ordinary course of the Company's business.
2.11 ABSENCE OF CERTAIN CHANGES. (a) Except as set forth in
Section 2.11 (a) of the Disclosure Schedule and as otherwise provided herein,
since December 31, 1996, (i) the business of the Company has been conducted only
in the ordinary course and consistent with past practice in all material
respects; (ii) there has not been any event or development prior to the date
hereof which, if it had occurred or existed after the date hereof, would be a
violation of Section 6.1(d); and (iii) there has not been any event or
development with respect to the business, financial condition or results of
operations of the Company and the Subsidiaries which, individually or in the
aggregate, has had a Material Adverse Effect and which has not been reflected in
the Adjustment Amount. The parties hereto hereby agree that, in determining
whether the loss of one or more customers has had a Material Adverse Effect, the
addition of any new customers shall be considered in the aggregate with such
loss of customers.
(b) Except as set forth in Section 2.11(b) of the Disclosure
Schedule, since September 17, 1997, neither the Company nor any Subsidiary has
declared, set aside or paid any dividend or other distribution or made any other
payment, in cash or other property, to any of the Company's shareholders or any
family member thereof, other than salary and benefits paid in the ordinary
course of business to Michael Hunter which would otherwise be payable to Michael
Hunter under the Employment Agreement had the Employment Agreement then been in
effect.
2.12 TAX MATTERS. (a) Except as set forth in Section 2.12(a)
of the Disclosure Schedule, the Company and the Subsidiaries have duly and
timely filed all Tax Returns that are required to be filed in all jurisdictions
where such entities are required to file with the appropriate Governmental
Authority and have duly, completely and correctly reported all income and all
other amounts and information required to be reported thereon and no material
fact has been omitted therefrom.
(b) Except as set forth in Section 2.12(b) of the Disclosure
Schedule, the Company and the Subsidiaries have duly and timely paid all Taxes,
including all installments on account of Taxes for the current year, that are
due and payable by them and the Company and the Subsidiaries have established
reserves or made adequate provisions in accordance with GAAP (except for normal
year-end adjustments with respect to periods after January 1, 1997) on the
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10
financial books and records of the Company and its Subsidiaries that will be
adequate for the payment by the Company and the Subsidiaries of all Taxes that
are not yet due and payable or that are being contested, and that relate to
periods ending on or prior to the last month's end for which financial
statements have been prepared, which, as of the date hereof, is August 31, 1997.
(c) The Company and the Subsidiaries have not requested, or
entered into any agreement or other arrangement or executed any waiver providing
for, any extension of time within which (i) to file any Tax Return covering any
Taxes for which they are or may be liable; (ii) to file any elections,
designations or similar things relating to Taxes for which they are or may be
liable; (iii) they are required to pay or remit any Taxes or amounts on account
of Taxes; or (iv) any Governmental Authority may assess or collect Taxes for
which they are or may be liable.
(d) The Canadian federal and provincial income and capital
tax liabilities of the Company and the Subsidiaries have been assessed by the
relevant taxing authorities and notices of assessment have been issued to each
such entity by the relevant taxing authorities for all taxation years prior to
and including the taxation year ended 1995.
(e) As of the date hereof, there are no actions, suits,
proceedings, investigations, audits or claims that have been commenced or, to
the best knowledge of the Sellers and the Senior Managers, threatened, against
the Company or any Subsidiary in respect of any Taxes and there are no matters
under discussion, audit or appeal with any Governmental Authority relating to
Taxes, except as set forth in Section 2.12(e) of the Disclosure Schedule.
(f) There are no liens for Taxes on any of the assets of the
Company or any Subsidiary other than liens for current Taxes which are not yet
due and payable.
(g) The Company and the Subsidiaries have duly and timely
withheld from any amount paid or credited by it to or for the account or benefit
of any person, including any of its employees, officers and directors and any
non-resident person, the amount of all Taxes and other deductions required by
any applicable law, rule or regulation to be withheld from any such amount and
has duly and timely remitted the same to the appropriate Governmental Authority.
The Company and the Subsidiaries have charged, collected and remitted on a
timely basis all Taxes as required under applicable legislation on any sale,
supply or delivery whatsoever, made by the Company and the Subsidiaries.
(h) Except as specifically disclosed in writing to the Buyer,
for purposes of the Income Tax Act (Canada) or any applicable provincial or
municipal taxing statute, no person or group of persons has, during the period
of seven years immediately prior to the Closing Date, acquired or had the right
to acquire control of the Company.
(i) None of the Sellers is a non-resident of Canada for
purposes of section 116 of the Income Tax Act (Canada).
<PAGE>
11
(j) For purposes of this Agreement, "Tax Returns" includes,
without limitation, all returns, reports, declarations, elections, notices,
filings, information returns and statements filed in respect of Taxes.
(k) For purposes of this Agreement, "Taxes" includes, without
limitation, all taxes, duties, fees, premiums, assessments, imposts, levies and
other charges of any kind whatsoever imposed by any Governmental Authority,
together with all interest, penalties, fines, additions to tax or other
additional amounts imposed in respect thereof, including those levied on, or
measured by, or referred to as income, gross receipts, profits, capital,
transfer, land transfer, sales, goods and services, use, value-added, excise,
stamp, withholding, business, franchising, property, payroll, employment,
health, social services, education and social security taxes, all surtaxes, all
customs duties and import and export taxes, all license, franchise and
registration fees and all unemployment insurance, health insurance and Canada,
Quebec and other government pension plan premiums.
(l) For purposes of this Agreement, "Governmental Authority"
means any government, regulatory authority, governmental department, agency,
commission, board, tribunal, crown corporation, or court or other law, rule or
regulation-making entity having or purporting to have jurisdiction on behalf of
any nation, or province or state or other subdivision thereof or any
municipality, district or other subdivision thereof.
2.13 EMPLOYEE BENEFITS. (a) Section 2.13 of the Disclosure
Schedule contains a true and complete list of all bonus, deferred compensation,
incentive compensation, stock purchase, stock option, stock appreciation,
phantom stock, savings, profit sharing, severance or termination pay, health or
other medical, dental, life, disability or other insurance (whether insured or
self-insured), supplementary unemployment or employment benefit, pension,
retirement, registered retirement savings, supplementary retirement, employment,
consulting, collective bargaining, change in control and any other benefit or
compensation plan, program, agreement, arrangement, policy or practice
(including any funding mechanism therefor which is now in effect or which will
be required in the future as a result of the transactions contemplated by this
Agreement), whether formal or informal, funded or unfunded, registered or
unregistered, oral or written, which are maintained or contributed to or are
required to be maintained, contributed to or provided by any of the Company and
the Subsidiaries, under which any employee, former employee or independent
contractor (or any dependent of any such persons) in relation to the Company or
any Subsidiary has any present or future right to benefits or compensation or
under which the Company or any Subsidiary has any present or future liability or
obligation. All such plans, programs, agreements, arrangements, policies or
practices shall be collectively referred to as the "Company Plans" and
individually as a "Company Plan".
(b) The Sellers have provided to the Buyer current, accurate
and complete copies of each written Company Plan or, where oral, a written
description of the terms thereof, as amended to date (except that in respect of
oral Company Plans which relate to employment the Sellers have provided the
Buyer the information under the headings in Section 2.13 of the Disclosure
Schedule on a current, accurate and complete basis), together with the most
current funding agreements and summary plan descriptions relating to each such
Company Plan
<PAGE>
12
including, without limiting the generality of the foregoing, the following
documents (where applicable):
(i) all actuarial reports and financial statements for each
Company Plan,
(ii) evidence of registration of each Company Plan (where
registration of any such Company Plan is required under applicable laws),
(iii) the most current copies of any insurance contracts,
investment management agreements or investment reports with respect to each
Company Plan,
(iv) all reports, returns, filings made with any regulatory
authority in respect of any Company Plan within the last six years,
(v) the most current copies of booklets or manuals prepared
for or circulated to employees with respect to any of the Company Plans,
(vi) all material correspondence with any regulatory
authority respecting each Company Plan within the last six years, and
(vii) any and all written legal or actuarial opinions,
memorandums or advice prepared for, or provided to the Company with respect to
the Company Plans prepared within the last six years.
(c) Except as disclosed in Section 2.13 of the Disclosure
Schedule, no promises or commitments have been made by any of the Sellers, the
Company or any Subsidiary or any of their employees, directors or officers to
amend any Company Plan or to provide increased benefits thereunder to any of the
current or former employees of the Company or any Subsidiary or any independent
contractor of the Company or any Subsidiary (collectively referred to as
"Employees"), except as may be required by applicable laws. The Sellers have
delivered to the Buyer a summary description of any other material terms or
conditions of employment (to the extent not disclosed pursuant to the above
provisions) of all Employees for which any of the Company and the Subsidiaries
has or may have obligations.
(d) Each Company Plan is and has been administered in all
material respects in accordance with the terms thereof, any collective
agreements and applicable laws, including registration with the relevant
provincial authorities and federal taxation authorities where such registration
is required to qualify for tax exemption or other beneficial tax status. All
obligations under the Company Plans have been satisfied, to the extent required
by the terms of the relevant Company Plan or applicable laws.
(e) Each Company Plan is in good standing under and in
compliance with all applicable laws and there are no outstanding material
defaults or violations by the Company in connection with any Company Plan, and
no order has been made or notice given pursuant to any
<PAGE>
13
applicable legislation requiring (or proposing to require) the Company or any
others to take or refrain from taking any action in respect of any Company Plan.
All material returns, filings reports and disclosures relating to the Company
Plans required pursuant to the terms of the Company Plans or applicable laws
have been made, filed or distributed in accordance with all such requirements
and all filing fees and levies imposed on the Company Plans by any regulatory
authorities or applicable laws have been made or remitted on a timely basis.
(f) Each investment held in respect of a Company Plan is a
qualified or eligible investment and no investment held under or in respect of a
Company Plan is a prohibited investment under the terms of the Company Plan, all
documents related thereto (including any statement of investment policies and
goals) or under applicable laws.
(g) There have been no withdrawals of surplus assets or other
amounts from any of the Company Plans and any employer contribution holidays
taken under the Company Plans have been permitted by the terms of the Company
Plans and have been in accordance with applicable laws.
(h) No step has been taken, no event has occurred and no
condition or circumstance exists that has resulted in or could reasonably be
expected to result in any Company Plan being ordered or required to be
terminated or wound up in whole or in part or having its registration under
applicable legislation refused or revoked, or being placed under the
administration of any trustee or receiver or regulatory authority or being
required to pay any material taxes, fees, penalties or levies under applicable
laws. Each Company Plan may be amended or terminated in accordance with the
terms thereof.
(i) As of the date hereof, no actions, suits, claims (other
than routine claims for payment of benefits in the ordinary course), trials,
demands, investigations, arbitrations or other proceedings have been commenced
or, to the best knowledge of the Sellers and the Senior Managers, threatened in
respect of any of the Company Plans or its assets.
(j) All premium payments and contributions relating to
Employees' benefit accruals or periods of service prior to the Closing Date
(including any and all current service costs and any special payments required
to be made) to the extent required to have been paid or remitted under the terms
of the Company Plans or applicable laws have been so paid or remitted and the
Company Plans have been funded in accordance with the terms thereof and
applicable laws. None of the Company Plans is a "defined benefit pension plan"
(as defined in the Pension Benefits Act (Ontario) or other equivalent provincial
pension legislation) and neither the Company nor any of its Subsidiaries have
sponsored, contributed to, or participated in any defined benefit pension plan.
(k) All contributions to each of the Company Plans in respect
of periods of service or benefits on or prior to September 30, 1997 have been or
will be accrued or paid prior to the Closing Date on the books and records of
the Company, notwithstanding that such contributions may not be due and owing
until after the Closing Date.
<PAGE>
14
(l) None of the Company Plans is a multi-employer pension
plan or multi-employer benefit plan.
(m) All vacation pay for Employees accrued up to the Closing
Date has been reflected and accrued in the Closing Date Statement, except for
accrued vacation pay for salaried employees not in excess of $10,000 in the
aggregate.
(n) Except as set forth in Section 2.13 of the Disclosure
Schedule, none of the Company Plans provides benefits to Employees following
their retirement, other than any registered pension plan or group retirement
savings plan disclosed in accordance with the foregoing provisions of this
Section 2.13.
(o) Except as set forth in Section 2.13 of the Disclosure
Schedule, no Company Plan exists that could result in (i) the payment to any
Employee of any money, benefits or other property, (ii) accelerated or increased
funding requirements for any Company Plan or (iii) the acceleration or provision
of any other increased rights or benefits to any Employee as a result of the
transactions contemplated by this Agreement.
2.14 LABOR RELATIONS. Except as set forth in Section 2.14 of
the Disclosure Schedule, (i) the Company is not a party to any collective
bargaining agreement applicable to employees of the Company, nor is any such
contract or agreement presently being negotiated; (ii) the Company is not a
party to any employment agreement or consulting agreement with any person or
entity obligating the Company to make payments in excess of Cdn $100,000 per
year, nor is any such contract or agreement presently being negotiated; (iii)
there is no unfair labor practice charge or complaint pending or, to the best
knowledge of the Sellers and the Senior Managers, threatened against or
otherwise affecting the Company which, if adversely determined, would reasonably
be likely to result in a liability having a Material Adverse Effect; (iv) there
is no labor strike, slowdown, work stoppage, or lockout in effect, or, to the
best knowledge of the Sellers and the Senior Managers, save in the course of the
negotiation of labor contracts or collective bargaining agreements or in the
resolution of grievances that may arise from time to time, threatened against or
otherwise affecting the Company, and the Company has not experienced any labor
strike, slowdown, work stoppage or lockout within the past three years; (v) the
Company is not a party to, or otherwise bound by, any consent order with, or
order by, any Governmental Authority relating to employees or employment
practices, except for any such order issued after the date hereof which is not
reasonably likely to result in liability having a Material Adverse Effect; (vi)
the Company will not have any material liability under any benefit or severance
policy, practice, agreement, plan, or program which exists or arises, or may be
deemed to exist or arise, under any applicable law or otherwise, as a result of
the transactions contemplated hereunder; and (vii) the Company is in compliance
with its obligations pursuant to all notification and bargaining obligations
arising under any collective bargaining agreement, statute or otherwise. To the
best knowledge of the Sellers and the Senior Managers, there is no effort to
organize employees of the Company which is pending or threatened.
2.15 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Section 2.15 of
the Disclosure Schedule contains a true and complete list of all patents,
trademarks, trade names and copyrights which are either registered or in respect
of which there are pending applications therefor
<PAGE>
15
(collectively, the "INTELLECTUAL PROPERTY") used or owned by the Company and a
list of all licenses and other agreements (collectively, the "LICENSE
AGREEMENTS") relating thereto. Except as set forth in Section 2.15 of the
Disclosure Schedule, (i) the consummation of the transactions contemplated by
this Agreement will not materially impair any right to use the Intellectual
Property owned by the Company or the License Agreements, (ii) all Intellectual
Property and License Agreements which relate to the interests of the Company in
the Intellectual Property and the License Agreements are valid, in good standing
and free and clear of liens or other security interests, and (iii) the Company
has not received written or, to the best knowledge of the Sellers and the Senior
Managers, oral, notice of any claims by any person to the use of any such
Intellectual Property, or challenging or questioning the validity or
effectiveness of any such License Agreement.
2.16 CONTRACTS. Subject to the exceptions provided for in the
next sentence, the contracts and agreements listed in Section 2.16 of the
Disclosure Schedule constitute each contract, instrument, lease, deed or
agreement which is material to the business or operations of the Company (the
"CONTRACTS"). Complete copies (or, if oral, written summaries, except as set
forth in Section 2.16 of the Disclosure Schedule) of each Contract have been
made available to the Buyer, including all of the following Contracts: (i) any
indenture, note, mortgage, installment obligation, or other instrument for or
relating to any borrowing of money; (ii) any guaranty of any obligation; (iii)
any agreement, contract, commitment or arrangement containing any covenant
limiting the ability of the Company to engage in any line of business or to
compete with any business or person; (iv) as of the date hereof, any agreement,
contract, commitment or arrangement relating to capital expenditures with
respect to the Company and involving future payments which exceed Cdn $100,000
in any 12-month period; (v) other than this Agreement, any agreement, contract,
commitment or arrangement relating to the acquisition or disposition of assets
or any capital stock of any business enterprise other than those relating to the
acquisition or disposition of assets entered in the ordinary course of business
consistent with past practice; (vi) any real property or personal property
lease; (vii) as of the date hereof, any contract, commitment, agreement or
arrangement which requires future payments in excess of Cdn $100,000 in any
12-month period, to the extent such contract, commitment, agreement or
arrangement is not terminable within 30 days without payment of premium or
penalty; and (viii) any contract, commitment, agreement or arrangement with any
director, shareholder or affiliate of the Company except this Agreement and the
agreements contemplated hereunder. Except as set forth in Section 2.16 of the
Disclosure Schedule, each Contract is in full force and effect, and is a legal,
valid and binding obligation of the Company and, to the best knowledge of the
Sellers and the Senior Managers, each of the other parties thereto, enforceable
in accordance with its terms, except that (x) enforcement may be limited by
bankruptcy, insolvency, arrangement or other similar laws now or hereafter in
effect relating to creditors' rights generally, (y) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought and (z) the Currency Act (Canada) precludes a
court in Canada from giving judgment in any currency other than Canadian
currency. Except as set forth in Section 2.16 of the Disclosure Schedule, no
condition exists or event has occurred which (whether with or without notice or
lapse of time or both, or the happening or occurrence of any other event) would
constitute a default by the Company or, to the best knowledge of the Sellers and
the Senior Managers as of the date hereof, any other party thereto under, or
result in a right in termination of, any Contract,
<PAGE>
16
by any other party thereto. Except as set forth in Section 2.16 of the
Disclosure Schedule, to the best knowledge of the Sellers and the Senior
Managers as of the date hereof, no party to any Contract intends (x) to
terminate such Contract or materially amend the terms thereof, (y) to refuse to
renew such Contract upon expiration thereof or (z) to renew such Contract upon
expiration thereof on terms and conditions which are materially more onerous to
the Company than those pertaining to such existing Contract.
2.17 ENVIRONMENTAL MATTERS. Except as set forth in Section
2.17 of the Disclosure Schedule, (i) the Company has not, as of the date hereof,
received any notice, complaint, direction or order alleging the material
violation of, or any material actual or potential liability relating to, any
applicable statutes, laws, regulations, rules, decrees, orders or judgments of
any Governmental Authority or any municipality, district or other subdivision
thereof related to the protection of human health or the environment or the
receipt, manufacture, processing, generation, presence, distribution, use,
treatment, storage, disposal, clean-up, transport, release, discharge,
migration, removal or handling of any Hazardous Materials (as defined below),
including, without limitation, the Canadian Environmental Protection Act, the
Fisheries Act, the Environmental Protection Act (Ontario), the Ontario Water
Resources Act, and the Occupational Health and Safety Act (Ontario), each as
amended and supplemented, and any regulations promulgated pursuant to such laws,
and any other similar federal, provincial, state or local statutes or
regulations ("ENVIRONMENTAL LAWS"), and any policies or guidelines of any
Governmental Authority, which violation or liability has not been resolved and,
to the best knowledge of the Sellers and the Senior Managers, no such notice,
complaint, direction or order is threatened or otherwise expected, and, to the
best knowledge of the Sellers and the Senior Managers, there are no
circumstances which could result in the issuance of any such notice, complaint,
direction or order, (ii) the Company and all operations of the Company on the
Leased Property (as defined below) or any real property formerly owned or leased
by the Company or over which the Company has or had charge, management or
control are and, during the time such real property was owned or leased by the
Company or was under its charge, management or control, were in material
compliance with all applicable Environmental Laws and, to the best knowledge of
the Sellers and the Senior Managers, there is no condition that could prevent or
materially interfere with such compliance in the future, (iii) there have been
and are no proceedings commenced or, to the knowledge of the Sellers and the
Senior Managers, threatened to revoke or amend any material environmental
permits, registrations and authorizations, (iv) no hazardous waste, substance,
material, chemical, pollutant or contaminant, or toxic substance or dangerous
good as defined, or identified in any Environmental Law, including, without
limitation, petroleum and petroleum products, asbestos and any other material
regulated under, or that can result in liability under, applicable Environmental
Laws ("HAZARDOUS MATERIALS"), has been transported, generated, handled, used,
stored, treated or disposed of by the Company on the real estate owned, operated
or otherwise used by or under the charge, management or control of the Company
or at any other location, except as would not result in a Material Adverse
Effect, (vi) the Company has not entered into, agreed to, been convicted or
found liable under or is subject to any judgment, decree, material order or
other similar requirement of any Governmental Authority under any Environmental
Laws, (vii) there are no (v) PCBs or equipment, PCB wastes, or other materials
containing PCBs, (w) underground or aboveground storage tanks, (x) surface
impoundments, (y) landfills or (z) sewer or septic systems currently or formerly
present at or about any of the properties or facilities currently or, to the
best knowledge of the Sellers and the
<PAGE>
17
Senior Managers, formerly owned, operated or otherwise used by or under the
charge, management or control of the Company that is reasonably likely to result
in material liability to the Company under any applicable Environmental Laws,
(viii) there are no actions, activities, events, conditions or circumstances
occurring or existing during the time of the Company's operations at or
ownership of the Leased Property or any property formerly owned or leased or
over which the Company has or had charge, management or control or, to the best
knowledge of the Sellers and the Senior Managers, prior to or following such
time, including without limitation the release, threatened release, emission,
discharge, spill, leak, pumping, pouring, emptying, injection, escape, leaching,
disposal, dumping, depositing, spraying, burial, abandonment, incineration,
seepage, placement, generation, treatment, storage or disposal of Hazardous
Materials, that is reasonably likely to result in a Material Adverse Effect;
(ix) to the best knowledge of the Sellers and the Senior Managers, except in
material compliance with applicable Environmental Laws or at levels which do not
exceed applicable criteria under any policies or guidelines of any Governmental
Authority under or relating to Environmental Law, there are no Hazardous
Materials in, on or under the Leased Property or any property formerly owned or
leased by the Company or over which the Company has or had charge, management or
control and there are no Hazardous Materials originating from any property
neighboring or adjoining such properties which has migrated onto, or is
migrating towards any such properties; and (x) all material environmental data
and studies (including the results of any environmental audit) relating to the
Company and in the Company's possession have been delivered or made available to
the Buyer.
2.18 INSURANCE. Section 2.18 of the Disclosure Schedule lists
all insurance policies of the Company covering the assets, employees and
operations of the Company and the Subsidiaries as of the date hereof. All such
policies are in full force and effect, all premiums due thereon have been paid
by the Company and the Company and the Subsidiaries have complied in all
material respects with the provisions of such policies and have not received any
notice from any of its insurance brokers or carriers that such broker or carrier
will not be willing or able to renew their existing coverage.
2.19 TRANSACTIONS WITH AFFILIATES. Except for this Agreement
and the agreements and transactions contemplated hereunder and except as
disclosed in Section 2.19 of the Disclosure Schedule, there are no Contracts,
agreements or arrangements between the Company (or any Subsidiary) and any
Seller (or any affiliate of a Seller).
2.20 MATERIAL CUSTOMERS AND SUPPLIERS. Section 2.20 of the
Disclosure Schedule sets forth the names of the ten suppliers of the Company to
whom the Company paid the greatest sum of money in respect of products and
materials sold to the Company and the ten customers of the Company from whom the
Company received the greatest sum of money in respect of products or services
provided by the Company between January 1, 1996 and July 31, 1997.
2.21 REAL PROPERTY. (a) Section 2.21(a) of the Disclosure
Schedule sets forth the municipal address of all of the real property owned by
the Company (the "OWNED PROPERTY").
<PAGE>
18
(b) The Company is the beneficial owner of the Owned
Property, together with all plants, buildings, structures, erections,
improvements, appurtenances and fixtures situate on or forming part thereof, in
fee simple.
(c) To the best knowledge of the Sellers and the Senior
Managers, there are no agreements, undertakings or other documents which affect
or relate to the title to, or ownership of such Owned Property, except as
registered against title to such Owned Property.
(d) Except (x) as disclosed by the registered title of the
Owned Property or (y) as disclosed or provided for in this Agreement or in
Section 2.21(d) of the Disclosure Schedule, no Person has any right to purchase
any of the Owned Property, and no Person other than the Company is using or has
any right to use, as tenant, or is in possession or occupancy of, any part of
such Owned Property.
(e) The Company has not granted any option, right of first
refusal or other contractual rights with respect to any of the Owned Property
other than to the Buyer pursuant to this Agreement.
(f) Except as disclosed by the registered title of the Owned
Property, the Company has not entered into any agreement to sell, transfer,
encumber, or otherwise dispose of or impair the Company's right, title and
interest in and to the Owned Property or the air, density and easement rights
relating to the Owned Property other than as listed in Section 2.21(f) of the
Disclosure Schedule.
(g) To the best knowledge of the Sellers and the Senior
Managers, Section 2.21(g) of the Disclosure Schedule provides details on the
most up-to-date surveys, prepared by registered land surveyors, relating to the
Owned Property which are available, and such surveys have been delivered or made
available to the Buyer.
(h) The Company has not received any notification of and the
Seller has no knowledge of, any outstanding or incomplete work orders in respect
of any of the buildings, improvements or other structures constructed on the
Owned Property or of any current non-compliance with applicable statutes and
regulations or building and zoning by-laws and regulations, but no independent
investigation has been conducted with respect to these matters.
(i) Except as disclosed in Section 2.21(i) of the Disclosure
Schedule, all accounts for work and services performed or materials placed or
furnished upon or in respect of the construction and completion of any of the
buildings, improvements or other structures constructed on the Owned Property
have been fully paid and no one is entitled to claim a lien under the
Construction Lien Act (Ontario) or other similar legislation for such work
performed by or on behalf of the Company.
(j) The Company has not made application for a rezoning of
any of the Owned Property and the Seller has no knowledge of any proposed or
pending change to any zoning affecting the Owned Property.
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19
(k) The Sellers and the Senior Managers have no knowledge of
any expropriation or condemnation or similar proceeding pending or threatened
against the Owned Property or any part of the Owned Property.
(l) Except as may be disclosed by the registered title of the
Owned Property and to the best knowledge of the Sellers and the Senior Managers,
there are no matters affecting the right, title and interest of the Company in
and to the Owned Property, which in the aggregate, would materially and
adversely affect the ability of the Company to carry on its business upon the
Owned Property.
2.22 REAL PROPERTY LEASES. (a) Section 2.22(a) of the
Disclosure Schedule sets forth a complete list of all leases and subleases of
real property relating to real property used or occupied by the Company (the
"Real Property Leases").
(b) Except as disclosed in Section 2.22(b) of the Disclosure
Schedule, all interests held by the Company as lessee under the Real Property
Leases are free and clear of all Encumbrances of any nature and kind whatsoever.
(c) All payments due and owing by the Company pursuant to the
Real Property Leases have been duly paid and the Company is not otherwise in
default in meeting its obligations under any of the Real Property Leases.
(d) To the best knowledge of the Sellers and the Senior
Managers, none of the landlords under each of the Real Property Leases is in
default in meeting any of its material obligations under its respective Real
Property Leases.
(e) Except as disclosed in the Real Property Leases and
Section 2.22(e) of the Disclosure Schedule, the Company has no option, right of
first refusal or other contractual right relating to the Leased Premises.
(f) To the best knowledge of the Sellers and the Senior
Managers, no event exists which, but for the passing of time or the giving of
notice, or both, would constitute a default by either party to any of the Real
Property Leases and no party to any Real Property Lease is claiming any such
default or taking any action purportedly based upon any such default.
(g) The Company has not waived, or omitted to take any action
in respect of, any substantial rights under any of the Real Property Leases
where the loss of such right would have a Material Adverse Effect on the
Company.
(h) The Company is not a party to any Real Property Lease as
Lessor.
(i) Except as set forth in Section 2.22(i) of the Disclosure
Schedule, no third party consent or approval under any Real Property Lease is
required for the consummation of the transactions contemplated herein.
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20
2.23 PRODUCT LIABILITY. Except as set forth in Section 2.23
of the Disclosure Schedule and except where a claim or threatened claim would
not have a Material Adverse Effect on the Company, the Company has not received
written notice of any claim or threatened claim against the Company for product
liability, nor, to the best knowledge of the Sellers and the Senior Managers,
has the Company received oral notice of any claim or threatened claim against
the Company for product liability.
2.24 BOOKS AND RECORDS. The financial books and records
pertaining to the business of the Company and the Subsidiaries are complete and
correct in all material respects (except for normal year-end adjustments with
respect to periods after January 1, 1997), have been maintained in accordance
with good business practice, and reflect the basis for the financial condition
and results of operations of the Company and the Subsidiaries set forth in the
financial statements referred to in Section 2.5 hereto.
2.25 NO BROKERS' OR OTHER FEES. No broker, finder or
investment banker is entitled to any fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer hereby represents and warrants to the Sellers as
follows:
3.1 ORGANIZATION. The Buyer is a corporation duly organized
and validly existing under the laws of the Province of Ontario. Russell-Stanley
is a corporation duly organized and validly existing under the laws of the State
of Delaware. Each of Russell-Stanley and the Buyer have delivered to the Sellers
complete and correct copies of their Articles of Incorporation and all
amendments thereto and By-laws as in effect on the date hereof. The Buyer has
been formed solely for the purpose of engaging in the acquisition of the Shares
and all of the issued and outstanding shares of capital stock of the Buyer are
legally and beneficially owned by Russell-Stanley directly.
3.2 AUTHORIZATION ETC. Each of the Buyer and Russell-Stanley
has full corporate power and authority to execute and deliver this Agreement and
to carry out the transactions contemplated hereby to be carried out by it. The
execution and delivery by Russell-Stanley and the Buyer of this Agreement and
the consummation by Russell-Stanley and the Buyer of the transactions
contemplated hereby have been duly approved and authorized by all necessary
corporate action on the part of Russell-Stanley and the Buyer, and no other
proceedings on the part of Russell-Stanley and the Buyer are necessary to
approve and authorize the execution and delivery by Russell-Stanley and the
Buyer of this Agreement and the consummation by Russell-Stanley and the Buyer of
the transactions contemplated hereby. This Agreement has been duly and validly
executed by Russell-Stanley and the Buyer and, assuming this Agreement
constitutes the legal, valid and binding agreement of the other parties hereto,
constitutes a legal, valid and binding agreement of Russell-Stanley and the
Buyer, enforceable against Russell-Stanley and the Buyer in accordance with its
terms, except that (i) the enforcement hereof may be limited by bankruptcy,
insolvency, arrangement or other similar laws now or hereafter in effect
relating to
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21
creditors' rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
3.3 NO APPROVALS OR CONFLICTS. Except as set forth in Section
3.3 of the Disclosure Schedule, the execution, delivery and performance by
Russell-Stanley or the Buyer of this Agreement and the consummation by
Russell-Stanley or the Buyer of the transactions contemplated hereby to be
consummated by it will not (i) violate, conflict with or result in a breach by
Russell-Stanley or the Buyer of any provision of the Articles of Incorporation
or By-laws of Russell-Stanley or the Buyer, (ii) violate, conflict with or
result in a breach of any provision of, or constitute a default by
Russell-Stanley or the Buyer (or an event which, with notice or lapse of time or
both, would constitute a default) or give rise to any right of termination,
cancellation or acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of Russell-Stanley's or the
Buyer's properties under, any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, lease, contract, agreement or other instrument to
which Russell-Stanley or the Buyer or any of its properties may be bound, (iii)
violate or result in a breach of any order, injunction, judgment, ruling, law or
regulation of any court or governmental authority applicable to Russell-Stanley
or the Buyer or any of their respective properties, or (iv) except for
applicable requirements of the Investment Canada Act, require any order,
consent, approval or authorization of, or notice to, or declaration, filing,
application, qualification or registration with, any governmental or regulatory
authority, excluding from the foregoing clauses (ii) and (iii) above, such
violations, conflicts and breaches which, individually or in the aggregate,
would not reasonably be likely to adversely affect the ability of
Russell-Stanley or the Buyer to consummate the transactions contemplated hereby
to be consummated by it or cause Russell-Stanley or the Buyer to suffer a loss
or pay a claim in excess of Cdn $100,000.
3.4 FINANCING. Russell-Stanley has obtained written binding
commitments to provide the financing required to pay the cash Purchase Price and
all contemplated fees and expenses of the Buyer related to the transactions
contemplated hereby. The Buyer has provided the Sellers' Representative with
true and complete copies of such written commitments. As of the date hereof, the
Buyer is not in default under any of the terms and conditions of the written
commitments.
3.5 CAPITALIZATION. As of the date hereof, the authorized
capital stock of Russell-Stanley consists of 3,000,000 shares of common stock,
par value $.01 per share ("RS COMMON SHARES"), of which 1,774,964 shares are
outstanding. As of the date hereof, except as contemplated by this Agreement and
except for options to purchase an aggregate of 148,149 RS Common Shares, no
securities exercisable or convertible into or exchangeable for RS Common Shares
("RS COMMON SHARES EQUIVALENTS") are authorized, issued or outstanding. The RS
Common Shares to be issued pursuant to the terms of the Exchangeable Shares will
be validly issued, fully paid and nonassessable and free of preemptive rights
under the Delaware General Corporation Law. Russell-Stanley has not issued any
RS Common Shares within the past six months for consideration with a fair market
value less than US $45 per share, other than RS Common Shares issued upon
exercise of RS Common Shares Equivalents.
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22
3.6 NO BROKERS' OR OTHER FEES. No broker, finder or
investment banker (other than Vestar Capital Partners) is entitled to any fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Buyer.
3.7 FINANCIAL STATEMENTS. Russell-Stanley has previously
delivered to Sellers the audited consolidated balance sheets of Russell-Stanley
Corp. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, redeemable preferred stock and shareholders'
deficit, and cash flows for each of the years ended December 31, 1996, 1995 and
1994 and the notes thereto and the report thereon of Deloitte & Touche LLP. ("RS
FINANCIAL STATEMENTS"). The RS Financial Statements present fairly in all
material respects the financial position of Russell-Stanley Corp. as at December
31, 1996 and the results of operations and cash flows for the year then ended
and have been prepared in accordance with generally accepted accounting
principles in the United States consistently applied.
ARTICLE IV
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of the Sellers to effect the Closing under
this Agreement are subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, unless validly waived in writing by the
Sellers' Representative.
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Buyer in this Agreement (i) in the case of any thereof
that are expressly qualified by any materiality qualification, shall be true and
correct, subject to such materiality qualification, and (ii) in the case of all
other representations and warranties, shall be true and correct in all material
respects, in each case on and as of the Closing Date as though such
representations and warranties were made on such date, except that any
representations and warranties that are made as of a specified date shall be
true as of such date.
4.2 PERFORMANCE. The Buyer shall have performed and complied
in all material respects with all agreements and obligations required by this
Agreement to be so performed or complied with by it prior to the Closing.
4.3 OFFICER'S CERTIFICATE. The Buyer shall have delivered to
the Sellers a certificate, dated as of the Closing Date and executed by the
President or a Senior Vice President of the Buyer, certifying to the fulfillment
of the conditions specified in Sections 4.1 and 4.2 hereof.
4.4 INJUNCTIONS. On the Closing Date there shall be no
injunction, writ, preliminary restraining order or other order in effect of any
nature issued by a federal or provincial court or governmental authority of
competent jurisdiction directing that the transactions provided for herein not
be consummated as provided herein.
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23
4.5 CONSENTS. All orders, consents, approvals, permits,
authorizations, notices, declarations, filings, applications, qualifications and
registrations identified in Section 3.3 of the Disclosure Schedule and necessary
to effect the Closing shall have been obtained.
4.6 EMPLOYMENT AND STAY-PAY AGREEMENTS. The Company shall
have executed and delivered to Michael W. Hunter (a) the Employment Agreement in
substantially the form of Exhibit 4.6(a) hereto and (b) the Stay-Pay Agreement
in substantially the form of Exhibit 4.6(b) hereto.
4.7 EQUITY AGREEMENTS. Russell-Stanley shall have executed
and delivered to Michael W. Hunter and John D. Hunter the HDL Investors'
Agreement, the Registration Rights Agreement, the Amended and Restated
Stockholders Transfer Rights Agreement and the Amended and Restated Voting
Agreement in substantially the forms of Exhibits 4.7(a), 4.7(b), 4.7(c) and
4.7(d) hereto.
4.8 MUTUAL RELEASE. The Buyer and Russell-Stanley shall have
executed and delivered to each of the Sellers the Mutual Release in
substantially the form of Exhibit 4.8 hereto.
4.9 EXCHANGEABLE SHARE AGREEMENTS. Russell-Stanley shall have
executed and delivered to Michael W. Hunter and John D. Hunter the Support
Agreement and the Exchange Agreement in substantially the forms of Exhibits
4.9(a) and 4.9(b) hereto.
ARTICLE V
CONDITIONS TO BUYER'S OBLIGATION
The obligation of the Buyer to effect the Closing under this
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions, unless validly waived in writing by the Buyer.
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Sellers in this Agreement (without giving effect to any
materiality qualification set forth in Article II) shall be true and correct on
and as of the Closing Date as though such representations and warranties were
made on such date (except that any representations and warranties that are made
as of a specified date shall be true and correct as of such date), except for
breaches which would not, individually or in the aggregate, reasonably be
expected to cause the Company to suffer a loss or pay a claim in excess of Cdn
$1,000,000 or to have a material adverse effect on the business, financial
condition or results of operations of the Company and the Subsidiaries taken as
a whole.
5.2 PERFORMANCE. The Sellers shall have performed and
complied in all material respects with all agreements and obligations required
by this Agreement to be so performed or complied with by the Sellers prior to
the Closing.
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24
5.3 OFFICER'S CERTIFICATE. The Sellers shall have delivered
to the Buyer a certificate, dated as of the Closing Date and executed by the
President of the Company and by the Sellers' Representative, certifying to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 hereof.
5.4 RESIGNATIONS. The Sellers shall have delivered to the
Buyer the written resignations of all directors of the Company other than
Michael W. Hunter and the written resignation of John D. Hunter as Executive
Vice President of the Company, in each case effective as of the Closing Date.
5.5 INJUNCTIONS. On the Closing Date there shall be no
injunction, writ, preliminary restraining order or other order in effect of any
nature issued by a federal or state court or governmental authority of competent
jurisdiction directing that the transactions provided for herein not be
consummated as provided herein.
5.6 CONSENTS. All orders, consents, approvals, permits,
authorizations, notices, declarations, filings, applications, qualifications and
registrations identified in Section 5.6 of the Disclosure Schedule shall have
been obtained.
5.7 AFFILIATE AGREEMENTS. The Buyer shall have received
evidence satisfactory to it that all agreements between the Company, on the one
hand, and any affiliate of the Company, on the other hand, have been terminated
without any penalty to the Company, except as disclosed in Section 5.7 of the
Disclosure Schedule.
5.8 EXISTING INDEBTEDNESS. If the Buyer has elected to
discharge any outstanding indebtedness for borrowed money of the Company and
shall have provided the Company with funds necessary to effect such discharge
without penalty or premium, each holder of such indebtedness shall have released
and discharged the same and any lien securing the same against payment by or on
behalf of the Company of such funds, and the Buyer shall have received written
evidence satisfactory to it of the foregoing. Any guarantee made by the Company
of the indebtedness of any other person (and any lien on the assets of the
Company securing the same) shall have been released and discharged, and the
Buyer shall have received written evidence satisfactory to it of the foregoing.
5.9 FINANCING. The Buyer shall have received or otherwise
have available, on terms and conditions reasonably satisfactory to the Buyer,
financing sufficient to pay the cash Purchase Price and all fees and expenses
incurred by the Buyer in connection with the transactions contemplated hereby
and to satisfy the ongoing working capital requirements of the Company.
5.10 EMPLOYMENT AND STAY-PAY AGREEMENTS. Michael W. Hunter
and the Company shall have executed and delivered to Buyer (a) the Employment
Agreement in substantially the form of Exhibit 4.6(a) hereto and (b) the
Stay-Pay Agreement in substantially the form of Exhibit 4.6(b) hereto.
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25
5.11 EQUITY AGREEMENTS. Michael W. Hunter and John D. Hunter
shall have executed and delivered to Russell-Stanley the HDL Investors'
Agreement, the Registration Rights Agreement, the Amended and Restated
Stockholders Transfer Rights Agreement and the Amended and Restated Voting
Agreement in substantially the forms of Exhibits 4.7(a), 4.7(b), 4.7(c) and
4.7(d) hereto.
5.12 MUTUAL RELEASE. Each of the Sellers shall have executed
and delivered to the Buyer the Mutual Release in substantially the form of
Exhibit 4.8 hereto.
5.13 SHAREHOLDER CONSENT. Each Seller holding any Retained
Shares shall have executed a written resolution approving the amalgamation of
Buyer and the Company and the unanimous shareholders agreement of the continuing
company resulting from the amalgamation of the Buyer and the Company in
substantially the form of Exhibit 5.13 hereto.
ARTICLE VI
COVENANTS AND AGREEMENTS
6.1 CONDUCT OF BUSINESS BY COMPANY. The Sellers, jointly and
severally, covenant that, except (i) as otherwise expressly contemplated by this
Agreement, (ii) as provided in Section 6.1 of the Disclosure Schedule or (iii)
as consented to by the Buyer, acting reasonably, in writing, from and after the
date of this Agreement and until the Closing Date the Sellers shall cause the
Company to:
(a) use all reasonable efforts consistent with good business
judgment to (i) maintain the present business organization of the Company, (ii)
maintain the Company's books and records in accordance with past practices;
(iii) keep available the services of the Company's officers and employees
(except for any effect which results from any announcement of the transactions
contemplated by this Agreement); and (iv) maintain satisfactory relationships
with licensors, suppliers, creditors, distributors, customers and others
transacting business with the Company (except for any effect which results from
any announcement of the transactions contemplated by this Agreement);
(b) purchase inventory, pay payables and other accrued
liabilities, and collect receivables in the ordinary and regular course of
business in a manner consistent with past practice and otherwise operate the
Company in the ordinary and regular course of business consistent with past
practice;
(c) notify the Buyer of any material change in the normal
course of business or operations of the Company and of any material governmental
complaints, investigations or hearings of which the Sellers or the Company are
notified (or communications received by the Sellers or the Company indicating
that the same may be contemplated), or the institution or settlement of material
litigation, in each case involving the Company, and to keep the Buyer informed
of such events;
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26
(d) not (i) cause to be issued or sold any debt or equity
securities of the Company or issue, grant or enter into any options, warrants,
rights, subscription agreements or commitments of any kind with respect thereto;
(ii) directly or indirectly cause to be purchased, redeemed or otherwise
acquired or disposed of any equity securities of the Company; (iii) permit or
allow the Company to borrow or agree to borrow any funds or incur, whether
directly or by way of guarantee, any obligation for borrowed money, other than
borrowings under existing lines of credit in the ordinary course of business and
consistent with past practice; (iv) subject any of the assets of the Company
(real, personal or mixed, tangible or intangible) to any Encumbrance or
otherwise permit or allow the sale, lease, transfer or disposition of any assets
of the Company (real, personal or mixed, tangible or intangible), other than in
the ordinary course of business and consistent with past practice; (v) assume,
guarantee, or otherwise become responsible for the obligations of, or make any
loans or advances to, any other individual, firm or corporation; (vi) waive or
release any rights of material value, or cancel, compromise, release or assign
any material indebtedness owed to it or any material claims held by it; (vii)
except for capital expenditures not to exceed Cdn $100,000 and except for those
commitments and expenditures disclosed in Section 6.1(d)(vii) of the Disclosure
Schedule, make any investment or expenditure of a capital nature either by
purchase of shares or securities, contributions to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other individual,
firm or corporation; (viii) cancel or terminate any insurance policy naming it
as a beneficiary or a loss payable payee; (ix) enter into any collective
bargaining agreements; (x) increase the compensation or fringe benefits of any
of its officers or, other than in accordance with past practice, effect any
material general increase in the compensation or fringe benefits of its
employees or pay or agree to pay any pension, retirement allowance, or other
benefit not required by any existing employee benefit plan to any such officers
or employees, commit itself to any employment agreement or employee benefit plan
with or for the benefit of any of its officers or employees or any other person,
or alter, amend, terminate in whole or in part, or curtail or permanently
discontinue contributions to, any pension plan or any other employee benefit
plan; (xi) enter into any contract, commitment, agreement or arrangement which
requires payments in excess of Cdn $100,000 in any 12-month period, to the
extent such contract, commitment, agreement or arrangement is not terminable
within 30 days without payment of premium or penalty; (xii) amend its articles
of incorporation or by-laws; or (xiii) agree to do any of the foregoing; and
(e) not declare, set aside or pay any dividend or other
distribution or make any other payment, in cash or in property, to any of the
Company's shareholders or any family member thereof, other than salary and
benefits paid in the ordinary course of business to Michael Hunter which would
otherwise be payable to Michael Hunter under the Employment Agreement had the
Employment Agreement then been in effect.
(f) comply in all material respects with all applicable laws,
including, without limitation, applicable Environmental Laws.
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27
6.2 ACCESS TO BOOKS AND RECORDS; COOPERATION.
(a) Except in respect of liability for Taxes, in which event
the commitment shall continue until the expiration of the Sellers' rights
hereunder, the Buyer agrees that from the Closing Date and until the fifth
anniversary of the Closing Date, during normal business hours upon reasonable
advance notice, it shall, at no cost to the Buyer (other than the time of
officers, directors and employees and of any other persons who are available to
the Buyer without additional compensation) and its affiliates and without
unreasonable disruption of the business of the Buyer and its affiliates, (1)
permit the Sellers and their respective counsel, accountants and other
authorized representatives to have access to the officers, directors, employees,
accountants and other advisors and agents, properties, books, records and
contracts of the Company, and the right to make copies and extracts from such
books, records and contracts, and (2) use all reasonable efforts to make
available to the Sellers and their authorized representatives those officers,
directors, employees, accountants and other advisors and agents whose
assistance, testimony or presence is necessary to assist the Sellers, in each
case to the extent necessary to investigate and defend any threatened or actual
litigation, to permit the Sellers to exercise any rights they may have hereunder
and in connection with any Tax matters involving the Company.
(b) The Buyer agrees not to, and to cause its subsidiaries
not to, destroy at any time any files or records which are subject to Section
6.2(a) without giving written notice to the Sellers' Representative, and giving
the Sellers' Representative 30 days following receipt of such notice to request
in writing that all or a portion of the records intended to be destroyed be
delivered to the Sellers' Representative at the Sellers' reasonable expense. The
Sellers acknowledge that the Buyer shall not be liable to the Sellers in the
event of any accidental destruction of such records.
(c) Subject to the provisions of the Confidentiality
Agreement (as defined in Section 9.7), during the period commencing on the date
hereof and ending on the Closing Date, the Company will, and the Sellers will
cause the Company to, afford to the Buyer and its counsel, accountants and other
authorized representatives access at all reasonable times upon reasonable
advance notice to the officers, directors, employees, accountants and other
advisors and agents, properties, books, records and contracts, of the Company,
and the right to make copies and extracts from such books, records and
contracts, and to furnish the Buyer with all financial, operating and other data
and information concerning the Company as Buyer and its advisors may reasonably
request. The Buyer and Russell-Stanley acknowledge and agree that they are
Representatives (as that term is defined therein) of Russell-Stanley Corp. under
that Confidentiality Agreement dated January 30, 1997 made between the Company
and Russell-Stanley Corp. and are bound by the terms thereof to the same extent
as if they were signatories thereto.
(d) During the period commencing on the date hereof and
ending on the Closing Date, Russell-Stanley will afford to the Company and its
counsel, accountants and other authorized representatives access at all
reasonable times upon reasonable advance notice to the officers, directors,
employees, accountants and other advisors and agents, books, records and
contracts of the Buyer and Russell-Stanley, and the right to make copies and
extracts from such books, records and contracts, and to furnish the Company with
all financial, operating and other
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28
data and information concerning the Buyer and Russell-Stanley as the Company may
reasonably request.
6.3 FILINGS AND CONSENTS. Each of the Sellers and the
Company, on the one hand, and the Buyer, on the other hand, shall use all
reasonable efforts to obtain and to cooperate in obtaining any consent,
approval, authorization or order of, and in making any registration or filing
with, any Governmental Authority or other third party required in connection
with the execution, delivery or performance of this Agreement.
6.4 TAX MATTERS.
(a) SELLERS' INDEMNITY FOR TAXES. From and after the Closing
Date, each Seller shall jointly and severally indemnify and hold harmless the
Buyer Indemnified Persons (as defined in Section 8.1(a)) against the following
Taxes (other than custom duties and import and export taxes on goods purchased
or shipped after the sixtieth day preceding the Closing Date) and, against any
loss, damage, liability or expense, including, but not limited to, reasonable
fees for attorneys and other outside consultants, incurred in contesting or
otherwise in connection with any such Taxes: (i) Taxes imposed on the Sellers or
the Company or any Subsidiary with respect to taxable years or periods ending on
or before the Closing Date, including, without limitation, any Taxes arising as
a result of or with respect to or in connection with the restructuring of the
Company described in Section 2.10 of the Disclosure Schedule as the Hunter
Packaging Reorganization; (ii) Taxes required to be paid or reimbursed by the
Sellers under Section 6.4(c) hereof (to the extent such Taxes have not been paid
by the Sellers); (iii) Taxes or additional Taxes imposed on any Buyer
Indemnified Person as a result of a breach of the representations and warranties
set forth in Section 2.12 of this Agreement or of the covenants contained in
this Section 6.4; or (iv) Taxes or other payments required to be made after the
date hereof by the Company or any Subsidiary to any party under any Tax sharing,
indemnity or allocation agreement (whether or not written); PROVIDED, HOWEVER,
that the Sellers shall have no liability under this Section 6.4(a) for (i) any
Taxes that were actually paid by or on behalf of the Company or any Subsidiary
to the proper Governmental Authority prior to the close of business on the
Business Day prior to the Closing Date or (ii) Taxes (excluding Other Taxes)
imposed with respect to taxable years or periods beginning on or after January
1, 1997 and ending on or prior to the Closing Date in an amount not in excess of
Cdn. $850,000 in the aggregate; and, PROVIDED, FURTHER, that the Sellers shall
not be liable for any Other Taxes imposed on the Company except to the extent
that such Other Taxes (net of any credits for Other Taxes) exceed, in the
aggregate, $50,000. For purposes of this Section 6.4, the term "OTHER TAXES"
shall mean any and all Taxes other than Taxes measured on or by reference to
income or capital, sales (including provincial sales), goods and services (GST)
or any transfer or conveyance taxes described in Section 6.4(c) of this
Agreement.
(b) PREPARATION OF TAX RETURNS; REFUNDS. (i) The Company
shall, as instructed by the Sellers' Representative, prepare and file, or cause
to be prepared and filed, any and all Tax Returns required to be filed by the
Company or any Subsidiary (after giving effect to any valid extensions of the
due date for filing any such Tax Returns) in respect of periods ending on or
prior to the Closing Date. All such Tax Returns shall be prepared in a manner
consistent with the prior Tax Returns of the Company and the Subsidiaries,
unless otherwise required under
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29
applicable law. The Company, as instructed by the Buyer, shall prepare and file,
or cause to be prepared and filed any and all other Tax Returns required to be
filed by the Company and the Subsidiaries. Without prejudice to its right to
indemnification under this Section 6.4, the Buyer shall cause the Company to pay
all Taxes shown as due and owing on all such Tax Returns. The Company and Buyer
shall reasonably cooperate, and shall cause their respective affiliates,
officers, employees, agents, auditors and other representatives reasonably to
cooperate, in preparing and filing all Tax Returns, including maintaining and
making available to the other parties all records necessary in connection with
Taxes and in resolving all disputes and audits with respect to all taxable
periods relating to Taxes.
(ii) Any refunds received by the Company or a Subsidiary or
any successor to any of the foregoing of Taxes in respect of the Company or any
Subsidiary that relate to taxable periods or portions thereof ending on or
before the Closing Date shall be for the account of the Company and its
Subsidiaries and their successors.
(c) TRANSFER AND CONVEYANCE TAXES. The Sellers shall be
liable for and shall pay all applicable sales, transfer, recording, deed, stamp
and other similar taxes, including, without limitation, any real property
transfer or gains taxes (if any), resulting from the consummation of the
transactions contemplated by this Agreement.
(d) CONTESTS. The Buyer shall promptly notify the Sellers'
Representative in writing of any written notice of a proposed assessment or
claim in an audit or administrative or judicial proceeding involving the Company
or any Subsidiary which, if determined adversely to the taxpayer, would be
grounds for indemnification under this Section 6.4; PROVIDED, HOWEVER, that a
failure to give such notice will not affect the Buyer's right to indemnification
hereunder, except to the extent, if any, that, but for such failure, the
Sellers' Representative could have avoided the Tax liability in question. In the
case of an audit or administrative or judicial proceeding that relates to any
Pre-Closing Period, PROVIDED that within 30 days after the Sellers'
Representative receives the written notice from the Buyer required under this
Section 6.4(d) and prior to taking any action with respect to such audit or
administrative or judicial proceeding, the Sellers' Representative acknowledges
in writing the Sellers' liability under this Section 6.4 to hold the Buyer and
the Company harmless against the full amount of any adjustment which may be made
as a result of such audit or proceeding, the Sellers' Representative shall have
the right at his, her or its own expense to control the conduct of such audit or
proceeding; PROVIDED, HOWEVER, that the Sellers' Representative shall not settle
or otherwise compromise any issue or matter without the Buyer's prior written
consent if such issue or matter will have a material effect on the Tax liability
of the Buyer or the Company or any Subsidiary for a post-Closing taxable year or
period. The Buyer also may participate in any such audit or proceeding at its
own expense and, if the Sellers' Representative does not assume the defense of
any such audit or proceeding, the Buyer may, without any effect to its or the
Company's right to indemnification under this Section 6.4, defend the same in
such manner as it may deem appropriate, including, but not limited to, settling
such audit or proceeding. Except as provided otherwise in this Section 6.4(d),
the Buyer shall control at its own expense any and all audit, administrative and
judicial proceedings related to the Company, the Subsidiaries or their Taxes.
<PAGE>
30
(e) TIME OF PAYMENT. Indemnity payments due under Section
6.4(a) of this Agreement, shall be made within three Business Days following a
settlement or compromise of an assessment of a Tax by a Government Authority or
a determination under subsection 152(1.1) of the Income Tax Act (Canada). If
liability under this Section 6.4 is in respect of costs or expenses other than
Taxes, payment by the Sellers of any amounts due under this Section 6.4 shall be
made within five Business Days after the date that the Sellers' Representative
has been notified by the Buyer that the Sellers have a liability for a
determinable amount under this Section 6.4 and is provided with calculations or
other materials supporting such liability. Any payments made by the Sellers
under this Section 6.4(e) shall be made directly to the Buyer (or any successor
to Buyer).
(f) TERMINATION OF SELLERS' INDEMNITY OBLIGATIONS FOR TAXES.
Notwithstanding any provision herein to the contrary, the obligations of the
Sellers to indemnify and hold harmless the Buyer and the Company pursuant to
this Section 6.4 shall terminate at the close of business on the 120th day
following the expiration of the applicable statute of limitations with respect
to the Tax liabilities in question (giving effect to any waiver, mitigation or
extension thereof).
(g) TAX ELECTIONS. From and after the date hereof, the
Sellers shall not, without the prior written consent of the Buyer (which may not
unreasonably withhold such consent), make or revoke, or cause or permit to be
made or revoked, any Tax election, or adopt or change any method of accounting,
that would adversely affect the Company or any Subsidiary. From and after the
Closing Date, the Buyer shall not, and shall not cause or permit the Company to,
without the prior consent of the Sellers' Representative (which may not
unreasonably withhold such consent), make, amend or revoke any Tax election, or
adopt or change any method of accounting, in either case in relation to a period
ending on or before the Closing Date, that would adversely affect the Sellers,
unless, in either case, such Tax election, the amendment or revocation of such a
Tax election or the adoption or change of any such method of accounting is
required by any Governmental Authority or, in Buyer's reasonable judgment, is
otherwise required under applicable law.
(h) TAX SHARING AGREEMENTS. As of the Closing Date, any and
all Tax sharing, indemnity or allocation agreements shall terminate as between
the Company and the Subsidiaries on the one hand, and the Sellers and/or any
affiliate of the Sellers, on the other hand, and, after the date hereof, no
Taxes or other amounts shall be paid or reimbursed by the Company and the
Subsidiaries under any such agreement, regardless of the taxable year or period
for which such Taxes are imposed, and the provisions of this Section 6.4 shall
govern thereafter.
(i) RESOLUTION OF DISAGREEMENTS. If the Sellers and the Buyer
disagree as to the amount for which the Buyer or the Company and the Sellers are
liable under this Section 6.4, the Sellers' Representative and the Buyer shall
promptly consult with each other in an effort to resolve such dispute. If any
such point of disagreement cannot be resolved within 30 days of the date of
consultation, such dispute shall be submitted to a tax adviser which is mutually
acceptable to the Buyer and the Sellers's Representative to act as an arbitrator
to resolve all points of disagreement concerning Taxes with respect to this
Agreement.
<PAGE>
31
6.5 NO NEGOTIATION. Neither the Company nor any of the
Sellers will, without the prior written consent of Russell-Stanley, directly or
indirectly through any director, employee, representative, affiliate, agent or
otherwise (i) solicit, initiate, encourage or assist in the submission of any
inquiries, proposals or offers from any corporation, partnership, person or
other entity or group relating to any acquisition or purchase of any assets of,
or any equity interest in, the Company or any form of recapitalization
transaction, merger, amalgamation, arrangement, consolidation, business
combination, spin-off, liquidation or similar transaction involving, directly or
indirectly, the Company (other than the purchase of assets of the Company in the
ordinary course of business consistent with past practice and except as
described in Section 6.1 of the Disclosure Schedule) (each an "ACQUISITION
PROPOSAL"), (ii) participate in any discussions or negotiations regarding an
Acquisition Proposal or, except as expressly permitted by the Confidentiality
Agreement (as defined in Section 9.7) executed in favor of Russell-Stanley
Corp., furnish to any person or entity any information concerning the Company or
any Acquisition Proposal or (iii) otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person to make or enter into an Acquisition Proposal. Except as expressly
contemplated by the Reorganization, the Sellers agree not to pledge, encumber or
dispose of the Shares or any other securities of the Company beneficially owned
by them prior to the Closing. If the Company or any Seller receives any inquiry,
proposal or offer to enter into any transaction of any type referred to above,
such party agrees to inform the Buyer promptly of the terms thereof.
6.6 COVENANT TO SATISFY CONDITIONS. Each party hereto agrees
to use all reasonable efforts to insure that the conditions set forth in Article
IV and Article V hereof are satisfied, insofar as such matters are within the
control of such party.
6.7 NONDISCLOSURE OF CONFIDENTIAL INFORMATION;
NON-COMPETITION. (a) None of the Sellers shall, without the prior written
consent of Russell-Stanley, use, divulge, disclose or make accessible to any
other person, firm, partnership, corporation or other entity any Confidential
Information (as defined below) pertaining to the business of Russell-Stanley or
any of its subsidiaries, except (i) while employed by Russell-Stanley or any of
its subsidiaries, which use, divulgence or disclosure such Seller reasonably
determines to be in connection with the business of and for the benefit of
Russell-Stanley and its subsidiaries, (ii) as required by law, (iii) as
reasonably required to enforce such Sellers' rights hereunder or under the HDL
Investors' Agreement, the Registration Rights Agreement, the Amended and
Restated Stockholders Transfer Rights Agreement, the Amended and Restated Voting
Agreement, the Support Agreement or the Exchange Agreement or, in the case of
Michael Hunter, under the Employment Agreement or the Stay/Pay Agreement or (iv)
for the purposes of obtaining personal, legal or financial advice from
independent professional advisors. For purposes of this Section 6.7(a),
"Confidential Information" shall mean non-public information concerning the
financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing plans and other non-public,
proprietary and confidential information of Russell-Stanley and its subsidiaries
or their respective customers, that, in any case, is not otherwise available to
the public (other than by a Seller's breach of the terms hereof).
(b) Except for actions or failures to take action that are
permitted by, or are contemplated by and are not prohibited by, Section 1.3 of
the Employment Agreement as such Employment Agreement
<PAGE>
32
is in effect on the Closing Date (without regard to any subsequent modification
or termination thereof), during the period ending the later of (i) 5 years from
the date of this Agreement and (ii) 1 year from the date of termination of
Michael W. Hunter's employment with the Company, Michael W. Hunter agrees that,
without the prior written consent of Russell-Stanley, he (A) will not, directly
or indirectly, either alone or in conjunction with any individual, partnership,
firm, association, syndicate, company or other entity, whether as principal,
manager, agent, consultant, officer, stockholder, partner, investor, lender or
employee or in any other capacity, carry on, be engaged in, advise, invest, lend
money to, guarantee the debts or obligations of, or have any financial interest
in, any business which is in competition with the business (as of the date of
termination of such employment if such termination has occurred) of
Russell-Stanley and its subsidiaries in North America, (B) shall not, on his own
behalf or on behalf of any person, firm or company, directly or indirectly,
solicit (other than by means of a general solicitation of employees through the
media) or hire any person who has been employed by Russell-Stanley or any of its
subsidiaries at any time during the 12 months immediately preceding such
solicitation (other than employees of any of the Company and the Subsidiaries
who have been fired by any of the Company and the Subsidiaries), and (C) will
not induce any person who is an agent, contractor, customer, supplier or dealer
of or relating to the business of Russell-Stanley or any of its subsidiaries to
leave, to stop selling to, or stop buying from Russell-Stanley or any of its
subsidiaries.
(c) For purposes of this Section 6.7, a business shall be
deemed to be in competition with the business of Russell-Stanley and its
subsidiaries if it is involved in the purchase, sale, lease, management of or
other dealing in any property or the rendering of any service purchased, sold,
leased, managed, dealt in or rendered by any of Russell-Stanley and its
subsidiaries as a part of the business of any of Russell-Stanley and its
subsidiaries, and a business shall be deemed to be in competition with the
business of the Company if it is involved in the manufacturing, sale,
distribution, leasing, reconditioning and/or fleet management of rigid
industrial packaging.
(d) Except as provided otherwise below, during the period
ending 5 years from the date of this Agreement, each Seller (other than Michael
W. Hunter) agrees that, without the prior written consent of Russell-Stanley,
such Seller (A) (other than as a director, shareholder or officer of, or
otherwise through, Hunter Packaging Ltd. at a time when Sellers, members of
Sellers' families and one or more corporations solely owned, directly or
indirectly, by one or more of Sellers and members of their family and trusts
solely for the benefit of Sellers and members of their family do not
collectively alone control Hunter Packaging Ltd.) will not, directly or
indirectly, either alone or in conjunction with any individual, partnership,
firm, association, syndicate, company or other entity, whether as principal,
manager, agent, consultant, officer, stockholder, partner, investor, lender or
employee or in any other capacity, carry on, be engaged in, advise, invest, lend
money to, guarantee the debts or obligations of, or have any financial interest
in, any business which is in competition with the business (as of the date
hereof) of the Company in North America, (B) (except by reason of actions of
Hunter Packaging Ltd. not personally involving John D. Hunter at a time when
Sellers, members of Sellers' families and one or more corporations solely owned,
directly or indirectly, by one or more of Sellers and members of their family
and trusts solely for the benefit of Sellers and members of their family do not
collectively alone control Hunter Packaging Ltd.) shall not, on such Seller's
own behalf or on behalf of any person, firm or company, directly or indirectly,
<PAGE>
33
solicit (other than by means of a general solicitation of employees through the
media) or hire any person who has been employed by Russell-Stanley or any of its
subsidiaries at any time during the 12 months immediately preceding such
solicitation (other than employees of any of the Company and the Subsidiaries
who have been fired by any of the Company and the Subsidiaries), and (C) (except
by reason of actions of Hunter Packaging Ltd. not personally involving John D.
Hunter at a time when Sellers, members of Sellers' families and one or more
corporations solely owned, directly or indirectly, by one or more of Sellers and
members of their family and trusts solely for the benefit of Sellers and members
of their family do not collectively alone control Hunter Packaging Ltd.) will
not induce any person who is an agent, contractor, customer, supplier or dealer
of or relating to the business of Russell-Stanley or any of its subsidiaries to
leave, to stop selling to, or stop buying from Russell-Stanley or any of its
subsidiaries; PROVIDED, HOWEVER, that if Sellers, members of Sellers' families
and one or more corporations solely owned, directly or indirectly, by one or
more of Sellers and members of their family and trusts solely for the benefit of
Sellers and members of their family acquire control of Hunter Packaging Ltd. at
a time when Hunter Packaging Ltd. is engaging in any business which is in
competition with the business (as of the date hereof) of the Company in North
America, such Sellers shall not be deemed in breach of Section 6.7(d) as a
result thereof so long as, within 90 days after the acquisition of such control,
(x) such control is divested or (y) Hunter Packaging Ltd. ceases to be involved
in any such business. Notwithstanding anything contained above in this Section
6.7(d), nothing in this Agreement shall prevent (i) such Seller (other than
Michael W. Hunter) from owning any class of publicly traded securities if (x)
such ownership (other than ownership of Hunter Packaging Ltd.) does not exceed
5% of such class (provided, however, that if such Seller unknowingly makes an
investment prohibited by this Section 6.7(d) and divests itself or himself of
such investment (to the extent so prohibited) as promptly as practicable, and in
no event later than the ninetieth day, following the date on which such Seller
obtains such knowledge, such investment shall not constitute a breach of this
Section 6.7(d)) and (y) such Seller's activities with respect to the issuer of
such securities (other than Hunter Packaging Ltd.) are consistent with those of
a passive investor or (ii) subject to Section 6.7(e), John D. Hunter, directly
or indirectly, from owning shares of Performance Recycling Inc. or being a
director or officer thereof.
(e) The Sellers agree that, upon the written request of
Russell-Stanley made within six months of the Closing Date and prior to the
disposition by Sellers of their interest in Performance Recycling Inc.
("Recycling"), they will, unless they sooner dispose of their interest in
Recycling, (1) subject to obtaining any necessary consents, sell their interest
in Recycling to the existing shareholders thereof or to a third party for a
purchase price equal to Cdn $167,500 (or a lesser amount if Russell-Stanley
reimburses them for the difference), (2) subject to obtaining any necessary
consents, sell such interest to Russell-Stanley for a purchase price equal to
Cdn $167,500, (3) subject to obtaining any necessary consents, abandon such
interest if Russell-Stanley pays them Cdn $167,500 and indemnifies them against
any actual damages (excluding loss of profits or other consequential damages)
suffered by them as a result of taking such action or (4) make a "Shotgun Offer"
pursuant to Article 7 of the Unanimous Shareholders' Agreement dated March 12,
1996 among, Recycling, Michael W. Hunter, Marco Petrucci and the other parties
named therein, if Russell-Stanley agrees, if necessary, to purchase any interest
owned by them for Cdn $167,500 and to purchase any additional interest which
they become obliged to acquire as a result of taking such action at the mandated
price.
<PAGE>
34
(f) Each Seller agrees that the provisions of this Section
6.7 are reasonable covenants under the circumstances, and further agree that if
in the opinion of any court of competent jurisdiction such restraints are not
reasonable in any respect, such court shall have the right, power and authority
to modify such provision or provisions of such covenants to the extent the court
determines such restraints are not reasonable and to enforce the covenants as so
amended. Each Seller agrees that any breach of this Section 6.7 would
irreparably injure Russell-Stanley. Accordingly, each Seller agrees that
Russell-Stanley may, in addition to pursuing any other remedies it may have in
law or in equity, obtain an injunction against such Seller from any court having
jurisdiction over the matter restraining any further violation of this Agreement
by such Seller.
6.8 CERTAIN PAYMENTS. Michael W. Hunter hereby confirms that
he has repaid Cdn $117,500 owed to the Company pursuant to an advance to Michael
W. Hunter.
ARTICLE VII
TERMINATION
7.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by the mutual consent of the Sellers' Representative and
the Buyer;
(b) by the Buyer if the Closing has not occurred on or before
October 31, 1997, unless (i) the failure of such consummation shall be due to
the failure of the Buyer to comply with the representations, warranties,
agreements and covenants contained herein to be performed by the Buyer on or
before October 31, 1997 or (ii) the Buyer shall otherwise not be entitled to
choose to not effect the Closing under Article V;
(c) by the Sellers' Representative if the Closing has not
occurred on or before October 31, 1997, unless (i) the failure of such
consummation shall be due to the failure of the Sellers to comply with the
representations, warranties, agreements and covenants contained herein to be
performed by the Sellers on or before October 31, 1997 or (ii) the Sellers shall
otherwise not be entitled to choose to not effect the Closing under Article IV;
or
(d) by either the Sellers' Representative or the Buyer if any
court or Governmental Authority of competent jurisdiction shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby and such order,
decree or ruling or other action shall have become final and nonappealable.
7.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby by the Sellers' Representative or the Buyer pursuant to
Section 7.1 hereof, written notice thereof shall forthwith be given to the other
parties. If this Agreement is terminated and the transactions contemplated by
this Agreement are abandoned as provided herein, no party to this Agreement will
<PAGE>
35
have any liability under this Agreement to any other except (i) that nothing
herein shall relieve any party from any liability for any breach of any of the
representations, warranties, covenants and agreements (including, without
limitation, Section 8.1) set forth in this Agreement and (ii) as contemplated by
Section 9.1.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION. INDEMNIFICATION BY SELLERS. (a) Subject
to the limits set forth in this Section 8.1, the Sellers agree, jointly and
severally, to indemnify, defend and hold the Buyer and its affiliates
(including, after the Closing Date, the Company) and their respective officers,
directors, partners, stockholders, employees, agents and representatives (the
"BUYER INDEMNIFIED PERSONS") harmless from and in respect of any and all losses,
damages, costs and reasonable expenses (including, without limitation,
reasonable fees and expenses of counsel) (collectively, "LOSSES"), that they may
incur arising out of or due to any inaccuracy of any representation or the
breach of any warranty, covenant, undertaking or other agreement of the Sellers
contained in this Agreement or the Disclosure Schedule. Anything to the contrary
contained herein notwithstanding, (x) none of the Buyer Indemnified Persons
shall be entitled to recover from the Sellers for any single claim for indemnity
with respect to any inaccuracy or breach of any representations or warranties
(other than recovery for claims predicated upon the inaccuracy or breach of
Sections 2.2, 2.3, 2.4, 2.19 and 2.25 and the first sentence of Section 2.1),
unless such claim in respect of Losses pursuant to this Section 8.1(a) exceeds
Cdn $25,000 and then only for the amount by which such claim exceeds such
amount, (y) none of the Buyer Indemnified Persons shall be entitled to recover
from the Sellers for any claims for indemnity with respect to any inaccuracy or
breach of any representations or warranties (other than recovery for claims
predicated upon the inaccuracy or breach of Sections 2.2, 2.3, 2.4, 2.19 and
2.25 and the first sentence of Section 2.1), unless and until the total of all
such claims in respect of Losses pursuant to this Section 8.1(a) (after giving
effect to any tax benefits related to such Losses) exceeds Cdn $250,000
(provided that, if such total exceeds Cdn $250,000, the first Cdn $250,000 as
well as all Losses in excess of such amount shall be indemnifiable) and (z) the
Buyer Indemnified Parties shall not be entitled to recover more than an
aggregate of Cdn $3,000,000 from the Sellers for any claims for indemnity under
this Section 8.1(a)(other than recovery for claims predicated upon the
inaccuracy or breach of Sections 2.2, 2.3, 2.4, 2.19 and 2.25 and the first
sentence of Section 2.1).
(b) INDEMNIFICATION BY RUSSELL-STANLEY. Subject to the limits
set forth in this Section 8.1, the Buyer and Russell-Stanley agree that after
the Closing Date Russell-Stanley and the Buyer shall indemnify, defend and hold
the Sellers and their respective agents and representatives (the "SELLER
INDEMNIFIED PERSONS") harmless from and in respect of any and all Losses that
they may incur arising out of or due to any inaccuracy of any representation or
the breach of any warranty, covenant, undertaking or other agreement of the
Buyer contained in this Agreement. Anything to the contrary contained herein
notwithstanding, (x) none of the Seller Indemnified Persons shall be entitled to
recover from the Buyer or Russell-Stanley for any single claim for indemnity
with respect to any inaccuracy or breach of any representations or warranties,
<PAGE>
36
unless such claim in respect of Losses pursuant to this Section 8.1(b) exceeds
Cdn $25,000, and then only for the amount by which such claim exceeds such
amount, (y) none of the Seller Indemnified Persons shall be entitled to recover
from the Buyer or Russell-Stanley for any claims for indemnity with respect to
any inaccuracy or breach of any representations or warranties, unless and until
the total of all such claims in respect of Losses pursuant to this Section
8.1(b) (after giving effect to any tax benefits related to such Losses) exceeds
Cdn $250,000 (provided that, if such total exceeds Cdn $250,000, the first Cdn
$250,000 as well as all Losses in excess of such amount shall be indemnifiable)
and (z) the Seller Indemnified Parties shall not be entitled to recover more
than an aggregate of Cdn $3,000,000 from the Buyer or Russell-Stanley for any
claims for indemnity under this Section 8.1(b).
(c) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties contained in this Agreement or in
any instrument delivered pursuant hereto will survive the Closing Date and will
remain in full force and effect thereafter until the second anniversary of the
Closing Date, provided that (i) the representations and warranties set forth in
Sections 2.2, 2.3, 2.4 and 2.19 and the first sentence of Section 2.1 will
survive the Closing Date and will remain in full force and effect until the
expiration of the applicable statute of limitations (after giving effect to
waiver, mitigation or extension thereof) and (ii) the representations and
warranties set forth in Section 2.12 will survive the Closing Date and will
remain in full force and effect until the ninetieth (90th) day following the
expiration of the period within which the relevant authorities are entitled to
assess or reassess liabilities for Taxes against the Company or its Subsidiaries
for any period ending on or before the Closing Date, having regard, without
limitation, to any waiver given by the Company or a Subsidiary in respect of
such period; PROVIDED, FURTHER, that such representations or warranties shall
survive (if at all) beyond such period with respect to any inaccuracy therein or
breach thereof, written notice of which shall have been duly given within such
applicable period in accordance with Section 8.1(d) hereof.
(d) NOTICE AND OPPORTUNITY TO DEFEND. If there occurs an
event which a party asserts is an indemnifiable event pursuant to Section 8.1(a)
or 8.1(b), the party or parties seeking indemnification shall notify the other
party or parties obligated to provide indemnification (the "INDEMNIFYING PARTY")
promptly. If such event involves (i) any claim or (ii) the commencement of any
action or proceeding by a third person, the party seeking indemnification will
give such Indemnifying Party prompt written notice of such claim or the
commencement of such action or proceeding; PROVIDED, HOWEVER, that the failure
to provide prompt notice as provided herein will relieve the Indemnifying Party
of its obligations hereunder only to the extent that such failure prejudices the
Indemnifying Party hereunder. In case any such action shall be brought against
any party in respect of which that person is seeking indemnification and it
shall notify the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to participate therein or, following the
delivery by the Indemnifying Party to the party or parties seeking
indemnification of the Indemnifying Party's acknowledgement in writing that the
relevant Loss is an indemnified liability hereunder and that the Indemnifying
Party, in its good faith judgment, will be able to pay any award of money
damages against the indemnified party in connection with such action, to assume
the defense thereof, with counsel reasonably satisfactory to such party or
<PAGE>
37
parties seeking indemnification and, after notice from the Indemnifying Party to
such party or parties seeking indemnification of such election so to assume the
defense thereof, the Indemnifying Party shall not be liable to the party or
parties seeking indemnification hereunder for any legal expenses of other
counsel or any other expenses subsequently incurred by such party or parties in
connection with the defense thereof. The Indemnifying Party and the party
seeking indemnification agree to cooperate fully with each other and their
respective counsel in connection with the defense, negotiation or settlement of
any such action or asserted liability. The party or parties seeking
indemnification shall have the right to participate at their own expense in the
defense of such action or asserted liability. If the Indemnifying Party assumes
the defense of an action (a) no settlement or compromise thereof may be effected
(i) by the Indemnifying Party without the written consent of the indemnified
party (which consent shall not be unreasonably withheld or delayed) unless (x)
there is no finding or admission of any violation of law or any violation of the
rights of any person by any indemnified party and no adverse effect on any other
claims that may be made against any indemnified party and (y) all relief
provided is paid or satisfied in full by the Indemnifying Party or (ii) by the
indemnified party without the consent of the Indemnifying Party and (b) the
indemnified party may subsequently assume the defense of such action if a court
of competent jurisdiction determines that the Indemnifying Party is not
vigorously defending such action. In no event shall an Indemnifying Party be
liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld or delayed). If more than one Seller is an
Indemnifying Party with respect to any matter, the Sellers' Representative shall
have the authority to exercise all rights of the Indemnifying Party afforded by
this Section 8.1(d).
(e) PAYMENT. On each occasion that any indemnified party
shall be entitled to indemnification or reimbursement under this Section 8.1,
the Indemnifying Party shall, at each such time, promptly pay the amount of such
indemnification or reimbursement (i) in the case of payment pursuant to Section
8.1(a), directly to the Buyer (or any successor to the Buyer) and (ii) in the
case of payment pursuant to Section 8.1(b), to the Sellers (allocated in
accordance with Exhibit 1.3(b)(i)). If any indemnified party shall be entitled
to indemnification under this Section 8.1, the Indemnifying Party shall pay the
indemnified party's costs and expenses arising as a result of a proceeding
directly relating to indemnifiable Losses (including, without limitation, any
reasonable fees and expenses paid to witnesses), periodically as incurred.
(f) ADJUSTMENT FOR INSURANCE AND TAXES. The amount which the
Sellers are required to pay to the Buyer or that the Buyer and Russell-Stanley
are required to pay to the Sellers pursuant to Section 6.4 or Section 8.1 shall
be adjusted (including, without limitation, retroactively) (i) by any insurance
proceeds actually recovered by any Buyer Indemnified Person, in the case of a
payment to the Buyer, and by any Seller Indemnified Person, in the case of a
payment to the Sellers, in reduction of the related indemnifiable Losses (the
Buyer hereby undertakes to, and shall cause each other Buyer Indemnified Person
to, and the Sellers hereby undertake to, and shall cause each other Seller
Indemnified Person to, use reasonable efforts to recover same) and (ii) to take
account of any tax benefit actually realized by any Buyer Indemnified Person, in
the case of a payment to the Buyer, and by any Seller Indemnified Person, in the
case of a payment to the Sellers, as a result of any indemnifiable Losses.
Amounts required to be paid, as so reduced, are hereafter sometimes called an
"Indemnity Payment." If the Buyer or any Seller shall have received an Indemnity
Payment in respect of an indemnifiable Loss and the parties in good faith
<PAGE>
38
believe that any Buyer Indemnified Person or any Seller Indemnified Person (a
"Beneficiary") is likely to subsequently receive insurance proceeds in respect
of such indemnifiable Loss, or has or will actually realize any tax benefit as a
result of such indemnifiable Loss, then the parties shall negotiate in good
faith to determine the present value of such anticipated insurance proceeds or
tax benefit and the Beneficiary shall promptly pay, in accordance with Section
8.1(e), such amount or, if lesser, the amount of the Indemnity Payment.
(g) TAX INDEMNITY. Other than with respect to Section 8.1(f),
notwithstanding anything to the contrary in this Section 8.1, indemnification
with respect to Taxes shall be governed solely by Section 6.4.
ARTICLE IX
MISCELLANEOUS
9.1 FEES AND EXPENSES. The Sellers shall bear all fees and
disbursement charges of counsel, accountants, environmental consultants and
other professional advisors retained by or on behalf of the Sellers and their
affiliates (including the Company), and the Buyer shall bear its own expenses,
in connection with the preparation and negotiation of this Agreement and the
consummation of the transactions contemplated by this Agreement. Each of the
Sellers and the Buyer shall bear the fees and expenses of any broker or finder
retained by such party or parties and their respective affiliates (including, in
the case of the Sellers, the Company) in connection with the transactions
contemplated herein.
9.2 GOVERNING LAW. This Agreement shall be construed under
and governed by the laws of the Province of Ontario without regard to the
conflicts of law principles thereof.
9.3 AMENDMENT. This Agreement may not be amended, modified or
supplemented except upon the execution and delivery of a written agreement
executed by the Buyer and the Sellers' Representative.
9.4 NO ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the Buyer, in the case of assignment by any
Seller, and the Sellers' Representative, in the case of any assignment by the
Buyer.
9.5 WAIVER. Any of the terms or conditions of this Agreement
which may be lawfully waived may be waived in writing at any time by each party
which is entitled to the benefits thereof; PROVIDED, HOWEVER, that the Sellers'
Representative is authorized to make any such waiver on behalf of any and all
the Sellers. Any waiver of any of the provisions of this Agreement by any party
hereto shall be binding only if set forth in an instrument in writing signed on
behalf of such party. No failure to enforce any provision of this Agreement
shall be deemed to or shall constitute a waiver of such provision and no waiver
of any of the provisions of this Agreement shall be deemed to or shall
constitute a waiver of any other provision hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.
9.6 NOTICES. Any notice, demand, or communication required or
permitted to be given by any provision of this Agreement shall be deemed to have
been sufficiently given or served for all purposes if (a) personally delivered,
<PAGE>
39
(b) sent by a nationally recognized overnight courier service, to the recipient
at the address below indicated or (c) delivered by facsimile which is confirmed
in writing by sending a copy of such facsimile to the recipient thereof pursuant
to clause (a) or (b) above:
If to Russell-Stanley or the Buyer:
c/o Russell-Stanley Corp.
230 Half Mile Road
Red Bank, New Jersey 07701
Attn: President
(908) 741-4913 (telecopier)
(908) 741-6366 (telephone)
With copies to:
Vestar Capital Partners III, L.P.
245 Park Avenue, 41st Floor
New York, New York 10167
Attn: Robert L. Rosner
(212) 949-6500 (telecopier)
(212) 808-4922 (telephone)
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Peter J. Gordon
(212) 455-2502 (telecopier)
(212) 455-2605 (telephone)
If to the Sellers' Representative or any Seller:
Hunter Drums Limited
5420 North Service Road
Burlington, Ontario
Canada L7L6C7
Attn: Michael W. Hunter
(905) 332-4844 (telecopier)
(905) 332-4800 (telephone)
<PAGE>
40
With a copy to:
Stikeman, Elliott
Commerce Court West, 53rd Floor
Post Office Box 85
Toronto, Ontario
Canada M5L 1B9
Attn: W. Brian Rose
(416) 947-0866 (telecopier)
(416) 869-5685 (telephone)
or to such other address as any party hereto may, from time to time, designate
in a written notice given in like manner.
Except as otherwise provided herein, any notice under this
Agreement will be deemed to have been given (x) on the date such notice is
personally delivered or delivered by facsimile or (y) the next succeeding
business day after the date such notice is delivered to the overnight courier
service if sent by overnight courier; PROVIDED that in each case notices
received after 4:00 p.m. (local time of the recipient) shall be deemed to have
been duly given on the next business day.
9.7 COMPLETE AGREEMENT. This Agreement, the confidentiality
agreements, dated January 9, 1997 and January 30, 1997, between the Company and
Russell-Stanley Corp. ("CONFIDENTIALITY AGREEMENTS") and the other documents and
writings referred to herein or delivered pursuant hereto contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and thereof.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
9.8 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
9.9 PUBLICITY. The Sellers' Representative and the Buyer will
consult with each other and will mutually agree upon any publication or press
release or third party communication of any nature with respect to this
Agreement or the transactions contemplated hereby and shall not issue any such
publication or press release or communication prior to such consultation and
agreement except as may be required by applicable law, or as reasonably required
to enforce rights hereunder, or by obligations pursuant to any listing agreement
with any securities exchange or any securities exchange regulation, in which
case the party proposing to issue such publication or press release or
communication shall make all reasonable efforts to consult in good faith with
the other party or parties before issuing any such publication or press release
or communication and shall provide a copy thereof to the other party or parties
prior to such issuance.
<PAGE>
41
9.10 HEADINGS. The headings contained in this Agreement are
for reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
9.11 SEVERABILITY. Any provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.
9.12 THIRD PARTIES. Except as specifically set forth or
referred to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or corporation, other than the
parties hereto and their permitted successors or assigns, any rights or remedies
under or by reason of this Agreement.
9.13 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Russell-
Stanley hereby irrevocably attorns and submits to, and agrees to take all
further steps necessary to submit to, the jurisdiction of the Ontario Court
(General Division) in any action or proceeding relating to the purchase of the
Shares or arising out of or related to this Agreement and irrevocably agrees
that all claims in respect of any such action or proceeding shall be heard and
determined in such Ontario court. Russell-Stanley 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. Russell-Stanley hereby
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. Russell-Stanley hereby irrevocably
designates and appoints Osler, Hoskin & Harcourt, Attention: Doug Marshall, or
any other partner of Osler, Hoskin & Harcourt, as its authorized agent to accept
and acknowledge on its behalf service of any and all process that may be served
in any such action or proceeding in any such court and agrees that service of
process upon such agent, and written notice of such service to Russell-Stanley
delivered to such agent, shall be deemed in every respect effective service of
process upon Russell-Stanley in any such suit, action, or proceeding and shall
be taken and held to be valid personal service upon Russell-Stanley.
9.14 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
LAW, THE PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE
PARTIES HERETO ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH
MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ANY OF THE OTHER PARTIES. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE PARTIES HERETO
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
<PAGE>
42
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. THE PARTIES HERETO FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS OR HIS, AS THE CASE MAY BE, LEGAL COUNSEL, AND
THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS OR HIS, AS THE CASE MAY BE, JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
9.15 SELLERS' REPRESENTATIVE. Each of the Sellers hereby
irrevocably makes, constitutes and appoints Michael W. Hunter as his or its
attorney-in-fact (the "SELLERS' REPRESENTATIVE") with full power to act in his
or its place and stead to compromise any claim or take any other action,
including, without limitation, pursuant to Section 6.4 or 8.1, with respect to
this Agreement. Each of the Sellers hereby agrees and acknowledges that any
obligations or liabilities of any Seller under this Agreement shall be joint and
several obligations or liabilities of all Sellers.
9.16 OBLIGATIONS GUARANTEE. Russell-Stanley hereby (i)
covenants, acknowledges and agrees that all representations, warranties,
covenants, undertakings and other agreements contained herein on the part of the
Buyer are joint and several obligations of the Buyer and Russell-Stanley, and
(ii) guarantees the obligations of the Buyer under this Agreement and agrees to
cause the Buyer to comply with the terms of this Agreement. This guarantee shall
be a continuing and irrevocable guarantee and shall survive the Closing. Without
limitation, the
<PAGE>
43
obligations of this guarantee shall not be released, discharged or affected by
any extensions of time or indulgences or modifications granted by the Sellers in
favour of the Buyer, or by any failure to enforce any of the terms of this
Agreement or by the bankruptcy, insolvency, dissolution, amalgamation,
winding-up or reorganization of the Buyer, and Russell-Stanley hereby waives any
right to require the Sellers to exhaust any action or recourse against the Buyer
before requiring performance by Russell-Stanley pursuant to this guarantee.
<PAGE>
44
IN WITNESS WHEREOF, each of the Sellers has executed this
Agreement, and each of the Company, Russell-Stanley and the Buyer has caused
this Agreement to be executed by its duly authorized officer, in each case as of
the day and year first above written.
/s/ R. MOSER /s/ MICHAEL W. HUNTER
- --------------------------- ----------------------------------------
Witness to execution by
M.W. Hunter
/s/ JOHN D. HUNTER
----------------------------------------
JOHN D. HUNTER
/s/ R. MOSER
- ---------------------------
Witness to execution by MICHAEL W. HUNTER HOLDINGS INC.
J.D. Hunter
By: /s/ MICHAEL W. HUNTER
-----------------------------------------
Name:
Title:
JOHN D. HUNTER HOLDINGS INC.
By: /s/ JOHN D. HUNTER
-----------------------------------------
Name:
Title:
HUNTER HOLDINGS INC.
By: /s/ MICHAEL W. HUNTER
-----------------------------------------
Name:
Title:
373062 ONTARIO LIMITED
By: /s/ MICHAEL W. HUNTER
-----------------------------------------
Name:
Title:
<PAGE>
45
HUNTER DRUMS LIMITED
By: /S/ MICHAEL W. HUNTER
-----------------------------------------
Name:
Title:
RUSSELL-STANLEY HOLDINGS, INC.
By: /s/ DANIEL W. MILLER
-----------------------------------------
Name:
Title:
HDL ACQUISITION, INC.
By: /s/ DANIEL W. MILLER
-----------------------------------------
Name:
Title:
EXHIBIT 10.5
PURCHASE AND SALE AGREEMENT
DATED AS OF OCTOBER 23, 1997
among
SMURFIT PACKAGING CORPORATION,
RUSSELL-STANLEY HOLDINGS, INC.
and
RUSSELL-STANLEY CORP.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE OF ASSETS....................................................1
1.1 Assets to be Transferred..............................................1
1.2 Excluded Assets.......................................................3
1.3 Other Transactions....................................................5
1.4 Assignment of Assets..................................................5
1.5 Obtaining Permits and Licenses........................................6
ARTICLE II
CONSIDERATION..................................................................6
2.1 Purchase Price........................................................6
2.2 Allocation of Purchase Price..........................................6
ARTICLE III
LIABILITIES, OBLIGATIONS AND INDEMNITIES.......................................7
3.1 Liabilities and Indemnity.............................................7
3.2 Indemnification Procedure............................................11
3.3 Other Indemnification Provisions.....................................12
3.4 Cash Settlements.....................................................12
ARTICLE IV
EMPLOYEES AND EMPLOYEE BENEFITS...............................................13
4.1 Interim Employment Period............................................13
4.2 Employment By Buyer..................................................13
4.3 Seller Reliance. ...................................................14
4.4 Health Care ...........................................14
4.5 Past Service and Vacations...........................................14
4.6 Bonuses. ...........................................................15
4.7 Employee Benefit Plans...............................................15
4.8 Addition to Assumed Liabilities......................................15
- 1 -
<PAGE>
PAGE
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER .....................................16
5.1 Organization and Corporate Power.....................................16
5.2 Due Authorization; No Breach.........................................16
5.3 Real Property........................................................17
5.4 Personal Property....................................................19
5.5 Title and Condition of Assets; Entire Business.......................19
5.6 Consents.............................................................20
5.7 Compliance With Laws.................................................20
5.8 Permits and Licenses.................................................20
5.9 Environmental Conditions.............................................21
5.10 Product Safety.......................................................22
5.11 Employee Relations...................................................22
5.12 Litigation, Claims and Proceedings...................................23
5.13 Intellectual Property................................................23
5.14 Contracts............................................................24
5.15 Benefit Plans........................................................25
5.16 Financial Statements.................................................26
5.17 Absence of Certain Changes or Events.................................27
5.18 Insurance............................................................27
5.19 Affiliate Transactions. ............................................28
5.20 Tax Matters. .......................................................28
5.21 Material Customers and Suppliers. ..................................28
5.22 Books and Records. .................................................28
5.23 Disclosure. ........................................................28
5.24 Survival of Representations and Warranties...........................29
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER............................29
6.1 Organization and Power...............................................29
6.2 Due Authorization; No Breach.........................................29
6.3 Consents.............................................................30
6.4 Financing. .........................................................30
6.5 Survival of Representations and Warranties...........................30
- 2 -
<PAGE>
PAGE
ARTICLE VII
PRE-CLOSING COVENANTS.........................................................30
7.1 Conduct of the Business..............................................30
7.2 Access to Books, Records and Facilities..............................31
7.3 ISRA.................................................................32
7.4 Best Efforts.........................................................32
7.5 Purchase Order No. 685-2155. .......................................32
ARTICLE VIII
CONDITIONS OF CLOSING.........................................................32
8.1 Seller's Conditions..................................................32
8.2 Buyer's Conditions...................................................33
ARTICLE IX
TERMINATION; SURVIVAL.........................................................34
9.1 Termination by Buyer or Seller.......................................34
9.2 Survival.............................................................34
ARTICLE X
CLOSING.......................................................................34
10.1 Closing..............................................................34
10.2 Seller's Obligations and Closing Deliveries..........................34
10.3 Buyer's Obligations and Closing Deliveries...........................35
ARTICLE XI
EXPENSES AND POST CLOSING OBLIGATIONS.........................................36
11.1 Taxes and Other Charges..............................................36
11.2 Restriction..........................................................37
11.3 Insurance Data.......................................................38
11.4 Further Assurances...................................................38
11.5 Access to Books, Records and Facilities..............................38
- 3 -
<PAGE>
PAGE
11.6 Preparation of Audited Financial Statements. .......................39
ARTICLE XII
BULK SALES LAW................................................................39
12.1 Waiver...............................................................39
ARTICLE XIII
PUBLICITY, CONFIDENTIALITY....................................................39
13.1 Publicity............................................................39
13.2 Confidentiality......................................................40
13.3 Negotiations with Third Parties......................................40
ARTICLE XIV
NOTICES.......................................................................40
14.1 Notices..............................................................40
ARTICLE XV
CONSULTANT FEES...............................................................42
15.1 Brokers..............................................................42
ARTICLE XVI
MISCELLANEOUS.................................................................43
16.1 Binding Effect; Assignment...........................................43
16.2 Exhibits and Schedules...............................................43
16.3 Specific Performance.................................................43
16.4 Counterparts.........................................................43
16.5 Headings; Interpretation.............................................43
16.6 Waiver...............................................................43
16.7 Severability.........................................................44
16.8 Governing Law and Forum..............................................44
16.9 Materiality..........................................................44
- 4 -
<PAGE>
PAGE
16.10 Obligations Guarantee..................................................44
- 5 -
<PAGE>
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT (this "Agreement"), dated as of
October 23, 1997, among SMURFIT PACKAGING CORPORATION, a Delaware corporation
("Seller"), RUSSELL-STANLEY HOLDINGS, INC, a Delaware corporation ("Parent"),
and Russell-Stanley Corp., a New Jersey corporation ("Buyer"). Seller and Buyer
are collectively referred to as the "Parties".
W I T N E S S E T H:
WHEREAS, Seller is engaged in the business of manufacturing
and marketing drums through its Plastics Division (the "Division");
WHEREAS, Seller owns or holds certain assets, including land,
buildings and other real property, fixed assets, machinery, equipment, inventory
and other personal property, technology, contracts and other intangible property
used in the business of the Division as presently conducted (the "Business");
and
WHEREAS, Buyer wishes to purchase, and Seller is willing to
sell, all of Seller's right, title and interest in and to the Division, together
with all of the assets of Seller and its affiliates used by Seller primarily in
the conduct of the Business (other than Excluded Assets as defined below), and
as part of such purchase and sale of such assets Buyer is willing to assume
certain of the obligations and liabilities of Seller related to the Assets (as
defined below) and the Division;
NOW, THEREFORE, for and in consideration of the mutual
covenants and agreements hereinafter set forth, the parties hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 ASSETS TO BE TRANSFERRED. Subject to the terms and
conditions of this Agreement, and except as otherwise expressly provided in
Articles 1.2 and 1.4 hereof, at the Closing (as defined in Article 10.1 hereof),
Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer
shall purchase, acquire and accept from Seller, all of Seller's right, title and
interest in and to all property, plant, machinery, equipment, inventories,
goodwill, and other assets of every kind, character and description, whether
tangible or intangible, whether real, personal or mixed, and wherever situated,
owned, possessed, leased
<PAGE>
2
or licensed by any of Seller or its affiliates and used by
Seller or its affiliates primarily in the conduct of the Business, with such
changes, deletions or additions thereto as may occur from the date hereof to the
Closing in accordance with the terms and conditions of this Agreement and any
Ancillary Agreement (as defined herein) executed in connection herewith,
including, without limitation, each of the following assets used by Seller or
its affiliates primarily in the conduct of the Business, except as otherwise
expressly provided in Article 1.2 hereof (collectively, the "Assets"):
(a) all properties, assets, rights and entitlements reflected
on the balance sheet included in the Financial Statements (as defined in Article
5.16(a)) hereof);
(b) all real property used by the Business that is owned by
Seller and listed on Schedule 5.3(a) and all buildings, structures and other
improvements and fixtures located on such real property and any additions,
improvements, replacements and alterations thereto between the date hereof and
the Closing Date;
(c) all leasehold interests in real property relating to the
Business leased by Seller and listed on Schedule 5.3(b), including all
buildings, structures and other improvements located on such real property and
any additions, improvements, replacements and alterations thereto between the
date hereof and the Closing Date;
(d) all tangible personal property and interests therein
located on the real property or leaseholds listed on Schedules 5.3(a) or 5.3(b)
or used by the Division, including all machinery, equipment, furniture,
equipment, raw materials, supplies, spare and replacement parts, vehicles,
storage tanks, fuel and construction in progress;
(e) all inventory and work in progress relating to the
Business, including, without limitation, any of such items in transit from
manufacturing facilities or warehouses of Seller (the "Inventory");
(f) all accounts and notes receivable relating to the
Business, including intercompany receivables, deposits and advances, and other
receivables (the "Accounts Receivable");
(g) all rights under all contracts, leases, licenses,
commitments, sales orders, purchase orders, invoices and other agreements
relating to the Business (the "Contracts");
(h) all warranties, claims and causes of action against third
parties relating to the Business, except to the extent related to Excluded
Assets or Excluded Liabilities;
(i) all prepayments and prepaid expenses relating to the
Business;
<PAGE>
3
(j) all United States, state and foreign intellectual property
owned or used by the Division, including, without limitation: (i) (A)
inventions, technology, discoveries, processes, formulae, designs, methods,
techniques, procedures, machines, manufactures, concepts, developments, new and
useful improvements thereof and know-how relating thereto, whether or not
patented or eligible for patent protection; (B) copyrights and copyrightable
works, including computer applications, programs, software, databases and
related items; (C) trademarks, service marks, trade names, trade dress, the
goodwill of the Business symbolized thereby and appurtenant thereto, and all
common-law rights relating thereto; (D) trade secrets and other confidential or
proprietary designs and information; (ii) all registrations, applications,
recordings and licenses related to the foregoing; (iii) the right to obtain all
renewals, reissues, divisions, continuations or other similar legal protections
pertaining to the foregoing; and (iv) the right to sue at law or in equity for
any infringement or misappropriation of, or impairment to the foregoing,
including the right to receive all proceeds and damages therefrom (collectively
"Intellectual Property");
(k) originals or copies of all records, files, invoices,
customer lists, supplier lists, blueprints, specifications, designs, accounting
books and records, tax books and records, business books and records,
promotional or advertising material, operating data and plans, and other
relevant data relating to the Business; provided that Seller shall retain
originals of any such items which (x) relate primarily to the Excluded Assets or
Excluded Liabilities; (y) are income tax books and records; or (z) are tax books
and records (other than income tax) relating to taxes paid by Seller prior to
the Closing; provided further that Buyer shall receive copies of the items set
forth in clauses (x), (y) and (z) to the extent such records do not contain
confidential information of Seller, and, to the extent such records do contain
confidential information, Seller shall provide Buyer and its representatives
with access during normal business hours upon reasonable prior notice to such
other confidential records; and Buyer shall receive originals of all other such
items;
(l) all federal, state, local and other governmental licenses,
permits, approvals and authorizations relating to the Business to the extent
transferrable or assignable;
(m) all insurance proceeds relating to the Business arising
out of or related to damage, destruction or loss of any Assets to the extent of
any damage or destruction that remains unrepaired, or to the extent any Assets
remain unreplaced, as of the Closing;
(n) all telephone numbers of the Division;
(o) all goodwill associated with the Business, the Division or
the Assets; and
(p) all other properties and assets of Seller and its
affiliates used primarily in the conduct of the Business as presently conducted
or as conducted on the date of the Closing.
<PAGE>
4
1.2 EXCLUDED ASSETS. The parties to this Agreement expressly
understand and agree that neither Seller nor any affiliate of Seller is
hereunder selling, assigning, transferring or conveying to Buyer any of the
following assets, rights and properties (the "Excluded Assets"):
(a) cash and cash equivalents (including marketable securities
and short-term investments) of Seller (other than petty cash located at the real
property described in Schedule 5.3);
(b) insurance policies and any prepaid premiums thereon and
the cash surrender value thereof;
(c) any assets sold or otherwise disposed of not in violation
of any provisions of this Agreement during the period from the date hereof until
the Closing;
(d) the name "Smurfit" and all trademarks, service marks,
trade names, trade dress and logos containing such name and the goodwill of any
business of Seller symbolized thereby and appurtenant thereto and all common law
rights relating thereto (the "Excluded Intellectual Property"); PROVIDED that
until the nine month anniversary of the Closing Date, Buyer shall have the right
to use the Excluded Intellectual Property in connection with the sale of
finished goods inventory and the use of product literature, signage and trailers
and other vehicles existing on the Closing Date which bear markings containing
the Excluded Intellectual Property; PROVIDED FURTHER, that Buyer shall
appropriately sticker such product literature so as to reflect accurately the
current ownership status of the Assets after the Closing Date and, if requested
by Seller, will deliver to Seller, at Seller's expense, any signage containing
the "Smurfit" name and logo removed by Buyer during such nine month period, and
Buyer agrees that any such use will cease after such nine month anniversary;
(e) any rights of Seller under this Agreement and any
agreement relating hereto between Seller and Buyer entered into on or after the
date hereof;
(f) any Tax refunds with respect to periods prior to the
Closing;
(g) the corporate charter qualifications to conduct business
as a foreign corporation, arrangements with registered agents relating to
foreign qualifications, taxpayer and other identification numbers, minute books,
blank share certificates and share transfer ledgers and other documents relating
to the organization, maintenance and existence of Seller as a corporation;
(h) personal belongings of any employee of Seller;
(i) the insurance recoveries, if any, relating to the Excluded
Assets and Excluded Liabilities;
<PAGE>
5
(j) the assets identified on Schedule 1.2(j) hereto; and
(k) all assets which are used exclusively in Seller's other
businesses.
1.3 OTHER TRANSACTIONS. In addition to the transactions
contemplated above, the following acts or transactions shall also occur on or
before the Closing:
(a) Buyer and Seller each shall execute and deliver a
Transition Services Agreement substantially in the form attached hereto as
Exhibit 1.3(a);
(b) Buyer and Seller each shall execute and deliver a Bill of
Sale and Assignment substantially in the form attached hereto as Exhibit 1.3(b);
and
(c) Buyer shall execute and deliver an Assumption Agreement
substantially in the form attached hereto as Exhibit 1.3(c).
The agreements set forth in paragraphs (a) through (c) of this
Article 1.3 are hereinafter referred to as the "Ancillary Agreements."
1.4 ASSIGNMENT OF ASSETS. (a) To the extent that any lease,
contract, license, agreement, sales or purchase order, commitment, property
interest, qualification or other Asset to be sold, assigned, transferred or
conveyed to Buyer, or any claim, right or benefit arising thereunder or
resulting therefrom (the "Interests"), cannot be sold, assigned, transferred or
conveyed without the approval, consent or waiver of or filing with the issuer
thereof or the other party thereto or any third person (including a government
or governmental unit), or to the extent that such sale, assignment, transfer or
conveyance or attempted sale, assignment, transfer or conveyance of any such
Interest would constitute a breach thereof or a violation of any law, decree,
order, regulation or other governmental edict, this Agreement shall not
constitute a sale, assignment, transfer or conveyance thereof or an attempted
sale, assignment, transfer or conveyance thereof.
(b) Notwithstanding anything to the contrary contained herein,
Seller is not obligated to sell, assign, transfer or convey to Buyer, and Buyer
is not obligated to purchase from Seller, any of Seller's rights and obligations
in and to any of the Interests without first having the necessary approvals,
filings, consents or waivers required to effect such sale, assignment, transfer
or conveyance and all permits, licenses, registrations or other authorizations
necessary to conduct the Business subsequent to Closing set forth in Schedule
5.6(b) hereof.
(c) To the extent that any of the approvals, consents,
filings, waivers, permits, licenses, registrations or other authorizations
referred to in Article 1.4(a) hereof have not been obtained by Seller as of the
Closing, Seller and its affiliates shall, during the remaining term of
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6
such Interest, use all reasonable efforts, to (i) obtain the consent of any such
third person (including a government or governmental unit), (ii) cooperate with
Buyer and Parent in any reasonable and lawful arrangement designed to provide
the benefits of such Interest to Buyer and (iii) enforce, at the request of
Buyer or Parent and for the benefit of Buyer, any rights of Seller and its
affiliates arising from such Interest against such issuer thereof or the other
party or parties thereto (including the right to elect to terminate any such
Interest in accordance with the terms thereof upon the written request of Buyer
or Parent). Any such efforts by Seller pursuant to this Article 1.4(c) shall be
at the expense of Seller.
1.5 OBTAINING PERMITS AND LICENSES. Buyer, in cooperation with
Seller, shall use all reasonable efforts to obtain as of the Closing or as soon
thereafter as may be practicable all permits and licenses required by any
governmental agency with respect to the Assets or the Division (including,
without limitation, environmental and other operating permits) and all
approvals, filings, consents or waivers necessary for Buyer to conduct the
Business, without any guaranty or liability of Seller and its affiliates with
respect thereto. Seller and its affiliates will assign, transfer and convey to
Buyer at the Closing those permits and licenses which are held or used by Seller
in the conduct of the Business and can be assigned without having to obtain the
consent of any third party (other than any affiliate of Seller) with respect
thereto, provided that Seller and Buyer will work together and use all
reasonable efforts to obtain any third party consents necessary to the
assignment or transfer of any other permits or licenses used or held by Seller
in the conduct of the Business which are so assignable or transferable.
Subsequent to the assignment, transfer and conveyance of each Asset on or after
the date of the Closing, to the extent permitted by law, Seller shall have the
right to cancel any permits or licenses held by Seller now applicable to such
Asset to the extent not assignable or transferrable to Buyer pursuant to this
Article 1.5. The failure of Seller to cancel any permits or licenses shall not
affect the rights, obligations, liabilities and indemnifications of Seller by
Buyer under this Agreement.
ARTICLE II
CONSIDERATION
2.1 PURCHASE PRICE. As consideration for the Assets and the
covenant contained in Article 11.2 hereof, at the Closing (as defined in Article
10.1 hereof) Buyer shall pay Seller the sum of (i) $69.5 million plus (ii) the
Addison Option Amount (as hereinafter defined). All payments made to Seller
pursuant to this Article 2.1 (the "Purchase Price") shall be made by wire
transfer of immediately available funds to an account designated by Seller at
least two business days prior to the Closing Date. As used herein the "Addison
Option Amount" shall mean an amount equal to the sum of (i) $450,000,
representing the option purchase price amount due upon exercise of the purchase
option pursuant to the real property lease for the Addison, Illinois facility;
plus (ii) $18,822.23, representing Seller's out-of-pocket costs incurred in
connection with the closing of the exercise of such purchase option.
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7
2.2 ALLOCATION OF PURCHASE PRICE. (a) Buyer and Seller agree
that they shall allocate the sum of the Purchase Price among the Assets as of
the Closing Date on Internal Revenue Service ("IRS") Form 8594, in accordance
with Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"),
and the Treasury regulations promulgated thereunder. The allocation described in
the preceding sentence shall be determined by the joint agreement of Buyer and
Seller based upon the fair market value of the Assets as of the Closing Date.
Buyer shall provide Seller with a copy of Buyer's proposed fair market value
allocation (the "Allocation") as promptly as reasonably practicable. In the
event that Buyer and Seller are unable to agree on the Allocation within 90 days
of the date on which Buyer provides Seller with a copy of the Allocation, a
third-party appraiser jointly selected by Buyer and Seller, the cost of which
shall be borne equally by Buyer and Seller, shall resolve all items with respect
to the Allocation to which there is a dispute between the parties.
(b) Buyer and Seller shall timely file with the appropriate
Tax authorities copies of the agreed upon IRS Form 8594 and shall use the
Allocation in the preparation of all Tax Returns (including any attachments
thereto) and for all other Tax purposes. In the event any party hereto receives
notice of an audit in respect of the Allocation, such party shall notify the
other party in writing as to the date and subject of such audit as promptly as
reasonably practicable.
(c) If any Tax Return filed by Buyer or Seller relating to the
transactions contemplated hereby is challenged by the Tax authority with which
such Tax Return was filed on the basis of the Allocation, as finally adjusted,
the filing party shall assert in good faith the validity and correctness of the
Allocation, provided, however, that after asserting such position the filing
party shall be free to settle such dispute as it determines. If any such Tax
Return is challenged as herein described, the party filing such Tax Return shall
keep the other party generally apprised of its decisions and the current status
and progress of all administrative and judicial proceedings, if any, that are
undertaken at the election of such party with respect thereto.
(d) Any adjustment to the Purchase Price or the amount of
Assumed Liabilities shall result in an appropriate adjustment to the Allocation
and the IRS Form 8594 described above.
ARTICLE III
LIABILITIES, OBLIGATIONS AND INDEMNITIES
3.1 LIABILITIES AND INDEMNITY. (a) Subject to the provisions
of Article 3.1(b) hereof and except as otherwise provided in this Agreement,
effective as of the Closing, Buyer shall, without any further responsibility or
liability of or recourse to Seller or any of its affiliates or any of their
respective directors, shareholders, officers, employees, agents, consultants,
representatives, successors, transferees and assigns (hereinafter sometimes
referred to as "Seller
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8
Indemnified Parties"), absolutely and irrevocably assume and be solely liable
and responsible for any and all of the following Liabilities (as defined below)
(collectively, the "Assumed Liabilities"):
(i) all Liabilities reflected on the unaudited balance sheet
of the Business as of June 30, 1997 and the notes thereto included in the
Financial Statements (the "June 30 Balance Sheet");
(ii) all Liabilities of Seller arising under the Contracts
assigned to Buyer hereunder (other than Liabilities attributable to any failure
by Seller to comply with the terms thereof);
(iii) all other Liabilities as of the Closing Date of Seller
incurred in the ordinary course of the Business since June 30, 1997 and not in
violation of any provision of this Agreement;
(vi) Liabilities agreed to be assumed by Buyer with respect to
Transferred Employees pursuant to Article IV hereof;
(v) Liabilities arising from any claim, action, suit,
investigation or proceeding relating to or arising out of Buyer's ownership of
the Assets after the Closing or Buyer's conduct of the Business after the
Closing, including without limitation, claims with respect to defective products
or services, alleged improper sales practices, warranty claims, claims for any
loss, damage or cost arising out of any property damage or personal injury, in
each case due to the use of any product sold by or services furnished by the
Business after the Closing Date;
(vi) Liabilities under or relating to Environmental Laws (as
defined in Article 5.9(a) hereof), in force or effect on or after the Closing
Date, concerning the Buyer's ownership of the Assets on or after the Closing
Date or Buyer's conduct of the Business on or after the Closing and, in each
case, arising out of or as a consequence of an event or condition first
occurring or existing on or after the Closing Date; without limiting the
foregoing, Buyer shall be responsible for compliance with Environmental Laws
which were enacted prior to the Closing Date and are in effect as of the Closing
Date and which by the terms of such Environmental Laws do not require compliance
until after the Closing Date; and
(vii) Seller's payables to Seller's affiliates identified on
Schedule 3.1(e)(iv) hereto.
The term "Liability" shall mean and include any direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, cost of environmental investigation
or remediation, obligation or
<PAGE>
9
responsibility, whether known or unknown, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured, accrued or unaccrued,
absolute, contingent or otherwise.
(b) Notwithstanding anything to the contrary contained in
Article 3.1(a) hereof, the term "Assumed Liabilities" shall not mean or include,
or be deemed to mean or include, and Seller hereby agrees to indemnify and hold
harmless each of Parent and Buyer and its affiliates and their respective
directors, shareholders, partners, officers, employees, agents, consultants,
representatives, successors, transferees and assigns (hereinafter sometimes
referred to as "Buyer Indemnified Parties") against (i) any Liabilities which
are satisfied or discharged prior to the Closing and (ii) any Excluded
Liabilities not expressly assumed under Section 3.1(a) (including in each case
any penalties, fines, reasonable attorneys' fees and other costs incident to
proceedings or investigations or the prosecution or defense of any claim
(collectively, "Damages")). Except as set forth in Articles 3.1(a) and 3.1(b)
hereof, or as may be otherwise expressly agreed upon in any Ancillary Agreement,
Buyer will assume no Liability of Seller or any of its affiliates. It is
understood that indemnity claims under this Article 3.1(b) may be brought by
Buyer Indemnified Parties at any time and shall not be limited as to dollar
amount.
(c) Buyer shall indemnify and hold harmless the Seller
Indemnified Parties against all Assumed Liabilities (including Damages) and (ii)
Damages which are caused by or arise out of the failure by Buyer to perform or
fulfill any agreement or covenant to be performed or fulfilled by Buyer under
this Agreement or any Ancillary Agreement. It is agreed and understood that
claims under this Article 3.1(c) may be brought by Seller Indemnified Parties at
any time and shall not be limited as to dollar amount.
(d) Buyer shall also indemnify and hold harmless the Seller
Indemnified Parties against any Damages which are caused by or arise out of any
breach of any representation or warranty of Buyer. It is agreed and understood
that no claim under this Article 3.1(d) shall be asserted after the second
anniversary of the Closing.
(e) Except for the Assumed Liabilities, Buyer is not assuming,
and is not responsible for, any Liabilities of Seller, whether or not related to
the Division ("Excluded Liabilities"), including without limitation, the
following:
(i) any Liabilities with respect to the operation of the
Business prior to the Closing for all Taxes (including, without limitation, all
United States federal, state and local income, sales, real property, personal
property and other Taxes, but excluding payroll Taxes), all levies, imposts and
duties in the nature of Taxes and all deficiencies, assessments, charges and
penalties associated therewith and any other Liabilities for Taxes for all
periods prior to the Closing;
(ii) Liabilities relating to employee benefits or compensation
arrangements arising before or as a result of the Closing, including, without
limitation, any
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10
Liabilities under any of Seller's Plans (as defined in Article 5.15
hereof), including, without limitation, Liabilities relating to any
severance payments or other benefits payable as a result of the
transactions contemplated hereby, except as provided in Article IV;
(iii) Liabilities accruing prior to the Closing to the extent
that Seller actually is reimbursed therefor under its insurance policies;
(iv) Seller's payables to Seller's affiliates which are not
identified on Schedule 3.1(e)(iv) hereto;
(v) Liabilities under any bond, note, debenture, or similar
instrument or any other indebtedness for borrowed money;
(vi) Any cash overdrafts;
(vii) Liabilities of Seller related to the Excluded Assets;
(viii) Liabilities of Seller under this Agreement or any
Ancillary Agreement;
(ix) Liabilities of Seller arising out of or as a consequence
of (A) injury or death of any person as a consequence of any event occurring
prior to the Closing, (B) damage to the property of any third party as a
consequence of any event occurring prior to the Closing, and (C) workers'
compensation claims relating to events or conditions which occurred or arose
prior to the Interim Employment Period Termination Date (as defined);
(x) Liabilities arising from any claim, action, suit,
investigation or proceeding (whether initiated prior to or after Closing)
relating to or arising out of Seller's ownership of the Assets or Seller's
conduct of the Business prior to the Closing, including without limitation,
claims with respect to defective products or services, alleged improper sales
practices, warranty claims, claims for any loss, damage or cost arising out of
any property damage or personal injury due to the use of any product sold by or
services furnished by the Business prior to the Closing Date;
(xi) Liabilities under or relating to Environmental Laws (as
defined in Article 5.9(a) hereof) concerning the Seller, the Assets, the
Business or the Division and arising out of or as a consequence of an event or
condition occurring or existing prior to the Closing; without limiting the
foregoing, Buyer shall be responsible for compliance with Environmental Laws
which were enacted prior to the Closing Date and are in effect as of the Closing
Date and which by the terms of such Environmental Laws do not require compliance
until after the Closing Date;
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11
(xii) Liabilities relating to the Division resulting from or
relating to Seller's failure to qualify to do business as a foreign corporation
in any jurisdiction;
(xiii) any Liabilities relating to Seller's former Fibredrum
business, including Seller's former facility located in Matawan, New Jersey;
(xiv) Liabilities identified on Schedule 5.12;
(xv) any liability of any other division of Seller or any
affiliate of Seller; and
(xvi) any obligations or liabilities arising out of or
relating to all claims and causes of action under federal, state and/or
municipal civil rights and/or employment law statutes including, but without
limitation, Title VII of the Civil Rights Acts of 1964, the Americans with
Disabilities Act, the Age Discrimination in Employment Act, the Fair Labor
Standards Act, the Occupational Health & Safety Act, the National Labor
Relations Act, or the Missouri Civil Rights Act for actions of Seller arising
prior to the Closing Date.
(f) Seller shall also indemnify and hold harmless each Buyer
Indemnified Party against any Damages which are caused by or arise out of any
breach of any representation or warranty of Seller. No claim shall be asserted
for a claim under this Article 3.1(f) after the eighteen month anniversary of
the Closing, provided that the foregoing shall not apply to claims for a breach
of (i) a representation or warranty under Articles 5.9 hereof, which may be
brought at any time on or prior to the third anniversary of the Closing or (ii)
any representation or warranty under Article 5.20 hereof, which may be brought
at any time prior to the sixtieth day following the expiration of all applicable
statutes of limitation (after giving effect to any extensions or tolling
thereof). No Buyer Indemnified Party shall be entitled to indemnification for
claims under this Article 3.1(f) for any claim or damage unless and until the
aggregate amount of claims of Buyer Indemnified Parties exceeds $500,000. If the
aggregate amount of such claims exceeds $500,000, then the Buyer Indemnified
Parties may claim indemnification only for any claims in excess of $500,000. The
aggregate indemnification obligations of Seller for claims under this Article
3.1(f) shall not exceed $25 million.
(g) Any indemnification amounts payable to Buyer Indemnified
Parties or Seller Indemnified Parties hereunder shall be paid them by wire
transfer of immediately available funds.
3.2 INDEMNIFICATION PROCEDURE. The obligation of a party (the
"Indemnifying Party") to indemnify any person or entity (the "Indemnified
Party") under Article 3.1 hereof is conditioned upon receiving from the
Indemnified Party written notice of the assertion or institution of a claim
arising from or related to any liability set forth in Article 3.1 hereof (a
"Claim") or of the occurrence of an event which the Indemnified Party reasonably
believes could
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12
lead to the assertion of a Claim, specifying in reasonable detail the nature and
amount of such Claim, promptly after the Indemnified Party becomes aware of such
Claim or event; provided, however, that the failure of the Indemnifying Party to
receive such notice on a timely basis shall relieve the Indemnifying Party of
its obligation to indemnify hereunder only if and to the extent that such
failure is prejudicial to its ability to defend such Claim. Subject to the terms
hereof, the Indemnifying Party shall have the absolute right, in its sole
discretion and at its sole expense, to elect to defend, settle or otherwise
protect against any Claim with legal counsel of its own selection reasonably
satisfactory to the Indemnified Party, provided, however, that no Claim may be
settled by the Indemnifying Party without the consent of the Indemnified Party,
which consent shall not be unreasonably withheld. The Indemnified Party shall
have the right, but not the obligation, to participate, at its own expense, in
the defense of any Claim through counsel of its own and the fees and expenses of
such counsel will be at the expense of such Indemnified Party unless (i) the
Indemnifying Party specifically authorized the employment of such counsel and
specifically agreed to pay such counsel's fees, (ii) the Indemnifying Party does
not employ counsel that is reasonably satisfactory to the Indemnified Party, or
there is a conflict of interest between the position of the Indemnifying Party
on the one hand and the Indemnified Party on the other hand, or (iii) the
Indemnifying Party fails to assume the defense or fails to contest such action
in good faith, in any which case, if the Indemnified Party notifies the
Indemnifying Party that it elects to employ separate counsel, the Indemnifying
Party will not have the right to assume the defense of such Claim on behalf of
the Indemnified Party and the reasonable fees and expenses of such separate
counsel shall be borne by the Indemnifying Party. The Indemnified Party shall,
and shall cause its affiliates to, at all times cooperate in all reasonable ways
with, make its relevant files and records available for inspection and copying
by, and make (subject to assertion of attorney-client and other applicable
privileges) its employees available or otherwise render reasonable assistance to
the Indemnifying Party in connection with its defense of any Claim. Subject to
the next sentence, in the event the Indemnified Party, without prior consent of
the Indemnifying Party (which shall not be unreasonably withheld or delayed),
makes any settlement with respect to any Claim, the Indemnifying Party shall be
discharged from all obligations under Article 3.1 hereof with respect to such
Claim. In the event the Indemnifying Party fails timely to defend, contest or
otherwise protect against any Claim or to contest any Claim in good faith, the
Indemnified Party shall have the right, but not the obligation, to defend,
contest, assert cross claims or counterclaims or otherwise protect against the
same, to make any compromise or settlement thereof, with the consent of the
Indemnifying Party which shall not be unreasonably withheld or delayed, and to
recover from the Indemnifying Party and be indemnified by the Indemnifying Party
for the entire cost thereof, including, without limitation, legal expenses,
disbursements and all amounts paid as a result of such Claim or the compromise
or settlement thereof.
3.3 OTHER INDEMNIFICATION PROVISIONS. The Parties shall make
appropriate adjustments for tax benefits actually realized as a result of an
indemnifiable Liability and for insurance proceeds actually recovered by or on
behalf of an Indemnified Party in respect of an indemnifiable Liability in
determining the amount of Damages pursuant to any Claims asserted
<PAGE>
13
under this Article 3. All indemnification payments made pursuant to this Article
3 shall be considered adjustments to the Purchase Price.
3.4 CASH SETTLEMENTS. (a) Any cash or cash equivalent
received by Seller (in its lock box or otherwise) on or prior to 5:00 p.m.,
eastern standard time, on the Closing Date shall constitute part of the Excluded
Assets.
(b) Any cash or cash equivalents received by Seller (in its
lock box or otherwise) after the Closing Date in respect of Accounts Receivable
or any other Assets shall be paid to Buyer within five (5) days of receipt
thereof to an account designated by Buyer.
(c) Seller shall issue checks on the Closing Date in respect
of all payments which are due on or prior to the Closing Date based upon
Seller's customary payment terms and conditions, which, in certain cases,
include a 66 day payment term notwithstanding an invoice specifying "net 30".
ARTICLE IV
EMPLOYEES AND EMPLOYEE BENEFITS
4.1 INTERIM EMPLOYMENT PERIOD. As provided in the Transition
Services Agreement all salaried, non-union hourly and unionized hourly employees
of Seller related to the Division ("Division Employees") shall remain employees
of Seller after the Closing until April 30, 1998 or such earlier date as Buyer
may elect by written notice to Seller ("Interim Employment Period," the last day
of the Interim Employment Period is hereinafter referred to as "Interim
Employment Termination Date").
4.2 EMPLOYMENT BY BUYER. (a) Effective as of the Interim
Employment Period Termination Date, Buyer (i) will offer employment to all
salaried and non-union hourly Division Employees of Seller at comparable
positions and rates of pay and (ii) agrees to hire all of Seller's unionized
hourly Division Employees subject to the terms and conditions of the collective
bargaining agreements applicable to such employees (the "Transferred
Employees"); provided, however that Buyer may terminate, at Buyer's sole
discretion and expense, at any time after the Interim Employment Period
Termination Date the employment of any Transferred Employee with Buyer provided,
that Buyer shall indemnify and hold Seller harmless from and against any claims
or causes of action asserted by any Transferred Employees arising from such
termination, including, without limitation, any claims for severance benefits.
Buyer agrees to offer severance benefits to the Transferred Employees in
accordance with Buyer's existing severance plan, giving the Transferred
Employees Past Service (as hereinafter defined) credit. For purposes of this
Article IV, Transferred Employees shall not include any person on disability
(including sick leave, short-term disability and long-term disability), layoff
or leave of absence or any retirees, COBRA
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14
beneficiaries or vested terminations as of the Interim Employment Period
Termination Date provided, however, that Buyer agrees to hire any Division
Employees of Seller who as of the Interim Employment Period Termination Date are
on disability, layoff or leave of absence as soon as the disability, layoff or
leave of absence terminates if such employee would have been entitled to
reinstatement at the time he or she is available to return to work in accordance
with the Seller's personnel policies in effect at the time of the Closing. Buyer
shall not assume responsibility for any Transferred Employee until such employee
commences employment with Buyer, except to the extent of the Assumed Liabilities
and as provided in the Transition Services Agreement.
(b) Effective as of the Interim Employment Period Termination
Date, Buyer shall, without any further responsibility or liability of or
recourse to Seller, assume and be solely liable and responsible for any and all
of the following Liabilities:
(i) Liabilities arising from the collective bargaining
agreements identified on Schedule 4.2(b) hereof;
(ii) workers compensation claims reported after the Interim
Employment Period Termination Date related to events or conditions which
occurred or arose after such date; and
(iii) Liabilities for vacation and sick pay accrued on the
books and records of Seller in the ordinary course of business consistent with
past practice which are due Transferred Employees after the Interim Employment
Period Termination Date.
4.3 SELLER RELIANCE. Buyer understands and acknowledges that
upon termination of the Interim Employment Period Termination Date Seller will
be relying on Buyer's agreement set forth in Section 4.2 hereof. In that regard,
Buyer retains sole responsibility for any Liabilities to the Transferred
Employees under the Worker Adjustment and Retraining Notification Act ("WARN")
and agrees to hold Seller harmless from and against any Liabilities arising
therefrom relating to the Transferred Employees.
4.4 HEALTH CARE (a) Buyer shall be responsible for providing
health care continuation coverage as required by the Consolidated Omnibus
Reconciliation Act of 1985 ("COBRA") to any Transferred Employees who are
employed by Buyer on and after the Interim Employment Period Termination Date
and who terminated employment after the Interim Employment Period Termination
Date.
(b) Buyer will waive any pre-existing condition restrictions
for Transferred Employees under Buyer's welfare plans to the extent the
Transferred Employee has satisfied the pre-existing condition restriction in the
Seller's welfare plans. Claims for expenses incurred by Transferred Employees or
their dependents prior to the Interim Employment Period Termination
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15
Date shall be covered by Seller's welfare plans and claims for expenses incurred
by Transferred Employees or their dependents on or after the Interim Employment
Period Termination Date shall be covered by Buyer's welfare plans.
4.5 PAST SERVICE AND VACATIONS. Transferred Employees will
receive credit for Past Service (as hereinafter defined) in determining vacation
entitlement under Buyer's applicable vacation policy. "PAST SERVICE" means
service (i) as an employee of Seller or Seller's affiliates and (ii) as an
employee of predecessor companies prior to the acquisition of the Business by
Seller, but only to the extent that such service is continuous through the
Closing Date; PROVIDED, HOWEVER, that in no event shall Buyer be required to
provide or recognize past service for any period of service not recognized under
Seller's Plans. Buyer will give credit to Transferred Employees for earned but
unused vacation and/or accrued vacation (determined as of the Interim Employment
Period Termination Date). Buyer shall have no obligation to make any cash
payment in lieu of earned, but unused, or accrued vacation to any Transferred
Employee. For purposes of this Section 4.5, "EARNED" vacation shall mean
vacation earned under Seller's vacation policy with respect to service in 1998
but to be taken in 1998, while "ACCRUED" vacation shall mean vacation accrued
under Seller's vacation policy with respect to service in 1997 but available
only in 1998.
4.6 BONUSES. Schedule 4.6 sets forth the amounts by employees
of the bonuses earned and accrued on the books of the Division by the salaried
employees of the Division as of September 30, 1997. At Closing, Seller shall
deliver to Buyer an update to Schedule 4.6 setting forth the amounts of such
bonuses accrued as of the Closing Date. Seller shall pay the 1997 bonuses in the
ordinary course of business prior to March 31, 1998, and Buyer shall reimburse
Seller for the portion of such bonuses earned from the Closing Date through
December 31, 1997, together with all taxes and other amounts payable in
connection with such portion, in accordance with the procedures set forth for
the reimbursement of salary and benefits in the Transition Services Agreement.
4.7 EMPLOYEE BENEFIT PLANS. (a) Except as otherwise expressly
provided herein, Seller shall retain all assets (including any plan
overfundings) and all liabilities and obligations in respect of benefits,
contributions or premiums accrued or incurred prior to the Interim Employment
Period Termination Date by employees of Seller related to the Division
(including Transferred Employees) under (i) any Seller Plans (as defined in
Article 5.15 hereof), (ii) any group life, accident, medical, dental or
disability plan or similar arrangement or (iii) any worker's compensation
arrangements, and Buyer shall not have any liability with respect thereto. No
assets of any of Seller's Plans shall be transferred to Buyer or to any plan of
Buyer. Seller shall cause all of Seller's Plans that are pension plans (as
defined in Section 3(2) of ERISA) to be amended to provide that the accrued
benefits as of the Interim Employment Period Termination Date of all Transferred
Employees and their beneficiaries shall be vested as of the Interim Employment
Period Termination Date and Seller agrees that any comparable plans established
by Buyer shall
<PAGE>
16
provide that any benefits payable under Buyer's plans shall be reduced by any
benefits payable or due under Seller's Plans.
(b) Except as otherwise provided in this Article IV, Buyer
will recognize all service of the Transferred Employees with the Seller and its
affiliates, only for purposes of eligibility to participate in, and vesting
under, any plans or other benefit arrangements of Buyer within the meaning of
Section 3(3) of ERISA, in which the Transferred Employees participate.
4.8 ADDITION TO ASSUMED LIABILITIES. The Liabilities to be
assumed by Buyer as of the Interim Employment Period Termination Date pursuant
to this Article IV, including those set forth in Article 4.2(b) hereof, and the
Transaction Services Agreement shall as of such date become for all purposes
"Assumed Liabilities" as defined in this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SELLER
Seller hereby represents and warrants to Parent and Buyer
that:
5.1 ORGANIZATION AND CORPORATE POWER. (a) Seller is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware. Seller has all requisite power and authority to
own, lease and operate the Assets and to conduct the Business. Seller has full
corporate power and authority to enter into and perform this Agreement and each
Ancillary Agreement.
(b) Each affiliate of Seller has all requisite power and
authority to enter into and perform any Ancillary Agreements to which such
affiliate is a party.
5.2 DUE AUTHORIZATION; NO BREACH. The execution, delivery and
performance by Seller of this Agreement and by Seller and its affiliates of each
Ancillary Agreement to which Seller or such affiliate is a party and the
transactions contemplated hereby and thereby have been approved by the Board of
Directors of each of Seller and Seller's relevant affiliates and no further
action is required to be taken by any of Seller and such affiliates in order to
execute, deliver and perform this Agreement and any of the Ancillary Agreements
to which Seller or such affiliate is a party and to transfer the Assets to
Buyer. This Agreement is a valid and legally binding obligation of Seller,
enforceable against it in accordance with its terms subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors rights and remedies generally, and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in equity), and each
Ancillary Agreement and other agreement or instrument contemplated by this
Agreement, when
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17
executed and delivered by any of Seller or its affiliates in accordance with the
provisions thereof, will be a valid and legally binding obligation of each of
Seller and any affiliate which is a party thereto, enforceable against each such
party in accordance with its terms subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors rights and remedies generally, and subject, as to enforceability, to
the effect of general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity). All persons who have executed
this Agreement on behalf of Seller, or who will execute on behalf of Seller or
any affiliate of Seller, any agreement or instrument contemplated by this
Agreement, have been duly authorized to do so by all necessary corporate action.
Neither the execution and delivery of this Agreement, any Ancillary Agreement to
which Seller or any affiliate of Seller is a party and the other agreements and
documents to be executed or delivered pursuant hereto, nor the consummation of
the transactions contemplated hereby and thereby, will (i) violate, or conflict
with, any provision of the articles of incorporation or by-laws (or other
governing documents) of Seller or any of its affiliates, (ii) violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event of default which with notice or lapse of time or both would
become a default) under, or result in the termination (or grant a right of
termination) of, cancellation, amendment or accelerate (or grant the right to
accelerate) the performance required by, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the Assets under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, agreement, lease, Permit or other material instrument to which
Seller or any of its affiliates is a party or by which they or any of the Assets
are bound or (iii) violate, or conflict with, any order, writ, injunction,
arbitration award, judgment or decree of any court, governmental body or
arbitrator applicable to Seller or any applicable statute, law, rule or
regulation, except, in the case of clause (ii) or (iii), as would not have a
Material Adverse Effect (as defined in Article 5.3).
5.3 REAL PROPERTY. (a) Schedule 5.3(a) attached hereto is a
true and complete list of all real property owned by Seller or its affiliates
and used in the conduct of the Business (other then Seller's Matawan, New Jersey
property, which is an Excluded Asset) (collectively, the "Owned Real Property";
the Owned Real Property and the Leased Real Property are hereinafter
collectively referred to as the "Real Property"). Legal descriptions of such
Real Property and the most recent title reports or policies with respect to each
Owned Real Property have previously been delivered to Buyer. Seller is (and at
Closing Buyer shall be) the sole owner of good, valid, fee simple, indefeasible,
sufficient and marketable title to the Owned Real Property, including, without
limitation, all easements or rights of ways granted to Seller and all buildings,
structures, fixtures, and improvements located thereon, in each case free and
clear of all pledges, security interests, liens, mortgages, encumbrances,
equities, claims, reservations, third party rights or obligations (including,
without limitation, third party leases or subleases, easements, rights of way or
other commercial or governmental use restrictions) of any nature (collectively,
"Encumbrances"), except (i) as expressly set forth on Schedule 5.3(a), (ii)
Encumbrances described in clauses (ii) and (v) of Article 5.5 hereto, (iii)
Encumbrances which, individually or in the aggregate, do not materially detract
from the value of the Assets or result in a material
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18
adverse effect on the business, financial condition or results of operations of
the Division or the Assets or have a material adverse effect on the ability of
any of Seller and its affiliates to perform Seller's and such affiliates'
obligations hereunder or under any Ancillary Agreement (each of such effects is
herein called a "Material Adverse Effect") and (iv) Encumbrances created by, or
arising as a result of the ownership of the Assets by, Buyer (clauses (i), (ii),
(iii) and (iv), collectively, the "Real Property Encumbrances"). There are no
brokerage or leasing commissions pertaining to the Owned Real Property which
have not been fully paid.
(b) Schedule 5.3(b) attached hereto is a true and complete
list of all agreements (together with any amendments thereof, collectively, the
"Real Property Leases") pursuant to which Seller leases, subleases or otherwise
occupies (whether as landlord, tenant, subtenant or other occupancy arrangement)
any real property included in the Assets (collectively, the "Leased Real
Property"), and true and complete copies of the Real Property Leases have
previously been delivered to Buyer. With respect to each Real Property Lease,
except as set forth on Schedule 5.3(b), (i) each Real Property Lease is a valid
and subsisting agreement in full force and effect and constitutes a valid and
binding obligation of Seller and, to Seller's Knowledge (as defined below), of
any other party thereto, and is legally enforceable against Seller and, to
Seller's Knowledge, any other party thereto, (ii) each such Real Property Lease
may be assigned by Seller without the consent of any other party and without
resulting in an increase in rent or penalty to the tenant or an early
termination, (iii) Seller has not received any written notice from the other
party to such lease of the termination thereof or alleging a default by Seller,
(iv) there is no material default or event which, with notice or lapse of time
or both, would constitute a material default on the part of Seller (nor, to
Seller's Knowledge, on the part of any other party thereto) under any such
lease, (v) Seller has not transferred, assigned, hypothecated, pledged or
encumbered any of its rights or interest thereunder, and (vi) Seller has, and
immediately after the Closing, Buyer will have, good, valid and enforceable
title to the leasehold estate in the Leased Real Property, free and clear of any
Encumbrance of any nature, except for Encumbrances listed on Schedule 5.3(a) or
which, individually or in the aggregate, would not have a Material Adverse
Effect and except for Encumbrances created by, or arising as a result of the
ownership of the Assets by, Buyer. For the purposes of this Agreement, "Seller's
Knowledge" shall mean any fact or set of facts of which Craig Hunt, Regina Wyse,
Kevin Kerchner, Paula Thomann, Ted Udell, Jim McGuire and any general manager,
plant manager or controller or sales manager employed by the Division have
actual knowledge.
(c) Seller has obtained all easements and rights of way
required from all governmental jurisdictions or from private parties for the
normal use and operation of the Business on the Owned Real Property as
heretofore conducted.
(d) There is no pending or, to Seller's Knowledge, threatened
condemnation, expropriation, eminent domain or similar proceeding affecting any
of the Real Property and Seller has not received any written notice of any of
the same.
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19
(e) Each Owned Real Property and, to Seller's Knowledge, each
Leased Real Property and all buildings, structures, fixtures and improvements on
each Owned Real Property and, to Seller's Knowledge, each Leased Real Property,
and all use of any thereof by Seller, conform with all applicable building,
zoning, subdivision, land use, fire and other laws pertaining to or affecting
real property, except where the failure to so conform would not have a Material
Adverse Effect. Each occupied Owned Real Property and, to Seller's Knowledge,
each occupied Leased Real Property is occupied under a valid and existing
certificate of occupancy for such Real Property. Seller has taken all corrective
action indicated in all written notices or orders to Seller to correct
violations of laws issued by any governmental authority having jurisdiction
against or affecting the Real Property. The Real Property is not in violation of
any restrictive covenant, condition, restriction or limitation which would have
a Material Adverse Effect or a material adverse effect on the use thereof as
currently utilized.
(f) No Owned Real Property is subject to any contract or other
restriction of any nature whatsoever (recorded or unrecorded) preventing or
limiting the right of Seller to convey or use it as currently operated.
(g) All Real Property and the improvements thereon are
supplied with the utilities necessary for the operation of such facilities as
currently operated.
(h) Seller has not received written notice of any special
assessment relating to any Real Property or any portion thereof, and, to
Seller's Knowledge, there are no pending or threatened special assessments.
(i) Seller has furnished Buyer with all non-privileged
environmental, engineering or other studies or reports prepared for Seller since
January 1, 1992 which primarily deal with the ownership, operation, maintenance
or management of the Real Property.
5.4 PERSONAL PROPERTY. (a) Except as disclosed or provided
for in this Agreement or any Exhibit or Schedule 5.4 attached hereto, and except
for dispositions of assets after the date hereof and prior to the Closing in
accordance with the terms of this Agreement, all of the fixtures, plants,
buildings, improvements, machinery, equipment, vehicles, construction in
progress and other tangible personal property referred to in Articles 1.1(c) and
1.1(d) hereof are located on the Real Property. Except for goods in transit and
as disclosed or provided for in this Agreement or any Exhibit or Schedule 5.4
attached hereto, all of the Inventory is located on the Real Property.
(b) All of the fixtures, plants, buildings, structures and
improvements on the Real Property and all machinery, equipment, vehicles and
other tangible personal property included in the Assets have no material
defects, are in normal operating condition and repair, except for immaterial
exceptions, and have been reasonably maintained consistent with standards
generally followed in the industry (giving due account to the age and length of
use of same, ordinary wear and tear excepted).
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20
5.5 TITLE AND CONDITION OF ASSETS; ENTIRE BUSINESS. (a) Seller
has good and marketable title to, or holds by valid and existing lease or
license, all of the Assets and will transfer same to Buyer at the Closing.
Except for Encumbrances created by, or arising as a result of the ownership of
the Assets by, Buyer, the Assets (other than the Real Property) are free and
clear of all Encumbrances, except:
(i) Encumbrances reflected on or reserved against in the
balance sheet included in the Financial Statements;
(ii) taxes and general and special assessments not in default
and payable without penalty or interest;
(iii) Encumbrances which, individually or in the aggregate, do
not have a Material Adverse Effect;
(iv) Encumbrances of public record;
(v) inchoate mechanic's and material men's liens for
construction in progress and workmen's, repairmen's, warehousemen's and
carrier's liens arising in the ordinary course of business; and
(vi) Encumbrances set forth on Schedule 5.5 hereto.
(b) Encumbrances referred to in paragraphs (i), (ii), (iii),
(iv), (v) or (vi) of Article 5.5(a) hereof are collectively referred to as
"Permitted Encumbrances".
(c) The Assets, together with the rights of Buyer under the
Ancillary Agreements, are sufficient to allow Buyer to conduct the Business
substantially in the same manner and to substantially the same extent as
heretofore conducted by Seller.
5.6 CONSENTS. Schedule 5.6(a) hereto sets forth all actions,
approvals, permits, consents or authorizations, including but not limited to any
action, approval, consent or authorization by any third party, financial
institution, governmental or quasi-governmental agency, commission, board,
bureau or instrumentality, required to be obtained by any of Seller and its
affiliates in order to consummate the transactions contemplated hereby and in
order for Buyer to continue the conduct of the Business after the Closing,
including, without limitation, (i) the expiration of any applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act")
and (ii) consents required to transfer or assign any Contracts or Permits (as
defined in Article 5.8) to Buyer. Schedule 5.6(b) identifies those items set
forth in Schedule 5.6(a) that are conditions to Closing pursuant to Article
8.2(e) hereof.
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21
5.7 COMPLIANCE WITH LAWS. Except (i) as set forth in Schedule
5.7 hereto and (ii) as to Environmental Laws, which are covered by Section 5.9
hereof, Seller is not , with respect to the conduct of the Business or the use
of the Assets, in default under or in violation of any federal, state or local
statute, law, ordinance, regulation, rule, judgment, order or decree which would
give rise to a material liability.
5.8 PERMITS AND LICENSES. Schedule 5.8 attached hereto sets
forth all governmental licenses, permits, franchises and other governmental
authorizations (collectively "Permits") which are issued to, held or used in
relation to the Business by Seller or for which Seller has applied, including
the dates of issuance and expiration or of application as the case may be, and,
except as set forth on Schedule 5.8 hereto, there are no other governmental
licenses, permits, franchises or authorizations which are material to the
Business. Except as set forth on Schedule 5.8 hereto and for environmental
matters, which are exclusively addressed in Article 5.9, within the past 24
months, Seller has not received any written warning, notice of violation or
probable violation, notice of revocation or other written communication from or
on behalf of any governmental entity, which violation has not been corrected or
otherwise settled, alleging (i) any material violation of any Permit relating to
the Division, (ii) that Seller needs a Permit material to the Business not
currently held by Seller in order to conduct the Business or (iii) any current
material violation, with respect to the conduct of the Business or the use of
the Assets, of any federal, state, county, local or foreign laws, ordinances,
regulations or orders.
5.9 ENVIRONMENTAL CONDITIONS. Except as disclosed on Schedule
5.9, in connection with the Business, the Assets (excluding the Excluded Assets)
or the Division,
(a) Seller holds, and is in compliance with, all Environmental
Permits (as defined below) and is otherwise in compliance with all applicable
Environmental Laws (as defined below), except for such failures to be in
compliance which individually or in the aggregate will not have a Material
Adverse Effect. Except as identified on Schedule 5.9(a) hereto, no modification,
revocation, reissuance, alteration, transfer, or amendment of the Environmental
Permits, or any review by, or approval of, any third party of the Environmental
Permits is required in connection with the execution or delivery of this
Agreement or the consummation of the transactions contemplated hereby or the
continuation of the Business following such consummation assuming the Business
is conducted as heretofore conducted. To Seller's Knowledge, there is no
condition that could prevent or interfere with continued material compliance
with Environmental Laws, assuming the Business continues to be conducted as
presently conducted and the Assets used as presently used. For purposes of this
Agreement, "Environmental Permits" shall mean all permits, licenses,
registrations and other governmental authorizations required under Environmental
Laws for the Seller to conduct the Business and "Environmental Laws" shall mean
any and all foreign, federal, state, local or municipal laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, requirements of any
governmental authority, or requirements of law (including, without
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22
limitation, common law) now in effect relating in any manner to contamination,
pollution, or protection of the environment;
(b) Since January 1, 1994, Seller has not received any written
notice of any Environmental Claim (as hereinafter defined) and, to Seller's
Knowledge, no such Environmental Claim is, or has been since January 1, 1994,
threatened. For purposes of this Agreement, "Environmental Claim" means any
notice, claim, demand, action, suit, complaint, proceeding or other
communication by any third person alleging liability or potential liability
(including, without limitation, liability or potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resource damages, property damage, personal injury, fines or penalties) arising
out of, relating to, based on or resulting from (x) the presence, discharge,
emission, release or threatened release of any Hazardous Materials (as
hereinafter defined) at any location, or (y) circumstances forming the basis of
any violation by Seller of any Environmental Laws, including, but not limited
to, any violations by Seller of any applicable Environmental Permits, in each
case which would reasonably be expected to result in material liability under
Environmental Laws. For purposes of this Agreement, "Hazardous Materials" means
any and all hazardous or toxic substances, wastes, materials or chemicals,
petroleum (including crude oil or any fraction thereof) and petroleum products,
asbestos and asbestos-containing materials, pollutants, contaminants,
polychlorinated biphenyls and any and all other materials and substances
regulated pursuant to any Environmental Laws or that could result in the
imposition of liability under any currently applicable Environmental Laws;
(c) Since January 1, 1994, Seller has not entered into, has
not agreed to, and has not received any written notice that it is subject to any
judgment, decree or order of any governmental authority under any Environmental
Laws, including, without limitation, relating to compliance or to investigation,
cleanup, remediation or removal of Hazardous Materials;
(d) To Seller's Knowledge, Hazardous Materials have not been
generated, transported, treated, stored, disposed of, arranged to be disposed
of, released or threatened to be released at, on, from or under any of the
Assets in violation of, or in a manner or, to Seller's Knowledge, to a location
that would reasonably be expected to give rise to material liability relating to
the Business under, any Environmental Laws;
(e) To Seller's Knowledge, there are no (r) underground or
aboveground storage tanks, (s) polychlorinated biphenyls, (t) asbestos or
asbestos-containing materials, (u) Hazardous Materials, (v) urea-formaldehyde
insulation, (w) sumps, (x) surface impoundments, (y) landfills or (z) sewer or
septic systems currently or formerly present at or about any of the Assets which
presently constitute a violation of any Environmental Law would reasonably be
expected to give rise to material liability under any Environmental Laws;
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23
(f) The Seller has not assumed, contractually or, to Seller's
Knowledge, by operation of law, any liabilities or obligations of third parties
under any Environmental Laws that concern the Business.
5.10 PRODUCT SAFETY. To Seller's Knowledge, each of the
products produced or sold by Seller in connection with the Business is, and at
all times up to and including the sale thereof has been, in compliance in all
material respects with all applicable federal, state, local and foreign laws and
regulations relating to safety.
5.11 EMPLOYEE RELATIONS. Except as disclosed in Schedule 5.11
attached hereto, Seller does not have any agreements with labor unions or
associations representing any employees of the Division. There is neither
pending nor, to Seller's Knowledge, threatened any strike, slowdown, picketing,
work stoppage or labor trouble or other occurrence, event or condition of a
similar character in which the employees of the Division are participating or,
to Seller's Knowledge, have threatened to participate, and the Division has not
experienced such labor controversy since January 1, 1994. There is no material
unfair labor practice charge or complaint pending or, to Seller's Knowledge,
threatened against the Division. No representation question exists or, to
Seller's Knowledge, has been raised since January 1, 1994, respecting any of the
Division's employees nor to Seller's Knowledge are there any campaigns being
conducted to solicit cards from employees of the Division to authorize
representation by any labor organization. The Seller has paid in full to all
employees of the Division all wages, salaries, commissions, bonuses, benefits
and other compensation, except as provided in Article 4.6, which are required to
be paid to such employees or otherwise arising under any policy, practice,
agreement, plan, program, statute or other law. Except as set forth on Schedule
5.11 attached hereto, Seller does not have any consultant agreements or
contracts of employment in connection with the Division and, from December 31,
1996 to the date hereof Seller has not made any commitment or agreement to
increase the wages or to materially modify the conditions or terms of employment
of any of the employees of the Division. The Seller has not closed any plant or
facility of the Division, except as set forth in Schedule 5.11, effectuated any
layoffs of employees of the Division at a single employment site during any
30-day period for at least ten percent of the employees or at least twenty
employees (whichever is less), or implemented any early retirement, separation
or window program applicable to employees of the Division since January 1, 1994,
nor has the Seller planned or announced any such action or program for the
future relating to the Division. Assuming compliance by Buyer with Article 4.1
hereof, the Seller is in compliance with its obligations pursuant to the Worker
Adjustment and Retraining Notification Act of 1988 and, except as set forth on
Schedule 5.11 hereto, all other notification and bargaining obligations arising
under any collective bargaining agreement, statute or otherwise relating to the
Division.
5.12 LITIGATION, CLAIMS AND PROCEEDINGS. Except as set forth
in Schedule 5.12 attached hereto, there are no judgments, orders, writs or
injunctions of any federal, state or local court or governmental authority
presently pending or, to Seller's Knowledge, threatened against Seller relating
to the Business or by which the Assets are or would be bound, and there are no
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24
lawsuits, actions, arbitrations, claims, governmental proceedings or notices of
violation presently pending or, to Seller's Knowledge, threatened to which
Seller is a party (as plaintiff, defendant or otherwise) which relate to the
Business, except for routine litigation, claims or proceedings (including,
without limitation, product liability and warranty claims or litigation, and
workers compensation claims) in which the amount in controversy does not exceed
$50,000 for any individual matter or $250,000 in the aggregate for any related
matters. Except as set forth on Schedule 5.12 hereto, to Seller's Knowledge,
there are no facts which could reasonably be expected to give rise to any
action, suit, proceeding, inquiry or investigation which could, if adversely
decided, have a Material Adverse Effect on the Division.
5.13 INTELLECTUAL PROPERTY. (a) Schedule 5.13(a) attached
hereto sets forth all Intellectual Property owned or used by Seller in the
conduct of the Business as heretofore conducted and the nature of Seller's
rights therein. For all Intellectual Property owned by a third party and used by
Seller in the conduct of the Business pursuant to a license or other agreement,
all such licenses or agreements are, to the Seller's Knowledge, in force and
assignable to Buyer. If specific disclosure on Schedule 5.13(a) would jeopardize
or impair the value or validity of any Intellectual Property, such Intellectual
Property is described generally thereon.
(b) Except as set forth on Schedule 5.13(a), (i) Seller owns
or has a valid license to use all Intellectual Property necessary to conduct the
Business and such Intellectual Property is valid, subsisting, unexpired,
enforceable, free of all Encumbrances, has not been abandoned by Seller, and, to
Seller's Knowledge, does not infringe or otherwise impair the intellectual
property rights of any third party; (ii) none of the Intellectual Property owned
or used by the Division is the subject of any license, security interest or
other agreement granting rights therein from Seller to any third party; (iii) no
judgment, decree, injunction, order or agreement is in effect which would limit,
cancel or question the validity of, or Seller's rights in and to, any
Intellectual Property used in the conduct of the Business; and (iv) no suit,
action, proceeding or investigation is pending or, to Seller's Knowledge,
threatened that seeks to limit, cancel or question the validity of, or Seller's
rights in and to, any Intellectual Property used in the conduct of the Business.
(c) Seller specifically warrants that the Assets (i) contain
all Intellectual Property for which improper or unauthorized disclosure would
jeopardize or impair its value or validity ("Trade Secrets") owned, possessed,
licensed and/or used by Seller in the conduct of the Business and (ii) to
Seller's Knowledge, constitute all those Trade Secrets necessary to conduct the
Business as heretofore conducted. Except as set forth on Schedule 5.13(c),
Seller is the owner of all Trade Secrets used in the conduct of the Business,
and where Seller does not own any Trade Secret, Seller is the licensee thereof
and all applicable license agreements are in force and assignable to Buyer.
5.14 CONTRACTS. (a) Schedule 5.14 attached hereto lists as of
the date hereof all written contracts, agreements, commitments and personal
property leases and includes summaries
<PAGE>
25
of all oral arrangements which relate to the Business and, with respect to both
oral and written arrangements, which meet the criteria specified in the
paragraphs below:
(i) involve future expenditures or receipts or other
performance with respect to goods or services having a total value in excess of
$50,000;
(ii) involve a lease, sublease, installment purchase or
similar arrangement for the use of property which involves a total consideration
in excess of $50,000;
(iii) contain any severance pay obligations or payments to
employees due as a result of the consummation of the transactions contemplated
hereby;
(iv) compel the employment of any person in the status of
"employee";
(v) involve a consulting relationship which involve total
consideration in excess of $50,000 during the term of such agreement;
(vi) any agreement with or for the benefit of any affiliate of
Seller other than Ancillary Agreements;
(vii) involves the handling, treatment, storage,
transportation, recycling, reclamation or disposal of wastes or substances
except for oral arrangements with suppliers that are not material;
(viii) contain commitments of suretyship, guaranty or
indemnification (except for guarantees, warranties and indemnities provided by
Seller in respect of its products in the ordinary course of business);
(ix) involve the development of any of the Real Property or
provide for improvements thereto;
(x) relate to the disposition or acquisition since January 1,
1992 of the assets or stock of, or any interest in, any business enterprise;
(xi) involve payments to or by Seller in respect of the
Business over the term in excess of $50,000 or which may not be terminated on 60
days or less notice without penalty; or
(xii) contain an indenture, mortgage, pledge, credit (other
than credit terms offered to customers in the ordinary course of business), or
other financing commitment for the borrowing or lending of funds from or to any
person.
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26
(b) Except as otherwise indicated in any Schedule or Exhibit
attached hereto, with respect to the contracts listed in Article 5.14(a) above,
(i) Seller is not in default of any material obligation under any of such
contracts, (ii) to Seller's Knowledge, no other party to any of such contracts
is in default of any material obligation thereunder and (iii) there does not
exist under any provision thereof any event that, with the giving of notice or
the lapse of time or both, would constitute a material default thereunder,
except for the failure to obtain any necessary consents.
5.15 BENEFIT PLANS. (a) Schedule 5.15 contains a true and
complete list of each "employee benefit plan" of the Seller (within the meaning
of section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), (including, without limitation, multiemployer plans within
the meaning of ERISA Section 3(37)), stock purchase, stock option, severance,
employment, change-in-control, fringe benefit, collective bargaining, bonus,
incentive, deferred compensation and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject to
ERISA (including any funding mechanism therefor now in effect or required in the
future as a result of the transaction contemplated by this Agreement or
otherwise), whether formal or informal, oral or written, legally binding or not
under which any employee or former employee of the Division has any present or
future right to benefits or under which Seller has any present or future
liability which relate to the Division. All such plans, agreements, programs,
policies and arrangements shall be collectively referred to as the "Seller
Plans".
(b) With respect to each Seller Plan, Seller has delivered to
the Buyer or its representative a current, accurate and complete copy (or, to
the extent no such copy exists, an accurate description) thereof and, to the
extent applicable, (i) any related trust agreement, annuity contract or other
funding instrument; (ii) the most recent determination letter if applicable;
(iii) any summary plan description and other written communications (or a
description of any oral communications) by the Seller to its employees
concerning the extent of the benefits provided under a Seller Plan; and (iv) for
the three most recent years (I) the Form 5500 and attached schedules; (II)
audited financial statements; (III) actuarial valuation reports; and (IV)
attorney's response to an auditor's request for information.
(c) (i) Each Seller Plan has been established and administered
in accordance with its terms, and in compliance in all material respects with
the applicable provisions of ERISA, the Code and other applicable laws, rules
and regulations; and (ii) each Seller Plan which is intended to be qualified
within the meaning of Code section 401(a) is so qualified and has received a
favorable determination letter as to its qualification and nothing has occurred,
whether by action or failure to act, that could reasonably be expected to cause
the loss of such qualification.
(d) Seller is not a party to, or obligated to contribute to,
any multiemployer plan (within the meaning of ERISA section 4001(a)(3)) with
respect to the employees of the Division.
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27
5.16 FINANCIAL STATEMENTS. (a) Attached hereto as Schedule
5.16 are (i) the unaudited balance sheet of the Business as of December 31, 1996
and the related unaudited statement of operations and statement of cash flows
for the Business for the fiscal year ended December 31, 1996 and (ii) the
unaudited balance sheet of the Business as of June 30, 1997 and the related
unaudited statement of operations and unaudited statement of cash flows for the
Business for the six months ended June 30, 1997 (collectively, clauses (i) and
(ii) are referred to herein as the "Financial Statements"). The Financial
Statements present fairly in all material respects the financial position and
results of operations of the Business as of the date or for the periods set
forth therein and, except as set forth on Schedule 5.16 hereto, were prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied during the periods set forth therein.
(b) Except (i) as specifically disclosed herein or in the
Schedules hereto, (ii) as reflected, reserved against or otherwise expressly
disclosed in the Financial Statements or (iii) for liabilities and obligations
or changes in assets incurred in accordance with the provisions of this
Agreement, since December 31, 1996, the Business has not had and will not have
any change in assets, liabilities or obligations that would be required to be
reflected on a balance sheet for the Business prepared in accordance with GAAP
consistently applied during the period set forth therein.
(c) The accounts and notes receivable of the Business,
including intercompany receivables, as of the date of the Closing will represent
valid claims, incurred in the ordinary course of business and consistent with
past practice, and no counterclaims or offsetting claims with respect to such
receivables shall be pending or, to the Seller's Knowledge, threatened as of the
date of the Closing other than customer credits arising in the ordinary course
of business and consistent with past practice.
(d) The inventories reflected on the Financial Statements
(except the inventories which have been sold or disposed of in the ordinary
course of business since the dates thereof and except for excess and obsolete
inventory which has been written off) and the inventories thereafter acquired or
manufactured in connection with the Business and not subsequently sold or
disposed of in the ordinary course of business do, and the inventories as of the
Closing Date will, consist of items of a quality and quantity which in the
aggregate are (i) usable in the ordinary course of the Business or (ii) saleable
in the ordinary course of the Business at net realizable values (i.e., normal
selling price less all applicable discounts, commissions and shipping costs) not
less than their respective book value amounts. Inventory on the Financial
Statements is, and Inventory as of the Closing Date will be, except for obsolete
and below-standard quality inventory described below, stated at the lower of
cost (determined by the FIFO method) or market in accordance with GAAP,
consistently applied. The value of excess and obsolete inventory and inventory
of below standard quality reflected on the Financial Statements has been, and as
of the Closing Date will be, written down to net realizable marketable value or
written off or adequate reserves in accordance with GAAP, consistently applied,
have been provided therefor. The
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inventory on hand is, and as of the Closing Date will be, at levels consistent
with expected customer demand and consistent with past practice.
5.17 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in Schedule 5.17 hereto, since December 31, 1996, the Business has been
conducted only in the ordinary course consistent with past practice and there
has not been:
(a) any event, occurrence or state of circumstances or facts
which has resulted in a Material Adverse Effect;
(b) any material damage or destruction of any of the Assets;
(c) any disposition by Seller of any assets relating to the
Business other than in the ordinary course of business consistent with past
practice;
(d) except in the ordinary course of business consistent with
past practice, any increase in, or commitment or plan adopted to increase, the
wages, salaries, compensation, pension or other benefits or payments to
employees of the Division;
(e) any change in accounting methods, principles or practices
of Seller relating to the Division except for any such change after the date
hereof required by reason of a concurrent change in generally accepted
accounting principles; or
(f) the agreement of Seller or any of its respective
affiliates to do any of the foregoing, except as otherwise expressly
contemplated hereby and by the Ancillary Agreements.
5.18 INSURANCE. The properties and assets of Seller which are
of an insurable character and are used or useful in the Business are insured
against loss or damage by fire or other risks, and Seller maintains liability
insurance, to the extent and in the manner and covering such risks as is
customary for companies engaged in a business similar to the Business or owning
assets similar to the Assets. The coverage under each such policy and binder is
in full force and effect, and no notice cancellation or nonrenewal with respect
to any such policy or binder has been received by Seller. Schedule 5.18 lists
insurance maintained by Seller on the Assets and with respect to the employees
and representatives of the Business and the operations of the Business.
5.19 AFFILIATE TRANSACTIONS. Except as set forth in Schedule
5.19, there are no agreements, arrangements, undertakings or other transactions
between the Business and any other division or business of Seller or any
affiliate of Seller.
5.20 TAX MATTERS. All Tax Returns required to be filed by
Seller on or before the Closing Date with respect to the Business or its
activities, properties or employees have been or shall be timely filed and all
Taxes which are due on such returns have been or shall be timely
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29
paid or accrued within the prescribed period, including any extension thereof.
There are no Liens upon any of the Assets in respect of Taxes except for Liens
for current Taxes that are not yet due and payable. All Taxes required to be
withheld by Seller with respect to the Business or its activities, properties or
employees have been withheld and paid over to the appropriate Tax authority.
Seller (or any predecessor of Seller) is not a party to and has not received any
notice with respect to any proposed or pending action by any governmental
authority for assessment or collection of Taxes with respect to the Business or
its activities, properties or employees, nor is Seller a party to any dispute or
threatened dispute in which action or dispute an adverse determination
reasonably could be expected to result in a foreclosure of the Assets and no
such claim for assessment or collection of Taxes has been made upon Seller.
Seller is not a "foreign person" within the meaning of section 1445 of the Code,
and Seller will furnish Buyer with an affidavit that satisfies the requirements
of section 1445(b)(2) of the Code. For purposes of this Agreement, (i) the term
"Tax" or "Taxes" shall mean all United States federal, state and local and all
foreign income, profits, franchise, gross receipts, payroll, sales, employment,
use, property, excise, value added, net worth, intangible, privilege, business,
license, transfer, estimated, stamp, alternative or add-on minimum,
environmental, withholding and any other taxes, duties, assessments or other
similar governmental charges, together with all interest, penalties and
additions imposed with respect to such amounts, (ii) the term "Tax Returns"
shall mean any return (including any consolidated combined or unitary return),
declaration, estimated, installment, report, claim for refund or information
return or statement relating to Taxes which is required to be filed with any
governmental agency or other Tax authority, including any schedule or attachment
thereto, and including any amendment thereof and (iii) the term "Tax authority"
shall mean any authority having jurisdiction over Taxes.
5.21 MATERIAL CUSTOMERS AND SUPPLIERS. Schedule 5.21 sets
forth the names of the ten suppliers of the Business to whom Seller paid the
greatest sum of money in respect of products and materials sold to the Business
and the ten customers of Business from whom Seller received the greatest sum of
money in respect of products or services provided by the Business between
January 1, 1996 and December 31, 1996.
5.22 BOOKS AND RECORDS. The financial books and records
pertaining to the Business are complete and correct in all material respects,
have been maintained in accordance with good business practice, and reflect the
basis for the financial position and results of operations of the Business set
forth in the Financial Statements.
5.23 DISCLOSURE. This Agreement and the related Schedules
hereto contain no untrue statement of any material fact nor omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
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30
5.24 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties made by Seller contained in this Article V shall
survive until the eighteen month anniversary of the Closing, except that those
representations and warranties contained in (i) Articles 5.9 shall survive until
the third anniversary of the Closing and (ii) Article 5.20 shall survive until
the sixtieth day following the expiration of all applicable statutes of
limitation (after giving effect to any extensions or tollings thereof).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer hereby represent and warrant to Seller that:
6.1 ORGANIZATION AND POWER. Each of Parent and Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of Parent and Buyer has full corporate power and
authority to enter into and perform this Agreement.
6.2 DUE AUTHORIZATION; NO BREACH. (a) The execution and
performance by each of Parent and Buyer of this Agreement, the Ancillary
Agreements to which it is a party and each of the other agreements contemplated
hereby and the transactions contemplated hereby and thereby has been approved by
its Board of Directors, and no further corporate action is required to be taken
by it in order to execute, deliver and perform this Agreement. Each of this
Agreement and the Ancillary Agreements to which it is a party is a valid and
legally binding obligation of each of Parent and Buyer, and each agreement or
instrument contemplated by this Agreement, when executed and delivered by Parent
or Buyer, as the case may be, in accordance with the provisions hereof, will be
a valid and legally binding obligation of Parent or Buyer, as the case may be,
in each case enforceable against Parent or Buyer, as the case may be, in
accordance with its terms subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors
rights and remedies generally, and subject, as to enforceability, to the effect
of general principles of equity (regardless of whether enforcement is considered
in a proceeding at law or in equity). All persons who have executed this
Agreement on behalf of Parent or Buyer, as the case may be, or who will execute
on behalf of Parent or Buyer, as the case may be, any agreement or instrument
contemplated by this Agreement, have been duly authorized to do so by all
necessary corporate action. Neither the execution and delivery of this
Agreement, the Ancillary Agreements and all other agreements and documents to be
executed or delivered hereunder, nor the performance and fulfillment by Parent
or Buyer, as the case may be, of all its representations, warranties, covenants
and obligations hereunder, will (i) violate, or conflict with, any provision of
Parent's or Buyer's certificate of incorporation or by-laws, (ii) violate, or
conflict with, or result in a breach of any provisions of, or constitute a
default under, or result in the termination of, or accelerate the performance
required by, or result in the creation of any
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31
Encumbrance upon any of the properties or assets of Parent or
Buyer under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, agreement, lease or other material
instrument to which Parent or Buyer is a party or by which either of them is
bound, or (iii) violate, or conflict with, any order, writ, injunction,
arbitration award, judgment or decree of any court, governmental body or
arbitrator applicable to Parent or Buyer or any statute, law, rule or
regulation, except, in the case of clause (i) or (ii), as would not have a
material adverse effect on the ability of Parent or Buyer to perform its
obligations hereunder or any Ancillary Agreement to which it is a party.
6.3 CONSENTS. Except for those permits, consents and approvals
required for the transfer of the Assets, permits of the type described in
Article 5.8, and except for the expiration of the applicable waiting periods
under the HSR Act, no action, approval, consent or authorization, including but
not limited to, any action, approval, permit, consent or authorization by any
third party, financial institution, governmental or quasi-governmental agency,
commission, board, bureau or instrumentality, is required to be obtained by
Buyer in order to consummate the transactions contemplated hereby.
6.4 FINANCING. Buyer has all funds necessary, or binding
commitments for all funds necessary (copies of which have been delivered to
Seller prior to the date hereof), to consummate the transactions contemplated by
this Agreement and Ancillary Agreements.
6.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties made by Parent or Buyer contained in this Article
VI shall survive until the second anniversary of the Closing.
ARTICLE VII
PRE-CLOSING COVENANTS
Seller hereby agrees that:
7.1 CONDUCT OF THE BUSINESS. From the date hereof until the
Closing, or termination of this Agreement in accordance with Article IX hereof,
Seller will:
(a) operate the Business only in the usual and ordinary course
of business consistent with past practice and do all acts and things as may be
necessary to preserve, protect and maintain intact the Assets and the Business
as a going concern;
(b) make payments on payables relating to the Business in a
manner consistent with past practice and collect receivables relating to the
Business in a manner consistent with past practice;
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32
(c) use reasonable efforts to preserve the business
relationships of Seller with respect to the Business;
(d) refrain from entering into any contract or renewing any
lease relating to the Business which (i) calls for payments exceeding $50,000 or
(ii) does not expire within one year or is not cancelable by Buyer within one
year without penalty, without the prior written approval of Buyer;
(e) refrain from taking any action which reasonably could be
expected to render any representation or warranty of Seller contained herein
untrue or incorrect in any material respect (except to the extent a
representation or warranty is qualified by materiality, in which case Seller
will refrain from taking any action which would render such representation or
warranty untrue or incorrect) as of the Closing;
(f) comply in all material respects with all laws applicable
to the Business, including, but not limited to, Environmental Laws;
(g) refrain from making any disposition of any assets relating
to the Business other than in the ordinary course of business consistent with
past practice;
(h) refrain from making any commitment for capital
expenditures relating to the Business in excess of $50,000 without the prior
written consent of Buyer, which consent shall not be unreasonably withheld;
(i) refrain from permitting any of the Assets owned by it to
become subject to any Encumbrances, except Permitted Encumbrances or Real
Property Encumbrances;
(j) maintain insurance as currently in effect;
(k) give Buyer a copy of any notice from any governmental or
regulatory authority or any other person alleging any violation of any rule,
regulation, law or ruling;
(l) refrain from making any change in accounting methods,
principles or practices relating to the Business; and
(m) refrain from agreeing to do any of the foregoing.
7.2 ACCESS TO BOOKS, RECORDS AND FACILITIES. Seller agrees
that prior to the Closing, Seller will permit Buyer, Parent and their
representatives full access during normal business hours and upon reasonable
notice to all of their respective plants, properties, books, contracts, records
and employees used in or relating to the conduct of the Business and will
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33
furnish Buyer, Parent and their representatives during such period, upon
reasonable notice, with all such financial, operating and other information
concerning the Assets and the conduct of the Business as Buyer, Parent or their
representatives may reasonably request.
7.3 ISRA. Seller, at its sole expense, shall comply with all
applicable requirements of the New Jersey Industrial Site Recovery Act,
including, without limitation, all requirements to undertake environmental
investigations and remediations.
7.4 BEST EFFORTS. Each Party will use all reasonable best
efforts to take all action and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (without payment of money, commencement of litigation, the assumption
of any material obligation or the entering of any agreement to divest or hold
separate any assets).
7.5 PURCHASE ORDER NO. 685-2155. Seller agrees to pay all
remaining amounts due under Purchase Order No. 685-2155 referenced in Schedule
5.12 on or prior to the Closing Date.
ARTICLE VII
CONDITIONS OF CLOSING
8.1 SELLER'S CONDITIONS. The obligations of Seller to
consummate the transactions contemplated by this Agreement are, unless waived by
Seller, subject to the fulfillment on or before the Closing, of each of the
following conditions:
(a) No statute, rule, regulation, injunction or restraining
order shall be in effect to forbid or enjoin the consummation of the
transactions contemplated by this Agreement;
(b) The transactions contemplated by this Agreement to be
completed before the Closing shall have been consummated upon the terms and
subject to the conditions set forth therein;
(c) Seller shall have received the Purchase Price and all
certificates, instruments, agreements and other documents to be delivered by
Buyer at or before the Closing as provided in this Agreement in form and
substance reasonably satisfactory to Seller;
(d) All covenants of Buyer and Parent under this Agreement to
be performed prior to the Closing shall have been performed, and the
representations and warranties of Buyer and Parent contained in this Agreement
shall be true and correct on and as of the Closing in all material respects
(except to the extent qualified by materiality in which event such
representations
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34
and warranties shall be true and correct) with the same effect as though such
representations and warranties had been made on and as of such date, except to
the extent attributable to actions permitted or consented to by Seller in
writing;
(e) All approvals, consents or authorizations or filings
listed on Schedule 5.6(b) hereto shall have been obtained, and all waiting
periods under the HSR Act shall have expired or been terminated; and
(f) Buyer and each other party thereto shall have executed and
delivered each of the Ancillary Agreements.
8.2 BUYER'S CONDITIONS. The obligations of Buyer to consummate
the transactions contemplated by this Agreement are, unless waived by Buyer,
subject to the fulfillment, on or before the Closing, of each of the following
conditions:
(a) No statute, rule, regulation, injunction or restraining
order shall be in effect to forbid or enjoin the consummation of the
transactions contemplated by this Agreement or to impose material limitations on
the ability of Buyer to effectively acquire and hold the Assets;
(b) Buyer shall have received all certificates, instruments,
agreements, and other documents to be delivered by Seller at or before the
Closing as provided in this Agreement in form and substance reasonably
satisfactory to Buyer;
(c) All covenants of Seller under this Agreement to be
performed prior to the Closing shall have been performed, and the
representations and warranties of Seller contained in this Agreement shall be
true and correct on and as of the Closing in all material respects (except to
the extent qualified by materiality in which event such representations and
warranties shall be true and correct) with the same effect as though such
representations and warranties had been made on and as of such date, except to
the extent attributable to actions permitted or consented to by Buyer in
writing;
(d) All items set forth on Schedule 5.6(b) hereto shall have
been obtained and all waiting periods under the HSR Act shall have expired or
been terminated; and
(e) Seller and each other party thereto shall have executed
and delivered each of the Ancillary Agreements.
(f) With respect to each parcel of Owned Real Property, Buyer
shall have received at Closing an owner's title insurance policy or binding
marked commitment therefor issued by a title insurance company reasonably
satisfactory to Buyer and Seller insuring the fee simple title to such property,
subject only to Real Property Encumbrances (other than those described in clause
(v) of Article 5.5 hereto).
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35
ARTICLE IX
TERMINATION; SURVIVAL
9.1 TERMINATION BY BUYER OR SELLER. Anything herein or
elsewhere to the contrary notwithstanding, this Agreement may be terminated and
the transactions contemplated hereby abandoned at any time prior to or at the
Closing by:
(a) mutual written consent of Seller and Buyer;
(b) Seller or Buyer, by written notice to the other, if the
transactions contemplated hereby are not consummated on or before the earlier to
occur of the (1) twentieth day after all items set forth on Schedule 5.6(b)
having been obtained and (2) December 31, 1997 and if the failure to consummate
such transactions on or before such date did not result from a breach of any
representation, warranty or covenant of the party seeking such termination prior
to or at the Closing; or
(c) Seller or Buyer, by written notice to the other, if a
court of competent jurisdiction or governmental, regulatory or administrative
agency or commission shall have issued an order, decree or ruling or taken any
other action, in each case permanently restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated hereby and such
order, decree, ruling or other action shall have become final and nonappealable.
9.2 SURVIVAL. If this Agreement is terminated pursuant to
Article 9.1 hereof, this Agreement shall become void and of no further force and
effect, except for the provisions of Articles 11.1(a), 13.1, 13.2 and 15.1
hereof; PROVIDED that such termination shall not relieve any party for liability
for Damages resulting from its breach of this Agreement. Promptly following
termination of this Agreement each party will destroy or return to the other
parties all documents received from such parties in connection with the
contemplated transaction, except documents which have been publicly distributed.
ARTICLE X
CLOSING
10.1 CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Simpson
Thacher & Bartlett, 425 Lexington Avenue, New York, New York as soon as
practicable after all the conditions to Closing set forth
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36
in Article VIII hereof shall be satisfied or duly waived, or at such other time
and place as Buyer and Seller may mutually agree.
10.2 SELLER'S OBLIGATIONS AND CLOSING DELIVERIES. At the
Closing, Seller shall deliver to Buyer:
(a) Bills of Sale and Assignments in recordable form for each
jurisdiction in which Assets are located substantially in the form attached as
Exhibit 1.3(b) hereto;
(b) Executed and acknowledged Assignments, each in a form
reasonably acceptable to Buyer, with respect to all Intellectual Property
identified in Schedule 5.13(a) or described in Article 1.1(i) hereof;
(c) Executed copy of each document of transfer required of
Seller with respect to the permits and licenses to be assigned or transferred at
Closing as described in Article 1.5 hereof;
(d) Special warranty deeds (or equivalent) in recordable form
and substance satisfactory to Buyer and sufficient to convey to Buyer all of
Seller's interest in the Owned Real Property free and clear of all Encumbrances,
except for Real Property Encumbrances;
(e) Such other instruments of sale, transfer, conveyance and
assignment, in form and substance reasonably satisfactory to Buyer's counsel, as
shall be effective to vest in Buyer good title, rights and interest to the
Assets (the General Assignments and other instruments referred to in Articles
10.2(a), 10.2(b), 10.2(c), 10(d) and 10.2(e) being collectively referred to
herein as the "Assignment and Assumption Instruments") and such other documents
to facilitate the transfer of the Real Property and the obtaining of title
insurance by Buyer as Buyer may reasonably request;
(f) Certified copy of the resolutions of Seller's Board of
Directors evidencing the authorizations set forth in Article 5.2 hereof;
(g) Executed copy of each of the Ancillary Agreements;
(h) Written receipt executed by Seller of payment of the
Purchase Price;
(i) Certificate of the President or any Vice President of
Seller that the conditions set forth in Article 8.2(c) hereof have been
satisfied;
(j) Opinion of Craig A. Hunt, Esq. substantially in the form
of Exhibit 10.2(j) hereto;
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37
(k) Certification of Nonforeign Status in accordance with
Internal Revenue Code Section 897 and Section 1445(b)(2) of the Foreign
Investment and Real Property Tax Act, as amended.
10.3 BUYER'S OBLIGATIONS AND CLOSING DELIVERIES. At the
Closing, Buyer shall deliver, or cause to be delivered, to Seller:
(a) The Purchase Price;
(b) Fully executed copy of each of the Assignment and
Assumption Instruments previously delivered by Seller and an executed copy of
the Assumption Agreement substantially in the form attached as 1.3(d) hereto;
(c) Certified copy of the resolutions of Buyer's and Parent's
Boards of Directors evidencing the authorization set forth in Article 6.2(a)
hereof;
(d) Executed copy of each of the Ancillary Agreements;
(e) Certificate of the President or any Vice President of
Buyer and Parent to the effect that the conditions set forth in Article 8.1(d)
have been satisfied;
(f) Opinion of Simpson Thacher & Bartlett substantially in the
form of Exhibit 10.3(f) hereto; and
(g) Opinion of Greenbaum, Rowe, Smith, Himmel & Davis
substantially in the form of Exhibit 10.3(g) hereto.
ARTICLE XI
EXPENSES AND POST CLOSING OBLIGATIONS
11.1 TAXES AND OTHER CHARGES. (a) Seller shall be responsible
for and shall pay any ad valorem real property taxes and general and special
assessments and any ad valorem personal property taxes, including any interest
or penalties thereon, which are attributable or are assessed with respect to the
operation and ownership of the Business for periods and events prior to the
Closing. Buyer will be responsible for ad valorem real property taxes and
general and special assessments and any ad valorem personal property taxes,
including any interest or penalties thereon, attributable or assessed with
respect to all periods and events on or following the Closing. Buyer is
responsible for and shall pay any rents, street surfacing and other municipal
charges, and fuel, water, sewer, electrical and other utility charges, including
any interest or penalties thereon, which are attributable to the operation and
ownership of the Business in the
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38
ordinary course and consistent with past practice for periods and events prior
to the Closing but not yet due and payable as of the Closing. Buyer will be
responsible for any such charges attributable to periods and events on or
following the Closing.
(b) Regardless of whether or not the transactions contemplated
hereby are consummated, each party to this Agreement shall pay all expenses
incurred by it or on its behalf in connection with the preparation,
authorization, execution and performance of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby, including, but not limited to, all fees and expenses of all
consultants, brokers, investment bankers, agents, representatives, counsel and
accountants engaged by such party; except that: (i) Buyer and Seller shall share
equally the costs of obtaining title insurance for the Real Property and (ii)
Buyer and Seller shall share equally any liability for all sales, transfer and
similar Taxes (including, without limitation, all recording fees and related
charges) arising from or attributable or related to the sale, transfer or
assignment to Buyer of any of the Real Property.
(c) Seller and Buyer shall cooperate regarding the filing of
any Tax Returns relating to the Business that cover a period which includes the
date of the Closing. Property Tax Returns will be filed by the party which owns
the property subject to the return on the assessment date for the property tax.
(d) Seller, at its option, shall have sole control over any
contest (including claims for refund or challenges of tax assessments) which
relates to liability for taxes during periods prior to the date of the Closing,
subject to approval of Buyer relating to any going-forward liability reasonably
likely to be imposed on Buyer or the Business thereafter for taxes. In any
event, any refunds of taxes which become available on or after the date of the
Closing but which relate to periods prior to the Closing shall belong to Seller
provided that Seller paid the taxes giving rise to the refund.
11.2 RESTRICTION. From the date of the Closing until the
fifth anniversary of the Closing, Seller shall not, and shall not permit any of
its Affiliates (as hereinafter defined) to, directly or indirectly, anywhere in
the world, (i) engage in the Restricted Business, (ii) license or permit any
person or entity to use technology or Trade Secrets hereby transferred by Seller
to Buyer or (iii) employ or solicit to hire, or otherwise receive the services
of, any Transferred Employee (x) so long as such Transferred Employee is
employed by any of Parent and its subsidiaries or their respective transferees
and assigns and (y) prior to the six month anniversary of the termination of
such employment. Nothing contained in this Section 11.2 shall prohibit, restrict
or prevent Seller or its Affiliates from consummating an acquisition transaction
even if a portion of the entity being acquired competes with the Restricted
Business, provided, that the net sales of the competitive business being so
acquired are 10% or less of the consolidated net sales of the entire business
being so acquired, and provided further, that the portion of the entity being
acquired which competes with the Restricted Business is sold by Seller and its
Affiliates on or prior to the first anniversary of the closing of the
acquisition thereof by Seller and its Affiliates. If
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Buyer (or a transferee of Buyer) transfers, directly or indirectly, by sale of
stock, merger, sale of assets or otherwise, any part of the Business to one or
more third parties, Seller's agreements in this Article 11.2 shall continue with
respect to such third party transferees and each transferee shall have the same
rights as Buyer hereunder. The parties agree that the remedy at law for any
breach of any obligation under this Article 11.2 will be inadequate and that in
addition to any other rights and remedies to which they may be entitled
hereunder, at law or in equity, Buyer and its transferees shall be entitled to
injunctive relief and reimbursement for all reasonable attorney's fees and other
expenses incurred in connection with the enforcement hereof. In the event this
Article 11.2 is held to be in any respect an unreasonable restriction upon
Seller or any of its affiliates by any court having competent jurisdiction, the
court so holding may reduce the territory to which this Article 11.2 pertains
and/or the period of time for which it operates, or effect any other change to
the extent necessary to render this Article 11.2 enforceable by such court. As
so modified Article 11.2 will continue in full force and effect. Such decision
by a court of competent jurisdiction shall not invalidate this Agreement, but
this Agreement shall be interpreted, construed and enforced as not containing
such invalidated provision. The term "Affiliates" as used in this Section 11.2
shall mean Jefferson Smurfit Group, plc ("JS Group") and any subsidiary or
affiliate (1) in which JS Group directly or indirectly beneficially owns voting
securities constituting 50.1% or more of the outstanding voting power thereof or
(2) a majority of the directors, trustees, managing partners or managing members
(or equivalent) of which are, directly or indirectly, nominees or designees of
JS Group or (3) other than Jefferson Smurfit Corporation, a Delaware
corporation, and its wholly owned subsidiaries, which JS Group directly or
indirectly otherwise controls. The term "Restricted Business" as used in this
Section 11.2 means the manufacture, sale, distribution, lease, reconditioning
and/or fleet management of plastic or steel drums or plastic or steel
intermediate bulk containers; PROVIDED HOWEVER, the manufacture, sale or
distribution of "bag in the box", which is a plastic liner inside a corrugated
or other rigid container and which is currently being manufactured, sold and
distributed by JS Group, shall not constitute "Restricted Business."
11.3 INSURANCE DATA. To the extent that, after the Closing,
either Buyer or Seller requires any information regarding claim data, payroll or
other information in order to make filings with insurance carriers relating to
the Business, Seller shall promptly supply such information to Buyer and Buyer
shall promptly supply such information to Seller.
11.4 FURTHER ASSURANCES. At any time after the Closing, the
parties agree to cooperate with one another to execute and deliver such other
documents, instruments of transfer or assignment, files, books and records and
do all such further acts and things as may be reasonably required to carry out
the transactions contemplated hereunder.
11.5 ACCESS TO BOOKS, RECORDS AND FACILITIES. Seller agrees
that on and after the Closing it will permit each of Parent and Buyer and its
representatives, during normal business hours and upon reasonable advance
notice, to have access to and to examine and make copies of (i) all books and
records of Seller (except books and records protected by attorney-client or
other
<PAGE>
40
privilege which Seller may be entitled to assert against Buyer in any pending or
threatened proceeding, suit or action) which relate to the Business to the
extent that the events reflected therein relate to transactions or events
occurring prior to the Closing or to transactions or events occurring subsequent
to the Closing which arise out of transactions or events occurring prior to the
Closing and (ii) all documents listed in the Schedules attached hereto and all
files, records and papers of any and all proceedings and matters listed in the
Schedules attached hereto. All books and records of Seller relating to the
Business will be preserved by Seller in accordance with Seller's records
retention policy, but in no event for a period of less than three years
following the Closing. Prior to any destruction or disposition by Seller of any
books and records relating to the Business, Seller will notify Buyer in writing
and Buyer shall have the right to receive and retain such books and records at
its expense. Buyer agrees that, after the Closing, it will permit, and will
cause its subsidiaries to permit, Seller and its representatives full access
during normal business hours and upon reasonable advance notice to all of its
and their respective properties, plants and facilities used in connection with
the Business, and to have access to the books and records (except records
protected by attorney-client or other privilege which Buyer or its affiliates
may be entitled to against Seller in any pending or threatened proceeding,
action or suit) of the Business, to the extent that any of the foregoing relates
to periods prior to the Closing, and is reasonably necessary in connection with
any then pending or threatened litigation, claim, liability, or judicial or
administrative matters in which Seller is involved and which involves or arises
out of the ownership or operation of the Business by Seller.
11.6 PREPARATION OF AUDITED FINANCIAL STATEMENTS. Seller
agrees that at the request of Buyer after the Closing Date Seller shall, and
shall use all reasonable efforts to cause its officers, employees and
independent public accountants to, cooperate with Buyer and Buyer's independent
public accountants, in the preparation by Buyer of audited financial statements
and notes thereto of the Business for each of the fiscal years ended December
31, 1995 and 1996 and the period ending at Closing in 1997. Buyer shall
reimburse Seller from time to time upon Seller's request (accompanied by
statements or other documentation evidencing such expenses) for all
out-of-pocket expenses and costs (including the fees and expenses of Seller's
independent public accountants) incurred by Seller in connection with the
preparation of such financial statements. Further, Buyer agrees to cooperate
with Seller as to the timing of its request so as not to burden the Seller's
internal auditing staff during periods in which they are preparing Seller's
year-end financials.
ARTICLE XIII
BULK SALES LAW
12.1 WAIVER. Buyer hereby waives compliance by Seller with any
bulk sales laws (including any applicable bulk sales provision of any state
sales tax law) which may be applicable. Seller agrees to indemnify and hold
Buyer harmless against any and all claims, losses,
<PAGE>
41
damages, liabilities, costs and expenses (including, without limitation, any
Taxes) incurred by Buyer or any of its affiliates as a result of any failure to
comply with any such bulk sales laws, except to the extent that any such claims,
losses, damages, liabilities, costs and expenses are Assumed Liabilities.
ARTICLE XIII
PUBLICITY, CONFIDENTIALITY
13.1 PUBLICITY. The Parties agree that no publicity, release
or announcement concerning the execution of this Agreement, any of the
provisions of this Agreement or the transactions contemplated hereby shall be
issued without the advance written approval of the form and content of the same
by the Parties; provided, however, that no such consent shall be required when
such disclosure is required by applicable law.
13.2 CONFIDENTIALITY. Each of Parent and Buyer confirms that
it is bound by the terms of the confidentiality agreement, dated February 3,
1997, between Seller and Russell-Stanley Corp. as if it were a signatory thereto
and that it will keep and treat the evaluation material and all other items of
confidential information provided by Seller to Parent and Buyer hereunder in
accordance with the terms of that confidentiality agreement.
13.3 NEGOTIATIONS WITH THIRD PARTIES. From the date hereof
through the Closing or, if earlier, the termination of this Agreement pursuant
to Article IX, Seller will not directly or indirectly, through any director,
employee, affiliate, representative, agent or otherwise, (i) solicit, initiate,
encourage or assist in the submission of any inquiries, proposals or offers from
any corporation, partnership, person, or other entity or group (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) (other than
Parent and Buyer, their respective associates and affiliates and officers,
partners, employees and other authorized representatives of Parent and Buyer or
such affiliates or associates) (collectively, "Persons") relating to any
acquisition or purchase of assets of, or any equity interest in, the Business or
any form of recapitalization transaction, merger, consolidation, business
combination, spin-off, liquidation or similar transaction involving, directly or
indirectly, the Business (each, an "Acquisition Proposal"), (ii) participate in
any discussions or negotiations regarding an Acquisition Proposal or furnish to
any Person any information concerning the Business or the transactions
contemplated hereby or (iii) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to make or enter into an Acquisition Proposal. Should Seller receive any
inquiry, proposal or offer to enter into any transaction of the type referred to
in clauses (i), (ii) or (iii) above, Seller will promptly inform Buyer of the
terms thereof and the identity of the party making such inquiry, proposal or
offer.
<PAGE>
42
ARTICLE XIV
NOTICES
14.1 NOTICES. Any notices or communications permitted or
required hereunder shall be deemed sufficiently given if hand-delivered, or sent
by (i) registered or certified mail return receipt requested, (ii) telecopy or
other electronic transmission service (to the extent receipt is confirmed) or
(iii) by overnight courier, in each case to the parties at their respective
addresses and telecopy numbers set forth below, or to such other address of
which any party may notify the other party in writing.
If to Seller, to
Smurfit Packaging Corporation
Jefferson Smurfit Centre
8182 Maryland Avenue
St. Louis, Missouri 63105
Attention: Michael W.J. Smurfit, Jr.
Chief Executive Officer
Telephone: (314) 746-1202
Fax: (314) 746-1288
with copies to:
Jefferson Smurfit Corporation
Jefferson Smurfit Center
8182 Maryland Avenue
St. Louis, Missouri 63105
Attention: General Counsel
Telephone: (314) 746-1100
Fax: (314) 746-1184
and
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Joseph A. Walsh, Esq.
Telephone: (312) 558-5600
Fax: (312) 558-5700
<PAGE>
43
If to Parent or Buyer, to
Russell-Stanley Holdings, Inc.
230 Half Mile Road
Red Bank, NJ 07701
Attention: President
with copies to:
c/o Vestar Capital Partners
245 Park Avenue
41st Floor
New York, New York 10167
Attention: Robert Rosner
Telephone: (212) 949-6500
Fax: (212) 808-4922
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Peter J. Gordon, Esq.
Telephone: (212) 455-2000
Fax: (212) 455-2502
ARTICLE XV
CONSULTANT FEES
15.1 BROKERS. Each of the Parties represents and warrants to
the other that, except for Parent's and Buyer's retention of Vestar Capital
Partners and PaineWebber Incorporated, whose fees and expenses shall be paid by
Parent and Buyer, no broker or finder has acted on its behalf in connection with
the transactions contemplated by this Agreement. Each of the Parties agrees to
indemnify, defend and hold the other party harmless against any claim or demand
for any commission, compensation or other payment by any other broker, finder or
similar agent claiming to have been or that was in fact employed by or on behalf
of it.
<PAGE>
44
ARTICLE XVI
MISCELLANEOUS
16.1 BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon, and inure to the benefit of, all the Parties and their respective
successors, legal representatives and assigns permitted in accordance with this
Article 16.1. Nothing herein shall create or be deemed to create any third party
beneficiary rights in any person or entity not a party hereto. No assignment of
this Agreement or of any rights or obligations hereunder may be made by any
party (by operation of law or otherwise) without the prior written consent of
the other party, and any attempted assignment without the required consents
shall be void; provided, however, that no such consent shall be required for
Buyer to assign part or all of its rights and obligations under this Agreement
prior to the Closing to one or more subsidiaries of Buyer, or after the Closing
to any third party.
16.2 EXHIBITS AND SCHEDULES. All Exhibits and Schedules
attached hereto and the documents and agreements referred to herein to be
delivered and the acts to be performed at or subsequent to the Closing
(collectively, the "Items") are incorporated herein and expressly made a part of
this Agreement as fully as though completely set forth herein.
16.3 SPECIFIC PERFORMANCE. Each of Seller and Buyer
acknowledges that the other will have no adequate remedy at law if it fails to
perform any of its obligations under this Agreement. In such event, the
performing party shall have the right, in addition to any other rights it may
have, to specific performance of this Agreement.
16.4 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Each counterpart may
consist of a number of copies hereof each signed by less than all, but together
signed by all, of the parties. In pleading or proving any provision of this
Agreement, it shall not be necessary to produce more than one such counterpart.
16.5 HEADINGS; INTERPRETATION. (a) The headings contained in
this Agreement are inserted for convenience of reference only and shall not
otherwise affect the meaning or interpretation or be deemed a substantive part
of this Agreement.
(b) Except to the extent that the context otherwise requires
"include," "includes" and "including" are deemed to be followed by "without
limitation" whether or not they are in fact followed by such words or words of
like import.
16.6 WAIVER. The failure of any party at any time or times to
enforce or require performance of any provision hereof shall in no way operate
as a waiver or affect the right of such party at a later time to enforce the
same. No waiver by any party of any condition or the breach
<PAGE>
45
of any term, covenant, representation or warranty contained in this Agreement,
in any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach, or a waiver of any other
condition or of any term, covenant, representation or warranty contained in this
Agreement. Any agreement on the part of a party hereto to a waiver shall be
valid only if set forth in an instrument in writing signed by such party.
16.7 SEVERABILITY. If any provision of this Agreement shall
hereafter be held to be invalid or unenforceable for any reason, that provision
shall be reformed to the maximum extent permitted to preserve the parties'
original intent, failing which, it shall be severed from this Agreement with the
balance of this Agreement continuing in full force and effect. Such occurrence
shall not have the effect of rendering the provision in question invalid in any
other jurisdiction or in any other case or circumstances, or of rendering
invalid any other provisions contained herein to the extent that such other
provisions are not themselves actually in conflict with any applicable law.
16.8 GOVERNING LAW AND FORUM. This Agreement and the Ancillary
Agreements shall be governed by and construed in all respects under the laws of
the State of New York, without reference to its conflicts of laws, rules or
principles. Any action to enforce, which arises out of or in any way relates to,
any of the provisions of this Agreement and the Ancillary Agreements may be
brought and prosecuted in such court or courts located within the State of New
York as provided by law; and the parties consent to the jurisdiction of such
court or courts located within the State of New York and to service of process
by registered mail, return receipt requested, or by any other manner provided by
New York law.
16.9 MATERIALITY. The dollar thresholds set forth in this
Agreement have been negotiated for the special purposes of the specific
provisions in which they appear, and are not to be taken as evidence of the
level of "materiality" for purposes of any other provision or statutory or
common law which may be applicable to the transactions contemplated by this
Agreement under which a level of materiality might be an issue.
16.10 OBLIGATIONS GUARANTEE. Parent hereby guarantees the
obligations of the Buyer and its permitted assigns under this Agreement and the
Ancillary Agreements and agrees to cause the Buyer and its permitted assigns to
comply with the terms of this Agreement and the Ancillary Agreements. This
guarantee shall be a continuing and irrevocable guarantee and shall survive the
Closing. Without limitation, the obligations of this guarantee shall not be
released, discharged or affected by any extensions of time or indulgences or
modifications granted by the Seller in favor of the Buyer or its permitted
assigns, or by any failure to enforce any of the terms of this Agreement or by
the bankruptcy, insolvency, dissolution, amalgamation, winding-up or
reorganization of the Buyer or its permitted assigns, and Parent hereby waives
any right to require the Seller to exhaust any action or recourse against the
Buyer or its permitted assigns before requiring performance by Parent pursuant
to this guarantee.
<PAGE>
46
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized representatives as of the day and year
first above written.
SMURFIT PACKAGING CORPORATION
By:/s/ MICHAEL W. J. SMURFIT, JR.
---------------------------------
Name: Michael W. J. Smurfit, Jr.
Title:President and CFO
RUSSELL-STANLEY HOLDINGS, INC.
By:/s/ DANIEL W. MILLER
---------------------------------
Name: Daniel W. Miller
Title:Executive Vice President
and CFO
RUSSELL-STANLEY CORP.
By:/s/ DANIEL W. MILLER
----------------------------------
Name: Daniel W. Miller
Title: Executive Vice President
and CFO
EXHIBIT 10.6
MANAGEMENT AGREEMENT
This Agreement is made as of this 23rd day of July, 1997 among
Russell-Stanley Holdings, Inc., a Delaware corporation ("Holdings"),
Russell-Stanley Corp., a New Jersey corporation and a wholly owned subsidiary of
Holdings ("Russell-Stanley"), Container Management Services, Inc., a South
Carolina corporation and a wholly owned subsidiary of Holdings ("CMS"), and
Vestar Capital Partners, a New York general partnership ("Vestar").
WHEREAS, Vestar, by and through its officers, employees,
agents, representatives and affiliates, has expertise in the areas of corporate
management, finance, product strategy, investment, acquisitions and other
matters relating to the business of Holdings and its subsidiaries; and
WHEREAS, each of Holdings, Russell-Stanley and CMS desires to
avail itself, for the term of this Agreement, of the expertise of Vestar in the
aforesaid areas, in which it acknowledges the expertise of Vestar.
NOW, THEREFORE, in consideration of the foregoing recitals and
the covenants and conditions herein set forth, the parties hereto agree as
follows:
1. APPOINTMENT. Each of Holdings, Russell-Stanley and CMS
hereby appoints Vestar to render the advisory and consulting services described
in Paragraph 2 hereof for the term of this Agreement.
2. SERVICES. Vestar hereby agrees that during the term of
this Agreement it shall render to Holdings and its subsidiaries by and through
such of Vestar's officers, employees, agents, representatives and affiliates as
Vestar, in its sole discretion, shall designate from time to time, advisory and
consulting services in relation to the affairs of Holdings and its subsidiaries
in connection with strategic financial planning, and other services not referred
to in the next sentence including, without limitation, advisory and consulting
services in relation to the selection, supervision and retention of independent
auditors, the selection, retention and supervision of outside legal counsel, and
the selection, retention and supervision of investment bankers or other
financial advisors or consultants. It is expressly agreed that the services to
be performed hereunder shall not include (x) investment banking or other
financial advisory services rendered by any of Vestar and its affiliates to any
of Holdings and its subsidiaries in connection with acquisitions, divestitures,
refinancings, restructurings and similar transactions by any of Holdings and its
subsidiaries or (y) except as expressly provided otherwise in Section 3 hereof,
full or part-time employment by Holdings or any of its subsidiaries of any
employee or partner of any of Vestar and its affiliates, for which Vestar and
its affiliates shall be entitled to receive additional compensation.
3. FEES. In consideration of the services contemplated by
Paragraph 2, subject to the provisions of Paragraph 6, each of Holdings,
Russell-Stanley and CMS and their respective successors hereby jointly and
severally agree to pay to Vestar an aggregate per annum fee (the "Fee") equal to
the sum of (A) the greater of (i) $225,000 or (ii) an amount per annum equal to
<PAGE>
2
.25% of the consolidated net sales of Holdings and its subsidiaries for such
fiscal year, determined in accordance with generally accepted accounting
principles, commencing on the date hereof, plus (B) if and for so long as an
employee or partner of any of Vestar and its affiliates is serving full-time as
the Chief Financial Officer of Holdings or any of its subsidiaries, the sum of
(i) the annual base salary of such Chief Financial Officer, plus (ii) an amount
to be determined by the President of Holdings based on certain performance
criteria established by the President of Holdings. The Fee shall be payable
semi-annually in advance (based on clauses (A) (i) and (B) (i) above), with any
remaining balance of the Fee for any fiscal year payable promptly following the
determination of consolidated net sales for such fiscal year or of the amount
referred to in clause (B) (ii) above, as the case may be, or on termination of
this Agreement. The semi-annual Fee payments shall be non-refundable.
4. REIMBURSEMENTS. In addition to the Fee, each of Holdings,
Russell-Stanley and CMS hereby agree, jointly and severally, at the direction of
Vestar, to pay directly or reimburse Vestar for its reasonable Out-of-Pocket
Expenses incurred in connection with the services provided for in Paragraph 2
hereof. For the purposes of this Agreement, the term "Out-of-Pocket Expenses"
shall mean the amounts paid by or on behalf of Vestar in connection with the
services provided for in Paragraph 2, including reasonable (i) fees and
disbursements of any independent professionals and organizations, including
independent auditors and outside legal counsel, investment bankers or other
financial advisors or consultants, (ii) costs of any outside services or
independent contractors such as financial printers, couriers, business
publications or similar services and (iii) transportation, per diem, telephone
calls, word processing expenses or any similar expense not associated with its
ordinary operations. All reimbursements for Out-of-Pocket Expenses shall be made
promptly upon or as soon as practicable after presentation by Vestar of the
statement in connection therewith.
5. INDEMNIFICATION. Each of Holdings, Russell-Stanley and
CMS hereby agree to jointly and severally indemnify and hold harmless Vestar and
its affiliates and their respective partners, officers, directors, employees,
agents, representatives and stockholders (each being an "Indemnified Party")
against any and all losses, claims, damages and liabilities of whatever kind or
nature, joint or several, absolute, contingent or consequential, to which such
Indemnified Party may become subject under any applicable federal or state law,
or any claim made by any third party, or otherwise, to the extent they relate to
or arise out of the advisory and consulting services contemplated by this
Agreement or the engagement of Vestar pursuant to, and the performance by Vestar
of the services contemplated by, this Agreement. Each of Holdings,
Russell-Stanley and CMS hereby agrees to jointly and severally reimburse any
Indemnified Party for all reasonable costs and expenses (including reasonable
attorneys' fees and expenses) as they are incurred in connection with the
investigation of, preparation for or defense of any pending or threatened claim
for which the Indemnified Party would be entitled to indemnification under the
terms of the previous sentence, or any action or proceeding arising therefrom,
whether or not such Indemnified Party is a party hereto. Holdings,
Russell-Stanley and CMS will not be liable under the foregoing indemnification
provision to the extent that any loss, claim, damage, liability, cost or expense
is determined by a court, in a final judgment from which no further appeal may
be taken, to have resulted primarily from the gross negligence or willful
misconduct of Vestar.
<PAGE>
3
6. TERM. This Agreement shall be in effect on the date
hereof and continue until such time as Vestar Capital Partners III, L.P., a
Delaware limited partnership ("VEP"), and the partners therein and the
respective affiliates thereof hold, in the aggregate, less than 10% of the
voting power of Holdings' outstanding voting stock. The provisions of Paragraphs
4, 5, 7 and 8 and the obligation of Holdings, Russell-Stanley and CMS to pay
Fees accrued during the term of this Agreement pursuant to Section 3 shall
survive the termination of this Agreement.
7. PERMISSIBLE ACTIVITIES. Subject to all applicable
provisions of New York law that impose fiduciary duties upon Vestar or its
partners or affiliates, nothing herein shall in any way preclude Vestar or its
partners, officers, employees or affiliates from engaging in any business
activities or from performing services for its or their own account or for the
account of others, including for companies that may be in competition with the
business conducted by any of Holdings and its subsidiaries.
8. GENERAL. (a) No amendment or waiver of any provision of
this Agreement, or consent to any departure by either party from any such
provision, shall in any event be effective unless the same shall be in writing
and signed by the parties to this Agreement and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
(b) Any and all notices hereunder shall, in the absence of
receipted hand delivery, be deemed duly given when mailed, if the same shall be
sent by registered or certified mail, return receipt requested, and the mailing
date shall be deemed the date from which all time periods pertaining to a date
of notice shall run. Notices shall be addressed to the parties at the following
addresses:
If to Vestar:
Vestar Capital Partners
245 Park Avenue, 41st Floor
New York, New York 10167
Attention: Robert L. Rosner
If to Holdings,
RUSSELL-STANLEY OR CMS:
Russell-Stanley Corp.
230 Half Mile Road
Red Bank, New Jersey 07701
Attn: President
<PAGE>
4
In any case, with a
copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Peter J. Gordon
(c) This Agreement shall constitute the entire Agreement
between the parties and their affiliates with respect to the subject matter
hereof, and shall supersede all previous oral and written (and all
contemporaneous oral) negotiations, commitments, agreements and understandings
relating hereto. The Management Agreement dated June 12, 1989 between
Russell-Stanley and Vestar Capital Partners, Inc. is hereby terminated, subject
to the second sentence of Section 6 thereof.
(d) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (EXCLUDING THE
CHOICE OF LAW PRINCIPLES THEREOF). THE PARTIES TO THIS AGREEMENT HEREBY AGREE TO
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED
IN THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT. This Agreement shall inure to the benefit of, and be binding
upon, Vestar, the Indemnified Parties, Holdings, Russell-Stanley, CMS and their
respective successors and assigns.
(e) This Agreement may be executed in two or more
counterparts, and by different parties on separate counterparts, each set of
counterparts showing execution by all parties shall be deemed an original, but
all of which shall constitute one and the same instrument.
(f) The waiver by any party of any breach of this Agreement
shall not operate as or be construed to be a waiver by such party of any
subsequent breach.
<PAGE>
5
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their duly authorized officers or agents as set
forth below.
VESTAR CAPITAL PARTNERS
By its General Partner: Vestar
Management Corporation I
By: /s/ ROBERT ROSNER
Name: Robert Rosner
Title: Managing Director
RUSSELL-STANLEY HOLDINGS, INC.
By: /s/ DANIEL W. MILLER
Name: Daniel W. Miller
Title: Executive Vice President and CFO
RUSSELL-STANLEY CORP.
By:/s/ DANIEL W. MILLER
Name: Daniel W. Miller
Title: Executive Vice President and CFO
CONTAINER MANAGEMENT SERVICES, INC.
By:/s/ MARK E. DANIELS
Name: Mark E. Daniels
Title: President and Director
With respect to the second sentence of Section 8(c)
hereof only.
<PAGE>
6
VESTAR CAPITAL PARTNERS, INC.
By:/s/ ROBERT ROSNER
Name: Robert Rosner
Title: Managing Director
EXHIBIT 10.13
RUSSELL-STANLEY HOLDINGS, INC.
1998 STOCK OPTION PLAN
Russell-Stanley Holdings, Inc., a Delaware corporation
(together with its successors, the "Company"), hereby adopts this Stock Option
Plan for Employees (as defined below) of the Company and its affiliates. The
purposes of this Plan are as follows:
(i) To further the growth, development and financial success
of the Company by providing additional incentives to certain of its Employees,
by assisting them to become owners of capital stock of the Company and thus to
benefit directly from its growth, development and financial success.
(ii) To enable the Company to obtain and retain the services
of Employees considered essential to the long range success of the Company by
providing and offering them an opportunity to become owners of capital stock of
the Company under Options.
ARTICLE 1
DEFINITIONS
Section 1.1 - General. Whenever the following terms are used
in this Plan they shall have the meaning specified below unless the context
clearly indicates to the contrary.
Section 1.2 - Board. "Board" shall mean the Board of
Directors of the Company.
Section 1.3 - Code. "Code" shall mean the Internal Revenue
Code of 1986, as amended.
Section 1.4 - Committee. "Committee" shall mean the
Compensation Committee of the Board determined as provided in Section 6.1.
Section 1.5 - Common Stock. "Common Stock" shall mean the
common stock, par value $0.01 per share, of the Company.
Section 1.6 - Common Stock Equivalents. "Common Stock
Equivalents" shall mean any stock, warrants, rights, calls, options or other
securities exchangeable or exercisable for or convertible into Common Stock.
<PAGE>
2
Section 1.7 - Employee. "Employee" shall mean any employee
(as defined in accordance with the regulations and revenue rulings then
applicable under Section 3401(c) of the Code) of the Company or an affiliate,
whether such employee is so employed at the time this Plan is adopted or becomes
so employed subsequent to the adoption of this Plan.
Section 1.8 - Grant Date. "Grant Date" shall mean the date on
which an Option is granted under the Plan.
Section 1.9 - Option. "Option" shall mean an option granted
under the Plan to purchase Common Stock. Options include only options which are
not intended to be "incentive stock options" under Section 422 of the Code.
Section 1.10 - Option Price. "Option Price" shall have the
meaning given in Section 4.2.
Section 1.11 - Optionee. "Optionee" shall mean an Employee to
whom an Option is granted under the Plan.
Section 1.12 - Permitted Transferee. "Permitted Transferee"
shall have the meaning set forth in the Option Agreement.
Section 1.13 - Plan. "Plan" shall mean the Company 1998 Stock
Option Plan.
Section 1.14 - Pronouns. The masculine pronoun shall include
the feminine and neuter and the singular shall include the plural, where the
context so indicates.
Section 1.15 - Secretary. "Secretary" shall mean the
Secretary of the Company.
Section 1.16 - Stock Option Agreement. "Stock Option
Agreement" shall mean any agreement between the Optionee and the Company
providing for the granting of an Option.
Section 1.17 - Termination of Employment. "Termination of
Employment" shall mean the time when the Optionee's employment with the Company
is terminated for any reason whatsoever. The Board, in its absolute discretion,
shall determine the effect of all matters and questions relating to Termination
of Employment, including, but not by way of limitation, all questions of whether
particular leaves of absence constitute Terminations of Employment and the
question of whether any reemployment by or renewal of service for the Company is
simultaneous with termination.
<PAGE>
3
ARTICLE II
SHARES SUBJECT TO PLAN
Section 2.1 - Shares Subject to Plan. The shares of capital
stock subject to Options shall be shares of Common Stock of the Company. The
aggregate number of shares of Common Stock which may be issued upon exercise of
Options under the Plan shall not exceed 120,000.
Section 2.2 - Unexercised Options. If any Option expires or
is canceled without having been fully exercised the number of shares subject to
such Option but as to which such Option was not exercised prior to its
expiration or cancellation may again be optioned hereunder, subject to the
limitations of Section 2.1.
Section 2.3 - Changes in Common Stock. If the outstanding
shares of Common Stock are hereafter changed into or exchanged for a different
number or kind of shares of capital stock or other securities of the Company, or
of another corporation, by reason of a reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividend, combination
of shares or otherwise, appropriate adjustments shall be made by the Committee
in the number and kind of shares for the purchase of which Options may be
granted, including adjustment of the limitations of Section 2.1 on the maximum
number and kind of shares which may be issued upon exercise of Options.
ARTICLE III
GRANTING OF OPTIONS
Section 3.1 - Eligibility. Any Employee shall be eligible to
be granted Options.
Section 3.2 - Granting of Options. The Committee shall from
time to time, in its absolute discretion:
(1) determine which Employees shall be granted Options under
the Plan; and
(2) determine the number of shares to be subject to such
Options granted to such Employees; and
(3) determine the terms and conditions of such Options,
consistent with the Plan; and
(4) establish such conditions as to the manner of exercise of
such Options as it may deem necessary, including but not
limited to requiring Optionees to enter into agreements
regarding transferability and other restrictions with respect
to shares issuable
<PAGE>
4
upon exercise of such Options.
ARTICLE IV
TERMS OF OPTIONS
Section 4.1 - Option Agreement. Each Option shall be
evidenced by a written Stock Option Agreement, which shall be executed by the
Optionee and an authorized officer of the Company, and which shall contain such
terms and conditions as the Committee shall determine, consistent with the Plan.
Section 4.2 - Option Price. The price per share of the Common
Stock subject to each Option shall be set by the Committee on the Grant Date and
may be at, above or below the fair market value (but not below par value) of a
share of Common Stock.
Section 4.3- Commencement of Exercisability. Subject to the
provisions of Section 7.2, Options shall become exercisable at such times and in
such installments (which may be cumulative) as the Committee shall provide in
the terms of each individual Stock Option Agreement; provided, however, that by
a resolution adopted after an Option is granted the Committee may, on such terms
and conditions as it may determine to be appropriate and subject to Section 7.2,
accelerate the time at which such Option or any portion thereof may be
exercised.
Section 4.4 - Expiration of Options. The Committee shall
provide, in the terms of each individual Stock Option Agreement, when such
Option expires and becomes unexercisable, except that no Option may be exercised
to any extent by anyone after, and every Option shall expire no later than, the
expiration of ten (10) years and one (1) day from the Grant Date.
Section 4.5 - Adjustments in Outstanding Options. If the
outstanding shares of Common Stock subject to Options are, from time to time,
changed into or exchanged for a different number or kind of shares of capital
stock or other securities of the Company, or of another corporation, by reason
of a reorganization, merger, consolidation, recapitalization, reclassification,
stock split-up, stock dividend, combination of shares or otherwise, the
Committee shall make an appropriate adjustment in the aggregate number and kind
of shares which may be issued pursuant to Section 2.1 hereof and the number and
kind of shares as to which all outstanding Options, or portions thereof then
unexercised, shall be exercisable. Such adjustment in an outstanding Option
shall be made without change in the total price applicable to the Option or the
unexercised portion of the Option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in Option Price per share.
<PAGE>
5
Section 4.6 - Merger, Consolidation, Exchange, Acquisition,
Liquidation or Dissolution. In its absolute discretion, and on such terms and
conditions as it deems appropriate, coincident with or after the grant of any
Option, the Committee may provide by the terms of any Option that such Option
cannot be exercised after the merger or consolidation of the Company into
another corporation, the exchange of all or substantially all of the assets of
the Company for the securities of another corporation, the acquisition by
another corporation of 80% or more of the Company's then outstanding shares of
voting stock or the liquidation or dissolution of the Company, and if the
Committee so provides, it will also provide either by the terms of such Option
or by a resolution adopted prior to the occurrence of such merger,
consolidation, exchange, acquisition, liquidation or dissolution, that, for ten
business days prior to such event, such Option shall be exercisable as to all
shares subject thereto, notwithstanding anything to the contrary in Section 4.3
or in any installment provisions of such Option (but subject to the provisions
of Section 4.4) and that, upon the occurrence of such event, such Option shall
terminate and be of no further force or effect; provided, however, that the
Committee may also provide, in its absolute discretion, that even if the Option
shall remain exercisable after any such event, from and after such event, any
such Option shall be exercisable only for the kind and amount of securities and
other property (including cash), or the cash equivalent thereof, receivable as a
result of such event by the holder of a number of shares of stock for which such
Option could have been exercised immediately prior to such event.
ARTICLE V
EXERCISE OF OPTIONS
Section 5.1 - Persons Eligible to Exercise. During the
lifetime of the Optionee, only he or his guardian may exercise an Option granted
to him, or any portion thereof. After the death of the Optionee, any exercisable
portion of an Option may, prior to the time when such portion becomes
unexercisable under Section 4.4 or Section 4.6, be exercised by his personal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.
Section 5.2 - Partial Exercise. At any time and from time to
time prior to the time when any exercisable Option or exercisable portion
thereof expires or becomes unexercisable under Section 4.4 or Section 4.6, such
Option or portion thereof may be exercised in whole or in part; provided,
however, that the Company shall not be required to issue fractional shares and
the Committee may, by the terms of any Option, require any partial exercise to
be with respect to a specified minimum number of shares.
Section 5.3- Manner of Exercise. An exercisable Option, or
any exercisable portion thereof, may be exercised solely by delivery to the
Secretary or his office of all of the following prior to the time when such
Option or such portion becomes unexercisable under Section 4.4 or Section 4.6:
<PAGE>
6
(1) Notice in writing signed by the Optionee or other person
then entitled to exercise such Option or portion thereof,
stating that such Option or portion thereof is exercised; and
(2) Full payment of the Option Price (in cash or by check)
for the shares with respect to which such Option or portion
thereof is thereby exercised, together with payment or
arrangement for payment of any federal income or other tax
required to be withheld by the Company with respect to such
shares; and
(3) Such representations and documents as the Committee
reasonably deems necessary or advisable to effect compliance
with all applicable provisions of the Securities Act of 1933,
as amended, and any other federal, state or foreign
securities laws or regulations. The Committee may, in its
absolute discretion, also take whatever additional actions it
deems appropriate to effect such compliance, including,
without limitation, placing legends on share certificates,
issuing stop-transfer orders to transfer agents and
registrars and requiring execution of an agreement as
described in Section 5.5 hereof; and
(4) In the event that the Option or portion thereof shall be
exercised pursuant to Section 5.1 by any person or persons
other than the Optionee, appropriate proof of the right of
such person or persons to exercise the Option or portion
thereof.
Section 5.4- Rights as Stockholders. The holders of Options
shall not be, nor have any of the rights or privileges of, stockholders of the
Company in respect of any shares purchasable upon the exercise of any part of an
Option unless and until certificates representing such shares have been issued
by the Company to such holders and the Company agrees to issue any such
certificates on a timely basis.
Section 5.5- Transfer Restrictions. The transferability of
the shares of Common Stock purchasable upon the exercise of any part of an
Option shall be subject to the restrictions which are set forth in the Stock
Option Agreement, any agreement referred to in Section 7.3 and any agreement
referenced in any thereof.
ARTICLE VI
ADMINISTRATION
Section 6.1 - Committee. The Committee, when appointed by the
Board, shall consist of at least three Directors and shall serve at the pleasure
of the Board. Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee shall be
filled by the Board. In the event that the Board does not specifically appoint a
Committee hereunder, the Board shall be deemed to be the Committee for purposes
of administration of the Plan and all references herein to the Committee shall
be deemed to be references to the Board acting with respect to the Plan in lieu
of the Committee.
<PAGE>
7
Section 6.2- Duties and Powers of Committee. It shall be the
duty of the Committee to conduct the general administration of the Plan in
accordance with its provisions. The Committee shall have the power to interpret
the Plan and to adopt such rules for the administration, interpretation, and
application of the Plan as are consistent herewith and to interpret, amend or
revoke any such rules. Any such interpretations and rules shall be consistent
with the basic purpose of the Plan to grant Options. The Board may, in its
absolute discretion, at any time and from time to time, exercise any and all
rights and duties of the Committee under the Plan.
Section 6.3- Majority Rule. The Committee shall act by a
majority of its members in office and the Committee may act either by vote at a
telephonic or other meeting or by a memorandum or other written instrument
signed by a majority of the Committee.
Section 6.4- Compensation; Professional Assistance; Good
Faith Actions. Members of the Committee shall not receive compensation for their
services as members, but all expenses and liabilities they incur in connection
with the administration of the Plan shall be borne by the Company. The Committee
may employ attorneys, consultants, accountants, appraisers, brokers or other
persons in connection with the administration of the Plan. The Committee, the
Company and the officers and directors of the Company shall be entitled to rely
upon the advice, opinions or valuations of any such persons. All actions taken
and all interpretations and determinations made by the Committee in good faith
shall be final and binding upon all Employees, the Company and all other
interested persons. No member of the Committee shall be personally liable for
any action, determination or interpretation made in good faith with respect to
the Plan, and all members of the Committee shall be fully protected by the
Company in respect to any such action, determination or interpretation.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1 - Options Not Transferable. No Option or interest
or right therein shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means, whether such
disposition be voluntary or involuntary or by operation of law or by judgment,
levy, attachment, garnishment or any other legal or equitable proceeding
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that nothing in this Section 7.1 shall
prevent transfers otherwise permitted by any Stock Option Agreement, by will or
by the applicable laws of descent and distribution.
<PAGE>
8
Section 7.2 - Amendment, Suspension or Termination of the
Plan. The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board. However,
without approval of the Company's stockholders given within 12 months before or
after the action by the Committee, no action of the Committee or the Board may,
except as provided in Section 2.3, increase any limit imposed in Section 2.1 on
the maximum number of shares which may be issued upon exercise of Options or
extend the limit imposed in this Section 7.2 on the period during which Options
may be granted. Neither the amendment, suspension nor termination of the Plan
shall, without the consent of the Employee, alter or impair any rights or
obligations under any Option theretofore granted. No Option may be granted
during any period of suspension nor after termination of the Plan, and in no
event may any Option be granted under this Plan after the expiration of ten
years from the date the Plan is adopted or the date the stockholders of the
Company approve this Plan, if earlier.
Section 7.3- Securityholder Agreements. Except as otherwise
consented to in writing by the Board of Directors of the Company, prior to the
grant of any Option hereunder, the Optionee shall become a party to all voting
agreements, stock transfer agreements, registration rights agreements and other
securityholder agreements to which any holder of Common Stock or Common Stock
Equivalents is a party, as provided therein. Any Permitted Transferee of the
Optionee shall become a party to such agreements and shall be bound by the terms
thereof as provided therein.
Section 7.4- Effect of Plan Upon Other Compensation Plans.
The adoption of the Plan shall not affect any other compensation or incentive
plans in effect for the Company. Nothing in this Plan shall be construed to
limit the right of the Company to establish any other forms of incentives or
compensation for Employees of the Company; or to grant or assume options or
other awards otherwise than under the Plan in connection with any proper
corporate purpose, including, but not by way of limitation, the grant or
assumption of options or other awards in connection with the acquisition by
purchase, lease, merger, consolidation or otherwise, of the business, stock or
assets of any corporation, firm or association.
Section 7.5- No Right to Continue in Employment. Nothing in
this Plan or in any Stock Option Agreement hereunder shall confer upon any
Employee any right to continue in the employ or service of the Company or shall
interfere with or restrict in any way the rights of the Company, which are
hereby expressly reserved, to discharge any Employee at any time for any reason
whatsoever, with or without good cause.
Section 7.6 - Titles. Titles are provided herein for
convenience only and are not to serve as a basis for interpretation or
construction of the Plan.
<PAGE>
9
I hereby certify that the foregoing Plan was duly adopted by
the Board of Directors of the Company on February 26, 1998.
Executed on this 24th day of April, 1998.
/s/ Alan E. Davis
- ----------------------------------
Secretary of the Meeting of the
Board of Directors
Exhibit 10.14
RUSSELL-STANLEY HOLDINGS, INC.
MANAGEMENT ANNUAL INCENTIVE COMPENSATION PLAN
1998
Management participants will be awarded annual incentive compensation based on
the company's overall profit achievement, profit performance of the
participant's business unit or division, and the achievement of specific
non-financial objectives. Participants eligible for awards under the plan must
be approved by the CEO.
Each participant will be assigned a target payout, expressed as a percentage of
base salary, which reflects scope of responsibility and ability to impact
overall business results. The award will have two components: a "financial"
component and a "non-financial" component. The financial component of the award
is calculated based on the profit performance of the business relative to profit
target, which will normally be the budgeted profit for the business.
Each participant will also be assigned two weighting factors. The
"discretionary" factor reflects the percentage of the total award determined
based on "non-financial" objectives agreed to by the participant's manager. The
second ("RSH") factor, also expressed as a percentage, reflects the portion of
the financial component of the award which is attributed to R-S Holdings (the
balance of the financial component being the portion attributed to the profit
performance of the participant's business unit/division).
No payout will occur under either component of the award if the profit of
Russell-Stanley Holdings (RSH) does not meet a threshold of 85% of the profit
target. 100 percent of the target payout under the financial component of the
award will be realized if the target profit of RSH and business unit is
achieved. Maximum payout under the plan will occur if the profit of RSH and
business unit meets or exceeds 120% of target.
For performance above or below target the payout will be determined as follows:
At threshold, payout is equal to 40% of target payout. At maximum performance,
payout is equal to 175% of target payout. Awards for performance between
threshold and target, or between target and maximum performance, are calculated
based on linear interpolation between target and either extreme. This
calculation is done for RSH and the business unit.
Payout under the discretionary component of the award will generally have the
same payout range as the financial component (40% -175% of payout target,
multiplied by the discretionary factor); however, greater payout can be awarded
under this
<PAGE>
component, with approval of the CEO (and Board of Directors in the case of
officers or senior staff).
Target payout percentages and weighting factors for all participants must be
approved by the CEO, and by the Board of Directors in the case of officers or
senior staff. No payouts can be made without the corresponding approvals,
following approval by the Board of audited year end financial statements,
normally by late February. Participants must be an employee of the company
through December 31st of the Plan year in order to be eligible to receive
payment under the plan. New employees joining the company mid year may be
eligible for prorated participation with relevant CEO/Board approval. In the
event of an acquisition or merger, profit targets will be adjusted, as required,
by the Board.
-2-
<PAGE>
[GRAPHIC OMITTED]
Target Annual Incentive Compensation Levels
Target Level
(% of Base
Level Position Salary)
I CEO .60 - .80
II RSH EVP .50 - .55
Subsidiary
President
III RSC VP .35 - .45
Division VP
IV Nat'l Sales Regional Ops Senior Staff .25 - .30
V Regional Sales .10 - .20
Plant Managers
Dept. Managers
Key Account
Mgrs
Junior Staff
-3-
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC.
1998 PERFORMANCE TARGETS
($ IN 000'S)
RUSSELL-STANLEY HOLDINGS INC. EBITDA = $51,341
BUSINESS UNITS:
PLASTIC: EBITDA = $29,420
STEEL: EBITDA = $10,570 (BUDGET = $9,852)
SERVICES EBITDA - DRUM PURCH. = $ 5,555
HDL EBITDA = C$ 6,520 (US$4,780)
-4-
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC.
PERFORMANCE UNIT PLAN II
(FEBRUARY 26,1998)
The Performance Unit Plan is designed to recognize key employees' performance
and contributions to the long term growth of the business. It is structured in a
way to incentivize and retain key executives. Participants are recommended by
the CEO and approved by the Board of Directors. Performance units are granted
based on level of responsibility and ability to impact the long term performance
of the business.
Each unit will have a target value of $100 if target performance of $169MM in
EBITDA is achieved during the three calendar year period 1998, 1999 and 2000.
Unit values will be prorated based on following scale of cumulative EBITDA
achievement:
$144MM $144MM $169MM $211MM $211MM
Award Earned
as % of Face
Value 0 25 100 200 200
PAYMENT CONDITIONS:
o One third of the earn out will be paid after audited statements have
been prepared for the three year period. The other two-thirds will be
paid in two equal installments in February of each of the following
years.
o Subject to prevailing government regulations, the Company will
undertake to offer payment through a tax deferred plan (at the
employee's option) in 2001.
o To be eligible for payment the employee must complete the three year
period in the employ of the company and stay thereafter until the
payout date of the award of each segment to receive subject segment.
o Partial payments may be made only if the employee takes long
term disability during the plan period or retires. Payment
will be prorated against the plan and the results achieved
during the plan period adjusted for the time the recipient
was employed by the Company. No partial payments will be
made unless the employee completes at least one full year in
the plan. Timing of payment will be made at discretion of
the Board of Directors.
-5-
<PAGE>
o Anybody who does not meet the above criteria will forfeit his units and
whatever is owed under the plan.
o Subject to approval by the Board, executives who join the Company
during the plan performance period may be granted a prorated
Performance Unit award to reflect their service time with the
organization and their opportunity to affect results.
o In the event of an acquisition or merger EBITDA achievement
will be adjusted, as required, by the Board.
-6-
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
AGREEMENT made October 30, 1997, by and among RUSSELL-STANLEY HOLDINGS,
INC., a Delaware corporation (the "Company"), HUNTER DRUMS LIMITED, a wholly
owned subsidiary of the Company organized under the laws of Ontario ("HDL"), and
MICHAEL W. HUNTER ("Executive").
RECITALS
In connection with the sale (the "Sale") of Executive's equity interest in
HDL to a subsidiary of the Company, and in order to induce Executive to continue
to serve as the President of HDL, the Company and HDL desire to provide
Executive with compensation and other benefits on the terms and conditions set
forth in this Agreement. Executive is willing to accept such employment and
perform services for HDL, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as follows:
I Employment.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to cause HDL to employ Executive during the term hereof as
President of HDL. In his capacity as President of HDL, Executive shall report to
the Company's Chief Executive Officer. As President of HDL, Executive shall have
the customary powers, responsibilities and authorities of presidents of
subsidiary corporations of the size, type and nature of HDL, as it exists from
time to time, and
<PAGE>
2
such additional powers, responsibilities and authorities as the Company's Chief
Executive Officer shall from time to time reasonably delegate to Executive
consistent with Executive's status as the President of HDL and as if he was an
executive vice-president of the Company.
1.2 Subject to the terms and conditions of this Agreement,
Executive hereby accepts employment as President of HDL commencing on the date
of the closing (the "Closing Date") of the transaction contemplated in the Share
Purchase Agreement, dated as of the date hereof, among Michael W. Hunter, John
D. Hunter, Michael W. Hunter Holdings Inc., John D. Hunter Holdings Inc., Hunter
Holdings Inc., 373062 Ontario Limited, HDL, the Company and a subsidiary of the
Company (the "Share Purchase Agreement"), and agrees to devote his full working
time and efforts, to the best of his ability, experience and talent, to the
performance of services, duties and responsibilities in connection therewith.
Executive shall perform such duties and exercise such powers, commensurate with
his position as the President of HDL and as the Company's Chief Executive
Officer shall from time to time reasonably delegate to him (consistent with
Executive's status as the President of HDL and as if he was an executive
vice-president of the Company). In no event shall the Executive be required by
the Company or HDL to maintain a residence in the United States.
1.3 (a) Nothing in this Agreement shall preclude Executive
from continuing to serve as a director, shareholder and/or officer of any
corporation solely owned, directly or indirectly, by one or more of the
Executive and members of his family and trusts solely for the benefit of
Executive and members of his family (the "Family Holding Companies"), provided,
however, that: (i) Executive's principal activities with respect to any of the
Family Holding Companies shall be as a shareholder and/or director and not as a
manager and/or operator; (ii) such service does not interfere with Executive's
duties and responsibilities under this Agreement;
<PAGE>
3
and (iii) none of the Family Holding Companies engages in any business (A) in
which any of the Company and its subsidiaries is engaged as of the date such
Family Holding Company enters into such business or (B) which is involved in the
manufacturing, sale, distribution, leasing, reconditioning and/or fleet
management of rigid industrial packaging in North America.
(b) Nothing in this Agreement shall preclude Executive from
continuing to serve as a director and/or shareholder of Hunter Packaging Limited
("Packaging"), provided, however, that (i) Executive shall promptly resign as a
director of Packaging if (1) Executive's service as a director of Packaging
unreasonably interferes with Executive's duties and responsibilities under this
Agreement or (2) Packaging engages in any business (A) in which any of the
Company and its subsidiaries is engaged as of the date Packaging enters into
such business or (B) which is involved in the manufacturing, sale, distribution,
leasing, reconditioning and/or fleet management of rigid industrial packaging in
North America (either of (A) or (B) causing Packaging to be a "Competitor"),
(ii) Executive and his spouse and children and trusts for the benefit of one or
more of Executive and his spouse and children shall not, directly or indirectly,
alone acquire control of Packaging, (iii) if (x) Packaging becomes a Competitor
and (y) Executive, members of Executive's family and the Family Holding
Companies collectively alone control Packaging, Executive shall use his
reasonable efforts to divest all securities of Packaging beneficially owned by
him as soon as reasonably practicable and (iv) if Packaging becomes a
Competitor, Executive thereafter shall not voluntarily increase the aggregate
equity interest in Packaging, or the percentage of the voting power of
Packaging's voting securities, beneficially owned, directly or indirectly, by
him.
(c) Nothing in this Agreement shall preclude: (i) Executive's
ownership of any class of publicly-traded securities where such ownership (other
than ownership of securities of
<PAGE>
4
Packaging) does not exceed 5% of such class; and (ii) Executive's ownership of
any class of non-publicly traded securities; provided, however, that: (A)
Executive shall not knowingly make any investment in any entity (1) which is
engaged in a business in which any of the Company and its subsidiaries is
engaged as of the date of such investment or (2) which is involved in the
manufacturing, sale, distribution, leasing, reconditioning and/or fleet
management of rigid industrial packaging in North America, and if Executive
obtains knowledge that any such entity is engaged in any such business he shall
divest himself of any and all investments in such entity as promptly as
practicable and in no event later than the ninetieth (90th) day following the
date on which Executive obtains such knowledge; (B) such ownership does not
interfere with Executive's duties and responsibilities under this Agreement; (C)
if Executive proposes to acquire beneficial ownership of 10% or more of any
class of non-publicly traded securities, then the Executive must provide the
Company's Chief Executive Officer with reasonably prompt prior written notice of
such acquisition; and (D) Executive's activities with respect to any such
investment shall be consistent with those of a passive investor.
(d) Nothing in this Agreement shall preclude Executive from
engaging in charitable and community affairs; provided, however, that: (i)
Executive provides the Company's Chief Executive Officer with reasonably prompt
prior written notice thereof; and (ii) in the reasonable determination of the
Company's Chief Executive Officer, such activities do not interfere with
Executive's duties and responsibilities under this Agreement.
(e) Subject to Section 6.7(e) of the Share Purchase Agreement,
nothing in this Agreement shall preclude Executive, directly or indirectly, from
owning shares of Performance Recycling Inc. or being a director thereof.
(f) Executive shall resign as an officer of Performance
Recycling Inc. and as a
<PAGE>
5
director of Vanguard Container Corporation as promptly as practical following
the Closing.
1.4 So long as Executive is an executive officer of the
Company or any of its subsidiaries, each of Vestar Capital Partners III, L.P.
and Vestar/R-S Investment Limited Partnership (together, "Vestar") shall, and
shall cause any party which they control to, vote its shares of voting stock of
the Company to have Executive elected to the Company's board of directors and
the Company shall cause Executive to be elected to HDL's board of directors.
Executive agrees that he shall accept such elections and shall not receive any
additional compensation therefor.
II Term of Employment.
Executive's term of employment under this Agreement shall
commence on the Closing Date and, subject to the terms hereof, shall terminate
on the earlier of (i) the fifth anniversary of the Closing Date (the
"Termination Date") or (ii) the termination of Executive's employment pursuant
to this Agreement; provided, however, that any termination of employment by
Executive (other than for death or Permanent Disability or by Executive within
ninety (90) days following a Severance Event (as defined in Section 6.1(c)
hereof)) may only be made upon 90 days prior written notice to the Company;
provided, further, that this Agreement will be automatically renewed and the
term extended for additional one-year periods commencing on the fifth
anniversary of the Closing Date, and on each anniversary date thereafter, unless
the Company or Executive provides 60 days' prior written notice of non-renewal
in accordance with Section 8 before the end of such initial term or any such
one-year renewal term. Each time this Agreement is renewed pursuant to this
provision, the "Termination Date" shall become the next anniversary of the
Closing Date.
<PAGE>
6
III Compensation.
3.1 Salary. HDL shall pay Executive a base salary ("Base
Salary") at the rate of Cdn $345,000 per annum. The Base Salary shall be payable
in accordance with the ordinary payroll practices of HDL. Any increase in Base
Salary shall be in the discretion of the board of directors of the Company,
exercised on an annual basis and taking into account increases provided to other
executives of the Company, and the Base Salary as so increased shall constitute
"Base Salary" hereunder. Base Salary may not be reduced below Cdn $345,000.
3.2 Annual Bonus. In addition to his Base Salary, Executive
shall be paid an annual bonus (the "Bonus") by HDL during the term of his
employment hereunder with a target amount equal to (i) 50% of (ii) (x) Base
Salary less (y) $20,000 (the "Target Bonus") based on performance criteria
determined by the board of directors of the Company in its sole discretion. The
Bonus shall be paid at the same time as the Company pays bonuses to its senior
executives. For the Company's 1997 fiscal year ending December 31, 1997 only,
HDL shall pay Executive a bonus equal to (a) Cdn $162,500, multiplied by (b) a
fraction, the numerator of which is the number of days elapsed from the Closing
Date through the end of the fiscal year and the denominator of which is 365.
3.3 Compensation Plans and Programs. Executive shall be
eligible to participate in any compensation plan or program (including any stock
option plan) maintained by the Company in which senior executives of the Company
participate on terms comparable to those applicable to such other senior
executives (or, in the case of any such compensation plan or program providing
for cash compensation, Executive may receive from HDL the equivalent benefit).
<PAGE>
7
IV Employee Benefits.
4.1 Employee Benefit Programs, Plans and Practices. HDL shall
provide Executive during the term of his employment hereunder with coverage
under all employee pension and welfare benefit programs, plans and practices
(excluding life insurance) (to the extent permitted under any employee benefit
plan) in accordance with the terms thereof.
4.2 Vacation and Fringe Benefits. Executive shall be entitled
to six weeks vacation. In addition, Executive shall be entitled to: (a) the
lease of a BMW 740iL or equivalent automobile and the reasonable expenses
associated with driving and maintaining said vehicle, including insurance and a
cellular telephone; and (b) annual dues relating to Executive's membership at
Burlington Golf and Country Club. Executive shall also be entitled to the other
perquisites and fringe benefits made available generally to the senior
executives of the Company.
4.3 D&O Insurance. So long as Executive is an officer or
director of any of the Company and its subsidiaries, Executive shall be covered
by any directors and officers insurance policy then maintained by the Company.
HDL shall reimburse the Company for its share of the cost thereof. The Company
will use all commercially reasonable efforts to maintain a directors and
officers insurance policy containing the endorsement attached hereto as Exhibit
A. If a directors and officers insurance policy containing such endorsement is
not so maintained, Executive may elect to resign as a director of HDL and/or the
Company. Such resignation or resignations by Executive shall not affect any of
the rights and obligations of the parties hereunder other than the obligation of
the Company and/or Vestar, as applicable, under Section 1.4 to cause Executive
to be elected to the board of directors of HDL and/or the Company, as
applicable, and Executive's obligation under Section 1.4 to serve as a director
of HDL and/or the Company, as applicable.
<PAGE>
8
4.4 Indemnification. During and after the term of employment
hereunder, the Company agrees that it shall indemnify the Executive, to the
maximum extent permitted by applicable law, against all judgements, fines,
costs, amounts paid in settlement and legal fees reasonably incurred in
connection with any civil, administrative or investigatory proceeding or action
brought against the Executive by third parties (a "Proceeding") arising out of
his actions or inactions on or after the date hereof in the good faith discharge
of his respective duties and responsibilities as an employee, officer or
director of the Company or any of its subsidiaries (the "indemnity obligation")
during the period of Executive's services as such an employee, officer or
director on or after the date hereof. The indemnity obligation shall continue to
the Executive even if he has ceased to be an employee, officer or director of
the Company or any of its subsidiaries. To the maximum extent permitted by
applicable law, the Company shall advance to the Executive all reasonable costs
and expenses incurred by him in connection with a Proceeding within 20 days
after receipt by the Company of a written request for such advance. Such request
shall include an itemized list of the costs and expenses and an undertaking by
the Executive to repay the amount of such advance if it shall ultimately be
determined, in a final judgment for which the time to appeal has expired, that,
pursuant to applicable law, he is not entitled to be indemnified against such
costs and expenses.
V Expenses.
Executive is authorized to incur reasonable expenses in
carrying out his duties and responsibilities under this Agreement, including,
without limitation, expenses for business class travel, business entertainment
and similar items related to such duties and responsibilities. HDL will
reimburse Executive for or pay directly all such expenses upon presentation by
Executive from time to time of appropriately itemized and approved (consistent
with HDL's policy) accounts
<PAGE>
9
of such expenditures.
VI Termination of Employment.
6.1 Termination Not for Cause. (a) The Company or HDL may
terminate Executive's employment at any time for any reason. If Executive's
employment is terminated by the Company or HDL other than for Cause (as defined
in Section 6.4 hereof) or as a result of Executive's death or Permanent
Disability (as defined in Section 6.2 hereof) or by Executive within ninety (90)
days following a Severance Event (as defined in Section 6.1(c) hereof), in each
case prior to the Termination Date, Executive shall receive such payments, if
any, under applicable plans or programs, including but not limited to those
referred to in Section 3.3 hereof, to which he is entitled pursuant to the terms
of such plans or programs. In addition, Executive shall be entitled to receive
an amount (the "Termination Amount") from HDL in lieu of any Bonus in respect of
all or any portion of the fiscal year in which such termination occurs and any
other cash compensation (other than the Compensation Payment referred to below).
The Termination Amount shall consist of the sum of: (a) the product of (i) the
Severance Multiplier (as defined in Section 6.1(b) hereof) and (ii) the Base
Salary (at its then current rate); and (b) the product of (i) the Target Bonus
in respect of the fiscal year in which Executive's termination occurs (which
fiscal year shall consist of twelve calendar months for purposes of this
calculation) multiplied by (ii) a fraction, the numerator of which is the number
of days passed in the current fiscal year prior to Executive's termination and
the denominator of which is 365. The portion of the Termination Amount referred
to in clause (a) shall be payable at the beginning of each month following such
termination of employment in a number of equal monthly installments equal to the
product of (i) 12 months and (ii) the Severance Multiplier, and the portion of
the Termination Amount referred to in clause (b) shall be payable when the
Company pays bonuses to its senior executives. In
<PAGE>
10
addition, Executive shall be entitled to receive (x) a cash lump sum payment in
respect of compensation earned but not yet paid (including any deferred Bonus
payments) (the "Compensation Payment") and (y) to continued coverage under HDL's
group employee medical, dental and disability plans in accordance with the
respective terms thereof for a period of time equal to the product of (i) 12
months and (ii) the Severance Multiplier. The Compensation Payment shall be paid
by HDL to Executive within 30 days after the termination of Executive's
employment. If the Company delivers a notice of non-renewal pursuant to Section
2 hereof and Executive's employment terminates on the Termination Date,
Executive shall be entitled to receive all of the foregoing payments and
benefits applicable following a termination of Executive's employment by the
Company or HDL other than for Cause (including a Termination Amount), except
that the Severance Multiplier shall be one (1).
(b) As used herein, the term "Severance Multiplier" shall
mean: prior to the second anniversary of the Closing Date, three (3); from (and
including) the second anniversary of the Closing Date up to (but not including)
the third anniversary of the Closing Date, two (2); and from (and including) and
after the third anniversary of the Closing Date, one and one-half (1.5).
(c) As used herein, the term "Severance Event" shall be
limited to:
(i)a material breach by the Company or HDL of the last
sentence of Section 1.2 hereof;
(ii) a material breach by the Company or Vestar of Section 1.4
hereof;
(iii) a material breach by HDL of the first or last sentence
of Section 3.1 hereof;
(iv) a material breach by HDL of Section 3.2, 3.3, 4.1 or 4.2
hereof;
(v) a material and adverse diminution of duties from the
duties held by Executive following the Closing Date, or, in the event of a
reorganization of the Company or HDL, from the duties held by Executive
immediately following such reorganization
<PAGE>
11
(which duties should be comparable in importance to those of the
Company's Executive Vice Presidents); provided, however, that this
subpart (v) shall be null and void in the event that either the Company
or Executive gives the other notice within 90 days of the Termination
Date that this Agreement shall not be automatically renewed as provided
in Section 2 hereof; and
(vi) if the Company shall not have (w) delivered to Executive
written notice of a meeting of the board of directors of the Company pursuant to
Section 6.4(b) hereof or (x) alleged the breach by Executive of Section 12
hereof or Section 6.7 of the Share Purchase Agreement and if (y) the Company
shall not be in default under any material credit agreement to which it is a
party and (z) the performance of its obligations under the Stay/Pay Agreement
dated the date hereof between the Executive and the Company (the "Stay/Pay
Agreement") would not (with or without notice or lapse of time or both)
constitute such a default, a material breach of the Stay/Pay Agreement;
provided, however, that none of the events listed in (i) through (vi) above
shall constitute a Severance Event unless (x) the Executive gives the Company
written notice within 30 days of the occurrence of the event, specifying in
reasonable detail the relevant facts and the Severance Event the Executive
believes they will constitute absent the Company curing such event as
contemplated by clause (y) below, and (y) the Company does not cure such event
within the 30 day period following its receipt of such notice.
6.2 Permanent Disability. If the Executive becomes totally
disabled (as defined in HDL's Long-Term Disability Benefit Plan applicable to
senior executive officers as in effect on the date hereof) for a continuous
period of six months or longer ("Permanent Disability"), the Company, HDL or
Executive may terminate Executive's employment on written notice thereof, and
Executive shall receive or commence receiving, as soon as practicable:
(i)amounts payable pursuant to the terms of a disability
insurance policy or similar arrangement which the Company maintains during the
term hereof;
(ii) the Target Bonus in respect of the fiscal year in which
his termination occurs, prorated by a fraction, the numerator of which is the
number of days of the fiscal year until termination and the denominator of which
is 365;
(iii) the Compensation Payment; and
<PAGE>
12
(iv) such payments under applicable plans or programs,
including but not limited to those referred to in Section 3.3 hereof, to which
he is entitled pursuant to the terms of such plans or programs.
6.3 Death. In the event of Executive's death during the term
of his employment hereunder, Executive's estate or designated beneficiaries
shall receive or commence receiving, as soon as practicable:
(i)the Target Bonus in respect of the fiscal year in which his
death occurs, prorated by a fraction, the numerator of which is the number of
days of the fiscal year until his death and the denominator of which is 365;
(ii) any death benefits provided under the employee benefit
programs, plans and practices referred to in Section 4.1 hereof, in accordance
with their terms;
(iii) the Compensation Payment; and
(iv) such payments under applicable plans or programs,
including but not limited to those referred to in Section 3.3 hereof, to which
Executive's estate or designated beneficiaries are entitled pursuant to the
terms of such plans or programs.
6.4 Voluntary Termination by Executive; Discharge for Cause.
(a) Either the Company or HDL shall have the right to terminate the employment
of Executive for Cause. In the event that Executive's employment is terminated
by the Company or HDL for Cause, as hereinafter defined, or by Executive (other
than as a result of the Executive's Permanent Disability or death or by
Executive within ninety (90) days following a Severance Event), prior to the
Termination Date, Executive shall only be entitled to receive the Compensation
Payment. Executive shall not be entitled, among other things, to the payment of
any Bonus in respect of all or any portion of the fiscal year in which such
termination occurs. After the termination of Executive's employment under this
Section 6.4, the obligations of the Company or HDL under this Agreement to make
any further payments, or provide any benefits specified herein, to Executive
shall thereupon cease and terminate.
<PAGE>
13
(b) As used herein, the term "Cause" shall be limited to (i)
willful neglect of duty (which shall not include any good faith errors in
business judgment) or willful misconduct (which shall not include any good faith
errors in business judgment) by Executive in connection with his employment,
(ii) continuing refusal by Executive to perform his duties hereunder as required
under Section 1.2, after 30 days prior written notice of any such refusal to
perform such duties or direction was given to Executive, (iii) any breach by
Executive of the provisions of Section 12 of this Agreement or Section 6.7 of
the Share Purchase Agreement or any other material breach of this Agreement by
Executive or (iv) (x) the commission by the Executive of (1) fraud, (2) an act
of dishonesty or disloyalty in respect of the discharge of his duties, (3) moral
turpitude, (4) an indictable offense under the Criminal Code (Canada) which in
the reasonable judgement of the board of directors of the Company is comparable
to a felony under the laws of the United States of America or any subdivision
thereof or (5) a felony under the laws of the United States of America or any
subdivision thereof or (y) the conviction of the Executive of an offense under
the Criminal Code (Canada) which results in the Executive's incarceration.
Termination of Executive pursuant to this Section 6.4 shall be made by delivery
to Executive of a copy of a resolution duly adopted by the affirmative vote of
not less than a majority of the Directors at a meeting of the board of directors
of the Company called and held for the purpose (after 30 days prior written
notice to Executive (during which 30 days Executive shall have the opportunity
to cure (if practicable) any action or inaction referred to in Section 6.4(b)
(i), (ii) or (iii)) and reasonable opportunity for Executive to be heard before
the board of directors of the Company prior to such vote), finding that in the
reasonable judgment of the board of directors of the Company Executive was
guilty of conduct set forth in any of clauses (i) through (iv) above and
specifying the particulars thereof.
<PAGE>
14
VII Mitigation of Damages.
Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise after the termination of his employment hereunder.
VIII Notices.
All notices or communications hereunder shall be in writing, addressed
as follows: To the Company:
Russell-Stanley Holdings, Inc.
230 Half Mile Road
Red Bank, NJ 07701
Attn: Chief Executive Officer
with a copy to:
Peter J. Gordon Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
To Executive:
Mr. Michael W. Hunter
c/o Hunter Drums Limited
5420 North Service Road
Burlington, Ontario
Canada L7L6C7
with a copy to:
W. Brian Rose, Esq.
Stikeman, Elliott
Commerce Court West
53rd Floor
P.O. Box 85
Toronto, Ontario
Canada M5L1B9
Any such notice or communication shall be delivered by hand or
by courier, addressed as above
<PAGE>
15
(or to such other address as such party may designate in a
notice duly delivered as described above).
IX Separability; Legal Fees.
If any provision of this Agreement shall be declared to be
invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect. In any dispute regarding this Agreement, the
non-prevailing party shall bear the reasonable out-of-pocket costs incurred by
the prevailing party in respect of enforcing its respective rights under this
Agreement. In the event that neither party has prevailed with respect to all of
its claims, then the expenses will be apportioned as determined by the court. In
addition, the Company and HDL appoint Osler, Hoskin & Harcourt, P.O. Box 50, 1
First Canadian Place, Toronto, Ontario, Canada M5X1B8, Attention: Doug Marshall;
or any other partner thereof, as agent for service of process and Executive
appoints Stikeman, Elliott (see Section 8 for address) Attention: Brian Rose, or
any other partner thereof, as agent for service of process.
X Assignment.
This contract shall be binding upon and inure to the benefit
of the heirs and representatives of Executive and the assigns and successors of
the Company, but neither this Agreement nor any rights or obligations hereunder
shall be assignable or otherwise subject to hypothecation by Executive (except
by will or by operation of the laws of intestate succession) or by the Company,
except that the Company may assign this Agreement to any successor (whether by
merger, purchase or otherwise) to all or substantially all of the stock, assets
or businesses of the Company, if such successor expressly agrees to assume the
obligations of the Company hereunder.
<PAGE>
16
XI Amendment.
This Agreement may only be amended by written agreement of the
parties hereto.
XII Nondisclosure of Confidential Information.
(a) Executive shall not, without the prior written consent of
the Company, use, divulge, disclose or make accessible to any other person,
firm, partnership, corporation or other entity any Confidential Information
pertaining to the business of the Company or HDL or any of their subsidiaries,
except (i) while employed by the Company or HDL or any of their subsidiaries,
which use, divulgence or disclosure Executive reasonably determines to be in the
business of and for the benefit of the Company or HDL or any of their
subsidiaries, (ii) as required by law, (iii) as reasonably required to enforce
his rights hereunder or under the Stay/Pay Agreement or Share Purchase Agreement
or (iv) for the purposes of obtaining personal, legal or financial advice from
independent professional advisors. For purposes of this Section 12(a),
"Confidential Information" shall mean non-public information concerning the
financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing plans and other non-public,
proprietary and confidential information of the Company, HDL and their
respective subsidiaries or their respective customers, that, in any case, is not
otherwise available to the public (other than by Executive's breach of the terms
hereof).
(b)Executive and the Company agree that this confidentiality
covenant and the covenant contained in Section 6.7 of the Share Purchase
Agreement are reasonable covenants under the circumstances, and further agree
that if in the opinion of any court of competent jurisdiction such restraints
are not reasonable in any respect, such court shall have the right, power and
authority to modify such provision or provisions of such covenants to the extent
the court determines such restraints are not reasonable and to enforce the
covenants as so amended.
<PAGE>
17
Executive agrees that any breach of the covenants contained in this Section 12
or in Section 6.7 of the Share Purchase Agreement would irreparably injure the
Company. Accordingly, Executive agrees that the Company or HDL may, in addition
to pursuing any other remedies it may have in law or in equity, cease making any
payments or providing any benefits otherwise required to be paid or provided
under this Agreement and obtain an injunction against Executive from any court
having jurisdiction over the matter restraining any further violation of this
Agreement by Executive.
XIII Beneficiaries; References.
Executive shall be entitled to select (and change, to the
extent permitted under any applicable law) a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following Executive's
death, and may change such election, in either case by giving the Company
written notice thereof. In the event of Executive's death, reference in this
Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, heirs at law, estate or other legal representative. Any reference
to the masculine gender in this Agreement shall include, where appropriate, the
feminine.
XIV Survivorship.
The provisions of Sections 4.4, 6 through 13 and 15, 17 and 18
shall survive any termination of this Agreement to the extent necessary to the
intended preservation of the rights and obligations provided therein.
<PAGE>
18
XV Governing Law; Attornment.
This Agreement shall be construed under and governed by the
laws of the Province of Ontario applicable to contracts made and to be performed
therein, and the parties hereto attorn to the exclusive jurisdiction of the
courts of the Province of Ontario for the purpose of any actions or proceedings
that may be required to enforce any provision of this Agreement.
XVI Effect on Prior Agreements.
This Agreement contains the entire understanding between the
parties hereto and supersedes in all respects any prior or other agreement or
understanding between the Company or any affiliate of the Company and Executive
regarding the subject matter hereof, other than the Share Purchase Agreement and
the Stay/Pay Agreement.
XVII Withholding.
The Company shall be entitled to withhold from payment any
amount of withholding required by law.
XVIII Payment.
Any money paid pursuant to this Agreement shall be paid by HDL
either by wire transfer of immediately available funds or by a check drawn on a
Canadian bank account in immediately available funds.
XIX Counterparts.
This Agreement may be executed in two or more counterparts,
each of which will be deemed an original.
<PAGE>
19
XX Currency.
Any sums delineated in dollars in this Agreement shall mean
Canadian dollars, not United States dollars.
XXI Guarantee.
The Company hereby (i) covenants, acknowledges and agrees that
all representations, warranties, covenants, undertakings and other agreements
contained herein on the part of HDL are joint and several obligations of HDL and
the Company and (ii) guarantees the obligations of HDL under this Agreement and
agrees to cause HDL to comply with the terms of this Agreement. This guarantee
shall be a continuing and irrevocable guarantee and shall survive the
termination of this Agreement. Without limitation, the obligations of this
guarantee shall not be released, discharged or affected by any extensions of
time or indulgences or modifications granted by the Executive in favor of HDL,
or by any failure to enforce any of the terms of this Agreement or by the
bankruptcy, insolvency, dissolution, amalgamation, winding-up or reorganization
of HDL, and the Company hereby waives any right to require the Executive to
exhaust any action or recourse against HDL before requiring performance by the
Company pursuant to this guarantee.
XXII Remedies.
In the event of a breach of this Agreement or the Stay Pay
Agreement which constitutes a Severance Event, the Executive may elect to treat
the breach as a Severance Event or, in the alternative but not in addition
thereto, exercise such other remedies as are available at law to enforce the
provisions of this Agreement or the Stay Pay Agreement. In the event of a breach
of this Agreement or the Stay Pay Agreement which does not constitute a
Severance Event, the Executive may exercise such remedies as are available at
law or under this Agreement
<PAGE>
20
or the Stay Pay Agreement to enforce the provisions of this Agreement or the
Stay Pay Agreement.
<PAGE>
HUNTER DRUMS LIMITED
By /s/ Michael W. Hunter
------------------------------
Name: Michael W. Hunter
Title: President
RUSSELL-STANLEY HOLDINGS, INC.
By /s/ Daniel W. Miller
------------------------------
Name: Daniel W. Miller
Title: President
/s/ Michael W. Hunter
---------------------------
MICHAEL W. HUNTER
With respect to Section 1.4 only,
VESTAR CAPITAL PARTNERS III, L.P.
By: VESTAR ASSOCIATES III, L.P.
Its: General Partner
By: VESTAR ASSOCIATES CORPORATION III
Its: General Partner
By: /s/ Daniel S. O'Connell
- -----------------------------
Name: Daniel S. O'Connell
Title: General Partner
By: /s/ Robert L. Rosner
- -----------------------------
Name: Robert L. Rosner
Title: Managing Director
<PAGE>
VESTAR/R-S INVESTMENT LIMITED PARTNERSHIP
By: /s/ Daniel S. O'Connell
- ------------------------------
Name: Daniel S. O'Connell
Title: General Partner
By: /s/ Robert L. Rosner
- ------------------------------
Name: Robert L. Rosner
Title: Managing Director
EXHIBIT 10.16
HUNTER DRUMS LIMITED RUSSELL-STANLEY HOLDINGS, INC.
5420 North Service Road 230 Half Mile Road
Burlington, Ontario Red Bank, NJ 07701
Canada L7L6C7
October 30, 1997
Mr. Michael W. Hunter
Hunter Drums Limited
5420 North Service Road
Burlington, Ontario
Canada L7L6C7
Dear Michael:
In order to provide you with additional incentive to remain
President of Hunter Drums Limited ("HDL"), a wholly owned subsidiary of
Russell-Stanley Holdings, Inc. (the "Company"), HDL hereby agrees to provide you
with the compensation provided herein, in addition to the benefits provided in
the Employment Agreement among yourself, HDL and the Company, dated the date
hereof (the "Employment Agreement").
HDL agrees to pay you or your legal personal representatives,
in arrears, the sum of Cdn $58,334 each month through the fourth anniversary of
this Agreement and the sum of Cdn $37,500 each month thereafter, through the
sixth anniversary of this Agreement. In the event that (x) your employment is
terminated by the Company or HDL without Cause (as defined in the Employment
Agreement), (y) you choose to terminate your employment within ninety (90) days
following a Severance Event (as defined in the Employment Agreement) or (z) the
Company delivers a notice of non-renewal pursuant to Section 2 of the Employment
Agreement and your employment terminates at the end of the initial term of the
Employment Agreement, and so long as you do not breach the covenants contained
in Section 12 of the Employment Agreement or your obligations under Section 6.7
of the Share Purchase Agreement (as defined in the Employment Agreement), HDL
will pay you or your legal personal representatives (i) 75% of the aggregate
payments remaining to be made pursuant to the preceding sentence in equal
monthly installments, in arrears, during the first 50% of the remaining term of
this Agreement and (ii) the remaining 25% of such aggregate payments on the
sixth anniversary of this Agreement. In the event that your employment is
terminated as a result of death or Permanent Disability (as defined in the
Employment Agreement) or you die or suffer a Permanent Disability following the
occurrence of any of the terminations of your employment referred to in clauses
(x), (y) and (z) of
<PAGE>
2
the preceding sentence, then HDL shall pay you or your legal personal
representatives, in lieu of any remaining payments due under this Agreement, a
single lump sum equal to the present value of the remaining payments due under
this Agreement, discounted to present value using a 7.5% interest rate per
annum. In the event that your employment is terminated by the Company or HDL for
Cause or by you (other than as a result of your death or Permanent Disability or
the occurrence of any termination of your employment referred to in clause (y)
of the second preceding sentence or you deliver a notice of non-renewal pursuant
to Section 2 of the Employment Agreement and your employment terminates at the
end of the initial term of the Employment Agreement), HDL shall not be obligated
to make any of the remaining payments contained in this Agreement and this
Agreement shall be null and void.
In the event of a Change of Control (as defined below) HDL
shall pay you or your legal personal representatives, in lieu of any remaining
payments due under this Agreement, a single lump sum equal to the present value
of the remaining payments due under this Agreement, discounted to present value
using a 7.5% interest rate per annum. For purposes of this Agreement, a Change
of Control shall occur if: (i) the Company sells all or substantially all of its
HDL stock or all or substantially all of the assets of HDL to a third party
which is not an affiliate of the Company, (ii) Vestar Capital Partners III, L.P.
and its affiliates ("Vestar") sell all or substantially all of their stock in
the Company, or the Company sells all or substantially all of its assets, to a
third party which is not an affiliate of Vestar, (iii) the stockholders of HDL
or the Company approve a plan of liquidation or dissolution of HDL or the
Company, (iv) a third party, together with its affiliates, acquires a percentage
of the voting stock of the Company or HDL which exceeds the greater of (a) 30%
and (b) the percentage held by Vestar (in respect of the Company) or by the
Company (in respect of HDL), or (v) a third party, together with its affiliates,
has more designees on the board of directors of the Company than has Vestar or
on the board of directors of HDL than has the Company.
As consideration for HDL agreeing to make the payments
described above, you agree: (i) to remain an employee of HDL until the sixth
anniversary of the date hereof and (ii) not to breach the provisions of Section
12 of the Employment Agreement and Section 6.7 of the Stock Purchase Agreement.
The Company represents and warrants that (i) as of the date
hereof, Vestar Capital Partners III, L.P. and Vestar/R-S Investment Limited
Partnership beneficially own a majority of the outstanding shares of voting
stock of the Company and (ii) following the consummation of the transactions
contemplated by the Share Purchase Agreement and assuming the accuracy of all of
the representations and warranties in Section 2.2 thereof, the Company will
beneficially own all of the outstanding shares of voting stock of HDL.
Any money paid pursuant to this Agreement shall (i) not be
taken into account as compensation for purposes of any retirement plans, be they
qualified or otherwise, of the Company or HDL and (ii) be paid either by wire
transfer of immediately available funds or by a check drawn on a Canadian bank
account in immediately available funds.
<PAGE>
3
This Agreement shall be construed and interpreted in
accordance with the laws of the Province of Ontario, without reference to rules
relating to conflicts of law, and the parties hereto attorn to the exclusive
jurisdiction of the courts of the Province of Ontario for the purpose of any
actions or proceedings that may be required to enforce any provision of this
Agreement. In addition, each party has designated the same agents for service of
process under this Agreement as under the Employment Agreement.
This Agreement contains the entire understanding between the
parties hereto and supersedes in all respects any prior or other agreements or
understandings between the Company, or any of its affiliates, and yourself with
respect to the subject matter hereof, other than the Employment Agreement and
the Stock Purchase Agreement.
This Agreement may only be amended by written agreement of the
parties hereto.
The Company hereby (i) covenants, acknowledges and agrees that
all representations, warranties, covenants, undertakings and other agreements
contained herein on the part of HDL are joint and several obligations of HDL and
the Company and (ii) guarantees the obligations of HDL under this Agreement and
agrees to cause HDL to comply with the terms of this Agreement. This guarantee
shall be a continuing and irrevocable guarantee and shall survive the
termination of this Agreement. Without limitation, the obligations of this
guarantee shall not be released, discharged or affected by any extensions of
time or indulgences or modifications granted by the Executive in favor of HDL,
or by any failure to enforce any of the terms of this Agreement or by the
bankruptcy, insolvency, dissolution, amalgamation, winding-up or reorganization
of HDL, and the Company hereby waives any right to require the Executive to
exhaust any action or recourse against HDL before requiring performance by the
Company pursuant to this guarantee.
<PAGE>
4
Two signed copies of this Agreement have been enclosed, please
sign them and return one to us as soon as possible for our records.
Russell-Stanley Holdings, Inc.
By: /s/ Daniel W. Miller /s/ Michael W. Hunter
Name: Daniel W. Miller Michael W. Hunter
Title: Senior Vice President & CEO
Hunter Drums Limited
By: /s/ Michael W. Hunter
Name: Michael W. Hunter
Title: President
EXHIBIT 10.17
EMPLOYMENT AGREEMENT
AGREEMENT, made July 23, 1997, by and between RUSSELL-STANLEY
HOLDINGS, INC., a Delaware corporation (the "Company"), and MARK E. DANIELS
("Executive").
RECITALS
In connection with the sale (the "Sale") of Executive's
equity interest in Container Management Services, Inc., a South Carolina
corporation ("CMS"), to a subsidiary of the Company, and in order to induce
Executive to serve as the Executive Vice President of the Company and to
continue to serve as the President of CMS, the Company desires to provide
Executive with compensation and other benefits on the terms and conditions set
forth in this Agreement.
Executive is willing to accept such employment and perform
services for the Company, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as
follows:
I Employment.
1.1 Subject to the terms and conditions of this Agreement,
the Company agrees to employ Executive during the term hereof as its Executive
Vice President and as President of CMS. In his capacity as Executive Vice
President, Executive shall report to the Company's Chief Executive Officer and,
in his capacity as President of CMS, Executive shall report to the Board of
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Directors of CMS (the "CMS Board"). As President of CMS, Executive shall have
the customary powers, responsibilities and authorities of presidents of
corporations of the size, type and nature of CMS, as it exists from time to
time, and as are assigned by the CMS Board.
1.2 Subject to the terms and conditions of this Agreement,
Executive hereby accepts employment as the Company's Executive Vice President
and as President of CMS commencing, for both positions, on the date of the
closing (the "Closing Date") of the transaction contemplated in the Stock
Purchase Agreement, dated as of July 1, 1997 by and among the Executive, R.E.
Daniels, Mark E. Daniels Irrevocable Family Trust, R.E. Daniels Irrevocable
Family Trust and the Company (the "Stock Purchase Agreement"), and agrees to
devote his full working time and efforts, to the best of his ability, experience
and talent, to the performance of services, duties and responsibilities in
connection therewith. Executive shall perform such duties and exercise such
powers, commensurate with his position, as the Executive Vice President of the
Company as the Company's Chief Executive Officer shall from time to time
delegate to him on such terms and conditions and subject to such restrictions as
such Chief Executive Officer may reasonably from time to time impose. Executive
shall also perform such duties and exercise such powers, commensurate with his
position, as the President of CMS as the CMS Board shall from time to time
delegate to him on such terms and conditions and subject to such restrictions as
such CMS Board may reasonably from time to time impose. Notwithstanding the
foregoing, the Company agrees that the Executive shall be employed within 50
miles of Greenville, South Carolina and may transfer the Executive to a location
more than 50 miles away from Greenville, South Carolina only with the
Executive's prior written consent. The refusal of the Executive to relocate the
place of his employment more than 50 miles from Greenville, South Carolina shall
not be deemed as an action allowing the Company to discharge the Executive for
Cause.
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1.3 Nothing in this Agreement shall preclude Executive from
engaging, so long as in the reasonable determination of the Company's Board of
Directors (the "Board") such activities do not materially interfere with his
duties and responsibilities hereunder, in charitable and community affairs or
from managing any passive investment made by him.
1.4 The Company shall cause the Executive to be elected to
the CMS Board and Vestar Capital Partners III, L.P. shall vote its stock of the
Company in favor of electing Executive to the Board, in each case so long as
Executive is the President of CMS. Executive agrees that he shall accept such
elections and shall receive $25,000 per annum, in the aggregate, for his service
on such boards.
II Term of Employment.
Executive's term of employment under this Agreement shall
commence on the Closing Date and, subject to the terms hereof, shall terminate
on the earlier of (i) the third anniversary of the Closing Date (the
"Termination Date") or (ii) the termination of Executive's employment pursuant
to this Agreement; provided, however, that any termination of employment by
Executive (other than for death or Permanent Disability) may only be made upon
90 days prior written notice to the Company; provided, further, that this
Agreement will be automatically renewed and the term extended for additional
one-year periods commencing on the third anniversary of the Closing Date, and on
each anniversary date thereafter, unless the Company or Executive provides 60
days' prior written notice in accordance with Section 9 before the end of such
initial term or any such one-year renewal term (any reference to the "Term" of
this Agreement will include the initial term and any renewal thereof).
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III Compensation.
3.1 Salary. The Company shall pay Executive a base salary
("Base Salary") at the rate of $225,000 per annum for the period commencing on
the beginning of Executive's term of employment hereunder and ending on the
Termination Date. The Base Salary shall be payable in accordance with the
ordinary payroll practices of the Company or CMS. Any increase in Base Salary
shall be in the discretion of the Board and, as so increased, shall constitute
"Base Salary" hereunder. Base Salary may not be reduced below $225,000 except in
connection with a general salary reduction program affecting senior executives
of the Company.
3.2 Annual Bonus. In addition to his Base Salary, Executive
shall be paid an annual bonus (the "Bonus") during the term of his employment
hereunder with a target amount equal to 50% of Base Salary (the "Target Bonus")
based on performance criteria determined by the Board in its sole discretion on
a basis consistent with the methadology used for other members of senior
management.
3.3 Compensation Plans and Programs. Executive shall be
eligible to participate in any compensation plan or program maintained by the
Company in which other senior executives of the Company participate on terms
comparable to those applicable to such other senior executives.
IV Employee Benefits.
4.1 Employee Benefit Programs, Plans and Practices. The
Company shall provide Executive during the term of his employment hereunder with
coverage under all employee pension and welfare benefit programs, plans and
practices (commensurate with his positions in the Company and to the extent
permitted under any employee benefit plan) in accordance with the terms thereof,
which the Company makes available to its senior executives.
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4.2 Vacation and Fringe Benefits. Executive shall be entitled
to vacation time commensurate with that which the Company makes available to
other similarly situated senior executives. In addition, Executive shall be
entitled to: a) the lease of a Chevrolet Suburban or equivalent automobile and
the expenses associated with driving and maintaining the vehicle, including
insurance and a cellular telephone, will be covered by the Company's automobile
policy, and b) annual dues and expenses (together not to exceed $12,000.00)
relating to Executive's membership at the Greenville Country Club. Executive
shall also be entitled to the other perquisites and fringe benefits made
available to senior executives of the Company, commensurate with his position
with the Company.
V Expenses.
Executive is authorized to incur reasonable expenses in
carrying out his duties and responsibilities under this Agreement, including,
without limitation, expenses for travel and similar items related to such duties
and responsibilities. The Company will reimburse Executive for all such expenses
upon presentation by Executive from time to time of appropriately itemized and
approved (consistent with the Company's policy) accounts of such expenditures.
VI Termination of Employment.
6.1 (a) Termination Not for Cause. The Company may terminate
Executive's employment at any time for any reason. If Executive's employment is
terminated by the Company other than for Cause (as defined in Section 6.4
hereof) or as a result of Executive's death or Permanent Disability (as defined
in Section 6.2 hereof) prior to the Termination Date, Executive shall receive
such payments, if any, under applicable plans or programs, including but not
limited to those referred to in Section 3.3 hereof, to which he is entitled
pursuant to the terms of such plans or programs. In addition, Executive shall be
entitled to receive an amount (the
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"Termination Amount") in lieu of any Bonus in respect of all or any portion of
the fiscal year in which such termination occurs and any other cash compensation
(other than the Compensation Payment referred to below), which Termination
Amount shall be payable in twelve monthly installments at the beginning of each
month following such termination of employment. The Termination Amount shall
consist of the sum of: a) one-year's Base Salary (at its then current rate), and
b) the product of (i) Executive's Bonus for the fiscal year ended prior to
Executive's termination of employment, multiplied by (ii) a fraction, the
numerator of which is the number of days passed in the current fiscal year prior
to Executive's termination and the denominator of which is 365. In addition,
Executive shall be entitled to receive a cash lump sum payment in respect of
compensation earned but not yet paid (including any deferred Bonus payments)
(the "Compensation Payment"), and to continued coverage for 12 months under any
employee medical, disability and life insurance plans in accordance with the
respective terms thereof.
(b) The Compensation Payment shall be paid by the Company to
Executive within 30 days after the termination of Executive's employment by
check payable to the order of Executive or by wire transfer to an account
specified by Executive.
6.2 Permanent Disability. If the Executive becomes totally
and permanently disabled (as defined in the Company's Long-Term Disability
Benefit Plan applicable to executive officers as in effect on the date hereof)
("Permanent Disability"), the Company or Executive may terminate Executive's
employment on written notice thereof, and Executive shall receive or commence
receiving, as soon as practicable:
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(i) amounts payable pursuant to the terms of a disability
insurance policy or similar arrangement which the Company maintains during the
term hereof;
(ii) the Target Bonus in respect of the fiscal year in which
his termination occurs, prorated by a fraction, the numerator of which is the
number of days of the fiscal year until termination and the denominator of which
is 365;
(iii) the Compensation Payment; and
(iv) such payments under applicable plans or programs,
including but not limited to those referred to in Section 3.3 hereof, to which
he is entitled pursuant to the terms of such plans or programs.
6.3 Death. In the event of Executive's death during the term
of his employment hereunder, Executive's estate or designated beneficiaries
shall receive or commence receiving, as soon as practicable:
(i) the Target Bonus in respect of the fiscal year in which
his death occurs, prorated by a fraction, the numerator of which is the number
of days of the fiscal year until his death and the denominator of which is 365;
(ii) any death benefits provided under the employee benefit
programs, plans and practices referred to in Section 4.1 hereof, in accordance
with their terms;
(iii) the Compensation Payment; and
(iv) such payments under applicable plans or programs,
including but not limited to those referred to in Section 3.3 hereof, to which
Executive's estate or designated beneficiaries are entitled pursuant to the
terms of such plans or programs.
6.4 Voluntary Termination by Executive; Discharge for Cause.
(a) The Company shall have the right to terminate the employment of Executive
for Cause. In the event that Executive's employment is terminated by the Company
for Cause, as hereinafter defined, or by Executive other than as a result of the
Executive's Permanent Disability or death, prior to the Termination Date,
Executive shall only be entitled to receive the Compensation Payment. Executive
shall not be entitled, among other things, to the payment of any Bonus in
respect of all or any portion of the fiscal year in which such termination
occurs. After the termination of Executive's employment under this Section 6.4,
the obligations of the Company under this Agreement to make any further
payments, or provide any benefits specified herein, to Executive
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shall thereupon cease and terminate.
(b) As used herein, the term "Cause" shall be limited to (i)
willful malfeasance or willful misconduct by Executive in connection with his
employment, (ii) continuing refusal by Executive to perform his duties hereunder
or any lawful direction of the Board of Directors of the Company as required
under Section 1.2, after notice of any such refusal to perform such duties or
direction was given to Executive, (iii) any breach of the provisions of Section
13 of this Agreement by Executive or any other material breach of this Agreement
by Executive or (iv) the commission by Executive of (a) any felony or (b) a
misdemeanor involving moral turpitude. Termination of Executive pursuant to this
Section 6.4 shall be made by delivery to Executive of a copy of a resolution
duly adopted by the affirmative vote of not less than a majority of the
Directors at a meeting of the Board of Directors of the Company called and held
for the purpose (after 30 days prior written notice to Executive and reasonable
opportunity for Executive to be heard before the Board prior to such vote),
finding that in the reasonable judgment of such Board, Executive was guilty of
conduct set forth in any of clauses (i) through (iv) above and specifying the
particulars thereof.
VII Stock Arrangements.
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Executive and the Company shall enter into a Non-Qualified
Option Agreement, substantially in the form attached hereto as Exhibit A.
VIII Mitigation of Damages.
Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise after the termination of his employment hereunder.
IX Notices.
All notices or communications hereunder shall be in writing,
addressed as follows:
To the Company:
c/o Russell-Stanley Corp.
230 Half Mile Road
Red Bank, NJ 07701
Attn: Chief Executive Officer
with a copy to:
Alvin H. Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
To Executive:
Mr. Mark E. Daniels
c/o Container Management Services, Inc.
P.O. Box 1148
1071 Holland Road
Simpsonville, South Carolina 29681
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with a copy to:
Richard Few, Esq.
Leatherwood Walker Todd & Mann P.C.
100 East Coffee Street
P.O. Box 87
Greenville, South Carolina 29602
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after the
actual date of mailing shall constitute the time at which notice was given.
X Separability; Legal Fees.
If any provision of this Agreement shall be declared to be
invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect. Each party shall bear the costs of any legal
fees and other fees and expenses which may be incurred in respect of enforcing
its respective rights under this Agreement.
XI Assignment.
This contract shall be binding upon and inure to the benefit
of the heirs and representatives of Executive and the assigns and successors of
the Company, but neither this Agreement nor any rights or obligations hereunder
shall be assignable or otherwise subject to hypothecation by Executive (except
by will or by operation of the laws of intestate succession) or by the Company,
except that the Company may assign this Agreement to any successor (whether by
merger, purchase or otherwise) to all or substantially all of the stock, assets
or businesses of the Company, if such successor expressly agrees to assume the
obligations of the Company hereunder.
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XII Amendment.
This Agreement may only be amended by written agreement of
the parties hereto.
XIII Nondisclosure of Confidential Information;
Non-Competition.
(a) Executive shall not, without the prior written consent
of the Company, use, divulge, disclose or make accessible to any other person,
firm, partnership, corporation or other entity any Confidential Information
pertaining to the business of the Company or any of its affiliates, except (i)
while employed by the Company, in the business of and for the benefit of the
Company, or (ii) when required to do so by a court of competent jurisdiction, by
any governmental agency having supervisory authority over the business of the
Company, or by any administrative body or legislative body (including a
committee thereof) with jurisdiction to order Executive to divulge, disclose or
make accessible such information. For purposes of this Section 13(a),
"Confidential Information" shall mean non-public information concerning the
financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing plans and other non-public,
proprietary and confidential information of the Company, CMS and their
respective affiliates or customers, that, in any case, is not otherwise
available to the public (other than by Executive's breach of the terms hereof).
(b) Given Executive's role in the Sale, during the longer of
(i) the period of his employment hereunder and one year thereafter or (ii) 5
years from the date of this Agreement, Executive agrees that, without the prior
written consent of the Company, (A) he will not, directly or indirectly, either
as principal, manager, agent, consultant, officer, stockholder, partner,
investor, lender or employee or in any other capacity, carry on, be engaged in
or have any financial interest in, any business which is in competition with the
business of the Company, CMS, or any of their respective subsidiaries (the
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"Restricted Group") and (B) he shall not, on his own behalf or on behalf of any
person, firm or company, directly or indirectly, solicit or hire any person who
has been employed by the Restricted Group at any time during the 12 months
immediately preceding such solicitation.
(c) For purposes of this Section 13, a business shall be
deemed to be in competition with the Restricted Group if it is involved in the
purchase, sale, lease, management of or other dealing in any property or the
rendering of any service purchased, sold, leased, managed, dealt in or rendered
by any member of the Restricted Group as a part of the business of that member
of the Restricted Group. Nothing in this Section 13 shall be construed so as to
preclude Executive from investing in any company, provided Executive's
beneficial ownership of any class of such company's securities does not exceed
1% of the outstanding securities of such class (although the limitations in
Section 1.3 will still apply).
(d) Executive and the Company agree that this covenant not to
compete is a reasonable covenant under the circumstances, and further agree that
if in the opinion of any court of competent jurisdiction such restraint is not
reasonable in any respect, such court shall have the right, power and authority
to modify such provision or provisions of this covenant to the extent the court
determines such restraint is not reasonable and to enforce the covenant as so
amended. Executive agrees that any breach of the covenants contained in this
Section 13 would irreparably injure the Company. Accordingly, Executive agrees
that the Company may, in addition to pursuing any other remedies it may have in
law or in equity, cease making any payments otherwise required by this Agreement
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and obtain an injunction against Executive from any court having jurisdiction
over the matter restraining any further violation of this Agreement by
Executive.
XIV Beneficiaries; References.
Executive shall be entitled to select (and change, to the
extent permitted under any applicable law) a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following Executive's
death, and may change such election, in either case by giving the Company
written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or other
legal representative. Any reference to the masculine gender in this Agreement
shall include, where appropriate, the feminine.
XV Survivorship.
The respective rights and obligations of the parties hereunder
shall survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations. The provisions of this
Section 15 are in addition to the survivorship provisions of any other section
of this Agreement.
XVI Governing Law.
This Agreement shall be construed under and governed by the
laws of the State of New York applicable to contracts made and to be performed
therein.
XVII Effect on Prior Agreements.
This Agreement contains the entire understanding between the
parties hereto and supersedes in all respects any prior or other agreement or
understanding between the Company or any affiliate of the Company and Executive
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regarding the subject matter hereof other than the Non-Qualified Option
Agreement referred to in Section 7 hereof.
XVIII Withholding.
The Company shall be entitled to withhold from payment any
amount of withholding required by law.
XIX Counterparts.
This Agreement may be executed in two or more counterparts,
each of which will be deemed an original.
RUSSELL-STANLEY HOLDINGS, INC.
By /s/ Daniel W. Miller
Name: Daniel W. Miller
Title: Senior Vice President & CFO
/s/ Mark E. Daniels
MARK E. DANIELS
With respect to Section 1.4 only, VESTAR CAPITAL PARTNERS III, L.P.
By: VESTAR ASSOCIATES III, L.P.
Its: General Partner
By: VESTAR ASSOCIATES CORPORATION III
Its: General Partner
By /s/ Robert L. Rosner
Name: Robert L. Rosner
Title: Managing Director
EXHIBIT 10.18
RUSSELL-STANLEY HOLDINGS, INC.
230 HALF MILE ROAD
RED BANK, NJ 07701
July 23, 1997
Mr. Mark Daniels
Container Management Services, Inc.
P.O. Box 1148
1071 Holland Road
Simpsonville, SC 29681
Dear Mark:
In order to provide you with additional incentive to remain
President of Container Management Services, Inc. ("CMS"), a wholly owned
subsidiary of Russell-Stanley Holdings, Inc. (the "Company"), the Company hereby
agrees to provide you with the compensation provided herein, in addition to the
benefits provided in the Employment Agreement between yourself and the Company
dated the date hereof (the "Employment Agreement").
The Company agrees to pay you the sum of $770,000 on each of
the first, second and third anniversaries of this Agreement. In the event that
your employment is terminated (i) by the Company without Cause (as defined in
the Employment Agreement), (ii) as a result of your death or Permanent
Disability (as defined in the Employment Agreement), or (iii) by you within 30
days after the Company has substantially reduced your base salary, the Company
will continue to make the payments provided herein so long as you do not breach
the covenants contained in Section 13 of the Employment Agreement. In the event
that your employment is terminated under any other circumstances, the Company
shall not be obligated to make any of the remaining payments contained in this
Agreement and this Agreement shall be null and void.
As consideration for the Company agreeing to make the payments
described above and subject to the provisions described above, you agree: (i) to
remain an employee of the Company and CMS until the third anniversary of the
date hereof, (ii) to perform your duties for the Company and CMS to the best of
your abilities, and (iii) to abide by the terms of the Employment Agreement,
including, but not limited to, the provisions of Section 13 thereof.
Any money paid pursuant to this Agreement shall not be taken
into account as compensation for purposes of any retirement plans, be they
qualified or otherwise, of the Company or CMS.
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This Agreement shall be construed and interpreted in
accordance with the laws of the State of New York, without reference to rules
relating to conflicts of law, and the parties hereto submit to the exclusive
jurisdiction of the courts of the State of New York for the purpose of any
actions or proceedings that may be required to enforce any provision of this
Agreement.
This Agreement contains the entire understanding between the
parties hereto and supersedes in all respects any prior or other agreements or
understandings between the Company or any of its affiliates, and yourself with
respect to the subject-matter herein, other than the Employment Agreement.
This Agreement may only be amended by written agreement of the
parties hereto.
Two signed copies of this Agreement have been enclosed, please
sign them and return one to us as soon as possible for our records.
Russell-Stanley Holdings, Inc.
By: /s/ Daniel W. Miller /s/ Mark Daniels
Name: Daniel W. Miller Mark Daniels
Title: Senior Vice President and CFO
EXHIBIT 10.19
[RUSSELL-STANLEY LETTERHEAD]
July 23, 1998
Mr. Gerard C. DiSchino
New England Container Company
455 George Washington Highway
Smithfield, RI 02917
Dear Gerry:
As you know, today Russell-Stanley Holdings, Inc. (the
"Company") will complete the acquisition of New England Container Co., Inc.
("NECC"), which will become a subsidiary of the Company. I am pleased to offer
you the position of President of NECC and, in addition, wanted to give you
certain assurances regarding your employment.
You will receive a base salary of $140,000 per year and be
eligible to participate in the Company's annual bonus plan, long-term incentive
program, option plan and in such benefit plans and programs as the Company makes
generally available to similarly situated executives of the Company and its
subsidiaries. During your employment, you will continue to be entitled to the
use of a leased Jeep Grand Cherokee or another vehicle of similar value.
In the event your employment with the Company and its
subsidiaries is terminated within two years of the date of this letter by the
Company and its subsidiaries without Cause (as defined below) (other than as a
result of your death or disability), then the Company shall, or shall cause NECC
or any other subsidiary of the Company which employs you, to continue to pay you
your base salary for one year following your termination of employment.
For purposes of this letter, "Cause" shall mean: (i) your
willful malfeasance or willful misconduct in connection with your employment,
(ii) your refusal to perform your duties hereunder or any lawful direction of
the Board of Directors of the Company or NECC or any other subsidiary of the
Company which employs you, (iii) your breach of any covenant or agreement you
have made or entered into with any of the Company and its subsidiaries
(including those covenants included in this letter agreement) or (iv) your
commission of (a) any felony or (b) a misdemeanor involving moral turpitude.
THIS LETTER AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND
GOVERNED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE
TO RULES RELATING TO CONFLICTS OF LAW. ALL ACTIONS AND PROCEEDINGS ARISING OUT
OF OR RELATING TO THIS LETTER AGREEMENT SHALL BE HEARD AND DETERMINED IN ANY NEW
YORK STATE OR FEDERAL COURT SITTING IN NEW YORK COUNTY, NEW YORK, AND THE
PARTIES HERETO HEREBY CONSENT TO THE JURISDICTION OF SUCH COURTS IN ANY SUCH
ACTION OR PROCEEDING.
This letter agreement contains the entire understanding
between the Company and its subsidiaries, on the one hand, and you, on the other
hand, and supersedes in all respects any prior or other agreement or
understanding between any of the Company and its subsidiaries, on
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the one hand, and you, on the other hand, including, but not limited to, that
employment agreement entered into on December 13, 1996 between you and NECC.
The Company shall be entitled to withhold from payments to you
any amounts required to be withheld by law. This letter agreement may only be
amended by, and provisions hereof may only be waived by, written agreement of
the parties hereto. This letter agreement may be executed in two or more
counterparts, each of which will be deemed an original.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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If you agree with the terms and conditions of this letter
agreement, please sign both copies hereof and return one to the Company
promptly.
Sincerely,
/s/ ROBERT SINGLETON
Robert Singleton
Agreed and Accepted:
/S/ GERARD C. DISCHINO
Gerard C. DiSchino
SERVICES AGREEMENT
This Services Agreement ("Agreement") is made as of this 10th day of
February, 1999 between Russell-Stanley Holdings, Inc., a Delaware corporation
("R-S"), and Vincent J. Buonanno, an individual ("Buonanno").
WHEREAS, Buonanno has expertise in the steel drum reconditioning
business and certain other matters relating to the steel drum reconditioning
business of R-S and its subsidiaries; and
WHEREAS, R-S desires to avail itself, for the term of this Agreement,
of the expertise of Buonanno in the aforesaid areas, in which it acknowledges
the expertise of Buonanno.
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants and conditions herein set forth, the parties hereto agree as follows:
1. Appointment. On the terms and subject to the conditions set forth
in this Agreement, R-S hereby appoints Buonanno to render the services described
in Paragraph 2 hereof for the term of this Agreement.
2. Services. Buonanno hereby agrees that during the term of this
Agreement he shall advise R-S and its subsidiaries on matters relating to the
steel drum reconditioning business of R-S and its subsidiaries, including but
not limited to, (a) acquisitions, (b) introductions to industry contacts and (c)
strategy and operations.
3. Consideration. In consideration of the services contemplated by
Paragraph 2 hereof, R-S agrees to make four payments to Buonanno in the amount
of $250,000 each. The first such payment will be made by check upon amendment or
waiver of certain provisions of the Fourth Amended and Restated Revolving Credit
and Term Loan Agreement (as amended by Amendment No. 1 thereto) among R-S,
certain other subsidiaries of R-S, BankBoston, N.A., as Agent, and the Lenders
(as defined therein) to permit the payments contemplated by this Paragraph 3.
The second, third and fourth payments will be made by check on or before
December 31st of each of 1999, 2000 and 2001.
4. Term. This Agreement shall terminate upon the making of the fourth
payment described in Paragraph 3 hereof on or before December 31, 2001. The
provisions of Paragraph 5 hereof and the obligation of R-S to make payments
accrued during the term of this Agreement pursuant to Paragraph 3 hereof shall
survive the termination of this Agreement.
5. Independent Contractor. Buonanno is and will perform this Agreement
as an independent contractor and as such shall have and maintain complete
control over and be responsible for all of his employees and operations. Neither
Buonanno nor anyone employed by him, acting in their capacities hereunder, shall
be, represent, act, purport to act, or be deemed to be the agent,
representative, employee or servant
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of R-S or any of its subsidiaries. This Agreement shall not be deemed to create
any form of business organization between the parties hereto, nor is either
party granted any right or authority to assume or create any obligation or
responsibility on behalf of the other party, nor shall either party be in any
way liable for any debt of the other. Without limiting the generality of the
foregoing, all final decisions with respect to matters as to which Buonanno has
provided services hereunder shall be solely those of R-S and its subsidiaries.
6. Compliance with Laws. Buonanno covenants that in the performance of
the services to R-S and its subsidiaries hereunder he will comply with all
applicable statutes, rules, regulations and orders of the United States and of
any state or political subdivisions hereof and of any applicable foreign
jurisdiction.
7. General. (a) No amendment or waiver of any provision of this
Agreement, or consent to any departure by either party from any such provision,
shall in any event be effective unless the same shall be in writing and signed
by the parties to this Agreement and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
(b) Any and all notices hereunder shall, in the absence of receipted
hand delivery, be deemed duly given when mailed, if the same shall be sent by
registered or certified mail, return receipt requested, and the mailing date
shall be deemed the date from which all time periods pertaining to a date of
notice shall run. Notices shall be addressed to the parties at the following
addresses:
If to R-S:
Russell-Stanley Holdings, Inc.
685 Route 202-206
Bridgewater, New Jersey 08807
Attention: Chief Executive Officer
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Peter J. Gordon
If to Buonanno:
Tempel Steel Co.
5215 Old Orchard Road
Skokie, Illinois 60077
Attention: Vincent J. Buonanno
With a copy to:
Edwards & Angell, LLP
2700 Hospital Trust Tower
Providence, Rhode Island 02903
Attention: Bernard V. Buonanno, Jr.
-2-
<PAGE>
(c) This Agreement shall constitute the entire Agreement between the
parties and their affiliates with respect to the subject matter hereof, and
shall supersede all previous oral and written (and all contemporaneous oral)
negotiations, commitments, agreements and understandings relating hereto.
(d) 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 federal and state courts located in the
Southern District of New York for purposes of any action or proceeding arising
out of or relating to this Agreement. Any such action or proceeding may be
brought only in such court. The parties hereto waive any objection they may have
to the venue of such action or proceeding in any such court or that such action
or proceeding in such court was brought in an inconvenient court and agree not
to plead or claim the same. This Agreement shall inure to the benefit of, and be
binding upon, Buonanno, R-S and their respective successors and assigns.
(e) This Agreement may be executed in two or more counterparts, and by
different parties on separate counterparts, each set of counterparts showing
execution by all parties shall be deemed an original, but all of which shall
constitute one and the same instrument.
(f) The waiver by any party of any breach of this Agreement shall not
operate as or be construed to be a waiver by such party of any subsequent
breach.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers or agents as set forth
below.
RUSSELL-STANLEY HOLDINGS, INC.
By: /s/ ROBERT L. SINGLETON
Name: Robert L. Singleton
Title: President and CEO
/s/ VINCENT J. BUONANNO
--------------------------------
VINCENT J. BUONANNO
-4-
EXHIBIT 12
Computation of Earnings to Fixed Charges
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1995 1996 1997 1998
------ --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
RATIO OF EARNINGS TO FIXED CHARGES:
Income (loss) before taxes and extraordinary items ..... $ 1.0 $ 2.6 $ 6.2 $ 6.9 ($4.8)
Plus: Fixed charges .................................... 8.0 8.5 7.8 9.2 17.5
----- ----- ----- ----- -----
Income (loss) before taxes and extraordinary items
plus fixed charges ................................... $ 9.0 11.1 $14.0 $16.1 $12.7
===== ===== ===== ===== =====
Fixed charges:
Interest expense ....................................... $ 7.8 $ 8.3 $ 7.5 $ 8.8 $16.0
One third of rental expense, representing interest
portion .............................................. 0.2 0.2 0.3 0.4 1.5
----- ----- ----- ----- -----
$ 8.0 $ 8.5 $ 7.8 $ 9.2 $17.5
===== ===== ===== ===== =====
Ratio of Earnings to Fixed Charges ..................... 1.1 1.3 1.8 1.8 --
</TABLE>
EXHIBIT 21
LIST OF SUBSIDIARIES OF RUSSELL-STANLEY HOLDINGS, INC.
Container Management Services, Inc.
Hunter Drums Limited
New England Container Co., Inc.
RSLPCO, Inc.
Russell-Stanley Corp.
Russell-Stanley, Inc.
Russell-Stanley, L.P.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Russell-Stanley
Holdings, Inc. and subsidiaries on Form S-4 of our reports dated February 22,
1999 relating to Russell-Stanley Holdings, Inc. and subsidiaries; dated
January 29, 1998 relating to Container Management Services, Inc. and Hunter
Drums Limited; and dated June 8, 1998 relating to Smurfit Plastic Packaging. All
such reports appear in the Prospectus, which is part of this Registration
Statement.
We also consent to the reference to us under the headings "Summary Historical
and Pro Forma Consolidated Financial and Other Data", "Selected Historical
Consolidated Financial and Other Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
April 9, 1999
[Letterhead of Elliott, Davis & Company, L.L.P.]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Container Management Services, Inc.
We consent to the use of our report on the financial statements of
Container Management Services, Inc. as of and for the year ended December 31,
1996 included in this Registration Statement on Form S-4 for Russell-Stanley
Holdings, Inc. and to the reference to our Firm under the caption "Experts" in
the Prospectus.
/s/ Elliott, Davis & Company, L.L.P.
ELLIOTT, DAVIS & COMPANY, L.L.P.
Greenville, South Carolina
April 9, 1999
EXHIBIT 24
POWER OF ATTORNEY
Each of the undersigned, being an officer or director, or
both, of RUSSELL-STANLEY HOLDINGS, INC. (the "Company") and/or one or more of
RUSSELL-STANLEY CORP., CONTAINER MANAGEMENT SERVICES, INC., NEW ENGLAND
CONTAINER CO., INC., RUSSELL-STANLEY, INC. (in its capacity as an issuer and as
general partner of Russell-Stanley, L.P.) and RSLPCO, INC. (each, a
"Guarantor"), in his capacity or capacities as set forth below, hereby
constitutes and appoints ROBERT L. SINGLETON and DANIEL W. MILLER, and each of
them acting alone, his true and lawful attorney and agent, to do any and all
acts and things and to execute any and all instruments which said attorney and
agent may deem necessary or desirable to enable the Company and/or one or more
Guarantors, as applicable, to comply with the Securities Act of 1933, as amended
(the "Act"), and any rules, regulations and requirements of the Securities and
Exchange Commission thereunder, in connection with the registration under the
Act of the Company's 10 7/8% Senior Subordinated Notes due 2009 and the
guarantees by the Guarantors thereof (collectively, the "Securities"),
including, without limitation, the power and authority to sign the name of each
of the undersigned in the capacity or capacities indicated below to one or more
registration statements to be filed with the Securities and Exchange Commission
with respect to the Securities, to any and all amendments or supplements to any
such registration statement, whether such amendments or supplements are filed
before or after the effective date of the applicable registration statement, and
to any and all instruments or documents filed as part of or in connection with
any such registration statement or any and all amendments or supplements
thereto, whether such amendments or supplements are filed before or after the
effective date of any such registration statement; and each of the undersigned
hereby ratifies and confirms all that such attorney and agent shall do or cause
to be done by virtue hereof.
<PAGE>
2
Signature Title
/s/ Robert L. Rosner Russell-Stanley Holdings, Inc.
- ------------------------- -----------------------------------
Robert L. Rosner Chairman of the Board of Directors
Russell-Stanley Corp.
-----------------------------------
Director
Russell-Stanley, Inc.
-----------------------------------
Director
RSLPCO, Inc.
-----------------------------------
Director
Russell-Stanley, L.P.
-----------------------------------
Director of Russell-Stanley, Inc.,
in its capacity as general partner
<PAGE>
3
/s/ Robert L. Singleton Russell-Stanley Holdings, Inc.
- ------------------------- -----------------------------------
Robert L. Singleton President, Chief Executive Officer,
Secretary,
Assistant Treasurer and Director
Russell-Stanley Corp.
-----------------------------------
President, Chief Executive Officer
and Director
Container Management Services, Inc.
-----------------------------------
Director
New England Container Co., Inc.
-----------------------------------
Director
Russell-Stanley, Inc.
-----------------------------------
President, Chief Executive Officer
and Director
RSLPCO, Inc.
-----------------------------------
President, Chief Executive Officer,
Secretary, Assistant Treasurer and
Director
Russell-Stanley, L.P.
-----------------------------------
Director of Russell-Stanley, Inc.,
in its capacity as general partner
<PAGE>
4
/s/ Daniel W. Miller Russell-Stanley Holdings, Inc.
- ------------------------- -----------------------------------
Daniel W. Miller Executive Vice President, Chief
Financial Officer, Treasurer,
Assistant Secretary and Director
Russell-Stanley Corp.
-----------------------------------
Executive Vice President, Chief
Financial Officer, Treasurer,
Assistant Secretary and Director
Container Management Services, Inc.
-----------------------------------
Executive Vice President, Chief
Financial Officer and Director
New England Container Co., Inc.
-----------------------------------
Executive Vice President, Chief
Financial Officer, Secretary and
Director
Russell-Stanley, Inc.
-----------------------------------
Executive Vice President, Chief
Financial Officer, Treasurer,
Assistant Secretary and Director
RSLPCO, Inc.
-----------------------------------
Executive Vice President, Chief
Financial Officer, Treasurer,
Assistant Secretary and Director
Russell-Stanley, L.P.
-----------------------------------
Director of Russell-Stanley, Inc.,
in its capacity as general partner
/s/ Mark E. Daniels Russell-Stanley Holdings, Inc.
- ------------------------- -----------------------------------
Mark E. Daniels Executive Vice President and
Director
Container Management Services, Inc.
-----------------------------------
President and Director
<PAGE>
5
/s/ Michael W. Hunter Russell-Stanley Holdings, Inc.
- ------------------------- -----------------------------------
Michael W. Hunter Executive Vice President and
Director
/s/ Ronald M. Litchkowski Russell-Stanley Corp.
- ------------------------- -----------------------------------
Ronald M. Litchkowski Vice President, Controller and
Secretary
Russell-Stanley, Inc.
-----------------------------------
Vice President, Controller and
Secretary
Russell-Stanley Holdings, Inc.
-----------------------------------
Vice President, Controller
/s/ Gerard C. DiSchino New England Container Co., Inc.
- ------------------------- -----------------------------------
Gerard C. DiSchino President and Director
/s/ Eugene D. Onofrio New England Container Co., Inc.
- ------------------------- -----------------------------------
Eugene D. Onofrio Vice President, Controller
and Treasurer
/s/ Norman W. Alpert Russell-Stanley Holdings, Inc.
- ------------------------ -----------------------------------
Norman W. Alpert Director
/s/ Vincent J. Buonanno Russell-Stanley Holdings, Inc,
- ------------------------- -----------------------------------
Vincent J. Buonanno Director
/s/ Todd N. Khoury Russell-Stanley Holdings, Inc.
- ------------------------- -----------------------------------
Todd N. Khoury Director
/s/ Leonard Lieberman Russell-Stanley Holdings, Inc.
- ------------------------- -----------------------------------
Leonard Lieberman Director
<PAGE>
6
/s/ Kevin Mundt Russell-Stanley Holdings, Inc.
- ------------------------- -----------------------------------
Kevin Mundt Director
/s/ Arthur J. Nagle Russell-Stanley Holdings, Inc.
- ------------------------- -----------------------------------
Arthur J. Nagle Director
/s/ Vincent J. Naimoli Russell-Stanley Holdings, Inc.
- ------------------------- -----------------------------------
Vincent J. Naimoli Director
/s/ Daniel S. O'Connell Russell-Stanley Holdings, Inc.
- ------------------------- -----------------------------------
Daniel S. O'Connell Director
/s/ John W. Priesing Russell-Stanley Holdings, Inc.
- ------------------------- -----------------------------------
John W. Priesing Director
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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) [__]
---------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-516-382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
---------------------------
RUSSELL-STANLEY HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Delaware 22-3525626
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
RUSSELL-STANLEY CORP.
(Exact name of obligor as specified in its charter)
New Jersey 22-1505645
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
RUSSELL-STANLEY CORP.
(Exact name of obligor as specified in its charter)
Illinois 22-2623485
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
RSLPCO, INC.
(Exact name of obligor as specified in its charter)
Delaware 22-3611710
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
<PAGE>
2
RUSSELL-STANLEY CORP.
(Exact name of obligor as specified in its charter)
Texas 22-3611707
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
685 Route 202/206
Bridgewater, NJ 08807
(Address of principal executive offices) (Zip code)
CONTAINER MANAGEMENT SERVICES, INC.
(Exact name of obligor as specified in its charter)
South Carolina 57-0941972
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1071 Holland Road
Simpsonville, SC 29681
(Address of principal executive offices) (Zip code)
NEW ENGLAND CONTAINER CO., INC.
(Exact name of obligor as specified in its charter)
Rhode Island 05-268961
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
455 Washington Highway
Smithfield, RI 02917-1996
(Address of principal executive offices) (Zip code)
---------------------------
10-7/8% Senior Subordinated Notes due 2009
(Title of the indenture securities)
<PAGE>
3
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS
SUBJECT.
Name Address
<TABLE>
<S> <C>
Superintendent of Banks of the State of New York 2 Rector Street, New York,
N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to com-mence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit
1 to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
<PAGE>
4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing 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 24th day of March, 1999.
THE BANK OF NEW YORK
By: /S/ REMO J. REALE
Name: REMO J. REALE
Title: ASSISTANT VICE PRESIDENT
<PAGE>
EXHIBIT 7
(to Form T-1, Exhibit 25)
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1998, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and currency and coin $3,951,273
Interest-bearing balances 4,134,162
Securities:
Held-to-maturity securities 932,468
Available-for-sale securities 4,279,246
Federal funds sold and Securities purchased under agreements to resell 3,161,626
Loans and lease financing receivables:
Loans and leases, net of unearned income 37,861,802
LESS: Allowance for loan and lease losses 619,791
LESS: Allocated transfer risk reserve 3,572
Loans and leases, net of unearned income, allowance, and reserve 37,238,439
Trading Assets 1,551,556
Premises and fixed assets (including capitalized leases) 684,181
Other real estate owned 10,404
Investments in unconsolidated subsidiaries and associated companies 196,032
Customers' liability to this bank on acceptances outstanding 895,160
Intangible assets 1,127,375
Other assets 1,915,742
Total assets $60,077,664
LIABILITIES
Deposits:
In domestic offices $27,020,578
Noninterest-bearing 11,271,304
Interest-bearing 15,749,274
In foreign offices, Edge and Agreement subsidiaries, and IBFs 17,197,743
Noninterest-bearing 103,007
Interest-bearing 17,094,736
Federal funds purchased and Securities sold under agreements to repurchase 1,761,170
Demand notes issued to the U.S.Treasury 125,423
Trading liabilities 1,625,632
Other borrowed money:
With remaining maturity of one year or less 1,903,700
With remaining maturity of more than one year through three years 0
With remaining maturity of more than three years 31,639
Bank's liability on acceptances executed and outstanding 900,390
Subordinated notes and debentures 1,308,000
Other liabilities 2,708,852
Total liabilities 54,583,127
<PAGE>
EQUITY CAPITAL
Common stock 1,135,284
Surplus 764,443
Undivided profits and capital reserves 3,542,168
Net unrealized holding gains (losses) on available-for-sale securities 82,367
Cumulative foreign currency translation adjustments (29,725)
Total equity capital 5,494,537
Total liabilities and equity capital $60,077,664
</TABLE>
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us and to the best
of our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true and correct.
Directors:
Thomas A. Reyni
Gerald L. Hassell
Alan R. Griffith
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FINANCIAL DATA SCHEDULE
FOR THE YEAR ENDED DECEMBER 31, 1998
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Dec-31-1998
<CASH> 1,630
<SECURITIES> 0
<RECEIVABLES> 29,577
<ALLOWANCES> 169
<INVENTORY> 3,460
<CURRENT-ASSETS> 55,993
<PP&E> 158,985
<DEPRECIATION> 66,342
<TOTAL-ASSETS> 258,254
<CURRENT-LIABILITIES> 43,089
<BONDS> 171,592
0
0
<COMMON> 23
<OTHER-SE> 33,514
<TOTAL-LIABILITY-AND-EQUITY> 258,254
<SALES> 274,042
<TOTAL-REVENUES> 274,042
<CGS> 213,207
<TOTAL-COSTS> 49,097
<OTHER-EXPENSES> 550
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,025
<INCOME-PRETAX> (4,837)
<INCOME-TAX> (505)
<INCOME-CONTINUING> (4,332)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,332)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
Exhibit 99.1
LETTER OF TRANSMITTAL
FOR
10 7/8 SENIOR SUBORDINATED NOTES DUE 2009
OF
RUSSELL-STANLEY HOLDINGS, INC.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00
P.M. , NEW YORK CITY TIME, ON _________________ (THE "EXPIRATION
DATE") UNLESS EXTENDED BY RUSSELL-STANLEY HOLDINGS, INC.
- --------------------------------------------------------------------------------
THE EXCHANGE AGENT IS:
THE BANK OF NEW YORK
BY REGISTERED OR CERTIFIED MAIL: BY HAND DELIVERY:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
New York, New York 10286 New York, New York 10286
Attn: Reorganization Unit Attn: Reorganization Unit
BY OVERNIGHT DELIVERY: BY FACSIMILE:
The Bank of New York The Bank of New York
101 Barclay Street Facsimile No. (212) 815-6334
New York, New York 10286 Attn: Reorganization Unit
Attn: Reorganization Unit
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 ,
1999 (the "Prospectus") of Russell-Stanley Holdings, Inc. (the "Company"), and
this Letter of Transmittal (the "Letter of Transmittal"), which together
describe the Company's offer (the "Exchange Offer") to exchange its 10 7/8
Senior Subordinated Notes due 2009, which have been registered under the
Securities Act of 1933, as amended (the "Securities Act") (the "Exchange Notes")
for each of its outstanding 10 7/8 Senior Subordinated Notes due 2009 (the
"Outstanding Notes" and, together with the Exchange Notes, the "Notes") from the
holders thereof.
The form and terms of the Exchange Notes will be substantially
identical to the form and terms of the Outstanding Notes, except that the
Exchange Notes will be freely tradeable by virtue of their registration under
the Securities Act of 1933, will not bear legends restricting their transfer,
will not be subject to any additional obligations regarding registration under
the Securities Act of 1933, and will not be subject to the special interest
payments resulting from a failure to meet certain registration obligations. The
Exchange Notes will be issued under and entitled to the benefits of the same
indenture that authorized the issuance of the Outstanding
<PAGE>
2
Notes. Consequently, both series will be treated as a single class of debt
securities under that indenture.
Capitalized terms used but not defined herein shall have the
same meaning given them in the Prospectus.
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.
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>
3
PLEASE READ THE ENTIRE
LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
List below the Outstanding Notes to which this Letter of
Transmittal relates. If the space provided below is inadequate, the certificate
numbers and aggregate principal amounts should be listed on a separate signed
schedule affixed hereto.
DESCRIPTION OF OUTSTANDING NOTES TENDERED HEREWITH
<TABLE>
<S> <C> <C> <C>
Name(s) and Address(es) Certificate Aggregate Principal
of Registered Holder(s) Number(s)* Principal Amount Amount Tendered**
(Please fill in) Represented by
Outstanding Notes*
- ----------------------- ----------- ------------------ ------------------
- ----------------------- ----------- ------------------ ------------------
- ----------------------- ----------- ------------------ ------------------
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 Outstanding Notes. See
instruction 2.
Holders of Outstanding Notes whose Outstanding Notes are not
immediately available or who cannot deliver all other required documents to the
Exchange Agent on or prior to the Expiration Date or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their
Outstanding Notes according to the guaranteed delivery procedures set forth in
the Prospectus.
Unless the context otherwise requires, the term "holder" for
purposes of this Letter of Transmittal means any person in whose name
Outstanding Notes are registered or any other person who has obtained a properly
completed bond power from the registered holder or any person whose Outstanding
Notes are held of record by The Depository Trust Company ("DTC").
[ ] CHECK HERE IF TENDERED OUTSTANDING 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 ______________________
<PAGE>
4
If Delivered by Book-Entry Transfer:
Name of Tendering Institution ___________________________________________
Account Number __________________________________________________________
Transaction Code Number _________________________________________________
[ ] CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN
PERSON SIGNING THIS LETTER OF TRANSMITTAL:
Name ________________________________________________________________________
Address _____________________________________________________________________
[ ] CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO ADDRESS
DIFFERENT FROM THAT LISTED ELSEWHERE IN THIS LETTER OF
TRANSMITTAL:
Name ________________________________________________________________________
Address _____________________________________________________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED OUTSTANDING NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES
AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF
ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Outstanding Notes
that were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus in connection with
any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. A broker-dealer may
not participate in the Exchange Offer with respect to Outstanding 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
<PAGE>
5
the distribution of the Exchange Notes to be acquired pursuant to the Exchange
Offer, or any broker-dealer who purchased Outstanding 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>
6
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 principal amount of the
Outstanding Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of all or any portion of the Outstanding Notes tendered
herewith in accordance with the terms and conditions of the Exchange Offer
(including, if the Exchange Offer is extended or amended, the terms and
conditions of any such extension or amendment), the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Outstanding Notes as are being tendered
herewith. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as its true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that the Exchange Agent also acts as the agent
of the Company, in connection with the Exchange Offer) to cause the Outstanding
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 Outstanding Notes and
to acquire Exchange Notes issuable upon the exchange of such tendered
Outstanding Notes, and that, when the same are accepted for exchange, the
Company will acquire good and unencumbered title to the tendered Outstanding
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 the tendered Outstanding Notes or transfer
ownership of such Outstanding Notes on the account books maintained by the
book-entry transfer facility. The undersigned further agrees that acceptance of
any and all validly tendered Outstanding 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 Exchange and Registration Rights
Agreement dated February 5, 1999, among Russell-Stanley Holdings, Inc.,
Russell-Stanley Corp., Container Management Services, Inc., New England
Container Co., Inc., Russell-Stanley, Inc., RSLPCO, Inc., and Russell-Stanley,
L.P., on the one hand, and Goldman, Sachs & Co., BancBoston Robertson Stephens
Inc. and PaineWebber Incorporated, as representatives for the several initial
purchasers, on the other hand (the "Registration Rights Agreement"), and that
the Company shall have no further obligations or liabilities thereunder except
as provided in the first Section 2(b) of such agreement. The undersigned will
comply with its obligations under the Registration Rights Agreement. The
undersigned has read and agrees to all terms of the Exchange Offer.
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 Outstanding Notes tendered hereby and, in such
event, the Outstanding Notes not exchanged will be returned to the undersigned
at the address shown above, promptly following the expiration or termination of
the Exchange Offer. In addition, the Company may amend the Exchange Offer at any
time prior to the Expiration Date if any of the
<PAGE>
7
conditions set forth under "The Exchange Offer--Certain Conditions to the
Exchange Offer" occur.
The undersigned understands that tenders of Outstanding Notes
pursuant to any one of the procedures described in the Prospectus and in the
instructions attached hereto will, upon the Company's acceptance for exchange of
such tendered Outstanding Notes, constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer. The undersigned recognizes that, under circumstances set forth
in the Prospectus, the Company may not be required to accept for exchange any of
the Outstanding Notes.
By tendering shares of Outstanding Notes and executing this
Letter of Transmittal, the undersigned represents that Exchange Notes received
in the exchange will be acquired in the ordinary course of business of the
undersigned, that the undersigned has no arrangement or understanding with any
person to participate in, and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such Exchange Notes, that the
undersigned is not an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act and that if the undersigned or the person receiving
such Exchange Notes. If the undersigned or the person receiving such Exchange
Notes, whether or not such person is the undersigned, is a broker-dealer that
will receive Exchange Notes for its own account in exchange for Outstanding
Notes that were acquired as a result of market-making activities or other
trading activities, it acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. If the
undersigned is a person in the United Kingdom, the undersigned represents that
its ordinary activities involve it in acquiring, holding, managing or disposing
of investments (as principal or agent) for the purposes of its business.
Any holder of Outstanding 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 enunciated in
its interpretive letter with respect to Exxon Capital Holdings Corporation
(available April 13, 1989) or similar interpretive letters and (ii) must comply
with the registration and prospectus requirements of the Securities Act in
connection with a secondary resale transaction.
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 Outstanding Notes may be
withdrawn at any time prior to the Expiration Date in accordance with the terms
of this Letter of Transmittal. Except as stated in the Prospectus, this tender
is irrevocable.
Certificates for all Exchange Notes delivered in exchange for
tendered Outstanding Notes and any Outstanding 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.
<PAGE>
8
The undersigned, by completing the box entitled "Description
of Outstanding Notes Tendered Herewith" above and signing this letter, will be
deemed to have tendered the Outstanding Notes as set forth in such box.
<PAGE>
9
TENDERING HOLDER(S) SIGN HERE
(Complete accompanying substitute Form W-9)
MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON
CERTIFICATE(S) FOR OUTSTANDING NOTES HEREBY TENDERED OR IN WHOSE NAME
OUTSTANDING NOTES ARE REGISTERED ON THE BOOKS OF DTC OR ONE OF ITS PARTICIPANTS,
OR BY ANY PERSON(S) AUTHORIZED TO BECOME THE REGISTERED HOLDER(S) BY
ENDORSEMENTS AND DOCUMENTS TRANSMITTED HEREWITH. 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.
(SIGNATURE(S) OF HOLDER(S))
Date ________________________________________________________________________
Name(s) _____________________________________________________________________
(PLEASE PRINT)
Capacity (full title) _______________________________________________________
Address _____________________________________________________________________
(INCLUDING ZIP CODE)
Daytime Area Code and Telephone No. _________________________________________
Taxpayer Identification No. _________________________________________________
<PAGE>
10
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTION 3)
Authorized Signature ________________________________________________________
Dated _______________________________________________________________________
Name ________________________________________________________________________
Title _______________________________________________________________________
Name of Firm ________________________________________________________________
Address _____________________________________________________________________
_____________________________________________________________________________
(Include Zip Code)
Area Code and Telephone No. _________________________________________________
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if Exchange Notes or Outstanding Notes not tendered are to
be issued in the name of someone other than the registered holder of the
Outstanding Notes whose name(s) appear(s) above.
Issue
[ ] Outstanding Notes not tendered to:
[ ] Exchange Notes to:
Name(s) _____________________________________________________________________
Address _____________________________________________________________________
_____________________________________________________________________________
(Include Zip Code)
Daytime Area Code and Telephone No. _________________________________________
Tax Identification No. ______________________________________________________
<PAGE>
11
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if Exchange Notes or Outstanding Notes not tendered are to
be sent to someone other than the registered holder of the Outstanding Notes
whose name(s) appear(s) above, or such registered holder(s) at an address other
than that shown above.
Mail
[ ] Outstanding Notes not tendered to:
[ ] Exchange Notes to:
Name(s) _____________________________________________________________________
Address _____________________________________________________________________
_____________________________________________________________________________
(Include Zip Code)
Area Code and Telephone No. _________________________________________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES.
A holder of Outstanding 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, if applicable, representing the Outstanding Notes
being tendered and any required signature guarantees and any other documents
required by this Letter of Transmittal, to the Exchange Agent at its address set
forth above on or prior to the Expiration Date, or (ii) complying with the
procedure for book-entry transfer described below, or (iii) complying with the
guaranteed delivery procedures described below.
Holders of Outstanding Notes may tender Outstanding Notes by
book-entry transfer by crediting the Outstanding Notes to the Exchange Agent's
account at DTC in accordance with DTC's Automated Tender Offer Program ("ATOP")
and by complying with applicable ATOP procedures with respect to the Exchange
Offer. DTC participants that are accepting the Exchange Offer should transmit
their acceptance to DTC, which will edit and verify the acceptance and execute a
book-entry delivery to the Exchange Agent's account at DTC. DTC will then send a
computer-generated message (an "Agent's Message") to the Exchange Agent for its
acceptance in which the holder of the Outstanding Notes acknowledges and agrees
to be bound by the terms of, and makes the representations and warranties
contained in, this Letter of Transmittal, the DTC participant confirms on behalf
of itself and the beneficial owners of such Outstanding Notes all provisions of
this Letter of Transmittal (including any representations and warranties)
applicable to it and such beneficial owner as fully as if it had completed the
information required herein and executed and transmitted this Letter of
Transmittal to the Exchange Agent. Delivery of the Agent's Message by DTC will
satisfy the terms of the Exchange Offer as to execution and delivery of a Letter
of Transmittal by the participant identified in the Agent's Message. DTC
participants may also accept the Exchange Offer by submitting a Notice of
Guaranteed Delivery through ATOP.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE
OUTSTANDING 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 OUTSTANDING NOTES OR LETTERS OF
TRANSMITTAL SHOULD BE SENT TO THE COMPANY.
Holders whose Outstanding Notes are not immediately available
or who cannot deliver their Outstanding Notes and all other required documents
to the Exchange Agent on or prior to the Expiration Date or comply with
book-entry transfer procedures on a timely basis must tender their Outstanding
Notes pursuant to the guaranteed delivery procedure set forth in the Prospectus.
Pursuant to such procedure: (i) such tender must be made by or through an
Eligible Institution (as defined below); (ii) on or prior to the Expiration
Date, the Exchange Agent must have received from such Eligible Institution a
letter, telegram or facsimile transmission of a Notice of Guaranteed
<PAGE>
2
Delivery (receipt confirmed by telephone and an original delivered by guaranteed
overnight courier) setting forth the name and address of the tendering holder,
the names in which such Outstanding Notes are registered, and, if applicable,
the certificate numbers of the Outstanding Notes to be tendered, guaranteeing
that, within three New York State Exchange trading days after the expiration
date of the Exchange Offer, this Letter of Transmittal, together with the
Outstanding Notes or a book-entry confirmation, and any other documents required
by this Letter of Transmittal will be delivered by the eligible institution to
the Exchange Agent; and (iii) all tendered Outstanding Notes (or a confirmation
of any book-entry transfer of such Outstanding Notes into the Exchange Agent's
account at a book-entry transfer facility) as well as this Letter of Transmittal
and all other documents required by this Letter of Transmittal, must be received
by the Exchange Agent within three New York Stock Exchange trading days after
the date of execution of such Notice of Guaranteed Delivery, all as provided in
the Prospectus.
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 Outstanding Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Outstanding Notes
evidenced by a submitted certificate is tendered, the tendering holder must fill
in the aggregate principal amount of Outstanding Notes tendered in the box
entitled "Description of Outstanding Notes Tendered Herewith." A newly issued
certificate for the Outstanding Notes submitted but not tendered will be sent to
such holder as soon as practicable after the Expiration Date. All Outstanding
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise clearly indicated.
If not yet accepted, a tender pursuant to the Exchange Offer
may be withdrawn prior to the Expiration Date.
To be effective with respect to the tender of Outstanding
Notes, a written notice of withdrawal must: (i) be received by the Exchange
Agent at one of the addresses for the Exchange Agent set forth above before the
Company notifies the Exchange Agent that it has accepted the tender of
Outstanding Notes pursuant to the Exchange Offer; (ii) specify the name of the
person who tendered the Outstanding Notes to be withdrawn; (iii) identify the
Outstanding Notes to be withdrawn (including the principal amount of such
Outstanding Notes, or, if applicable, the certificate numbers shown on the
particular certificates evidencing such Outstanding Notes and the principal
amount of Outstanding Notes represented by such certificates); (iv) include a
statement that such holder is withdrawing its election to have such Outstanding
Notes exchanged; and (v) be signed by the holder in the same manner as the
original signature on this Letter of Transmittal (including any required
signature guarantee). The Exchange Agent will return the properly withdrawn
Outstanding Notes promptly following receipt of notice of withdrawal. If
Outstanding 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
Outstanding Notes or otherwise comply with the book-entry transfer facility's
procedures. 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 Outstanding Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any
Outstanding Notes which have been tendered for exchange but which are not
<PAGE>
3
exchanged for any reason will be returned to the holder thereof without cost to
such holder (or, in the case of Outstanding 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 Outstanding
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 Outstanding
Notes may be retendered by following one of the procedures described under the
caption "The Exchange Offer--Procedures for Tendering" in the Prospectus at any
time 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 Outstanding 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 Outstanding 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 Outstanding 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
Outstanding 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 Outstanding Notes) of Outstanding Notes listed and tendered hereby,
no endorsements of certificates or separate written instruments of transfer or
exchange are required.
If this Letter of Transmittal is signed by a person other than
the registered holder or holders of the Outstanding Notes listed, such
Outstanding 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 Outstanding 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 must be guaranteed by
an Eligible Institution, unless Outstanding Notes are tendered: (i) by a holder
who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on this Letter of Transmittal; or (ii) for the
account of an Eligible Institution (as defined below). In the event that the
<PAGE>
4
signatures in this Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantees must be by an eligible
guarantor institution which is a member of a firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or another "eligible institution" within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended (an "Eligible
Institution"). If Outstanding Notes are registered in the name of a person other
than the signer of this Letter of Transmittal, the Outstanding Notes surrendered
for exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company, in its sole discretion, duly executed by the registered holder with the
signature thereon guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders should indicate, as applicable, the name and
address to which the Exchange Notes or certificates for Outstanding Notes not
exchanged are to be issued or sent, if different from the name and address of
the person signing this Letter of Transmittal. In the case of issuance in a
different name, the tax identification number of the person named must also be
indicated. Holders tendering Outstanding Notes by book-entry transfer may
request that Outstanding Notes not exchanged be credited to such account
maintained at the book-entry transfer facility as such holder may designate.
5. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable
to the transfer and exchange of Outstanding Notes to it or its order pursuant to
the Exchange Offer. If a transfer tax is imposed for any reason other than the
transfer and exchange of Outstanding Notes to the Company or its order pursuant
to the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) 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.
6. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive, in whole or
in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
7. MUTILATED, LOST, STOLEN OR DESTROYED SECURITIES.
Any holder whose Outstanding Notes have been mutilated, lost,
stolen or destroyed, should contact the Exchange Agent at the address indicated
below for further instructions.
8. SUBSTITUTE FORM W-9
Each holder of Outstanding Notes whose Outstanding 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 certain other information, on Substitute
Form W-9, which is provided under "Important Tax Information" below, and to
<PAGE>
5
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 Outstanding 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 Outstanding Notes, 31% of all such payments will be withheld
until a TIN is provided.
9. 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 the Exchange Agent at the address and
telephone number indicated above.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE OR COPY
THEREOF (TOGETHER WITH CERTIFICATES OF OUTSTANDING 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>
6
IMPORTANT TAX INFORMATION
Under U.S. Federal income tax law, a holder of Outstanding Notes whose
Outstanding Notes are accepted for exchange may be subject to backup withholding
unless the holder provides The Bank of New York, as Paying Agent (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 Outstanding Notes is awaiting a TIN) and that (A) the holder of
Outstanding 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 Outstanding 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 Outstanding Notes is an individual, the TIN is such holder's
social security number. If the Paying Agent is not provided with the correct
TIN, the holder of Outstanding Notes may be subject to certain penalties imposed
by the Internal Revenue Service.
Certain holders of Outstanding Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. However, exempt holders of Outstanding
Notes should indicate their exempt status on Substitute Form W-9. For example, a
corporation must complete the Substitute Form W-9, providing its TIN and
indicating that it is exempt from backup withholding. 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 Outstanding 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 Outstanding 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 Outstanding 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 Outstanding 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 Outstanding Notes. If the Outstanding 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>
7
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number for the Payee (You)
to Give the Payer.--Social security numbers have nine digits separated by two
hyphens: i.e., 000-00-0000. Employee identification numbers have nine digits
separated by only one hyphen: i.e., 00-0000000. The table below will help
determine the number to give the payer. All "Section" references are to the
Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue
Service.
<TABLE>
<CAPTION>
<S> <C>
For this type of account: Give the social security number of
1. Individual The individual
2. Two or more individuals (joint account) The actual owner of the account or,
if combined funds, the first individual
on the account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-trustee(1)
trust account (grantor is also trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
state law
5. Sole proprietorship The owner(3)
For this type of account: Give the employer identification number of
6. Sole proprietorship The owner(3)
7. A valid trust, estate, or pension The legal entity(4)
trust
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational, or
other tax-exempt organization account
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a
state or local government,
school district, or prison)
that receives agricultural
program payments
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
your employer identification number (if you have one).
(4) List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the taxpayer identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL
BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5. Application for a Social Security Card, at the local
Social Administration office, or Form SS-4, Application for Employer
Identification Number, by calling 1 (800) TAX-FORM, and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
<PAGE>
8
PAYEES SPECIFICALLY EXEMPTED FROM WITHHOLDING INCLUDE:
o An organization exempt from tax under Section 501(a), an individual
retirement account (IRA), or a custodial account under Section 403(b)(7), if
the account satisfies the requirements of Section 401(f)(2).
o The United States or a state thereof, the District of Columbia, a possession
of the United States, or a political subdivision or wholly-owned agency or
instrumentality of any one or more of the foregoing.
o An international organization or any agency or instrumentality thereof.
o A foreign government and any political subdivision, agency or instrumentality
thereof.
o Payees that may be exempt from backup withholding include:
o A corporation.
o A financial institution.
o A dealer in securities or commodities required to register in the United
States, the District of Columbia, or a possession of the United States.
o A real estate investment trust.
o A common trust fund operated by a bank under Section 584(a).
o An entity registered at all times during the tax year under the Investment
Company Act of 1940.
o A middleman known in the investment community as a nominee or who is listed
in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
o A futures commission merchant registered with the Commodity Futures Trading
Commission.
o A foreign central bank of issue.
PAYMENTS OF DIVIDENDS AND PATRONAGE DIVIDENDS GENERALLY EXEMPT FROM BACKUP
WITHHOLDING INCLUDE:
o Payments to nonresident aliens subject to withholding under Section 1441.
o Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident alien partner.
o Payments of patronage dividends not paid in money.
o Payments made by certain foreign organizations.
o Section 404(k) payments made by an ESOP.
PAYMENTS OF INTEREST GENERALLY EXEMPT FROM BACKUP WITHHOLDING INCLUDE:
o Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more and you have
not provided your correct taxpayer identification number to the payer.
o Payments of tax-exempt interest (including exempt-interest dividends under
Section 852).
o Payments described in Section 6049(b)(5) to nonresident aliens.
o Payments on tax-free covenant bonds under Section 1451.
o Payments made by certain foreign organizations.
o Mortgage interest paid to you.
Certain payments, other than payments of interest, dividends, and patronage
dividends, that are exempt from information reporting are also exempt from
backup withholding. For details, see the regulations under sections 6041, 6041A,
6042, 6044, 6045, 6049, 6050A and 6050N.
EXEMPT PAYEES DESCRIBED ABOVE MUST FILE FORM W-9 OR A SUBSTITUTE FORM W-9 TO
AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER,
FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART II OF THE
FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE OF INTEREST, DIVIDENDS, OR
PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
PRIVACY ACT NOTICE. -- Section 6109 requires you to provide your correct
taxpayer identification number to payers, who must report the payments to tje
IRS. The IRS uses the number for identification purposes and may also provide
this information to various government agencies for tax enforcement or
litigation purposes. Payers must be given the numbers whether or not recipients
are required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to payer.
Certain penalties may also apply.
PENALTIES
(1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish
your taxpayer identification number to a payer, you are subject to a penalty of
$50 for each such failure unless your failure is due to reasonable cause and not
to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
<PAGE>
9
PAYER'S NAME:
SUBSTITUTE
FORM W-9
Department of the Treasury
Internal Revenue Service
Payer's Request for Taxpayer Identification Number (TIN)
PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND
DATING BELOW.
----------------------------
Social Security Number
OR
----------------------------
Employer Identification Number
PART 2
CERTIFICATION--Under the penalties of perjury, I certify that:
(1)The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me), and
(2)I am not subject to backup withholding because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
(the "IRS") that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
PART 3--
[ ] Awaiting TIN
CERTIFICATE 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 under-reporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out such item (2).
SIGN HERE
SIGNATURE ____________________________________________________________________
DATE _________________________________________________________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER,
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 payments made to me will be withheld.
Signature ______________________ Date _______________________________, 1998
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
10 7/8% SENIOR SUBORDINATED NOTES DUE 2009
IN EXCHANGE FOR
NEW 10 7/8% SENIOR SUBORDINATED NOTES DUE 2009
OF
RUSSELL - STANLEY HOLDINGS, INC.
Registered holders of outstanding 10 7/8% Senior Subordinated Notes due
2009 (the "Outstanding Notes") who wish to tender their Outstanding Notes in
exchange for a like principal amount of new 10 7/8% Senior Subordinated Notes
due 2009 (the "Exchange Notes") and whose Outstanding Notes are not immediately
available or who cannot deliver their Outstanding Notes and Letter of
Transmittal (and any other documents required by the Letter of Transmittal) to
The Bank of New York (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 facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight courier) or mail to the Exchange Agent. See "The Exchange
Offer--Procedures for Tendering" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
BY HAND DELIVERY: BY MAIL:
The Bank of New York (INSURED OR REGISTERED RECOMMENDED)
101 Barclay Street The Bank of New York
New York, New York 10286 101 Barclay Street
Attn: Reorganization Unit New York, New York 10286
Attn: Reorganization Unit
BY OVERNIGHT COURIER: BY FACSIMILE:
The Bank of New York (212) 815-6339
101 Barclay Street Attn: Reorganization Unit
New York, New York 10286
Attn: Reorganization Unit CONFIRM BY TELEPHONE:
(212) 815-
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>
2
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Outstanding
Notes indicated below, upon the terms and subject to the conditions contained in
the Prospectus dated , 1999 of Russell-Stanley Holdings, Inc. (the
"Prospectus"), receipt of which is hereby acknowledged.
DESCRIPTION OF OUTSTANDING NOTES TENDERED
<TABLE>
<S> <C> <C> <C>
NAME OF TENDERING NAME AND ADDRESS OF CERTIFICATE NUMBER(S) PRINCIPAL AMOUNT OF
HOLDER REGISTERED HOLDER AS IT OF OUTSTANDING NOTES OUTSTANDING NOTES
APPEARS ON THE TENDERED (OR ACCOUNT TENDERED
OUTSTANDING NOTES (PLEASE PRINT) NUMBER AT BOOK-
ENTRY FACILITY)
_________________ ________________________________ _____________________ ___________________
_________________ ________________________________ _____________________ ___________________
_________________ ________________________________ _____________________ ___________________
_________________ ________________________________ _____________________ ___________________
</TABLE>
SIGN HERE
NAME OF REGISTERED OR ACTING HOLDER: __________________________________________
SIGNATURE(S): _________________________________________________________________
NAME(S) (PLEASE PRINT): _______________________________________________________
ADDRESS: ______________________________________________________________________
_______________________________________________________________________________
TELEPHONE NUMBER: _____________________________________________________________
DATE: _________________________________________________________________________
<PAGE>
3
IF SHARES OF OUTSTANDING NOTES WILL BE TENDERED BY BOOK-ENTRY TRANSFER, PROVIDE
THE FOLLOWING INFORMATION:
DTC ACCOUNT NUMBER: _________________________________________________
DATE: _______________________________________________________________
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 on the reverse hereof, the certificates representing the
Outstanding Notes (or a confirmation of book-entry transfer of such Outstanding
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 New York Stock
Exchange trading days after the Expiration Date (as defined in the Letter of
Transmittal).
Name of Firm: _______________________ ____________________________
(Authorized Signature)
Address: ___________________ Title: _____________________
____________________________ Name: ______________________
(Zip Code) (Please type or print)
Area Code and Telephone No.: Date: ______________________
____________________________
NOTE: DO NOT SEND OUTSTANDING NOTES WITH THIS NOTICE OF GUARANTEED
DELIVERY. OUTSTANDING NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
