<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------------
BGF INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 2221 56-1600845
(State of Formation) (Primary Standard (I.R.S. Employer
Industrial Identification No.)
Classification Code
Number)
3802 Robert Porcher Way
Greensboro, North Carolina 27410
(336) 545-0011
(Name, address, including zip code, and telephone number, including area code,
of Registrant's Principal Executive Offices)
With a copy to:
Richard L. Cromer, President B. Lynn Walsh, Esq.
BGF Industries, Inc. Alston & Bird LLP
3802 Robert Porcher Way One Atlantic Center
Greensboro, North Carolina 27410 1201 West Peachtree Street
(336) 545-0011 Atlanta, Georgia 30309-3424
(404) 881-7185
(Name, address, including zip code, and telephone number, including area code,
of Registrant's agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of the Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to be Offering Price per Aggregate Offering Amount of
Securities to be Registered Registered Note(1) Price Registration Fee
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 1/4% Series B Senior
Subordinated Notes due 2009..... $100,000,000 100% $100,000,000 $27,800
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f), based upon the book value of such securities.
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 SEC +
+is effective. This prospectus is not an offer to sell these securities and we +
+are not soliciting an offer to buy these securities in any state where the +
+offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 12, 1999
PROSPECTUS
BGF INDUSTRIES, INC.
Offer to Exchange its
10 1/4% Series B Senior Subordinated Notes due 2009
which have been registered under the Securities Act
for up to $100,000,000 aggregate principal amount of its outstanding
10 1/4% Senior Subordinated Notes due 2009
The Exchange Notes:
. The terms of the exchange notes we issue will be substantially identical to
the outstanding notes that we issued on January 21, 1999, except for the
elimination of certain transfer restrictions, registration rights and
liquidated damages provisions relating to the old notes.
. We will pay interest on the exchange notes twice a year, beginning July 15,
1999.
. We cannot redeem the exchange notes before January 15, 2004. After that date,
we may redeem them at certain specified prices. However, before January 15,
2002, we can redeem up to 35% of the exchange notes at 110.5% of their face
amount, plus interest, with money we raise in certain public equity
offerings.
. If we experience certain changes of control, we must offer to purchase the
exchange notes at 101% of their face amount, plus interest.
Guarantees:
. Certain of our future subsidiaries will guarantee the exchange notes on an
unsecured, senior subordinated basis.
The Exchange Offer:
. The exchange offer will expire at 5:00 p.m., New York City time, on ,
1999, unless extended.
. Our completion of the exchange offer is subject to customary conditions,
which we may waive.
. Upon our completion of the exchange offer, all old notes that are validly
tendered and not withdrawn will be exchanged for an equal principal amount of
exchange notes that are registered under the Securities Act.
. Tenders of outstanding notes may be withdrawn at any time prior to the
expiration of the exchange offer.
. The exchange of notes will not be a taxable exchange for federal income tax
purposes.
. We do not intend to list the exchange notes on any national securities
exchange or Nasdaq.
. We will not receive any cash proceeds from the exchange offer.
Notice to Investors:
. You should consider carefully the risk factors beginning on page 14 of this
prospectus before tendering your old notes in the exchange offer.
. Neither the SEC nor any state securities commission has approved or
disapproved of the exchange notes or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is , 1999.
<PAGE>
We have not authorized any person to make a statement that differs from what
is in this prospectus. If any person makes a statement that differs from what
is in this prospectus, you should not rely on it. This prospectus is not an
offer to sell, nor is it seeking an offer to buy, the exchange notes in any
state where such offer or sale is not permitted. The information in this
prospectus is complete and accurate as of its date, but the information may
change after that date.
This exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of old notes in any jurisdiction in which this exchange
offer or the acceptance thereof would not be in compliance with the securities
or blue sky laws of such jurisdiction.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary......................................................... 1
Risk Factors............................................................... 14
Old Notes Outstanding After the Exchange Offer Will Not Have Registration
Rights and We Expect the Market for the Old Notes to be Illiquid ....... 14
Our Indebtedness Results in Significant Debt Service Obligations and
Limitations.............................................................. 14
Your Exchange Notes Will Be Subordinate to Our Senior Debt............... 15
Our Indebtedness May Prevent Us from Engaging in Certain Beneficial
Activities............................................................... 15
Market Downturns Could Reduce Demand for Our Products.................... 16
Our Customers Could Switch to Other Suppliers............................ 16
Our Operating Performance Is Dependent upon a Limited Number of
Customers................................................................ 17
We May Experience a Decline in the Supply of Raw Materials............... 17
We May Be Affected By "Year 2000" Issues................................. 17
We May Be Responsible for Environmental and Safety and Health Costs...... 18
We May Have Conflicts of Interest with Our Controlling Equity Holders.... 18
We May Not Have Sufficient Funds to Repay the Exchange Notes upon A
Change of Control........................................................ 18
Technological Change..................................................... 19
Issuance of the Old Notes and any Note Guarantee May Be Subject to
Fraudulent Conveyance Laws.............................................. 19
You Cannot Be Sure That an Active Trading Market Will Develop for the
Exchange Notes........................................................... 19
Use of Proceeds............................................................ 21
Capitalization............................................................. 22
Selected Financial and Operating Information............................... 23
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 25
Business................................................................... 34
Management................................................................. 42
Certain Relationships and Related Party Transactions....................... 46
Stock Ownership............................................................ 47
The Affiliated Transaction................................................. 48
Description of Other Indebtedness.......................................... 49
Description of Exchange Notes.............................................. 51
Certain Federal Income Tax Considerations.................................. 82
The Exchange Offer......................................................... 83
Plan of Distribution....................................................... 93
Legal Matters.............................................................. 94
Experts.................................................................... 94
Index to Financial Statements.............................................. F-1
</TABLE>
i
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-4 that we have
filed with the SEC. This prospectus does not contain all of the information set
forth in the registration statement. For further information about us and the
exchange notes, you should refer to the registration statement. This prospectus
summarizes material provisions of contracts and other documents to which we
refer you. Since these summaries may not contain all of the information that
you may find important, you should review the full text of these documents. We
have filed certain of these documents as exhibits to our registration
statement.
In addition, we have agreed that, even though the SEC does not require us to
do so, for so long as any notes remain outstanding, we will furnish to you and
the trustee and file with the SEC all such information, documents and reports
specified in Section 13 or 15(d) of the Exchange Act.
You should direct any request for information to our Chief Financial Officer
at least 10 business days before you tender your exchange notes in the exchange
offer. Our mailing address and telephone number are:
BGF Industries, Inc.
3802 Robert Porcher Way
Greensboro, North Carolina 27410
(336) 545-0011
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Some of the information in this prospectus may contain forward looking
statements. Such statements include, in particular, statements about our plans,
strategies and prospects under the headings "Prospectus Summary," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
"Business." You can identify forward looking statements by our use of forward
looking terminology such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. Although we believe that our plans,
intentions and expectations reflected in or suggested by such forward looking
statements are reasonable, we cannot assure you that our plans, intentions or
expectations will be achieved. Important factors that could cause our actual
results to differ materially from the forward looking statements we make in
this prospectus are set forth in the "Risk Factors" section and elsewhere in
this prospectus. All forward looking statements attributable to us or persons
acting for us are expressly qualified in their entirety by our cautionary
statements.
ii
<PAGE>
CERTAIN MARKET AND INDUSTRY DATA
Unless we indicate otherwise, we derived the industry data in this
prospectus from our internal surveys and estimates. We believe there are no
industry-wide publications or trade associations that report data on the
markets in which we compete and therefore no independent sources have verified
our internal surveys or our market data. Our methodology in estimating market
and industry data, including data in this prospectus, include, among other
things, the following sources:
. routine discussions with manufacturers of glass yarns to estimate
existing and projected purchases of glass yarns;
. information from third parties, when possible, to estimate existing
industry manufacturing capacity; and
. public statements by competitors and independent financial analysts.
We believe that our competitors use a similar methodology to estimate market
and industry data. However, we cannot guarantee the accuracy of any of the
market or industry data in this prospectus.
USE OF CERTAIN TERMS
Unless the context otherwise requires, as used in this prospectus, (1) the
terms "BGF," "our," or "we" refer to BGF Industries, Inc., its predecessors and
BGF Overseas, Inc., a wholly owned subsidiary of BGF, (2) the term "Advanced
Glassfiber" refers to Advanced Glassfiber Yarns LLC, and where the context
requires, to the historical operations of Owens Corning's business of
manufacturing and selling glass yarns and specialty materials, (3) "old notes"
refer to the 10 1/4% Senior Subordinated Notes due 2009 that we issued on
January 21, 1999, (4) "exchange notes" refers to the 10 1/4% Series B Senior
Subordinated Notes due 2009 that have been registered under the Securities Act
of 1933 and that we are offering in exchange for the old notes, and (5) "notes"
collectively refer to the old notes and the exchange notes.
iii
<PAGE>
PROSPECTUS SUMMARY
This summary highlights some information from this prospectus. It may not
contain all the information that is important to you. For a more complete
understanding of the exchange offer, we encourage you to read the entire
prospectus carefully, including the risk factors and financial statements.
BGF Industries, Inc.
BGF is the second largest manufacturer of glass fiber fabrics and a leading
producer of other high performance fabrics in North America. We produce fabrics
for use in a variety of electronic, filtration, composite, insulation,
construction and commercial products. Some of our customers use glass fiber
fabrics to construct printed circuit boards, which are integral to virtually
all advanced electronic products, including computers and cellular telephones.
Other of our customers use our fabrics to strengthen, insulate and enhance the
dimensional stability of hundreds of products in various end-markets, such as
aerospace, transportation, construction, power generation and oil refining. We
focus on producing value-added specialty woven and non-woven fabrics made from
glass, carbon and aramid yarns.
We sell our products to over 400 customers, including Cytec Fiberite,
Polyclad Laminates, Isola USA, General Electric, BHA Group, Chemfab and 3M. For
the twelve months ended September 30, 1998, our net sales were $208.1 million
and our EBITDA was $39.2 million. Sales of glass fiber fabrics accounted for
85.7% of our net sales in that period. Sales of glass fiber fabrics for the
electronics industry, primarily for use in printed circuit boards, accounted
for approximately half of our net sales and EBITDA in that period.
Porcher Industries S.A. of Badinieres, France owns 100% of BGF through its
United States holding company, Glass Holdings Corp. Porcher Industries is a
worldwide leader in the industrial fabrics industry and has manufacturing
facilities in France, Brazil, China, the United Kingdom and, through our
facilities, the United States.
On September 30, 1998, AGY Holdings, Inc. (a wholly owned subsidiary of our
parent company, Glass Holdings) acquired a 51% ownership interest in Advanced
Glassfiber from Owens Corning. Advanced Glassfiber owns and operates the glass
yarns and specialty materials business formerly owned by Owens Corning.
Advanced Glassfiber is our largest supplier of glass yarns, the principal
material we use to produce glass fiber fabrics. The purpose of the offering of
the old notes was to repay a portion of the indebtedness we incurred to enable
AGY Holdings to purchase its 51% ownership interest in Advanced Glassfiber. See
"Prospectus Summary--The Affiliated Transaction" and "Use of Proceeds."
1
<PAGE>
Products and Markets
We sell our products primarily in North America and focus on the following
markets:
Electronics. We produce glass fiber fabrics for multi-layer and rigid
printed circuit boards for use in the electronics industry. Over the last five
years, the demand for multi-layer printed circuit boards, which primarily use
lightweight glass fiber fabrics, has been increasing. In contrast, over the
last fifteen months, the demand for our heavyweight fabrics has been decreasing
due to competitive pressures from Asian laminate producers. As a result, we
have shifted our electronics glass fiber fabrics manufacturing capacity mix in
recent years from heavyweight fabrics, which are typically used in rigid
printed circuit boards, toward more technologically advanced and higher-margin
lightweight fabrics. Sales of glass fiber fabrics to the electronics industry
were $107.8 million for the twelve months ended September 30, 1998,
representing 51.8% of our net sales.
Composites. We produce glass, carbon and aramid fiber fabrics for use in
various composite materials, which are used in structural aircraft parts and
interiors, helicopter rotor blades, tooling, brake linings and ducting. Sales
of fabrics for composites were $51.2 million for the twelve months ended
September 30, 1998, representing 24.6% of our net sales.
Filtration. We produce fabrics for high temperature dust filtration that are
used by our industrial customers to control emissions into the environment. Our
filtration bags are sold to utilities, producers of asphalt and carbon black,
cement plants and steel mills. Sales of filtration fabrics were $22.3 million
for the twelve months ended September 30, 1998, representing 10.7% of our net
sales.
Commercial. Our glass fiber fabrics are used in commercial applications
where fire resistance and dimensional stability are critical. Applications for
these products include ceiling tile and acoustical facing fabrics, window
coverings and movie screens. Sales of commercial fabrics were $10.1 million for
the twelve months ended September 30, 1998, representing 4.9% of our net sales.
Insulation. We produce materials for high-temperature, fire-resistant
insulation. Applications for these products include insulation for joints,
pipes, valves, transportation exhaust systems, heat shields and home
appliances. Sales of insulation fabrics were $8.6 million for the twelve months
ended September 30, 1998, representing 4.1% of our net sales.
Construction. Glass fiber fabrics are a critical component of products used
in the construction industry because of their fire resistant qualities.
Applications for these products include smoke and fire barrier curtains,
drywall bonding tape, rubber mat backing and fabric structures, such as
commercial tents and roofs. Sales of construction fabrics were $8.1 million for
the twelve months ended September 30, 1998, representing 3.9% of our net sales.
2
<PAGE>
Our Strengths
We attribute our strong historical results and positive outlook for growth
and profitability to the following:
Our Leading Market Position. We have been a technological leader in
producing glass fiber fabrics since we pioneered the industry with Owens
Corning in the 1930s. We were the:
. first to produce glass fiber fabrics;
. first glass fiber fabric weaver to become ISO 9002 certified; and
. first to bring a variety of innovative products and manufacturing
technologies to the market.
We continue to capitalize on our strong position as the second largest North
American manufacturer of glass fiber fabrics with an estimated 40% of total
domestic capacity.
Attractive Industry Fundamentals. The glass fiber fabrics industry is
characterized by (1) a limited number of domestic manufacturers, (2) barriers
to entry due primarily to a limited supply of raw materials, (3) diverse end-
user markets, and (4) a limited number of cost effective product substitutes.
In addition, the electronics market, which accounted for approximately half of
our net sales and EBITDA for the twelve months ended September 30, 1998, has
experienced substantial growth in recent years. We expect the electronics
market to continue to grow due to expanded applications, technological
advancements and new computer products and systems introductions. Industry
research forecasts that the United States printed circuit board market will
grow from $8.4 billion in 1997 to $11.1 billion in 2002, representing a 5.7%
compound annual growth rate.
Our State-of-the-Art Facilities. In 1996, we began operations at our
128,000 square foot manufacturing facility in South Hill, Virginia that is
dedicated to producing lightweight glass fiber fabrics for the electronics
industry. We believe this facility will continue to enhance our position as a
technological leader in producing glass fiber fabrics for this industry.
Advanced Glassfiber leases segregated space at this facility to manufacture
glass yarns exclusively for our production of lightweight glass fiber fabrics.
Also, in 1995, we built a state-of-the-art research and development laboratory
as part of our new corporate headquarters to focus on developing new products.
Strong Cash Flow Generator in a Leveraged Environment. Our strong cash flow
characteristics and experienced management team have allowed us to
successfully operate as a leveraged company. In 1988, Porcher Industries
acquired us from Burlington Industries in a leveraged buyout. Immediately
following the buyout, our total debt was $88.0 million. Between 1988 and
September 30, 1998, we reduced our debt by $75.0 million, while making
significant investments in the business. These investments included a new
corporate headquarters and research and development facility and the first
phase of the South Hill, Virginia lightweight fabrics facility.
Our Long-Term Customer Relationships. We have been able to maintain long-
term relationships with many of our customers due to (1) the high quality of
our products, (2) our ability to meet the unique quality specifications
required by our customers, (3) the emphasis we place on customer service and
(4) the limited number of domestic producers in our industry. Each of our top
ten customers for the twelve months ended September 30, 1998 has been a
customer since 1989.
The Unique Properties of Glass Fiber Fabrics. Glass fiber fabrics possess
several desirable characteristics including:
. dimensional stability;
. heat resistance;
3
<PAGE>
. moisture resistance;
. chemical resistance;
. electrical resistance;
. thermal conductivity; and
. when combined with other composite materials, a high strength-to-weight
ratio.
These unique characteristics make glass fiber fabrics the material of choice
for a variety of end-use applications, including printed circuit boards,
telecommunications equipment, structural aircraft parts and interiors, window
coverings, automotive part reinforcement, muffler insulation, filtration bags
and sporting goods.
4
<PAGE>
Business Strategy
Our goal is to be the preferred supplier to markets requiring a technically
complex application of fabrics made of glass, carbon and aramid yarns. To
achieve our goal, we intend to pursue the following key strategies:
Continue Focusing on Lightweight Fabrics for the Multi-Layer Printed Circuit
Board Market. We intend to continue expanding our sales of lightweight glass
fiber fabrics to meet the growing demand for multi-layer printed circuit
boards. Our investment in the South Hill, Virginia lightweight fabrics facility
is an important part of this strategy. In addition, we have leased a portion of
this facility to Advanced Glassfiber to manufacture glass yarns exclusively for
our production of lightweight glass fiber fabrics. We believe this arrangement
strengthens the compatibility of our weaving process with the glass yarns we
use in such process, which enables us to produce the highest quality
lightweight glass fiber fabrics. We also believe that the quality of our
products manufactured at the South Hill facility allows us to enhance and
expand our relationships with customers in the multi-layer printed circuit
board market. Our net sales of lightweight glass fiber fabrics have increased
by 95.8% from $30.6 million in 1993 to $59.9 million for the twelve months
ended September 30, 1998.
Capitalize on the Growth in the Filtration and Composites Markets. We
believe substantial opportunities exist to increase our sales and market share
in both the filtration and composites markets. Collectively, these markets
accounted for approximately 35.3% of our net sales for the twelve months ended
September 30, 1998.
We intend to enhance our already strong position in the high temperature
filtration market by developing new woven and non-woven high performance
fabrics for environmental applications in power generation, steel mills and
other industries that are subject to strict environmental regulations. In
addition, we believe that opportunities exist internationally in this market as
lesser developed countries adopt stricter environmental regulations.
We also believe that substantial opportunities exist to increase sales in
the composites market for applications in the transportation industry. In the
composites market, we are pursuing strategic relationships with key suppliers
to the aerospace and automobile industries for the design and manufacture of
new products. Our sales in the filtration and composites markets have increased
by 95.5% from $37.6 million in 1993 to $73.5 million for the twelve months
ended September 30, 1998.
Developing New Applications for Our Fabrics. We plan to continue leveraging
the technical expertise and experience of our research and development and
sales and marketing staff to develop new applications for existing fabrics and
to develop new fabrics that meet customer requirements for strength, weight,
fire resistance and durability. We believe many opportunities exist to continue
developing both woven and non-woven fabrics to replace traditional materials in
markets which have historically not utilized fabrics such as those we produce.
For example, we have begun selling certain of our fabrics for use in the
reinforcement of metal automobile body parts.
5
<PAGE>
The Affiliated Transaction
On September 30, 1998, AGY Holdings, a wholly owned subsidiary of our parent
company, Glass Holdings, acquired a 51% ownership interest in Advanced
Glassfiber from Owens Corning for aggregate consideration of $338.9 million
(including post-closing adjustments). Advanced Glassfiber is our largest
supplier of glass yarns, the principal material we use to produce glass fiber
fabrics. Owens Corning, which formed Advanced Glassfiber to own and operate its
glass yarns and specialty materials business, owns the remaining 49% interest
through its wholly owned subsidiary, Jefferson Holdings, Inc.
To fund AGY Holdings' purchase of the 51% ownership interest in Advanced
Glassfiber:
. we borrowed $88.4 million (including $1.4 million to fund a post-closing
purchase price adjustment) under our $125.0 million senior credit
facility with First Union National Bank;
. we borrowed $65.0 million under our $65.0 million senior subordinated
credit facility with First Union Investors, Inc.;
. we then loaned $138.6 million to Glass Holdings and Glass Holdings then
loaned AGY Holdings $135.3 million;
. AGY Holdings used the proceeds from this loan, along with an additional
$198.9 million intra-day loan from First Union National Bank and $4.7
million in other borrowings, to purchase the 51% interest in Advanced
Glassfiber; and
. after the completion of the purchase, Advanced Glassfiber paid AGY
Holdings a $203.6 million dividend and AGY Holdings used this money to
repay the $198.9 million intra-day loan and the $4.7 million in other
borrowings.
The net cash outlay by BGF for the 51% ownership interest in Advanced
Glassfiber was $135.3 million. The net proceeds from the offering of the old
notes were used to repay all amounts outstanding under our senior subordinated
credit facility and a portion of the amounts outstanding under our senior
credit facility incurred in connection with the affiliated transaction.
We are Advanced Glassfiber's largest customer and believe that AGY Holdings'
investment in Advanced Glassfiber will enable us to enhance our competitive
position within the glass fiber fabrics industry by allowing us to:
Enhance the Quality of Our Products. A critical factor in the quality of our
products is the quality of the glass yarns we use. We believe that AGY
Holdings' 51% ownership interest in Advanced Glassfiber will provide us with a
significant competitive advantage in providing the highest quality products to
our customers, especially in lightweight glass fiber fabrics. Additionally,
coordinating research and development efforts with Advanced Glassfiber will
directly benefit us by ensuring that our manufacturing process and the glass
yarns we use in such process are increasingly compatible. We believe that
increasing compatibility will reduce waste and improve efficiency. We also
believe that our relationship with Advanced Glassfiber will enable us to
continue meeting the strict quality standards of our customers, particularly
those in the multi-layer printed circuit board market.
Collaborate with Owens Corning on Product Development. We have worked with
Owens Corning for over 60 years on a number of successful projects, including
developing new products and producing glass yarns at our South Hill, Virginia
facility. We believe that our relationship with Advanced Glassfiber will
increase our cooperative efforts with Owens Corning in developing new products
and sharing proprietary technology.
6
<PAGE>
Summary of the Exchange Offer
The Exchange Offer.......... We are offering to exchange $1,000 principal
amount of our exchange notes for each $1,000
principal amount of old notes. As of the date of
this prospectus, $100,000,000 in aggregate
principal amount of old notes are outstanding.
We have registered the exchange notes under the
Securities Act and they are substantially
identical to the old notes, except for the
elimination of certain transfer restrictions,
registration rights and liquidated damages
provisions relating to the old notes.
Resale of the Exchange Based on interpretations by the SEC set forth in
Notes...................... certain no-action letters issued to third
parties, we believe that the exchange notes may
be offered for resale, resold and otherwise
transferred by you without compliance with the
registration and prospectus delivery provisions
of the Securities Act; provided that:
. you are acquiring the exchange notes in the
ordinary course of business;
. you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate,
in the distribution of the exchange notes
issued to you in the exchange offer; and
. you are not an "affiliate" of ours.
If our belief is inaccurate and you transfer any
exchange notes without delivering a prospectus
meeting the requirements of the Securities Act or
without an exemption from registration of your
exchange notes from such requirements, you may
incur liability under the Securities Act. We do
not assume or indemnify you against such
liability.
Each broker-dealer that is issued exchange notes
for its own account in exchange for old notes
which were acquired by such broker-dealer as a
result of market-making or other trading
activities, must acknowledge that it will deliver
a prospectus meeting the requirements of the
Securities Act, in connection with any resale of
the exchange notes. The accompanying letter of
transmittal states that by so acknowledging and
by delivering a prospectus, such broker-dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. A broker-dealer may use this
prospectus for an offer to resell, resale or
other retransfer of the exchange notes. We have
agreed that, for a period of 180 days after the
date of this prospectus, we will make this
prospectus and any amendment or supplement to
this prospectus available to any such broker-
dealer for use in connection with any such
resales. We believe that no registered holder of
the old notes is an affiliate (as such term is
defined in Rule 405 of the Securities Act) of
BGF.
The exchange offer is not being made to, nor will
we accept surrenders for exchange from, holders
of old notes in any
7
<PAGE>
jurisdiction in which this exchange offer or the
acceptance thereof would not be in compliance
with the securities or blue sky laws of such
jurisdiction.
Accrued Interest on the
Exchange Notes and the Old
Notes......................
Interest on the exchange notes will accrue from
the last interest payment date on which interest
was paid on the old notes, or, if no interest was
paid on the old notes, from the date of issuance
of the old notes (January 21, 1999). Holders
whose old notes are accepted for exchange will be
deemed to have waived the right to receive any
interest accrued on the old notes.
No Minimum Condition........ We are not conditioning the exchange offer on the
tender of any minimum aggregate principal amount
of old notes.
Expiration Date............. The exchange offer will expire at 5:00 p.m., New
York City time, on , 1999, unless we decide
to extend the exchange offer.
Withdrawal Rights........... You may withdraw your tender at any time prior to
5:00 p.m., New York City time, on the expiration
date.
Conditions to the Exchange The exchange offer is subject to customary
Offer...................... conditions, which we may waive. We currently
anticipate that each of the conditions will be
satisfied and that we will not need to waive any
conditions. We reserve the right to terminate or
amend the exchange offer at any time before the
expiration date if any such condition occurs. See
"The Exchange Offer--Conditions."
Procedures for Tendering If you are a holder of old notes who wishes to
Old Notes.................. accept the exchange offer, you must:
. complete, sign and date the accompanying letter
of transmittal, or a facsimile thereof, and
mail or otherwise deliver such documentation,
together with your old notes to the exchange
agent at the address set forth under "The
Exchange Offer--Exchange Agent;" or
. arrange for the Depository Trust Company to
transmit certain required information,
including an agent's message forming part of a
book-entry transfer in which you agree to be
bound by the terms of the letter of
transmittal, to the exchange agent in
connection with a book-entry transfer.
By tendering your old notes, in either manner,
you will be representing, among other things,
that:
. you are acquiring the exchange notes in the
ordinary course of business;
. you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate,
in the distribution of the exchange notes
issued to you in the exchange offer; and
. you are not an "affiliate" of ours.
8
<PAGE>
Special Procedures for
Beneficial Owners..........
If you beneficially own old notes registered in
the name of a broker, dealer, commercial bank,
trust company or other nominee and you wish to
tender your old notes in the exchange offer, you
should contact such registered holder promptly
and instruct it 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 old notes, either
arrange to have your old notes registered in your
name or obtain a properly completed bond power
from the registered holder. The transfer of
registered ownership may take considerable time.
Guaranteed Delivery If you wish to tender your old notes and time
Procedures................. will not permit your required documents to reach
the exchange agent by the expiration date, or the
procedures for book-entry transfer cannot be
completed on time, you may tender your old notes
according to the guaranteed delivery procedures
set forth in "The Exchange Offer Guaranteed
Delivery Procedures."
Use of Proceeds............. We will not receive any proceeds for the issuance
of the exchange notes in the exchange offer. We
will pay all our expenses incurred in connection
with the exchange offer.
Federal Income Tax We anticipate that the exchange of notes in the
Consequences............... exchange offer will not be a taxable event for
federal income tax purposes. See "Certain Federal
Income Tax Considerations."
Effect on Holders of Old As a result of this exchange offer, we will have
Notes...................... fulfilled an obligation under the registration
rights agreement dated as of January 21, 1999
between BGF and First Union Capital Markets, and,
accordingly, there will be no increase in the
interest rate on the old notes. If you do not
tender your old notes in the exchange offer:
. you will continue to hold the old notes and
will be entitled to all the rights and
limitations applicable to the old notes under
the indenture governing the notes, except for
any rights under the registration rights
agreement that terminate as a result of the
completion of the exchange offer; and
. you will not have any further registration or
exchange rights and your old notes will be
subject to certain restrictions on transfer.
Accordingly, the trading market for untendered
old notes could be adversely affected.
Shelf Registration Under certain circumstances, certain holders of
Statement.................. old notes may require us to file, and cause to
become effective, a shelf registration statement
under the Securities Act, which would cover
resales of old notes by such holders.
Exchange Agent.............. The Bank of New York is serving as exchange agent
in connection with the exchange offer. See "The
Exchange Offer--Exchange Agent."
9
<PAGE>
Summary of the Exchange Notes
Issuer...................... The exchange notes will be the obligations of
BGF.
Securities Offered.......... Up to $100,000,000 in principal amount of 10 1/4%
Series B Senior Subordinated Notes due 2009.
Maturity Date............... January 15, 2009.
Interest Payment Dates...... January 15 and July 15, beginning on July 15,
1999.
Optional Redemption......... We may redeem:
. all or part of the exchange notes beginning on
January 15, 2004, at the redemption prices
described in "Description of Exchange Notes--
Redemption;" and
. up to 35% of the exchange notes originally
issued at any time prior to January 15, 2002 at
the price of 110.5% of their face amount, plus
accrued and unpaid interest, with money we
raise in certain public equity offerings.
Ranking..................... The exchange notes are, and any note guarantees
will be, senior subordinated debt. They rank
behind all of our current and future indebtedness
(other than trade payables), except indebtedness
that expressly provides that it is not senior to
the exchange notes. The exchange notes will
effectively rank behind any of our future
indebtedness that is secured by any of our assets
to the extent of the value of such assets, even
if such indebtedness expressly provides that it
is not senior to the exchange notes.
Note Guarantees............. Certain of our future subsidiaries will guarantee
the exchange notes on an unsecured basis. The
note guarantees will be senior subordinated
debts. They will rank behind (1) all of the
indebtedness of the note guarantors (other than
trade payables), except indebtedness that
expressly provides that it is not senior to the
note guarantees and (2) any indebtedness of the
note guarantors that is secured by any assets to
the extent of the value of such assets.
Mandatory Offer to If we sell certain assets or experience certain
Purchase................... changes of control, we must offer to purchase the
exchange notes at the prices listed in
"Description of Exchange Notes."
Basic Covenants of We will issue the exchange notes under an
Indenture.................. indenture that will contain covenants for your
benefit. Such covenants, among other things,
could limit or restrict our ability and the
ability of certain of our subsidiaries to:
. incur additional debt;
. pay dividends and make distributions;
. repurchase securities;
. make certain investments;
10
<PAGE>
. create liens;
. transfer or sell assets;
. enter into transactions with affiliates;
. issue or sell stock of subsidiaries; or
. merge or consolidate.
However, these restrictions will be subject to a
number of important qualifications and
exceptions. For more details, see "Description of
Exchange Notes--Certain Covenants."
Risk Factors
You should read the "Risk Factors" section, beginning on page 14, as well as
the other cautionary statements throughout this prospectus, to ensure you
understand the risks associated with tendering your old notes in the exchange
offer.
11
<PAGE>
Summary Unaudited As Adjusted Financial Information
We present below summary unaudited as adjusted financial information of BGF.
We have adjusted the information to give effect to the issuance and sale of the
old notes and the affiliated transaction as if such events had occurred on the
first day of each of the periods presented below, except for balance sheet
data, which gives effect to such events as if they had occurred on September
30, 1998.
By including summary unaudited as adjusted financial information, we do not
suggest that the information indicates what our financial position or results
of operations would actually have been had the issuance and sale of the old
notes and the affiliated transaction been completed on such dates, or to
project our financial position or results of operations for any future period.
You should read the information together with the footnotes below, our
historical financial statements and the other financial information in this
prospectus.
<TABLE>
<CAPTION>
As Adjusted
-------------------------------------------------------
Nine Months Ended
Year Ended September 30, Twelve Months Ended
December 31, 1997 1998 September 30, 1998
----------------- ----------------- -------------------
(dollars in thousands)
<S> <C> <C> <C>
Statement of Operations
Data:
Net sales............... $217,889 $150,711 $208,107
Gross profit............ 47,403 28,709 41,550
Operating income........ 37,664 21,443 31,960
Interest expense (1).... 17,179 12,870 16,981
Other (income) expenses,
net.................... (73) (6) (3)
Income tax expense...... 7,945 3,303 5,799
Income before
extraordinary loss..... 12,613 5,276 9,183
Extraordinary loss, net
of taxes............... 1,061 1,061 1,061
Net income.............. $ 11,552 $ 4,215 $ 8,122
Other Data:
Capital expenditures.... $ 7,275 $ 9,016 $ 11,081
Depreciation and
amortization (2)....... 6,759 5,688 7,271
EBITDA (3).............. 44,423 27,131 39,231
EBITDA margin (3)....... 20.4% 18.0% 18.9%
Cash interest expense... 16,515 12,127 16,129
Ratio of total debt to
EBITDA................. 3.8x -- 4.0x
Ratio of EBITDA to cash
interest expense....... 2.7x 2.2x 2.4x
Ratio of earnings to
fixed charges (4)...... 2.2x 1.7x 1.9x
Balance Sheet Data (at
period end):
Working capital......... $ 53,449
Total assets............ 140,616
Total debt.............. 156,550
Stockholder's deficit
(5).................... (42,352)
</TABLE>
- --------
(1) Reflects an estimated 8% interest rate on the senior credit facility. If
the interest rate on the senior credit facility changed 1/8%, interest
expense would change by $57, $28 and $57 for the year ended December 31,
1997, and the nine months ended and the twelve months ended September 30,
1998, respectively.
(2) Amounts do not include amortization of debt issuance costs and original
issue discount, which is included in interest expense.
(3) EBITDA is defined as net income before extraordinary loss, interest
expense, income taxes, depreciation, amortization expense, accounting
changes and other (income) expenses, net. We believe that EBITDA provides
additional information for determining our ability to meet our debt service
requirements. EBITDA does not represent and should not be considered as an
alternative to net income or cash flow from operations as determined by
generally accepted accounting principles, and EBITDA does not necessarily
indicate whether cash flow will be sufficient for cash requirements. Not
every company calculates EBITDA in exactly the same fashion. As a result,
EBITDA as presented above may not necessarily be comparable to similarly
titled measures of other companies. EBITDA margin represents the percentage
of EBITDA to net sales.
(4) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. Earnings consist of income before taxes, extraordinary loss,
and changes in accounting principle plus fixed charges, excluding
capitalized interest. Fixed charges consist of interest expense,
capitalized interest, amortization of debt issuance costs and one-third of
rental expense (the portion deemed representative of the interest factor).
(5) Stockholder's deficit includes our $136.7 million loan to Glass Holdings.
12
<PAGE>
Summary Historical Financial Information
We present below summary historical financial information of BGF for the
periods indicated. We derived the information for the years ended December 31,
1994, 1995, 1996 and 1997 from our audited consolidated financial statements.
We derived the information as of and for the year ended January 1, 1994 from
our unaudited financial statements.
We derived the historical financial information at the end of and for the
nine month periods ended September 30, 1997 and 1998 from unaudited
consolidated financial statements contained elsewhere in this prospectus. In
our opinion, this information includes all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the
information. Interim period results do not necessarily indicate the results
that may be expected for a complete fiscal year.
You should read this information together with the footnotes below, our
historical financial statements and the other financial information in this
prospectus.
<TABLE>
<CAPTION>
Fiscal Year Ended Nine Months Ended
-------------------------------------------------------------- ---------------------------
January 1, December 31, December 31, December 31, December 31, September 30, September 30,
1994 1994 1995 1996 1997 1997 1998
---------- ------------ ------------ ------------ ------------ ------------- -------------
(unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales............... $132,573 $150,023 $176,792 $195,196 $217,889 $160,493 $150,711
Gross profit............ 17,497 25,412 32,469 50,371 47,403 34,562 28,709
Operating income........ 10,556 17,839 23,320 40,151 37,664 27,147 21,443
Interest expense........ 4,728 4,311 2,979 1,993 2,355 1,949 1,751
Other (income) expenses,
net.................... 1,208 1,663 664 (1,868) (73) (76) (6)
Income tax expense...... 1,824 4,478 7,093 15,996 13,652 9,730 7,584
Income before cumulative
effect of change in
accounting principle... 2,796 7,387 12,584 24,030 21,730 15,544 12,114
Cumulative effect of
change in accounting
for post- retirement
benefits(1)............ -- 600 -- -- -- -- --
Net income.............. $ 2,796 $ 6,787 $ 12,584 $ 24,030 $ 21,730 $ 15,544 $ 12,114
Other Data:
Capital expenditures.... $ 3,796 $ 1,942 $ 8,311 $ 21,983 $ 7,275 $ 5,210 $ 9,016
Depreciation and
amortization(2)........ 8,672 7,801 8,223 6,085 6,759 5,176 5,688
EBITDA(3)............... 19,228 25,640 31,543 46,236 44,423 32,323 27,131
EBITDA margin(3)........ 14.5% 17.1% 17.8% 23.7% 20.4% 20.1% 18.0%
Balance Sheet Data (at period end):
Working capital......... $ 30,597 $ 45,534 $ 40,745 $ 39,702 $ 51,799 $ 48,712 $ 52,785
Total assets............ 90,234 95,592 97,029 123,784 136,476 130,641 139,191
Total debt(4)........... 41,500 35,000 17,500 36,276 25,000 25,000 152,000
Stockholder's equity
(deficit).............. 38,243 45,030 57,614 66,480 83,297 77,111 (39,891)
</TABLE>
- --------
(1) Attributable to BGF's adoption in 1994 of Statement of Financial Accounting
Standards No. 106 "Employers' Accounting for Postretirement Benefits other
than Pensions."
(2) Amounts do not include amortization of debt issuance costs, which is
included in interest expense.
(3) EBITDA is defined as net income before extraordinary loss, interest
expense, income taxes, depreciation, amortization expense, accounting
changes and other (income) expenses, net. We believe that EBITDA provides
additional information for determining its ability to meet debt service
requirements. EBITDA does not represent and should not be considered as an
alternative to net income or cash flow from operations as determined by
generally accepted accounting principles, and EBITDA does not necessarily
indicate whether cash flow will be sufficient for cash requirements. Not
every company calculates EBITDA in exactly the same fashion. As a result,
EBITDA as presented above may not necessarily be comparable to similarly
titled measures of other companies. EBITDA margin represents the percentage
of EBITDA to net sales.
(4) Includes long-term debt and borrowings under a line of credit.
13
<PAGE>
RISK FACTORS
Before you tender your old notes, you should be aware that there are various
risks involved in such an investment, including those we describe below. You
should consider carefully these risk factors together with all of the other
information included in this prospectus before you decide to tender your old
notes in the exchange offer.
Old Notes Outstanding After the Exchange Offer Will Not Have Registration
Rights and We Expect the Market for the Old Notes To Be Illiquid
If you do not exchange your old notes for exchange notes pursuant to the
exchange offer, your old notes will continue to be subject to the restrictions
on transfer of old notes. In general, you may not offer or sell old notes
unless they are registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws. We do
not currently intend to register the old notes under the Securities Act. Based
on interpretations by the SEC, we believe that you may offer for resale, resell
or otherwise transfer the exchange notes issued pursuant to the exchange offer
(unless you are an "affiliate" of ours within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act, so long as you acquired the
exchange notes in the ordinary course of your business and you will not, and
have no arrangement with any person to, participate in the distribution of the
exchange notes. Each broker-dealer that receives exchange notes for its own
account in exchange for old notes, where such old notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such exchange notes. See "Plan of Distribution." To the
extent that old notes are tendered and accepted in the exchange offer, the
trading market for untendered and tendered but unaccepted old notes will be
adversely affected.
Our Indebtedness Results in Significant Debt Service Obligations and
Limitations
We incurred significant debt in connection with AGY Holdings' purchase of a
51% ownership interest in Advanced Glassfiber and as a result, we have
significant debt service obligations. As of September 30, 1998, as adjusted for
the affiliated transaction and the issuance and sale of the old notes, we would
have had $156.6 million of indebtedness. We also would have had $66.4 million
of additional borrowing availability under our senior credit facility as of
such date. In addition, the indenture governing the notes allows us to incur
additional indebtedness under certain circumstances. If we add new debt to our
current debt levels, the related risks that we now face could intensify. See
"Capitalization," "Selected Financial and Operating Information," "Description
of Other Indebtedness" and "Description of Exchange Notes--Certain Covenants--
Limitation on Incurrence of Additional Indebtedness."
Our substantial indebtedness poses important consequences to you, including
the risks that:
. we will use a substantial portion of our cash flow from operations to pay
principal and interest on our debt, thereby reducing the funds available
for working capital, capital expenditures, acquisitions, research and
development and other general corporate purposes;
. our indebtedness may limit our ability to obtain additional financing on
satisfactory terms and to otherwise fund working capital, capital
expenditures, acquisitions, research and development, and other general
corporate requirements;
. our level of indebtedness may make us more vulnerable to economic
downturns and may limit our ability to withstand competitive pressures;
. our debt may bear interest at variable rates which creates higher debt
service requirements if market interest rates increase; and
. our failure to comply with the financial and other covenants applicable
to our debt could result in an event of default, which, if not cured or
waived, could have a material adverse effect on us.
14
<PAGE>
If we successfully implement our business and operating strategies, we
believe we will have enough capital to carry on our business and service our
debt requirements for the foreseeable future. However, if we cannot generate
sufficient cash flow from operations to meet our obligations, we may be forced
to reduce or delay capital expenditures, sell assets, restructure or refinance
our debt, or seek additional equity capital. We cannot assure you that any of
these remedies would be satisfactory or could be effected on satisfactory
terms, if at all. Our ability to pay principal and interest on the exchange
notes and to satisfy our other debt obligations will depend on our future
operating performance. Our operating performance will be affected by prevailing
economic conditions and financial, business and other factors which may be
beyond our control. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,"
"Description of Other Indebtedness" and "Description of Exchange Notes."
Your Exchange Notes Will Be Subordinate to Our Senior Debt
Before paying principal and interest on the exchange notes, we must first
make payments on any of our existing and future senior debt that is in default,
including all outstanding amounts under our senior credit facility. As of
September 30, 1998, as adjusted for the affiliated transaction and the issuance
and sale of the old notes, we would have had $58.6 million of senior debt
outstanding and $66.4 million of additional borrowing availability under our
senior credit facility.
Substantially all of our real and personal property secures our obligations
under our senior credit facility. If we default on any payments required under
any of our secured debt, the secured lenders could declare all amounts
outstanding, together with accrued and unpaid interest, immediately due and
payable. If we are unable to repay the amounts due, the lenders could proceed
against the collateral securing the debt. If the lenders proceed against any of
the collateral, we may not have enough assets left to pay you or the other
noteholders. Moreover, if we become bankrupt or similarly reorganize, we may
not be able to use our assets to pay you or the other noteholders until after
we repay all of our senior debt. In addition, the senior credit facility may
prohibit us from paying amounts due on the exchange notes, or from purchasing,
redeeming or otherwise acquiring the exchange notes if a default exists under
our senior debt. None of our non-United States subsidiaries will guarantee the
exchange notes and the exchange notes will be effectively subordinated in right
of payment to all debt and other liabilities (including trade payables) of
these subsidiaries. See "Description of Exchange Notes--Subordination of the
Exchange Notes and Note Guarantees."
Our Indebtedness May Prevent Us from Engaging in Certain Beneficial Activities
Our senior credit facility and the indenture governing the old notes and the
exchange notes each contain a number of significant covenants. These covenants
could limit or restrict our ability to:
. incur additional debt;
. pay dividends and make distributions;
. repurchase securities;
. make certain investments;
. create liens;
. transfer or sell assets;
. enter into transactions with affiliates;
. issue or sell stock of subsidiaries; or
. merge or consolidate.
These limitations and restrictions may adversely affect our ability to
finance our future operations or capital needs or engage in other business
activities that may be in our best interests. In addition, our senior credit
facility requires us to comply with certain financial ratios. Events beyond our
control may prevent us from complying with these ratios. If we breach any of
the covenants in the senior credit facility or the
15
<PAGE>
indenture, or if we are unable to comply with the required financial ratios, we
may be in default under the senior credit facility and the indenture. If we
default under the senior credit facility, the lenders can declare all
borrowings outstanding, including accrued interest and other fees, due and
payable. If we use all of our available cash to repay borrowings under the
senior credit facility, we may not be able to make payments on the exchange
notes. See "Description of Other Indebtedness" and "Description of Exchange
Notes."
Market Downturns Could Reduce Demand for Our Products
We sell our products for use in a wide range of applications in the
electronics, composites, filtration, commercial, insulation and construction
markets. Any downturn in these markets, which are susceptible to cyclical and
general economic downturns, would reduce demand for our products. A reduction
in overall demand will likely result in increased competition for customers. If
we fail to meet satisfactorily the challenges of increased competition, our
business, financial condition and results of operations could be adversely
affected. For example, according to recent press reports, a significant number
of aircraft orders placed by Asian buyers have been, or could be, cancelled.
These cancellations could adversely affect the aerospace industry and, in turn,
could adversely affect the demand for our composite products, the majority of
which are ultimately used by end-users in the aerospace industry. If that
demand were to decrease, it could have a material adverse effect on our results
of operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business--Competition."
Our Customers Could Switch to Other Suppliers
The markets in which we compete are highly competitive. We believe that the
principal competitive factors affecting our markets include the:
. quality, performance, price and consistency of products;
. responsiveness to customer requirements; and
. ability to maintain customer relationships.
Our primary domestic competitor is Hexcel Corporation. In September 1998,
Hexcel acquired the assets and operating liabilities of the glass fiber fabrics
manufacturing business of Clark-Schwebel. Prior to the acquisition, Clark-
Schwebel was our primary domestic competitor in the glass fiber fabrics market.
Our major competitors globally are Hexcel/Clark-Schwebel, Nitto Boseki (Japan),
Nan Ya Plastics (Taiwan) and Taiwan Glass (Taiwan).
Historically, imports of glass fiber fabrics into the U.S. have been limited
because of import quotas, restrictions, duties and tariffs. Recently, however,
imports of goods such as laminates and rigid printed circuit boards from Asia
have increased and are negatively affecting demand for domestically produced
heavyweight glass fiber fabrics. Increased competition from Asian producers,
particularly in heavyweight glass fiber fabrics for the electronics market, has
also resulted from:
. their increased vertical integration of glass yarn manufacturing and
weaving operations;
. greater price competition due to currency fluctuations; and
. their increased heavyweight manufacturing capacity.
As a result of these competitive pressures, during the first nine months of
1998, our net sales of heavyweight glass fiber fabrics declined 35.3% from the
same period in 1997. Some of our competitors may have greater financial and
other resources than we do. We cannot assure you that we will be able to
continue to compete effectively in the future or that other competitors will
not enter the markets in which we compete. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business--
Competition."
16
<PAGE>
Our Operating Performance Is Dependent upon a Limited Number of Customers
Sales to our top ten customers accounted for 55.2% of our total sales for
the twelve months ended September 30, 1998. A decrease in business from, or the
loss of one or more of our major customers could have a material adverse effect
on our business, financial condition and results of operations. We have been
advised by one of our top three customers that it intends to terminate its
heavyweight laminates business. Consequently, this customer will no longer
purchase heavyweight fiber fabrics from us for use in producing rigid printed
circuit boards. We estimate that approximately $13.2 million of our total sales
of heavyweight fiber fabrics to this customer in fiscal 1998 were used to
produce rigid printed circuit boards. We believe this termination resulted from
competitive pressures from Asian laminate producers. However, we believe that
this customer will continue to purchase other fabrics from us.
In addition, our future business, financial condition and results of
operations will depend to a significant extent upon the commercial success of
our major customers and their continued willingness to purchase our products.
Any significant downturn in the business of our major customers could cause
them to reduce or discontinue their purchases from us. This could have a
material adverse effect on our business, financial condition and results of
operations. See "Business--Sales and Marketing."
We May Experience a Decline in the Supply of Raw Materials
We purchase the vast majority of our glass yarns from Advanced Glassfiber
and PPG Industries. We also purchase glass yarns from Nitto Boseki and
Compagnie de Saint Gobain (also known as Vetrotex); aramid yarns from DuPont
and Akzo Nobel; and carbon yarns from Amoco Performance Products, Toho Carbon
Fibers and Hexcel. In the event our suppliers are unable or unwilling to
deliver us glass, aramid or carbon yarns, our business, financial condition and
results of operations could be materially adversely affected. We experienced
shortages of glass yarns from the fourth quarter of 1994 through the second
quarter of 1996. Due in part to such shortages, the price of glass yarns
increased in 1996 at a higher than historical rate. In addition, during 1996,
shortages of carbon yarns occurred. We believe that the supply of glass, carbon
and aramid yarns should be adequate for the foreseeable future. However, we can
provide no assurance that glass, carbon and aramid yarns will continue to be
available or that they will be available at prices that will not have a
material adverse effect on our profitability. Additionally, we have generally
been able to pass through increases in the cost of yarn to our customers. Our
inability to do so in the future could have a material adverse effect on our
business, financial condition and results of operations.
We May Be Affected by "Year 2000" Issues
Many computer programs use only two digits to identify a year in a date
field within the program (e.g., "98" or "02") often meaning that the program
will fail to distinguish dates in the "2000s" from dates in the "1900s." If not
corrected, computer applications making calculations and comparisons in
different centuries may cause inaccurate results, or fail by or at the Year
2000. These Year 2000 related issues are of particular importance to us. We
depend upon our information technology and other systems for administrative
functions, as well as in the day to day management of business functions such
as production scheduling and manufacturing order handling.
We have identified and evaluated all of our information technology systems
for Year 2000 related issues and have completed about 25% of the conversion and
testing of the affected systems as well as the implementation of systems that
have been made Year 2000 compliant. We have completed about 50% of the
identification and evaluation of Year 2000 issues related to technology
embedded in our manufacturing equipment. We expect to complete identifying and
evaluating such equipment by the end of the first quarter of 1999. Our goal is
to have all of our systems, including embedded technology, Year 2000 compliant
by the end of the second quarter of 1999. We currently expect to spend a total
of approximately $440,000 to make our systems Year 2000 compliant, and as of
December 15, 1998, we had incurred expenses of approximately $126,000.
17
<PAGE>
Aside from focusing on our own systems, we have also asked our major vendors
about their Year 2000 progress and substantially all of them have responded.
Their responses do not indicate any material Year 2000 problems or concerns. We
are also planning to contact our major customers about their Year 2000
readiness to determine whether any of their purchasing patterns could change
because of Year 2000 disruptions. Finally, we are developing and evaluating
contingency plans related to both our systems and external relationships.
Although we are not currently aware of any Year 2000 issues that could
materially affect our business or financial condition, we cannot assure you
that our systems and equipment will be fully Year 2000 compliant on time or
that the amount of money we spend to make them compliant will not become
material. We also cannot assure you that our contingency plans, when we finish
developing them, will be adequate for all of the Year 2000 problems that could
arise. Further, we cannot currently anticipate the possible negative impact
that Year 2000 issues might have on our material vendors and customers which
could, in turn, materially adversely affect our business, financial condition
and results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000."
The disclosures contained herein concerning Year 2000 are designated as
"Year 2000 Readiness Disclosures" and are made pursuant to the Year 2000
Information and Readiness Disclosure Act.
We May Be Responsible for Environmental and Safety and Health Costs
Various federal, state and local environmental laws and requirements govern
the use of our facilities. Such laws and requirements govern: (1) discharges to
air and water, (2) the handling and disposal of solid and hazardous substances
and wastes and (3) the remediation of contamination associated with releases of
hazardous substances at our facilities and off-site disposal locations. Laws
and requirements relating to workplace safety and worker health also govern our
operations. These laws and requirements establish formaldehyde, asbestos and
noise standards and regulate the use of hazardous chemicals in the workplace.
We have taken, and will continue to take, steps to comply with these laws and
requirements. We believe, based upon currently available information, that
complying with environmental and health and safety laws and requirements will
not require material capital expenditures in the foreseeable future. However,
we cannot assure you that existing and future laws and requirements, ordinances
or regulations will not give rise to additional compliance or remediation costs
which could have a material adverse effect on our business, financial condition
and results of operations.
We May Have Conflicts of Interest with Our Controlling Equity Holders
Glass Holdings owns 100% of BGF and the Porcher family, through its
controlling interest in Porcher Industries, controls Glass Holdings. As a
result, the Porcher family has the power to elect all of our directors and
appoint new management. Consequently, the Porcher family has the ability to
control our policies and operations. In addition to controlling Advanced
Glassfiber, the Porcher family also controls companies in Europe and Asia which
manufacture products competitive to ours. Circumstances may occur in which the
interests of the Porcher family could be in conflict with the interests of our
noteholders. See "Management--Directors, Executive Officers and Senior Managers
of BGF," "Certain Relationships and Related Party Transactions" and "Stock
Ownership."
We May Not Have Sufficient Funds to Repay the Exchange Notes upon a Change of
Control
If we experience certain changes of control, you will have the right to
require us to purchase your exchange notes at a purchase price equal to 101% of
the principal amount of your exchange notes plus accrued and unpaid interest.
In such circumstances, we may also be required to (1) repay our outstanding
senior debt or (2) obtain our lender's consent to our purchase of the exchange
notes. If we cannot repay our debt or cannot obtain the needed consents, we may
be unable to purchase the exchange notes. This would be an event of default
under the indenture. Upon a change of control, we cannot guarantee that we will
have sufficient funds to make any debt payment (including purchases of the
exchange notes) as described above. To avoid default,
18
<PAGE>
we would try to refinance our debt. We cannot guarantee, however, that such
refinancing, if available, would be on favorable terms. See "Description of
Exchange Notes--Change of Control."
The events that qualify as a change of control under the indenture may also
be events of default under our senior credit facility or other indebtedness. An
event of default under our senior credit facility would permit our lenders to
accelerate our indebtedness. If we cannot repay such borrowings when due, the
lenders could proceed against the collateral securing the debt.
Technological Change
Rapid technological advances in the markets we serve place rigorous demands
on the weight, quality and consistency of our products. For example,
technological changes in the printed circuit board industry are rapid and
continuous and require extensive technological and manufacturing capability and
expertise. In addition, we could face increased competition if cost-effective
alternatives to glass, carbon or aramid fiber fabrics were developed for our
products. We cannot assure you that we will be able to maintain our current
technological position. If competitors develop and introduce cost-effective
alternatives to our products or if we do not anticipate and respond to
technological changes, our business, financial condition and results of
operations could suffer a material adverse effect.
Issuance of the Old Notes and any Note Guarantee May Be Subject to Fraudulent
Conveyance Laws
Under applicable provisions of the U.S. Bankruptcy Code or comparable
provisions of state fraudulent transfer or conveyance laws, if we, at the time
we issued the old notes:
(1) incurred such indebtedness with the intent to hinder, delay or
defraud creditors; or
(2) received less than reasonably equivalent value or fair consideration
for incurring such indebtedness, and:
. were insolvent at the time of incurrence;
. were rendered insolvent by reason of such incurrence (and the
application of the proceeds thereof);
. were engaged or were about to engage in a business or transaction
for which our remaining assets constituted unreasonably small
capital to carry on our businesses; or
. intended to incur, or believed that we would incur, debts beyond
our ability to pay such debts as they matured,
then, in each case, a court of competent jurisdiction could (1) void, in whole
or in part, the notes, and direct the repayment of any amounts paid thereunder
to our creditors, (2) subordinate the notes to our obligations to our existing
and future creditors, or (3) take other actions detrimental to the holders of
the notes. The measure of insolvency for purposes of the foregoing will vary
depending upon the law applied in such case. Generally, however, we would be
considered insolvent if the sum of our debts, including contingent liabilities,
was greater than all of our assets at fair valuation or if the present fair
saleable value of our assets was less than the amount that would be required to
pay the probable liability on our existing debts, including contingent
liabilities, as they become absolute and matured. A note guarantee, at the time
it is issued by one of our subsidiaries, would also be subject to the same
fraudulent transfer or conveyance laws as the notes.
You Cannot Be Sure That an Active Trading Market Will Develop for the Exchange
Notes
The old notes were offered to a small number of institutional buyers and are
eligible for trading in the PORTAL Market The exchange notes will be a new
issue of securities for which there is no existing trading market. We cannot
assure you as to the liquidity of markets that may develop for the exchange
notes, your ability to sell the exchange notes or the price at which you would
be able to sell the exchange notes. If such markets were to exist, the exchange
notes could trade at prices that may be lower than their principal amount or
19
<PAGE>
purchase price depending on many factors, including prevailing interest rates
and the markets for similar securities. First Union Capital Markets has advised
us that it currently intends to make a market with respect to the exchange
notes. However, it is not obligated to do so, and any market making with
respect to the exchange notes may be discontinued at any time without notice.
In addition, such market making activity may be limited during the pendency of
the exchange offer or the effectiveness of a shelf registration statement in
lieu thereof. We do not intend to apply for listing of the exchange notes on
any national securities exchange or on Nasdaq. The liquidity of, and trading
market for, the exchange notes also may be adversely affected by changes in the
market for high yield securities and by changes in our financial performance or
prospects or in the prospects for companies in our industry generally. As a
result, you cannot be sure that an active trading market will develop for the
exchange notes.
20
<PAGE>
USE OF PROCEEDS
BGF will not receive any cash proceeds from the exchange of old notes
pursuant to the exchange offer. The net proceeds to BGF from the sales of the
old notes were approximately $94.9 million, after deducting the initial
purchaser's discount and expenses of the offering of the old notes. BGF used
the net proceeds from the offering to repay all $65.0 million of indebtedness
under BGF's senior subordinated credit facility and $29.9 million of
indebtedness under the revolver under BGF's senior credit facility. This
indebtedness was incurred on September 30, 1998 to fund the purchase by AGY
Holdings of the 51% ownership interest in Advanced Glassfiber. Affiliates of
First Union Capital Markets are a lender and the agent under both the senior
credit facility and the senior subordinated credit facility. For a description
of certain terms under the senior credit facility, see "Description of Other
Indebtedness."
21
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of BGF as of September 30,
1998 and as adjusted to give effect to the issuance and sale of the old notes
and the affiliated transaction as if such events had occurred on September 30,
1998.
The following table should be read in conjunction with the historical
Consolidated Financial Statements of BGF, the related notes thereto, and other
information contained elsewhere in this prospectus. See "Where You Can Find
More Information," "Summary Unaudited As Adjusted Financial Information,"
"Summary Historical Financial Information," "Selected Financial and Operating
Information" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
<CAPTION>
At September 30, 1998
----------------------
Actual As Adjusted
--------- -----------
(dollars in
thousands)
<S> <C> <C>
Long-term debt (including current portion):
Senior credit facility................................ $ 87,000 $ 58,550
Senior subordinated credit facility................... 65,000 --
Notes offered hereby (1).............................. -- 98,000
--------- ---------
Total long-term debt (2)............................ 152,000 156,550
--------- ---------
Stockholder's equity:
Common stock, $1.00 par value, authorized 3,000
shares; issued and outstanding 1,000 shares.......... 1 1
Capital in excess of par value........................ 34,999 34,999
Retained earnings (3)................................. 60,411 59,350
Loan to parent (4).................................... (135,302) (136,702)
--------- ---------
Total stockholder's deficit......................... (39,891) (42,352)
--------- ---------
Total capitalization.............................. $ 112,109 $ 114,198
========= =========
</TABLE>
- --------
(1) Net of original issue discount of $2,000.
(2) The increase in as adjusted total long-term debt is due to the initial
purchaser's discount, estimated fees and expenses related to the offering
of the old notes and post-closing adjustments related to the affiliated
transaction. See "Prospectus Summary--The Affiliated Transaction."
(3) The reduction in as adjusted retained earnings is due to a write-off of
debt issuance costs associated with the senior subordinated credit facility
of $1,725 ($1,061 after tax benefit).
(4) Loan to parent related to the affiliated transaction of $135.8 million net
of an existing outstanding loan from parent.
22
<PAGE>
SELECTED FINANCIAL AND OPERATING INFORMATION
(dollars in thousands)
The following selected historical financial information of BGF (except for
the as adjusted amounts) for the fiscal years ended December 31, 1995, 1996 and
1997, and as of December 31, 1996 and 1997, are derived from the Consolidated
Financial Statements of BGF which have been audited by PricewaterhouseCoopers
LLP, independent certified public accountants, and are included in this
prospectus. The following selected historical financial information for the
fiscal year ended December 31, 1994, and as of December 31, 1994 and 1995, were
derived from consolidated financial statements of BGF which have been audited
and are not included in this prospectus.
The following selected consolidated financial data as of and for the year
ended January 1, 1994 and at the end of and for the nine month periods ended
September 30, 1997 and 1998 have been derived from unaudited consolidated
financial statements and, in the opinion of BGF, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation, in all material respects, of the results of operations and
financial position of BGF at the end of and for each of the interim periods
presented. Interim period results are not necessarily indicative of results to
be expected for a complete fiscal year. The following selected historical
financial information for the year ended January 1, 1994 is not included
elsewhere in this prospectus. The following selected historical financial
information for the nine month periods ended September 30, 1997 and 1998 is
contained elsewhere in this prospectus.
The unaudited as adjusted financial information for December 31, 1997 and
September 30, 1998 give effect to the issuance and sale of the old notes and
the affiliated transaction as if such events had occurred on the first day of
each of these periods, except for balance sheet data which gives effect to such
events as if they had occurred at the balance sheet date.
The selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements of BGF, the related notes thereto, and
other information contained in this prospectus.
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------------------
January 1, December 31, December 31, December 31, December 31, December 31,
1994 1994 1995 1996 1997 1997
---------- ------------ ------------ ------------ ------------ ------------
Actual As Adjusted
------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales....... $132,573 $150,023 $176,792 $195,196 $217,889 $217,889
Cost of goods
sold........... 115,076 124,611 144,323 144,825 170,486 170,486
-------- -------- -------- -------- -------- --------
Gross profit.... 17,497 25,412 32,469 50,371 47,403 47,403
Selling, general
and
administrative
expenses....... 6,941 7,573 9,149 10,220 9,739 9,739
-------- -------- -------- -------- -------- --------
Operating
income......... 10,556 17,839 23,320 40,151 37,664 37,664
Interest
expense........ 4,728 4,311 2,979 1,993 2,355 17,179
Other (income)
expenses, net.. 1,208 1,663 664 (1,868) (73) (73)
-------- -------- -------- -------- -------- --------
Income before
taxes and
cumulative
effect of
change in
accounting
principle...... 4,620 11,865 19,677 40,026 35,382 20,558
Income tax
expense........ 1,824 4,478 7,093 15,996 13,652 7,945
-------- -------- -------- -------- -------- --------
Income before
cumulative
effect of
change in
accounting
principle ..... 2,796 7,387 12,584 24,030 21,730 12,613
Cumulative
effect of
change in
accounting for
post-retirement
benefits....... -- 600 -- -- -- --
-------- -------- -------- -------- -------- --------
Net income...... $ 2,796 $ 6,787 $ 12,584 $ 24,030 $ 21,730 $ 12,613
======== ======== ======== ======== ======== ========
<CAPTION>
Nine Months Ended
(unaudited)
-----------------------------------------
September 30, September 30, September 30,
1997 1998 1998
------------- ------------- -------------
Actual As Adjusted
------------- -------------
<S> <C> <C> <C>
Net sales....... $160,493 $150,711 $150,711
Cost of goods
sold........... 125,931 122,002 122,002
------------- ------------- -------------
Gross profit.... 34,562 28,709 28,709
Selling, general
and
administrative
expenses....... 7,415 7,266 7,266
------------- ------------- -------------
Operating
income......... 27,147 21,443 21,443
Interest
expense........ 1,949 1,751 12,870
Other (income)
expenses, net.. (76) (6) (6)
------------- ------------- -------------
Income before
taxes and
cumulative
effect of
change in
accounting
principle...... 25,274 19,698 8,579
Income tax
expense........ 9,730 7,584 3,303
------------- ------------- -------------
Income before
cumulative
effect of
change in
accounting
principle ..... 15,544 12,114 5,276
Cumulative
effect of
change in
accounting for
post-retirement
benefits....... -- -- --
------------- ------------- -------------
Net income...... $ 15,544 $ 12,114 $ 5,276
============= ============= =============
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------------------
January 1, December 31, December 31, December 31, December 31, December 31,
1994 1994 1995 1996 1997 1997
---------- ------------ ------------ ------------ ------------ ------------
Actual As Adjusted
------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Other Data:
Depreciation &
amortization (1).. $ 8,672 $ 7,801 $ 8,223 $ 6,085 $ 6,759 $ 6,759
Capital
expenditures... 3,796 1,942 8,311 21,983 7,275 7,275
EBITDA (2)...... 19,228 25,640 31,543 46,236 44,423 44,423
EBITDA margin
(2)............ 14.5% 17.1% 17.8% 23.7% 20.4% 20.4%
Ratio of total
debt to
EBITDA......... 2.2x 1.4x 0.6x 0.8x 0.6x 3.8x
Ratio of EBITDA
to cash
interest
expense........ 4.2x 6.1x 10.2x 23.3x 16.9x 2.7x
Ratio of
earnings to
fixed charges
(3)............ 1.9x 3.4x 6.8x 17.4x 14.5x 2.2x
Balance Sheet Data (at
period end):
Working
capital........ $30,597 $45,534 $40,745 $ 39,702 $ 51,799 $ 51,659
Total assets.... 90,234 95,592 97,029 123,784 136,476 142,354
Total debt (4).. 41,500 35,000 17,500 36,276 25,000 168,539
Stockholder's
equity
(deficit)...... 38,243 45,030 57,614 66,480 83,297 (54,504)
<CAPTION>
Nine Months Ended
(unaudited)
-----------------------------------------
September 30, September 30, September 30,
1997 1998 1998
------------- ------------- -------------
Actual As Adjusted
------------- -------------
<S> <C> <C> <C>
Other Data:
Depreciation &
amortization (1).. $ 5,176 $ 5,688 $ 5,688
Capital
expenditures... 5,210 9,016 9,016
EBITDA (2)...... 32,323 27,131 27,131
EBITDA margin
(2)............ 20.1% 18.0% 18.0%
Ratio of total
debt to
EBITDA......... -- -- --
Ratio of EBITDA
to cash
interest
expense........ 15.4x 15.9x 2.2x
Ratio of
earnings to
fixed charges
(3)............ 13.1x 10.9x 1.7x
Balance Sheet Data (at
period end):
Working
capital........ $ 48,712 $ 52,785 $ 53,449
Total assets.... 130,641 139,191 140,616
Total debt (4).. 25,000 152,000 156,550
Stockholder's
equity
(deficit)...... 77,111 (39,891) (42,352)
</TABLE>
- --------
(1) Amounts do not include amortization of debt issuance costs and original
issue discount, which is included in interest expense.
(2) EBITDA is defined as net income before extraordinary loss, interest
expense, income taxes, depreciation, amortization expense, accounting
changes and other (income) expenses, net. BGF believes that EBITDA provides
additional information for determining its ability to meet debt service
requirements. EBITDA does not represent and should not be considered as an
alternative to net income or cash flow from operations as determined by
generally accepted accounting principles, and EBITDA does not necessarily
indicate whether cash flow will be sufficient for cash requirements. Not
every company calculates EBITDA in exactly the same fashion. As a result,
EBITDA as presented above may not necessarily be comparable to similarly
titled measures of other companies. EBITDA margin represents the percentage
of EBITDA to net sales.
(3) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. Earnings consist of income before extraordinary loss, taxes
and changes in accounting principles and fixed charges, excluding
capitalized interest. Fixed charges consists of interest expense,
capitalized interest, amortization of debt issuance costs and one-third of
rental expense (the portion deemed representative of the interest factor).
Earnings were adequate to cover fixed charges for the years ended January
1, 1994, and December 31, 1994, 1995, 1996 and 1997 and the nine months
ended September 30, 1997 and 1998 by $4.6 million, $11.3 million, $19.6
million, $39.8 million, $35.4 million, $25.2 million, and $19.6 million,
respectively.
(4) Includes long-term debt and borrowings under a line of credit.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements of BGF and notes thereto contained in this prospectus. See
"Risk Factors" for trends and uncertainties known to BGF that could cause
reported financial information to differ materially from future results.
Overview
BGF is the second largest manufacturer of glass fiber fabrics and a leading
producer of other high performance fabrics in North America. BGF's fabrics are
a critical component in the production of a variety of electronic, filtration,
composite, insulation, construction and commercial products. For the twelve
months ended September 30, 1998, approximately half of BGF's net sales and
EBITDA were derived from the sale of glass fiber fabrics for use in printed
circuit boards.
Over the last five years, the demand for multi-layer printed circuit boards,
which primarily use lightweight glass fiber fabrics, has been increasing. In
contrast, over the last fifteen months, the demand for BGF's heavyweight
fabrics has been decreasing due to competitive pressures from Asian laminate
producers. As a result, BGF has shifted its electronics glass fiber fabrics
manufacturing capacity mix in recent years from heavyweight fabrics, which are
typically used in rigid printed circuit boards, toward more technologically
advanced and higher-margin lightweight fabrics. Beginning in the fourth quarter
of 1997, BGF has experienced downward pricing pressures on its heavyweight
glass fiber fabrics due to foreign exchange fluctuations between the dollar and
various Asian currencies and over-capacity in Asian heavyweight fabrics
manufacturing, which has led to increased imports of laminates and printed
circuit boards into the U.S. from Asia. However, BGF's sales of the higher-
margin, lightweight glass fiber fabrics used in multi-layer printed circuit
boards have continued to increase. BGF believes that currently, there is no
cost-effective substitute for glass fiber fabrics that can satisfy the
stringent quality and performance criteria demanded of printed circuit boards.
From calendar year 1993 to the twelve months ended September 30, 1998, BGF's
net sales of glass fiber fabrics to the electronics industry increased at a
compound annual growth rate of 8.5%, from $73.2 million to $107.8 million. Over
the same time period, net sales of heavyweight glass fiber fabrics to the
electronics industry increased from $42.6 million to $47.9 million, and net
sales of lightweight glass fiber fabrics to the electronics industry increased
from $30.6 million to $59.9 million. For the twelve months ended September 30,
1998, net sales of glass fiber fabrics to the electronics industry represented
51.8% of BGF's net sales.
During the twelve months ended September 30, 1998, approximately 35.3% of
BGF's net sales were derived from the sale of products to the composites and
filtration markets. BGF's sales to the composites market are dependent on new
aircraft building programs and the refurbishment of existing aircraft. BGF's
sales to the filtration market are dependent on environmental laws regulating
emissions by industrial customers into the environment. BGF has continued to
direct resources to these markets, which is demonstrated by an increase in net
sales from $37.6 million in calendar year 1993 to $73.5 million for the twelve
months ended September 30, 1998.
BGF purchases glass yarns, its principal raw material, primarily from three
suppliers. While glass yarns have been in short supply from time to time,
currently the supply is adequate. BGF generally has been able to pass through
price increases in raw materials to its customers.
The following table summarizes approximate net sales for each market that
BGF serves, as classified by BGF, for the fiscal years ended December 31, 1995,
1996, 1997, and for the nine months ended September 30, 1997 and 1998.
25
<PAGE>
<TABLE>
<CAPTION>
Nine Months
Fiscal Year Ended Ended
December 31, September 30,
-------------------- -------------
1995 1996 1997 1997 1998
------ ------ ------ ------ ------
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Electronics:
Lightweight fabrics........................ $ 45.5 $ 46.1 $ 57.6 $ 42.5 $ 44.8
Heavyweight fabrics........................ 64.8 69.0 65.7 50.4 32.6
Composites................................... 26.2 31.2 45.7 34.2 39.7
Filtration................................... 16.4 21.7 22.8 13.6 13.1
Commercial................................... 9.7 11.5 11.0 8.8 7.9
Insulation................................... 8.2 10.3 9.0 6.7 6.3
Construction................................. 6.0 5.4 6.1 4.3 6.3
------ ------ ------ ------ ------
Total net sales.......................... $176.8 $195.2 $217.9 $160.5 $150.7
====== ====== ====== ====== ======
</TABLE>
Results of Operations
The following table summarizes BGF's historical results of operations as a
percentage of net sales for the years ended December 31, 1995, 1996 and 1997
and for the nine months ended September 30, 1997 and 1998:
<TABLE>
<CAPTION>
Nine Months
Ended
Fiscal Year Ended September
December 31, 30,
------------------- ------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold......................... 81.6 74.2 78.2 78.5 81.0
----- ----- ----- ----- -----
Gross profit............................. 18.4 25.8 21.8 21.5 19.0
Selling, general and administrative
expenses.................................. 5.2 5.2 4.5 4.6 4.8
----- ----- ----- ----- -----
Operating income......................... 13.2 20.6 17.3 16.9 14.2
Other (income) expenses:
Interest expense......................... 1.7 1.1 1.1 1.2 1.2
Other expenses, net...................... 0.4 (1.0) 0.0 0.0 0.0
----- ----- ----- ----- -----
Income before taxes.................... 11.1 20.5 16.2 15.7 13.0
Income tax expense......................... 4.0 8.2 6.2 6.1 5.0
----- ----- ----- ----- -----
Net income............................. 7.1% 12.3% 10.0% 9.6% 8.0%
===== ===== ===== ===== =====
</TABLE>
Nine Months Ended September 30, 1998 and 1997
Net Sales. Net sales decreased $9.8 million, or 6.1%, to $150.7 million in
the first nine months of 1998 from $160.5 million in the first nine months of
1997, due to a decrease in sales in the heavyweight fabric segment of the
electronics market. Sales in the electronics market decreased $15.5 million, or
16.7%, to $77.4 million in the first nine months of 1998 from $92.9 million in
the first nine months of 1997, due to a decline in sales of heavyweight fabrics
used in rigid printed circuit boards. Sales of BGF's products in the composites
market increased $5.5 million, or 16.1%, from $34.2 million in the first nine
months of 1997 to $39.7 million in the first nine months of 1998 due to strong
purchases of carbon, aramid and glass fiber fabrics by the aerospace industry.
Sales in BGF's other markets increased $0.2 million due to strong purchases by
the construction market, offset in part by a decrease in sales to the
insulation and commercial markets.
Gross Profit Margins. Gross profit margins decreased from 21.5% in the first
nine months of 1997 to 19.0% in the first nine months of 1998 due primarily to
lower capacity utilization and price pressures in heavyweight fabrics used in
rigid printed circuit boards.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses remained relatively constant at 4.8% and 4.6% of net
sales in the first nine months of 1998 and 1997, respectively.
26
<PAGE>
Operating Income. As a result of the aforementioned factors, operating
income decreased $5.7 million to $21.4 million, or 14.2% of net sales, in the
first nine months of 1998, from $27.1 million, or 16.9% of net sales, in the
first nine months of 1997.
Interest Expense. Interest expense decreased $0.2 million to $1.7 million in
the first nine months of 1998 from $1.9 million in the first nine months of
1997, primarily as a result of lower borrowings outstanding during the first
nine months of 1998.
Income Tax Expense. The effective tax rate of 38.5% for both periods is
higher than the federal statutory rate of 35.0% primarily due to state income
taxes.
Net Income. As a result of the aforementioned factors, net income decreased
$3.4 million to $12.1 million in the first nine months of 1998 from $15.5
million in the first nine months of 1997.
Fiscal Year Ended December 31, 1997 Compared to Fiscal Year Ended December 31,
1996
Net Sales. Net sales increased $22.7 million, or 11.6%, to $217.9 million in
1997 from $195.2 million in 1996. Sales in the electronics market increased
$8.2 million, or 7.1%, to $123.3 million in 1997 from $115.1 million in 1996
due primarily to strong demand in the electronics industry, as well as a shift
in product mix toward higher margin lightweight fiber fabrics. The effect of
this increased volume was offset in part by price decreases in sales of
heavyweight fabrics to Asia in the electronics market. Sales in the composites
market increased $14.5 million, or 46.5%, from $31.2 million in 1996 to $45.7
million in 1997, due primarily to increased purchases of carbon fabrics by the
aerospace industry. Net sales in other markets remained relatively unchanged.
Gross Profit Margins. Gross profit margins decreased from 25.8% in 1996 to
21.8% in 1997 due to a decrease in the price of heavyweight fiber fabrics sold
to Asia and start-up costs associated with the South Hill, Virginia facility.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $0.5 million to $9.7 million, or 4.5% of net
sales, in 1997 from $10.2 million, or 5.2% of net sales, in 1996. This decrease
was primarily due to continued cost controls by management and lower
professional service expenses.
Operating Income. As a result of the aforementioned factors, operating
income decreased $2.5 million to $37.7 million, or 17.3% of net sales, in 1997
from $40.2 million or 20.6% of net sales, in 1996.
Interest Expense. Interest expense increased $0.4 million to $2.4 million in
1997 from $2.0 million in 1996. This increase was primarily due to an increase
in the interest rates on outstanding debt in 1997 and higher average borrowings
throughout the year as a result of a distribution to Glass Holdings to fund the
equity of Shanghai Porcher Industries Co., Ltd., a PRC Company and Belmont of
America, Inc.
Income Tax Expense. The effective tax rate in 1997 of 38.6% and in 1996 of
40.0% was higher than the federal statutory tax rate of 35.0% primarily due to
state income taxes.
Net Income. As a result the aforementioned factors, net income decreased
$2.3 million to $21.7 million in 1997 from $24.0 million in 1996.
Fiscal Year Ended December 31, 1996 Compared to Fiscal Year Ended December 31,
1995
Net Sales. Net sales increased $18.4 million, or 10.4%, to $195.2 million in
1996 from $176.8 million in 1995. Net sales were favorably impacted by
significant price increases throughout BGF's product lines which was driven by
increased demand across all of BGF's markets.
27
<PAGE>
Gross Profit Margin. Gross profit margins increased from 18.4% in 1995 to
25.8% in 1996 due to significant price increases in BGF's products which were
implemented by BGF as a result of unusually strong market conditions.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses remained constant at 5.2% of net sales.
Operating Income. As a result of the aforementioned factors, operating
income increased $16.9 million to $40.2 million, or 20.6% of net sales in 1996,
from $23.3 million or 13.2% of net sales, in 1995.
Interest Expense. Interest expense decreased $1.0 million to $2.0 million in
1996 from $3.0 million in 1995. This decrease was primarily due to lower
outstanding borrowings and a prepayment of $8.7 million of subordinated debt
which resulted in a decrease in the weighted average interest rate paid by BGF.
Income Tax Expense. The effective tax rate in 1996 of 40.0% and 1995 of
36.0% was higher than the federal statutory tax rate of 35.0% primarily due to
state income taxes.
Net Income. As a result of the aforementioned factors, net income increased
$11.4 million to $24.0 million in 1996 from $12.6 million in 1995.
Liquidity and Capital Resources
Historically, BGF's primary sources of liquidity have been cash flow from
operations and borrowings under BGF's credit facilities. BGF's future need for
liquidity will arise primarily from interest payable on the notes and the
senior credit facility, principal payments on the senior credit facility
beginning in December 1999 and the funding of BGF's capital expenditures and
working capital requirements. See "Description of Other Indebtedness." BGF has
no mandatory payments of principal on the notes scheduled prior to their
maturity.
Net Cash Provided by Operating Activities. Net cash provided by operating
activities was $22.3 million for the nine months ended September 30, 1998.
BGF's net operating cash was primarily a result of net income of $12.1 million,
depreciation of $5.6 million and decreases in accounts receivable of $7.2
million. Net cash provided by operating activities was $19.9 million for the
year ended December 31, 1997 and was primarily the result of net income of
$21.7 million and depreciation of $6.6 million, offset by increases in working
capital. Net cash provided by operating activities was $22.8 million for the
year ended December 31, 1996, and was primarily the result of net income of
$24.0 million and depreciation of $6.0 million, offset by increases in working
capital. Net cash provided by operating activities was $17.6 million for the
year ended December 31, 1995 and was primarily due to net income of $12.6
million and depreciation of $8.1 million, offset by increases in working
capital.
Net Cash Used in Investing Activities. Net cash used in investing activities
was $9.0 million for the nine months ended September 30, 1998, and was the
result of purchases of property, plant and equipment. Net cash used in
investing activities was $7.3 million for the year ended December 31, 1997, and
was the result of purchases of property, plant and equipment. Net cash used in
investing activities was $25.4 million for the year ended December 31, 1996,
and was primarily the result of purchases of property, plant, and equipment of
$22.0 million, of which $13.9 million was related to the construction of phase
one of BGF's lightweight fabrics facility in South Hill, Virginia. Net cash
used in investing activities in 1996 was also impacted by the payment by BGF of
approximately $3.5 million in connection with a U.S. federal income tax
settlement relating to the purchase of BGF in 1988. Net cash used in investing
activities was $8.3 million for the year ended December 31, 1995, and was
primarily the result of purchases of property, plant and equipment for a new
corporate headquarters building and related land.
Net Cash Used in Financing Activities. Net cash used in financing activities
was $13.3 million for the nine months ended September 30, 1998, resulting
primarily from a loan to BGF's parent, Glass Holdings, of $135.3 million,
payments on long-term debt and other debt of $20.0 million and $4.5 million of
debt issuance
28
<PAGE>
costs offset by borrowings under the senior credit facility and senior
subordinated credit facility of $152.0 million. Net cash used in financing
activities was $12.8 million for the year ended December 31, 1997, and was
primarily a result of net payments on debt of $11.3 million, as well as a
distribution to Glass Holdings of $4.9 million. This was offset by an increase
in the book overdraft of $3.5 million. Net cash provided by financing
activities was $2.8 million for the year ended December 31, 1996, which was
primarily due to the net borrowings on the working capital line of credit of
$27.5 million offset by payments on long-term debt of $8.8 million and a
distribution to Glass Holdings of $15.2 million. Net cash used in financing
activities was $16.7 million for the year ended December 31, 1995 and was
primarily due to payments of long term debt of $17.5 million.
Certain Indebtedness and Other Matters. At September 30, 1998, BGF had
outstanding $152.0 million of long-term debt, consisting of $87.0 million under
its senior credit facility and $65.0 million under its senior subordinated
credit facility. The credit agreements governing these facilities require BGF
to maintain certain minimum net worth, debt to equity, cash flow and current
ratio requirements.
BGF does not believe its current exposure to changes in interest rates under
its senior credit facility will have a material adverse effect on its business,
financial condition or results of operations. BGF has entered into interest
rate swap agreements to hedge its exposure to changes in interest rates under
the term loan (as described herein) such that its exposure under the term loan
will not have a material adverse effect on its business, financial condition or
results of operations.
On September 30, 1998, BGF entered into a credit agreement with certain
lenders and First Union National Bank, as Agent, pursuant to which such lenders
have provided BGF with a senior secured credit facility in an aggregate amount
of up to $125.0 million. This senior credit facility consists of: (1) a five-
year revolving credit facility in an aggregate principal amount of up to $75.0
million and (2) a six-year amortizing term loan in an aggregate principal
amount of $50.0 million. The revolver includes (a) a swingline loan facility
with a $5.0 million sublimit and (b) a letter of credit facility with a $20.0
million sublimit. The term loan is payable in twenty consecutive fiscal
quarterly installments commencing on December 31, 1999 and ending on September
30, 2004. Installments one through four are each $1.0 million; five through
eight are each $1.75 million; nine through twelve are each $2.5 million;
thirteen through sixteen are each $3.25 million; and seventeen through twenty
are each $4.0 million. As of September 30, 1998, BGF had outstanding borrowings
under the revolver of $37.0 million and had fully drawn down the term loan. See
"Description of Other Indebtedness."
BGF also entered into a senior subordinated credit facility on September 30,
1998 which provides for a loan in the aggregate principal amount of $65.0
million. The senior subordinated credit facility, which was drawn down in full
on September 30, 1998 in connection with the affiliated transaction, was repaid
with the proceeds of the offering of the old notes. See "Description of Other
Indebtedness."
On September 30, 1998, AGY Holdings purchased a 51% ownership interest in
Advanced Glassfiber for aggregate consideration of approximately $338.9 million
(including post-closing adjustments). In connection with the acquisition, BGF
loaned Glass Holdings approximately $138.6 million to provide Glass Holdings a
portion of the capital necessary to fund the acquisition. BGF raised the
proceeds for this loan by borrowing (1) $88.4 million under the Senior credit
facility, and (2) $65.0 million under the senior subordinated credit facility.
The loan from BGF to Glass Holdings is evidenced in part by promissory notes
that bear interest at the Cost of Funds Rate for BGF for the calendar year
immediately preceding the date on which any interest is due. With respect to
any period of determination, the "Cost of Funds Rate" means a rate per annum
equal to the blended interest rate (as reasonably calculated by BGF) applicable
to borrowings of BGF during such period in respect of indebtedness incurred by
BGF to fund the loan to Glass Holdings. Accrued interest is due and payable on
the first business day of February of each year commencing on February 1, 1999
and on any date on which any principal is due. The promissory notes are payable
on October 31, 2008 or such later date as may be agreed to by BGF and Glass
Holdings. Payments made pursuant to the promissory notes are expected to be
offset by other distributions from BGF to Glass Holdings and therefore, the
promissory notes should not be
29
<PAGE>
considered a source of liquidity. See "Prospectus Summary--The Affiliated
Transaction," "Use of Proceeds," "Capitalization" and "Certain Relationships
and Related Party Transactions."
In connection with its purchase of a 51% ownership interest in Advanced
Glassfiber, AGY Holdings intends to make a partnership election to step up the
basis of certain of its intangible assets. The resulting increase in
amortization expense will allow the consolidated U.S. tax group of Porcher
Industries (which includes BGF, hereinafter "Porcher U.S.") to significantly
reduce its tax liability, and as a result, Porcher U.S. has agreed to defer the
receipt of annual distributions which AGY Holdings was otherwise required to
make in order to fund those taxes, to the extent that such taxes relate to
income earned by AGY Holdings (the "Deferred Distributions"). The amortization
deductions may be challenged by the Internal Revenue Service; however, BGF
believes the amortization deductions are valid and that AGY Holdings is likely
ultimately to prevail in any challenge. If, however, the amortization
deductions are disallowed, AGY Holdings will be required to distribute all
accumulated annual Deferred Distributions to the extent that both before and
after such distribution there is not a default under its senior credit facility
or its senior subordinated notes. Moreover, all Deferred Distributions would
cease, and AGY Holdings would have to pay in full all future distributions for
taxes to Porcher U.S. Based on the purchase price paid by AGY Holdings for its
purchase of a 51% ownership interest in Advanced Glassfiber, and a 15 year
amortization period, the maximum annual Deferred Distribution will be $6.8
million. The actual amounts of Deferred Distributions may be less if Porcher
U.S.'s share of taxes due with respect to income earned by BGF is less than
$6.8 million.
BGF believes that Advanced Glassfiber will have sufficient funds available
under its senior credit facility and available cash to fund any potential tax
liability resulting from the disallowance of the amortization deductions.
However, since BGF is a member of the same consolidated group as AGY Holdings
for U.S. federal income tax purposes, BGF may be liable for any unpaid amounts
in the event Advanced Glassfiber has insufficient funds to make distributions
to AGY Holdings to pay its tax liability in full or if all accumulated annual
Deferred Distributions are less than the tax liability. Based on the current
level of operations, management of BGF believes that cash flow from operations
and borrowings under the senior credit facility will be adequate to fund any
tax liability imposed upon BGF as a result of the IRS disallowing the
amortization deductions. However, there can be no assurance that BGF will
generate sufficient cash from operations or that future borrowings will be
available under the senior credit facility to pay any tax liability resulting
from the disallowance of the amortization deductions.
Capital Expenditures. BGF has historically financed capital expenditures
through cash flow from operations and borrowings under BGF's credit facilities.
Capital expenditures were $9.0 million for the nine months ended September 30,
1998 and $8.3 million, $22.0 million and $7.3 million for the years ended
December 31, 1995, 1996, and 1997, respectively. The principal capital
expenditures during this period included (1) $3.8 million in 1995, and $0.4
million in 1996, for construction of BGF's corporate headquarters in
Greensboro, North Carolina, (2) a total of $16.2 million in 1996 and 1997 for
the construction of the first phase of BGF's lightweight fabrics facility in
South Hill, Virginia and the acquisition of new weaving looms and finishing
equipment, and (3) a total of $3.7 million in 1997 and through September 30,
1998 for the construction of the yarns manufacturing facility at the
lightweight fabrics facility. BGF is anticipating total capital expenditures in
1998 and 1999 to be approximately $12.8 million and $15.1 million,
respectively.
BGF's ability to make scheduled payments of principal of, or to pay the
interest or liquidated damages (as defined herein), if any, on, or to refinance
its indebtedness (including the notes), or to fund planned capital expenditures
will depend on its future performance, which, to a certain extent, is subject
to general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. Based upon the current level of
operations, management believes that cash flow from operations and available
cash, together with availability under the senior credit facility, will be
adequate to meet BGF's future liquidity needs for at least the next two years.
However, there can be no assurance that BGF will generate sufficient cash flow
from operations or that future borrowings will be available under the senior
credit facility in an amount sufficient to enable BGF to service its
indebtedness, including the notes, or to fund its other liquidity needs. In
addition, BGF may need to refinance all or a portion of the principal of the
notes on or prior to maturity. There can be
30
<PAGE>
no assurance that BGF will be able to effect any such refinancing on
commercially reasonable terms or at all. See "Risk Factors--Our Indebtedness
Results in Significant Debt Service Obligations and Limitations," "Risk
Factors--Our Indebtedness May Prevent Us from Engaging in Certain Beneficial
Activities," "Description of Other Indebtedness" and "Description of Exchange
Notes."
Impact of Inflation
BGF generally attempts to pass cost increases on to its customers. Costs are
affected by, among other things, inflation, and the effects of inflation may be
experienced by BGF in future periods. BGF believes, however, that inflation has
not had a material impact on BGF during the past three years.
Impact of New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information." SFAS No. 131 requires
public business enterprises to adopt its provisions for fiscal years beginning
after December 31, 1997, and to report certain information about operating
segments in complete sets of financial statements of the enterprise issued to
shareholders. Segment disclosures will also be required in interim financial
statements beginning in the second year of application. BGF is evaluating the
provisions of SFAS No. 131, but has not determined if additional disclosure
will be required.
SFAS No. 132 "Employers' Disclosure about Pensions and Other Postretirement
Benefits," will become effective in 1998. This Statement standardizes the
disclosure requirements for pensions and postretirement benefits and will
require changes in disclosures of benefit obligations and fair values of plan
assets. Comparative disclosures which include prior period information will be
restated to conform with the provisions of SFAS No. 132. BGF will adopt the
provisions of SFAS No. 132 effective December 31, 1998.
On June 15, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999. SFAS 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether
a derivative is designated as part of a hedge transaction and, if it is, the
type of hedge transaction. BGF anticipates that, due to its limited use of
derivative instruments, the adoption of SFAS 133 will not have a significant
effect on BGF's results of operations or its financial position.
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities"'
defines such costs and requires that they be expensed as incurred. This
pronouncement is effective for financial statements for fiscal years beginning
after December 15, 1998 although earlier adoption is encouraged. BGF will adopt
this pronouncement effective January 1, 1999 and does not believe that it will
materially affect reported results of operations or financial condition upon
adoption.
Seasonality
BGF's business is not materially subject to seasonality.
Year 2000
Many computer programs use only two digits to identify a year in a date
field within the program (e.g., "98" or "02") often meaning that the program
will fail to distinguish dates in the "2000s" from dates in the "1900s." If not
corrected, computer applications making calculations and comparisons in
different centuries may cause inaccurate results, or fail by or at the Year
2000. These Year 2000 related issues are of particular importance to BGF. BGF
depends upon its information technology ("IT") and non-IT systems (collectively
the "Internal Systems") to conduct and manage BGF's business. Year 2000 related
issues may also adversely affect the operations and financial performance of
one or more of BGF's material vendors or customers.
31
<PAGE>
BGF recognizes the significance of the Year 2000 problem and since late
1997, has been working to achieve Year 2000 readiness. BGF's work on Year 2000
issues is being directed by its Information Systems department (the "IS
Department") with frequent interaction with senior management. The IS
Department is responsible for (1) identifying systems and applications that may
be affected by Year 2000 issues (the "Identification Phase"), (2) evaluating
and/or developing alternatives for affected systems (modification, replacement
or discontinuance) (the "Evaluation Phase"), and (3) converting, testing and
implementing systems to ensure that the systems and applications are Year 2000
compliant (the "Conversion, Testing and Implementation Phase"). The IS
Department is also responsible for evaluating the Year 2000 readiness of BGF's
primary vendors and customers and developing contingency plans in the event BGF
or its primary vendors or customers are not Year 2000 ready on a timely basis.
BGF's goal is to have its Internal Systems Year 2000 compliant by the end of
the second quarter of 1999, with the vast majority of such systems compliant no
later than the end of April 1999. At the present time, BGF expects to achieve
this goal.
IT Systems. BGF's IT systems include those that run administrative functions
such as accounting, e-mail and telephone systems, as well as those systems
(including embedded technology in personal computers) used in the day to day
management of business functions such as production scheduling and
manufacturing order handling. BGF has completed the Identification Phase and
Evaluation Phase and is currently about 25% complete with the Conversion,
Testing and Implementation Phase for its IT systems. BGF expects to complete
conversion, testing and implementation work on its IT Systems no later than the
end of the second quarter of 1999.
Non-IT Systems. BGF's non-IT systems include technology embedded in
manufacturing equipment. BGF has completed approximately 50% of the
Identification Phase and Evaluation Phase and has begun the Conversion, Testing
and Implementation Phase in connection with its non-IT systems. BGF expects to
complete the Identification Phase and Evaluation Phase by the end of the first
quarter of 1999 and the Conversion, Testing and Implementation Phase no later
than the end of the second quarter of 1999.
Third Parties. The third parties on which BGF relies most heavily are its
suppliers of raw materials, energy, equipment and services, as well as its
customers. Although BGF purchases its resources from several vendors and sells
its products to a number of customers for a wide variety of applications, the
failure of a significant number of these vendors or customers to be Year 2000
ready could prevent or substantially impair BGF's ability to transact business
with them as usual and BGF would be required to find alternative supplies of
these resources or customers for its products. The inability to find, or a
delay in finding, such alternatives could have a material adverse effect on
BGF's business, results of operations and financial condition.
BGF has identified its key vendors of raw materials, energy, equipment and
services, has contacted each of these suppliers regarding their plans for
dealing with Year 2000 issues and has received responses from substantially all
of them. BGF is in the process of following up with suppliers who have not yet
responded. Of the responses received to date, BGF has not identified any
material issues regarding the Year 2000 readiness of its major vendors.
However, there can be no assurance that BGF's vendors will be Year 2000 ready.
The failure of any material vendor of BGF to be Year 2000 ready could have an
adverse material effect on BGF's business and results of operations. Beginning
in the first quarter of 1999, BGF is also planning to survey its major
customers as to their preparations for the Year 2000 and any anticipated
changes in their purchases from BGF related to this issue.
Costs. BGF is currently using mainly internal resources to address its Year
2000 issues. Costs associated with BGF's Year 2000 efforts are being expensed
as incurred through BGF's normal budget with no additional funding allocated to
BGF's IS Department. BGF currently estimates that the total overall costs
related to its Year 2000 efforts will be approximately $440,000. Expenses
incurred through December 15, 1998 were approximately $126,000. Although BGF's
current cost estimates are not material to its results of operations, liquidity
or capital resources, if BGF determines that significant additional remedial
efforts are required
32
<PAGE>
following the completion of the Identification and Evaluation Phases to make
its Internal Systems Year 2000 compliant, then its actual costs could be
significantly higher than currently estimated.
Contingency Plans. If certain of its Internal Systems or material vendors or
customers are not Year 2000 ready on a timely basis, BGF will need alternative
means to ensure the continuation of normal business operations. BGF is in the
process of developing and evaluating contingency plans relating to both its
Internal Systems and external relationships and expects to have such plans in
place no later than the end of the second quarter of 1999.
Risks Presented by the Year 2000. Currently, BGF is not aware of any Year
2000 issues that would materially affect its business or financial condition.
However, there can be no assurance that its Internal Systems will be Year 2000
compliant on schedule, that Year 2000 related costs will not become material or
that BGF's contingency plans, when finalized, will be adequate. Furthermore,
BGF is currently unable to anticipate the magnitude of the effect on BGF of the
failure of any of its material vendors and customers to be Year 2000 ready. If
any such risks (either with respect to BGF's Internal Systems or its vendors or
customers) materialize, they could have a material adverse effect on BGF's
business, financial condition and results of operations.
The disclosures contained herein concerning Year 2000 are designated as
"Year 2000 Readiness Disclosures" and are made pursuant to the Year 2000
Information and Readiness Disclosure Act. The estimates and conclusions related
to BGF's Year 2000 efforts contain forward looking statements and are based on
management's best estimates of future events. Risks to achieving Year 2000
compliance include the availability of resources, BGF's ability to discover and
correct potential Year 2000 sensitive problems which could have a serious
impact on specific systems, equipment or facilities, and the ability of BGF's
material vendors and customers to make their systems Year 2000 compliant. See
"Risk Factors--We May Be Affected by "Year 2000' Issues."
33
<PAGE>
BUSINESS
General
BGF is the second largest manufacturer of glass fiber fabrics and a leading
producer of other high performance fabrics in North America. BGF's fabrics are
a critical component in the production of a variety of electronic, filtration,
composite, insulation, construction and commercial products. BGF's glass fiber
fabrics are used in printed circuit boards, which are integral to virtually all
advanced electronic products, including computers and cellular telephones.
BGF's fabrics are also used to strengthen, insulate and enhance the dimensional
stability of hundreds of products in a variety of other end-markets, such as
aerospace, transportation, construction, power generation and oil refining.
BGF's focus is on producing value-added specialty woven and non-woven fabrics
made from glass, carbon and aramid yarns.
BGF began its glass fiber product development efforts in cooperation with
Owens Corning in 1938. As a result of their combined research and development
efforts, glass fiber fabrics were available to the market by 1941. In 1947, BGF
began to manufacture and sell glass fiber fabrics independently of Owens
Corning. In 1951, BGF merged with Horace Linton & Brothers, a narrow tape
manufacturer that had teamed with Owens Corning to develop and market glass
fiber electrical insulation tapes. In 1956, BGF was acquired by Burlington and
remained a division of Burlington until it was sold in 1988 to Porcher
Industries.
BGF is a Delaware corporation. Its headquarters are located at 3802 Robert
Porcher Way, Greensboro, North Carolina 27410, and its telephone number is
(336) 545-0011.
Industry Overview
Glass fiber fabrics are a critical component in the production of numerous
products in the electronics industry, including primarily printed circuit
boards, as well as products in a variety of other end-markets, such as
aerospace, transportation, construction, power generation and oil refining. In
general, the industry BGF competes in is characterized by a limited number of
domestic producers, barriers to entry consisting primarily of a limited supply
of raw materials, diversified end-user markets, and a lack of product
substitutes.
Limited Number of Domestic Producers. BGF is one of a limited number of
major domestic manufacturers of glass fiber fabrics. BGF and its primary
competitor, Hexcel/Clark-Schwebel, account for approximately 90% of domestic
capacity, which is estimated to be 400 million yards. Domestic market share, as
estimated by BGF, is detailed in the following chart:
<TABLE>
<CAPTION>
Glass Fabric Domestic Market Share
----------------------------------
<S> <C>
Hexcel/Clark-Schwebel..................... 50%
BGF....................................... 40%
JPS Converter and Industrial.............. (less than) 10%
</TABLE>
The major competitors in the global glass fabric weaving industry are
BGF/Porcher Industries, Hexcel/Clark-Schwebel, Nitto Boseki (Japan), Nan Ya
Plastics (Taiwan) and Taiwan Glass (Taiwan). Although currently direct imports
of glass fiber fabrics into the U.S. have been limited, increasing imports of
laminates and rigid printed circuit boards from Asia have been impacting demand
for domestically produced heavyweight glass fiber fabrics used in rigid printed
circuit boards.
Barriers to Entry. There are a limited number of major global suppliers of
glass and carbon yarns to fabric producers such as BGF, and BGF has experienced
supply shortages from time to time. Accordingly, BGF believes that it would be
difficult for new competitors to ensure a constant and adequate supply of glass
and carbon yarns. Additionally, the process of producing high quality glass
fiber and other high performance fabrics requires extensive technological
expertise and research and development capability, both of which require
substantial know-how and capital compared to many less complex businesses.
34
<PAGE>
Diversified End-User Markets. The unique characteristics of BGF's fabrics
make them critical components in a variety of products manufactured for sale in
the electronics, composites, filtration, commercial, insulation and
construction markets. Within each of these markets, BGF's fabrics have a
variety of end-use applications, including printed circuit boards,
telecommunications equipment, filtration bags, heat shields, welding curtains,
aircraft laminates, helicopter blades, reinforced concrete, roofing materials,
wall coverings, filtration equipment and sporting goods.
Lack of Product Substitutes. For many applications of BGF's products, there
are a limited number of economical product substitutes, if any. For example,
substantially all printed circuit boards for high-end electronics applications
use glass fiber fabrics. The unique properties of glass fiber also make it a
critical component in high temperature filtration and insulation products. In
many composite products, only glass, carbon and aramid fibers can meet the
requisite strength-to-weight ratios.
Glass fiber fabrics are the reinforcement for the vast majority of high-end
electronic products. Demand for electronics products has experienced
substantial growth in recent years and is expected to continue to grow due to
expanded applications, technological advancements and new computer products and
systems introductions. BGF believes this growth is primarily attributable to
the development of more complex and sophisticated electronic products,
including cellular telephones, pagers, personal computers and portable
computing devices, as well as the increasing electronic content of products in
which such use has been historically absent or limited, such as automobiles,
home appliances and medical equipment.
The following chart illustrates the role of glass fiber fabric producers in
the U.S. electronics industry supply chain based on estimated 1997 sales:
[In the document to be delivered to investors, a reverse pyramid appears here
that
contains the following information from top to bottom:]
Electronics $382 Billion
Printed Circuit Boards $ 8 Billion
High Pressure Laminates $1.4 Billion
Glass Fiber Fabrics $305 Million
Glass Fiber Yarn $150 Million
Sources: PCI Quarterly Forecast--December 1997 and Company estimates
Glass fiber fabrics offer an excellent combination of properties from high
strength to fire resistance. Wide ranges of yarn sizes and weave patterns
provide broad design potential, enabling customers to choose the best
combination of material performance, economics and product flexibility. Carbon
fiber fabrics possess many of the same characteristics of glass fiber fabrics
and provide higher strength, higher modulus and lighter weight in the products
in which they are incorporated. Aramid fiber fabrics also share many of the
same characteristics as glass fiber fabrics and are lighter in weight and
provide greater impact resistance in the products in which they are
incorporated.
35
<PAGE>
Company Strengths
BGF attributes its strong historical results and its positive outlook for
growth and profitability to the following factors:
Leading Market Position. BGF has been a technological leader in producing
glass fiber fabrics since it pioneered the industry with Owens Corning in the
1930s. BGF was the first to produce glass fiber fabrics, the first glass fiber
fabric weaver to become ISO 9002 certified and the first to bring a variety of
innovative products and manufacturing techniques to the market. BGF continues
to capitalize on its strong position as the second largest North American
manufacturer of glass fiber fabrics with an estimated 40% of domestic capacity.
Attractive Industry Fundamentals. The glass fiber fabrics industry is
characterized by a limited number of domestic manufacturers; barriers to entry
consisting primarily of a limited supply of raw materials; diverse end-user
markets; and a limited number of product substitutes. In addition, the
electronics industry, which accounted for approximately half of BGF's net sales
and EBITDA for the twelve months ended September 30, 1998, has experienced
substantial growth in recent years and is expected to continue to grow due to
expanded applications, technological advancements, and new computer products
and systems introductions. Industry research published in 1998 forecasts that
the United States printed circuit board market will grow from $8.4 billion in
1997 to $11.1 billion in 2002, representing a 5.7% compound annual growth rate.
State-of-the-Art Facilities. To maintain BGF's position as a technological
leader in producing glass fiber fabrics for the electronics industry, BGF
commenced operations at its 128,000 square foot facility in South Hill,
Virginia in 1996. This facility is dedicated to the production of lightweight
glass fiber fabrics for the electronics industry. Advanced Glassfiber leases
segregated space at the South Hill facility to manufacture glass yarns
exclusively for BGF's production of lightweight glass fiber fabrics. BGF also
built a state-of-the-art research and development laboratory as part of its new
corporate headquarters in 1995 to focus on the development of new products.
Strong Cash Flow Generator in a Leveraged Environment. BGF's strong cash
flow characteristics and experienced management team have enabled it to
successfully operate as a leveraged company. In 1988, Porcher Industries
acquired BGF from Burlington in a leveraged buyout. Immediately following the
buyout, BGF's total debt was $88.0 million. Between 1988 and September 30,
1998, BGF reduced its debt by $75.0 million, while making significant
investments in the business, including a new corporate headquarters and
research and development facility and the first phase of the South Hill,
Virginia lightweight fabric facility.
Long-Term Customer Relationships. Due to the high quality of its products,
its ability to meet the unique quality specifications required by its
customers, the emphasis it places on customer service, and a limited number of
domestic producers, BGF has been able to maintain long-term relationships with
many of its customers. Each of BGF's top ten customers for the twelve months
ended September 30, 1998 has been a customer since 1989.
Unique Physical Properties of Glass Fiber Fabrics. Glass fiber fabrics
possess several desirable characteristics including dimensional stability; heat
resistance; moisture resistance; chemical resistance; electrical resistance;
thermal conductivity; and when combined with other composite materials, a high
strength-to-weight ratio. These unique characteristics make glass fiber fabrics
the material of choice for a variety of end-use applications, including printed
circuit boards, telecommunications equipment, structural aircraft parts and
interiors, window coverings, automotive part reinforcement, muffler insulation,
filtration bags and sporting goods.
Business Strategy
BGF's goal is to be the preferred supplier to markets that require a
technically complex application of fabrics made of glass, carbon and aramid
yarns. To achieve this goal, BGF intends to pursue the following key
strategies:
36
<PAGE>
Continue to Focus on Lightweight Fabrics for the Multi-Layer Printed Circuit
Board Market. BGF seeks to continue to expand its sales of lightweight glass
fiber fabrics to meet the growing demand for multi-layer printed circuit
boards. BGF's investment in the South Hill, Virginia lightweight fabrics
facility is an important part of this strategy. In addition, BGF has leased a
portion of this facility to Advanced Glassfiber to manufacture glass yarns
exclusively for BGF's production of lightweight glass fiber fabrics. Management
believes that this arrangement strengthens the compatibility between BGF's
weaving process and the glass yarns used in such process, thereby enabling BGF
to produce the highest quality lightweight glass fiber fabrics. Management also
believes that the quality of the products manufactured at the South Hill
facility will enable BGF to enhance and expand its relationships with customers
in the multi-layer printed circuit board market. BGF has increased its net
sales of lightweight glass fiber fabrics by 95.8%, from $30.6 million in 1993
to $59.9 million for the twelve months ended September 30, 1998.
Capitalize on the Growth in the Filtration and Composites
Markets. Management believes substantial opportunities exist to increase BGF's
sales and market share in both the filtration and composites markets, which
together accounted for approximately 35.3% of BGF's net sales for the twelve
months ended September 30, 1998.
BGF intends to leverage its already strong position in the high temperature
filtration market by developing new woven and non-woven high performance
fabrics for environmental applications in power generation, steel mills and
other industries that are subject to strict environmental regulations. In
addition, management believes that there may be increased opportunities
internationally in this market as lesser developed countries adopt stricter
environmental regulations.
Management also believes BGF has substantial opportunities to increase sales
in the composites market for applications in the transportation industry. In
the composites market, BGF is pursuing strategic relationships with key
suppliers to the aerospace and automobile industries for the design and
manufacture of new products. BGF has increased net sales in the filtration and
composites markets by 95.5%, from $37.6 million in 1993 to $73.5 million for
the twelve months ended September 30, 1998.
Developing New Applications for Fabrics. BGF plans to continue to leverage
the technical expertise and experience of its research and development and
sales and marketing staff to develop new applications for existing fabrics and
to develop new fabrics that meet customer requirements for strength, weight,
fire resistance and durability. Management believes that many opportunities
exist to continue to develop both woven and non-woven fabrics to replace
traditional materials in markets which have historically not utilized fabrics
such as those produced by BGF. For example, BGF has begun selling certain of
its fabrics for use in the reinforcement of metal automobile body parts.
Products and Markets
BGF sells its products primarily in North America and focuses on the
following markets:
Electronics. BGF produces glass fiber fabrics for multi-layer and rigid
printed circuit boards for use in the electronics industry. The demand for
multi-layer printed circuit boards, which primarily use lightweight glass fiber
fabrics, has been increasing. Furthermore, the demand for BGF's heavyweight
fabrics has decreased due to competitive pressures from Asian laminate
producers. As a result of the increasing demand for multi-layer printed circuit
boards, which primarily use lightweight glass fiber fabrics, BGF has shifted
its electronics glass fiber fabrics manufacturing capacity mix in recent years
from heavyweight fabrics, which are typically used in rigid printed circuit
boards, toward more technologically advanced and higher margin lightweight
fabrics. Sales of glass fiber fabrics to the electronics industry were $107.8
million for the twelve months ended September 30, 1998, representing 51.8% of
BGF's net sales.
Composites. BGF's glass, carbon and aramid fiber fabrics are used in various
composite materials, which are used in various applications, including
structural aircraft parts and interiors, helicopter rotor blades, tooling,
37
<PAGE>
brake linings and ducting. Sales of fabrics for composites were $51.2 million
for the twelve months ended September 30, 1998, representing 24.6% of BGF's net
sales.
Filtration. BGF produces fabrics for high temperature dust filtration used
by industrial customers to control emissions into the environment. BGF's
filtration bags are sold to utilities, producers of asphalt and carbon black,
cement plants and steel mills. Sales of BGF's filtration fabrics were $22.3
million for the twelve months ended September 30, 1998, representing 10.7% of
BGF's net sales.
Commercial. BGF's glass fiber fabrics are used in commercial applications
where fire resistance and dimensional stability are critical. Applications for
these products include ceiling tile and acoustical facing fabrics, window
coverings and movie screens. Sales of BGF's commercial fabrics were $10.1
million for the twelve months ended September 30, 1998, representing 4.9% of
BGF's net sales.
Insulation. BGF produces materials for high-temperature, fire-resistant
insulation. Applications for these products include insulation for joints,
pipes, valves, transportation exhaust systems, heat shields and home
appliances. Sales of BGF's insulation fabrics were $8.6 million for the twelve
months ended September 30, 1998, representing 4.1% of BGF's net sales.
Construction. The fire resistant qualities of glass fiber fabrics make them
a critical component of products used in the construction industry.
Applications for these products include smoke and fire barrier curtains,
drywall bonding tape, rubber mat backing and fabric structures, such as
commercial tents and roofs. Sales of BGF's construction fabrics were $8.1
million for the twelve months ended September 30, 1998, representing 3.9% of
BGF's net sales.
Sales and Marketing
BGF sells its products through a direct sales force of eight sales
representatives, four market managers and two telemarketing representatives.
All of the sales representatives and three of the four market managers have
been with BGF for more than ten years. BGF's sales representatives have
geographic territories, while the market managers are responsible for specific
product lines. The sales representatives are compensated on a salary and
commission basis and the market managers are compensated on a salary and bonus
basis. Each sales representative has a technical orientation and the necessary
expertise to sell BGF's full line of products. BGF maintains an internet web
site, located at www.bgf.com, which contains extensive product information.
BGF sells its products to over 400 customers, including many leading
companies in their respective industry segments such as Cytec Fiberite,
Polyclad Laminates, Isola USA and General Electric. BGF continually seeks to
strengthen and expand its relationship with its customers. Due to the stringent
quality, delivery and performance standards demanded by many of BGF's customers
and end-users, customers are increasingly moving toward single source supply
and collaborative agreements among both fabric producers, such as BGF, and end-
users. BGF believes that it is well positioned to benefit from this trend
because of its strong competitive position within the industry, its investment
in technical and manufacturing expertise and its long-term relationships with
customers and suppliers. During the twelve month period ended September 30,
1998, two customers of BGF, Cytec Fiberite and Polyclad Laminates, each
accounted for more than 10% of BGF's net sales and BGF's top ten customers
accounted for 55.2% of BGF's total sales.
Manufacturing Facilities and Processes
BGF owns and operates four manufacturing facilities and a research and
development facility, together occupying over 786,000 square feet. By
exchanging manufacturing technology and expertise with its international
affiliates within Porcher Industries, BGF is able to develop innovative,
efficient and flexible manufacturing processes. BGF was the first weaver of
glass fiber in the United States to be ISO 9002 certified, which evidences
BGF's strong focus on high-quality manufacturing processes. The following table
sets forth the general location, principal uses and approximate size of BGF's
properties and whether such properties are leased or owned.
38
<PAGE>
<TABLE>
<CAPTION>
Approximate Leased
Area In Or
Facility Use Square Feet Owned
- -------- --- ----------- ------
<S> <C> <C> <C>
Greensboro, North Headquarters; Research and Development Facility 36,000 Owned
Carolina
Altavista, Virginia Weaving glass fiber and aramid fibers 399,000 Owned
South Hill, Virginia
Heavyweight Fiber Weaving heavyweight glass fibers 147,000 Owned
Fabrics Facility
Lightweight Fiber Weaving lightweight glass fibers 128,000 Owned
Fabrics Facility
Cheraw, South Carolina Weaving carbon fibers 76,000 Owned
Altavista, Virginia Warehouse 101,000 Leased
Altavista, Virginia Warehouse 24,000 Leased
Los Angeles, California Warehouse 20,000 Leased
South Hill, Virginia Warehouse 18,000 Leased
</TABLE>
South Hill, Virginia--Lightweight Fabrics Facility. This facility is
dedicated to producing lightweight glass fiber fabrics for the multi-layer
printed circuit board market. Lightweight glass fiber fabrics are manufactured
through a multi-step process applied to glass yarns which consist of glass
filaments gathered together in twine-like strands. BGF first purchases glass
yarns and then adds a protective coating to protect the yarns during the
weaving process. The yarns are then woven into various patterns and
constructions generally established by industry standards. The woven fabric is
then sent through a heat cleaning process where organic materials are burned
away. After the cleaning process is completed, the fabric may be treated with a
finishing process at BGF's Altavista, Virginia facility if required by the
particular application or end-use of the fabric. The specific finishing agent
that is used depends upon the chemistry and processes of the customer's
products. BGF has developed several proprietary finishing agents that BGF
believes allows its fabrics to interact more effectively with certain of its
customers' processes than its competitors' finishes.
The first phase of the lightweight fabrics facility has been operating for
approximately two years. BGF expects the second phase of the facility, which
will provide finishing capability and additional weaving capacity for
lightweight fabrics, to be completed in 2000. BGF expects the third phase of
the facility, which will provide distribution capabilities as well as
additional finishing capabilities, to be completed by the end of 2002.
Currently, Advanced Glassfiber leases approximately 27,200 square feet of
segregated space at the lightweight fiber fabric facility for the purpose of
manufacturing glass yarns for exclusive supply to BGF under a supply contract,
extendible at the option of Advanced Glassfiber, that expires on December 31,
2008. BGF also provides Advanced Glassfiber with leased employees and
administrative and technical support services.
South Hill, Virginia--Heavyweight Fabrics Facility. This facility produces
heavyweight glass fiber fabrics used primarily for rigid printed circuit board
applications and utilizes some of the same manufacturing processes as BGF's
lightweight fabric facility. This facility also produces certain lightweight
glass fiber fabrics, which production can be increased if necessary.
Altavista, Virginia. This facility produces specialty woven and non-woven
glass fiber fabrics for high temperature filtration, scrim, glass mat and
general industrial fabrics. The Altavista facility is fitted with modern
twisting and texturing equipment to provide the flexibility necessary for
processing a variety of yarns to produce fabrics for multiple markets. For
woven products, the manufacturing process is similar to the process utilized at
BGF's South Hill, Virginia facilities, except that some of the yarns undergo a
preparation stage whereby BGF twists and plies the yarns prior to the weaving
process to produce the desired texture and thickness to meet specific customer
needs and product designs. After the weaving process is completed, the fabric
may be sold with or without a finishing process. BGF also manufactures a non-
woven fabric made of glass fiber, and others made of glass, aramid and other
synthetic fibers, at the Altavista facility. BGF also
39
<PAGE>
weaves Kevlar and Twaron aramid fibers at the Altavista facility. The Altavista
facility has the capability to finish all of the fabric types manufactured by
BGF and currently finishes all of BGF's products, including products
manufactured at its other facilities that are shipped by truck to the Altavista
facility.
Cheraw, South Carolina. This facility handles all stages of weaving carbon
yarns for the highly technical aerospace, transportation and composites
markets. To produce carbon fiber fabrics, BGF purchases carbon yarns and, upon
confirming that the yarns are of a sufficient quality to meet its customer
needs, weaves the yarns to the customer's specifications. Unlike glass and
aramid yarns, carbon yarns are conductors of electricity and therefore, are
isolated from BGF's other manufacturing facilities to ensure quality and safety
in the production process.
Research and Development
Throughout its history, BGF has demonstrated that it is one of the
industry's leading innovators, by becoming the first to weave glass fabrics;
develop a patented process for heat cleaning glass fabrics to improve the
physical properties of composites; weave single yarns by developing warp size;
develop unidirectional fabrics; and develop a product using "DE" size filaments
to improve composite strengths. BGF believes its innovations have enhanced
existing customer relationships and created new applications for BGF's fabrics.
BGF maintains a research and development staff of seven chemical and four
laboratory technicians who work under BGF's Director of Research and
Development. BGF has a modern, well-equipped research and development facility,
located at its headquarters in Greensboro, North Carolina, that divides its
efforts among developing new products and improving current products. The
research and development facility is divided into seven state-of-the-art
laboratories focusing on the following strategic areas of product development:
Applications Development, Physical Testing, Microscopy, Analytical Testing,
Pilot Processing, Composites Development and Filtration Technology.
Raw Materials
The principal materials used in the manufacture of BGF's products are glass,
aramid and carbon yarns. BGF purchases glass yarns from Advanced Glassfiber,
PPG Industries, Nitto Boseki and Vetrotex. Beginning in September 1998,
Advanced Glassfiber began to supply BGF with glass yarns produced at the South
Hill, Virginia lightweight fiber fabrics facility. See "Manufacturing
Facilities and Processes." The supply agreement for such yarns expires on
December 31, 2008, unless extended by Advanced Glassfiber. Glass Holdings,
BGF's parent corporation, through a wholly owned subsidiary, purchased a 51%
interest in Advanced Glassfiber from Owens Corning on September 30, 1998. See
"Prospectus Summary--The Affiliated Transaction." BGF's main suppliers of
carbon yarns are Amoco, Toho and Hexcel and its main suppliers of aramid yarns
are DuPont and Akzo Nobel.
Competition
BGF is the second largest domestic manufacturer of glass fiber fabrics and a
leading producer of other high performance fabrics. BGF's primary competitor is
Hexcel/Clark-Schwebel. Other competitors are smaller and generally compete in
niche markets. The major competitors in the global glass fabric weaving
industry are BGF/Porcher Industries, Hexcel/Clark-Schwebel, Nitto Boseki
(Japan), Nan Ya Plastics (Taiwan) and Taiwan Glass (Taiwan).
Beginning in the fourth quarter of 1997, BGF has experienced downward
pricing pressures on its heavyweight glass fiber fabrics due to foreign
exchange fluctuations between the dollar and various Asian currencies and over-
capacity in Asian heavyweight fabrics manufacturing, which has led to increased
Asian imports of laminates and printed circuit boards into the United States.
40
<PAGE>
Employees
As of September 30, 1998, BGF employed 1,142 full time and part time
employees, 213 of which are salaried employees and 929 of which are paid on an
hourly basis. All of BGF's employees are located in the United States. Of these
employees, 1,035 were engaged in manufacturing and manufacturing related
services, and 107 were engaged in sales, marketing and administrative
functions. None of BGF's employees is represented by a labor union. BGF
considers its relationship with its employees to be strong and since January
1994, has experienced an annual turnover rate of 5.9%.
Environmental and Safety and Health Matters
The past and present operations of BGF, including its ownership and
operation of real properties, are subject to extensive and changing federal,
state, local and foreign environmental laws and requirements including those
governing discharges to air and water, the handling and disposal of soils and
hazardous substances and wastes, and the remediation of contamination
associated with releases of hazardous substances at BGF's facilities and off-
site disposal locations. The operations of BGF are also governed by laws and
requirements relating to workplace safety and health. Management believes that
BGF is generally in material compliance with currently applicable environmental
laws and requirements.
BGF may incur costs or liabilities relating to environmental or safety and
health matters in the future, including those relating to compliance with laws
and requirements, remediation of contamination or claims by third parties.
BGF, like all weavers of glass, carbon and aramid fibers, is subject, in
certain jurisdictions, to laws and regulations designed to reduce solid wastes
by requiring, among other things, certain wastes to be degradable in landfills,
minimum levels of recycled content, various recycling requirements, disposal
fees and limits on the use of certain products. In addition, various consumer
and special interest groups have lobbied from time to time for the
implementation of additional environmental protection measures. BGF does not
believe that the legislation promulgated to date and currently pending
initiatives will have a material adverse effect on its business, financial
condition and results of operations. There can be no assurance that any future
legislation or regulatory efforts will not have a material adverse effect on
BGF's business, financial condition and results of operations.
Legal Proceedings
From time to time, BGF is involved in various legal proceedings arising in
the ordinary course of business. None of the legal matters in which BGF is
currently involved, either individually or in the aggregate, is expected to
have a material adverse effect on BGF's business, financial condition and
results of operations. See "Environmental and Safety and Health Matters."
Patents and Trademarks
BGF has several United States patents, patent applications and trademarks.
While BGF considers its patents to be valuable assets, BGF does not believe
that its competitive position is dependent on patent protection or that its
operations are dependent on any individual patent or group of related patents.
However, in some instances, patents and patent protection may serve as a
barrier to entry in certain product lines. BGF's policy is to obtain patents on
its new products and enforce its patent rights.
41
<PAGE>
MANAGEMENT
Directors, Executive Officers and Senior Managers of BGF
The following sets forth certain information with respect to members of the
Board of Directors, executive officers and other senior managers of BGF.
<TABLE>
<CAPTION>
Name Age Positions with BGF
- ---- --- ------------------
<S> <C> <C>
Robert T. Porcher....... 70 Chairman of the Board, Chief Executive Officer and Director
Philippe Porcher........ 45 Vice Chairman
Graham A. Pope.......... 65 Director
Richard L. Cromer....... 55 President
Philippe R. Dorier...... 42 Senior Vice President, Chief Financial Officer, Secretary and Treasurer
James R. Henderson...... 61 Executive Vice President Sales and Merchandising
Gerald F. Mitchell...... 51 Vice President Manufacturing
Robert A. Frank......... 56 Vice President Operations
Charles H. Alligood..... 59 Vice President Quality Assurance and Industrial Engineering
Lee-Pei H. Chou, Ph.D... 50 Vice President Research and Development
Edward P. Cardille...... 59 Vice President Information Systems
Thomas E. Mann, Jr...... 45 Vice President Human Resources
</TABLE>
Robert T. Porcher has been Chairman of the Board, Chief Executive Officer
and a Director of BGF since 1988. Mr. Porcher has maintained various positions
with Porcher Industries, including Chairman of the Board of Directors and Chief
Executive Officer of Porcher Industries, since 1952. Mr. Porcher, together with
certain members of his family, beneficially owns a controlling interest in
Porcher Industries, which owns 100% of the outstanding capital stock of BGF's
parent, Glass Holdings. Since December 9, 1998, Mr. Porcher has served as
Chairman of the Supervisory Board of Porcher Industries.
Philippe Porcher has been the Vice Chairman of BGF since April 1998. He has
also served as Vice President of Porcher Industries since March 1993. Before
becoming Vice President of Porcher Industries, Mr. Philippe Porcher served as
Director of Porcher Industries' industrial division. Mr. Philippe Porcher is
the son of Robert Porcher, who is Chairman of the Board, Chief Executive
Officer and a Director of BGF. Since December 9, 1998, Mr. Philippe Porcher has
served as Chairman of the Executive Board of Porcher Industries.
Graham A. Pope has been a Director of BGF since 1989. From 1989 until 1998,
Mr. Pope served as President and Chief Operating Officer of BGF. From 1959 to
1988, Mr. Pope served in various positions with Burlington, including Division
Manufacturing Manager of Burlington's Glass Division. Since December 9, 1998,
Mr. Pope has served as a member of the Supervisory Board of Porcher Industries.
Richard L. Cromer was named President of BGF in April 1998. Prior to joining
BGF, Mr. Cromer was employed by Owens Corning for 31 years in various
capacities, including as Director of Operations Strategy from 1997 to 1998,
General Manager-Textiles from 1994 to 1997 and Director of Operations Support
from 1989 to 1994. Since December 9, 1998, Mr. Cromer has served as a member of
the Executive Board of Porcher Industries.
Philippe R. Dorier has been Senior Vice President, Chief Financial Officer,
Secretary and Treasurer of BGF since 1993. From 1988 to 1993, he served as
BGF's Vice President International Audit. From 1984 until 1988, Mr. Dorier
served as the Vice President of Finance of Babolat VS, S.A., and from 1980
until 1983, as the Administration and Finance Manager of Syva-Biomerieux S.A.
Since December 9, 1998, Mr. Dorier has served as a member of the Executive
Board of Porcher Industries.
James R. Henderson has been Executive Vice President Sales and Merchandising
since joining BGF in 1989. Prior to joining BGF, Mr. Henderson was employed for
31 years with United Merchants and Manufacturers, Inc. ("United"), a company
engaged in the textile business. Mr. Henderson served as the
42
<PAGE>
Senior Vice President of United, President of their Uniglass Division, and as
Chairman of the Board of United's Marglass subsidiary in England.
Gerald F. Mitchell has been Vice President Manufacturing of BGF since 1991.
From 1970 until 1991, Mr. Mitchell was employed with Burlington in various
capacities, including as a Plant Manager of Burlington's Knit Division from
1989 to 1991 and as the Vice President, Manufacturing of Burlington's Lees
Carpet Division from 1986 to 1989.
Robert A. Frank has been Vice President Operations of BGF since 1988. From
1967 until 1988, Mr. Frank held various planning and marketing positions with
Burlington, including Marketing Manager of Burlington's Electronics
Applications Department, Operations Manager of Burlington's Glass Division and
Vice President of Operations.
Charles H. Alligood has been Vice President Quality Assurance and Industrial
Engineering of BGF since 1988. From 1964 until 1988, Mr. Alligood was employed
by Burlington and served in various positions including as Division Industrial
Engineer for Burlington's Glass Division from 1983 until 1988 and as Cost
Reduction Coordinator for Burlington's Industrial Division from 1981 to 1983.
Lee-Pei H. Chou, Ph.D. has been Vice President Research and Development of
BGF since 1997. From 1986 until 1996, Dr. Chou served as the Research and
Development Director/Manager of Elk Corporation. From 1984 until 1986, Dr. Chou
served as the Research and Development Leader of Trenco, Inc. a subsidiary of
BF Goodrich Co. From 1979 until 1984, Dr. Chou served as the Research and
Development Project Leader of Ferro Corporation and from 1976 until 1979, Dr.
Chou was a Senior Research Chemist within the Coatings & Resins Division of PPG
Industries, Inc.
Edward P. Cardille has been Vice President Information Systems of BGF since
1997. From 1991 until 1997, Mr. Cardille served as BGF's Director of
Information Systems. From 1968 until 1991, Mr. Cardille served in various
positions with Burlington, including as Manager of Systems and Programming for
Burlington's Carpet Division from 1983 until 1991.
Thomas E. Mann, Jr. was named Vice President Human Resources of BGF in
December 1998. Since 1997, he had served as BGF's Director of Human Resources.
From 1993 until 1997, Mr. Mann served as BGF's Corporate Planning Manager, and
from 1988 until 1993, as a Plant Personnel Manager of BGF.
43
<PAGE>
Executive Compensation
The following table shows, for the fiscal year ended December 31, 1998, the
compensation paid to or earned by BGF's Chief Executive Officer and its four
other most highly compensated executive officers who were serving at the end of
1998, as well as Mr. Graham Pope, who served as BGF's President and Chief
Operating Officer until April 1998 (the "Named Executive Officers").
<TABLE>
<CAPTION>
Other Annual
Name and Principal Position Salary(1) Bonus Compensation
- --------------------------- --------- ----- ------------
<S> <C> <C> <C>
Robert T. Porcher........................ $120,000(2) $200,000(5) $49,505(6)
Chairman of the Board, Chief
Executive Officer and Director
Philippe Porcher......................... $120,000(2) $120,000(5)
Vice Chairman
Graham A. Pope........................... $204,452(3) $150,000 $19,200(7)
Director; former President
and Chief Operating Officer
Richard L. Cromer........................ $155,331(4) $110,500
President
Philippe R. Dorier....................... $141,828(5) $ 90,000(5) $16,524(7)
Senior Vice President, Chief
Financial Officer, Secretary and
Treasurer
James R. Henderson....................... $146,058 $120,000 $16,940(7)
Executive Vice President Sales and
Marketing
</TABLE>
- --------
(1) Includes the following amounts deferred at the election of the following
Named Executive Officers pursuant to BGF's Profit Sharing and Tax Savings
Plan (the "401(k) Plan"): Mr. Pope--$10,000; Mr. Dorier--$7,738; and Mr.
Henderson--$10,000.
(2) Represents a "management fee" paid by BGF Services, Inc., an affiliate of
BGF, to Messrs. Robert and Philippe Porcher and reimbursed by BGF to cover
services provided by Messrs. Robert and Philippe Porcher to BGF. See
"Certain Relationships and Related Party Transactions."
(3) Mr. Pope remained an employee of BGF after retiring from the offices of
President and Chief Operating Officer.
(4) Based on an annualized gross salary of $207,108. Mr. Cromer has served as
President of BGF since April 1, 1998.
(5) Paid for by BGF Services and reimbursed by BGF to BGF Services in the form
of "management fees" to cover services rendered to BGF. See "Certain
Relationships and Related Party Transactions."
(6) Includes $3,086 for club membership fees; $932 for maintenance of
automobile; $25,824 depreciation associated with cost of residence; and
$19,663 associated with maintenance of residence.
(7) Represents gross annual profit sharing distributions. Named Executive
Officers contributed the following portions of such amounts to the 401(k)
Plan: Mr. Pope--$19,200; Mr. Dorier--$10,328; and Mr. Henderson--$16,940.
Retirement Plans
Retirement Plan. The Retirement System of BGF Industries, Inc. (the
"Retirement Plan") covers substantially all employees of BGF after they have
completed one year of service. Employees with five or more years of service are
entitled to benefits beginning at normal retirement age. The Retirement Plan
also provides reduced benefits to participants electing to retire early,
beginning at age 55. Participants are required to contribute three percent of
covered compensation per year and interest is credited on employee
contributions. In general, the normal retirement benefit is payable as an
annuity. Participants may also elect a lump-sum distribution of their accrued
benefit.
Normal retirement benefits are determined by reference to an employee's
"accumulated contributions." Accumulated contributions are the sum of all
required employee contributions (3% of plan compensation, which generally
includes all amounts reported on the employee's Form W-2, but does not include
bonuses, director's fees, expense reimbursements and payments for other
employee benefits) plus interest credited on such contributions, compounded
annually at the rate of 120% of the federal mid-term rate in effect under
44
<PAGE>
section 1274 of the Internal Revenue Code for the first month of the plan year.
In general, the annual normal retirement benefit is equal to 50% of the
accumulated employee contributions, plus 3/4% of employee plan compensation up
to $6,600 for plan year 1989.
The estimated annual benefits payable upon retirement at normal retirement
age for the Named Executive Officers is as follows: Mr. Robert Porcher--$0 (not
a participant); Mr. Philippe Porcher--$0 (not a participant); Mr. Pope--
$24,160.56; Mr. Cromer--$21,800.00; Mr. Dorier--$54,932.40; and Mr. Henderson--
$23,508.36. These calculations are based on 1998 compensation, assume benefits
are payable as a straight-life annuity, and assume that each individual will
work until age 65. As of December 31, 1998, Mr. Cromer had not completed a
qualifying year of service required to participate in the Retirement Plan. The
benefit shown is based on his electing to participate in the Retirement Plan
effective April 1, 1999.
401(k) Plan. The Employees' Profit Sharing and Tax Savings Plan of BGF
Industries, Inc. (the "401(k) Plan") covers most employees of BGF, after they
have completed one year of service. Employees may defer up to 15% of their plan
compensation each year, subject to Internal Revenue Code limitations. BGF may,
in its discretion, match employees' elective deferrals up to a specified
limitation each year and may make a discretionary employer contribution. All
contributions are 100% vested and nonforfeitable at all times. Benefits are
payable after separation from service in a lump sum in cash.
Compensation of Directors
Directors of BGF did not receive separate compensation for their services as
directors in 1998.
Compensation Committee Interlocks and Insider Participation
Mr. Robert Porcher, who serves as both an executive officer and as a member
of the board of directors of BGF, serves as the Chairman of the Supervisory
Board (the board of directors) of Porcher Industries. Mr. Pope also serves on
the Supervisory Board of Porcher Industries. Messrs. Cromer and Dorier also
serve as members of the Executive Board (i.e. as executive officers) of Porcher
Industries, of which Mr. Philippe Porcher serves as Chairman. Mr. Robert
Porcher serves as the President and Chairman of the Board of Directors of BGF
Services, Inc., an affiliate of BGF. Mr. Philippe Dorier serves as
Secretary/Treasurer and as a director of BGF Services. See also "Certain
Relationships and Related Party Transactions."
Deferred Compensation Agreements
BGF has entered into Deferred Compensation Agreements with Messrs. Pope,
Cromer and Henderson and is the guarantor of Mr. Dorier's Deferred Compensation
Agreement with BGF Services. The agreements provide for both pre-retirement
survivor benefits, as well as post-retirement benefits to the executive. The
agreements also contain a non-competition provision. Generally, under each of
the agreements, if the executive dies before the age of 65, his beneficiary or,
if none, his estate will receive monthly payments for a 10-year period of an
amount equal to 50% of the greater of: (i) the executive's monthly base salary
in effect on the January 1 prior to his death or (ii) the executive's average
monthly base salary on January 1 of the five years prior to his death. This
amount is decreased by certain percentages if the executive dies after the age
of 60 but before 65. The agreements also provide for post-retirement benefits
in the form of (1) monthly payments over 10 years, the sum of which is equal to
the "applicable percentage" multiplied by the greater of (a) the executive's
annual base salary on January 1 immediately preceding (or concurrent with) his
retirement or (b) the average of the executive's annual base salary on January
1 of the five years prior to his retirement and (2) a payment on death equal to
three-quarters of his annual base salary on the January 1 immediately preceding
(or concurrent with) his retirement. The "applicable percentage" for Mr. Pope
is two and one quarter. The "applicable percentage" for Mr. Cromer, Mr. Dorier
and Mr. Henderson is one and one-half. Mr. Pope's agreement has been amended to
pay his death benefit over the 10-year period mentioned in clause (1) above. If
the executive dies prior to receiving all of the monthly payments, such
payments are made to his designated beneficiary or, if none, his estate.
Reduced benefits are paid if the executive retires prior to age 65.
45
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
BGF is wholly owned by Porcher Industries through its U.S. holding company,
Glass Holdings. As such, BGF has certain on-going agreements and financial,
managerial and commercial agreements and arrangements with Porcher Industries,
Glass Holdings and other wholly-owned subsidiaries of Glass Holdings, as well
as other affiliates of Porcher Industries. Mr. Robert Porcher, the Chairman of
the Board and Chief Executive Officer of BGF, together with certain members of
his family, beneficially owns a controlling interest in Porcher Industries.
BGF pays management fees to BGF Services, Inc., a wholly owned subsidiary of
Glass Holdings, that cover the periodic management services of Robert Porcher
and his son Philippe Porcher, the Vice President of Porcher Industries, and the
full time services of Philippe Dorier, the Chief Financial Officer of BGF. BGF
also reimburses BGF Services for the costs associated with automobiles provided
to Messrs. Robert Porcher and Dorier and maintenance and upkeep of Robert
Porcher's Greensboro, North Carolina residence, which was transferred to BGF
Services by Glass Holdings in 1997 at a net book value of $1.0 million. BGF
paid an aggregate of $800,000, $1.0 million and $1.0 million to BGF Services in
1995, 1996 and 1997, respectively, and has paid $622,000 for the nine months
ended September 30, 1998.
Porcher Industries and its French parent company provide general management
and strategic planning advice to BGF in exchange for management fees that
reimburse such companies for a portion of the compensation of Robert Porcher,
Philippe Porcher and other employees who allocate their time among BGF and
other Porcher Industries affiliates. BGF paid an aggregate of $1.3 million,
$388,000, and $304,000 to such companies in management fees in 1995, 1996 and
1997, respectively, and has paid an aggregate of $243,000 for the nine months
ended September 30, 1998.
BGF provides management, accounting and administrative services to Belmont,
a wholly owned subsidiary of Glass Holdings that produces non-woven glass and
carbon products for reinforcement applications in exchange for fees that
reimburse BGF for its costs associated with these services. BGF also subleases
approximately 12,800 square feet of its Cheraw, South Carolina facility to
Belmont for its production facilities and leases to Belmont 11 employees that
work at such facility. Belmont paid an aggregate of $0, $13,000, and $360,000
to BGF in fees, leased employee payments, rent and its proportionate share of
utilities costs at the Cheraw plant in 1995, 1996 and 1997, respectively, and
has paid $494,000 for the nine months ended September 30, 1998. BGF believes
that the sublease to Belmont is on no more favorable terms than would be given
to third parties. Currently, Belmont is in the process of winding down its
operations, which is expected to be complete by the end of April 1999. BGF and
Glass Holdings are also guarantors of a $5.0 million industrial revenue bond
originally issued by Belmont in June 1997. As of September 30, 1998,
approximately $4.7 million remained outstanding on this bond.
BGF provides on-going senior management, technological support and
administrative assistance to Shanghai-Porcher, a joint venture company between
Glass Holdings, which owns 85% of such company and China Worldbest Development
Co., LTD that produces glass fiber fabrics for the electronics markets in Asia.
Porcher Industries and Shanghai-Porcher have entered into a ten (10) year
Technology Know-How Agreement, dated February 7, 1996 pursuant to which Porcher
Industries is entitled to receive royalty payments of up to 3% of net sales
revenue in years in which Shanghai-Porcher achieves a pre-tax profit. Under the
agreement, Shanghai-Porcher is required to reimburse Porcher Industries for all
travel, lodging and other reasonable expenses of Porcher Industries personnel
that conducts on-site training visits. BGF anticipates that Porcher Industries
will assign its rights and obligations under the Technology Know-How Agreement
to BGF. From time to time, BGF has acted as Shanghai-Porcher's billing agent at
no cost to Shanghai-Porcher. Shanghai-Porcher paid BGF a total of $0, $705,000,
and $349,000 in 1995, 1996 and 1997, respectively, and $6,000 for the nine
months ended September 30, 1998.
BGF paid dividends to Glass Holdings of $0, $15.2 million and $4.9 million
in 1995, 1996 and 1997, respectively, approximately all of which was used to
fund start up costs of Shanghai-Porcher and Belmont.
46
<PAGE>
On June 23, 1997, Glass Holdings loaned BGF $2.0 million for working capital
purposes. Such loan is non-interest bearing. On September 30, 1998, the
remaining $1.8 million outstanding on this loan was paid by BGF.
BGF purchases carbon fibers and finished products from Porcher Industries.
BGF paid Porcher Industries $5.9 million, $5.7 million and $8.1 million in
1995, 1996, and 1997, respectively, and $4.8 million for the nine months ended
September 30, 1998 for such purchases. BGF sells finished goods and
occasionally unfinished goods directly to Porcher. Porcher Industries paid BGF
$771,000, $484,000, and $329,000 in 1995, 1996, and 1997, respectively, and
$1.2 million for the nine months ended September 30, 1998. BGF has paid Porcher
Industries commissions for sales of its products in Asia, Europe, and Australia
of $378,000, $307,000, and $380,000 in 1995, 1996, and 1997, respectively, and
$321,000 for the nine months ended September 30, 1998. BGF believes that prices
and commissions paid or received by BGF for these transactions are comparable
to those paid to third parties.
BGF collects and deposits customer payments on behalf of two wholly owned
subsidiaries of Porcher Industries in exchange for fees equal to 2% of amounts
collected. BGF received $0, $17,000, $23,000 and $27,000 in fees for these
services in 1995, 1996, 1997 and the nine months ended September 30, 1998,
respectively.
On April 14, 1998, BGF loaned $365,258 to Richard L. Cromer, the President
of BGF, for the purchase of a residence in Greensboro, North Carolina. The loan
bears no interest and is payable upon the sale of Mr. Cromer's residence in
Toledo, Ohio.
On September 30, 1998, AGY Holdings purchased a 51% ownership interest in
Advanced Glassfiber for aggregate consideration of approximately $338.9 million
(including post-closing adjustments). In connection with the acquisition, BGF
loaned Glass Holdings approximately $138.6 million to provide Glass Holdings a
portion of the capital necessary to fund the acquisition. The loan from BGF to
Glass Holdings is evidenced in part by promissory notes that bear interest at
the Cost of Funds Rate for BGF for the calendar year immediately preceding the
date on which any interest is due. With respect to any period of determination,
the Cost of Funds Rate means a rate per annum equal to the blended interest
rate (as reasonably calculated by BGF) applicable to borrowings of BGF during
such period in respect of indebtedness incurred by BGF to fund the loan to
Glass Holdings. Accrued interest is due and payable on the first business day
of February of each year commencing on February 1, 1999 and on any date on
which any principal is due. The promissory notes are payable on October 31,
2008 or such later date as may be agreed to by BGF and Glass Holdings. Payments
made pursuant to the promissory notes are expected to be offset by other
distributions from BGF to Glass Holdings. See "Prospectus Summary--The
Affiliated Transaction," "Use of Proceeds" and "Capitalization."
Currently, Advanced Glassfiber leases approximately 27,200 square feet of
segregated space at BGF's South Hill, Virginia lightweight fiber fabric
facility for the purpose of manufacturing glass yarns for exclusive supply to
BGF under a supply contract, extendible at the option of Advanced Glassfiber,
that expires on December 31, 2008. BGF also provides Advanced Glassfiber with
leased employees and administrative and technical support services. Advanced
Glassfiber paid BGF approximately $900,000 pursuant to this arrangement in
1998.
STOCK OWNERSHIP
BGF has 1,000 shares of common stock, $1.00 par value per share,
outstanding, all of which are owned by Glass Holdings, a Delaware corporation.
All of the outstanding capital stock of Glass Holdings is owned by Porcher
Industries.
47
<PAGE>
THE AFFILIATED TRANSACTION
On September 30, 1998, AGY Holdings, a wholly owned subsidiary of our parent
company, Glass Holdings, acquired a 51% ownership interest in Advanced
Glassfiber from Owens Corning for aggregate consideration of $338.9 million
(including post-closing adjustments). Advanced Glassfiber is BGF's largest
supplier of glass yarns, the principal material BGF uses to produce glass fiber
fabrics. Owens Corning, which formed Advanced Glassfiber to own and operate its
glass yarns and specialty materials business, owns the remaining 49% interest.
To fund AGY Holdings' purchase of the 51% ownership interest in Advanced
Glassfiber, BGF borrowed $88.4 million under the senior credit facility and
$65.0 million under the senior subordinated credit facility. From these
borrowings, BGF loaned Glass Holdings approximately $138.6 million and Glass
Holdings then loaned AGY Holdings $135.3 million. AGY Holdings used the money
from this loan, along with an additional $198.9 million intra-day loan from
First Union National Bank and $4.7 million in other borrowings, to purchase the
51% interest in Advanced Glassfiber. Immediately after the completion of the
purchase, Advanced Glassfiber paid AGY Holdings a $203.6 million dividend and
AGY Holdings used this money to repay the $198.9 million intra-day loan and the
$4.7 million in other borrowing. See "Use of Proceeds," "Capitalization" and
"Certain Relationships and Related Party Transactions."
48
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
BGF has entered into a credit agreement dated September 30, 1998, with a
syndicate of lenders and First Union National Bank, as Agent (the senior credit
facility). Under the senior credit facility, the lenders have agreed to provide
BGF with a total of up to $125.0 million of credit consisting of (i) a five-
year revolving credit facility for up to $75.0 million (the revolver) and (ii)
a six-year amortizing term loan in the amount of $50.0 million (the term loan).
The revolver contains two sub facilities: a $5.0 million swingline facility for
working capital requirements and a $20.0 million letter of credit facility. As
of September 30, 1998, the term loan was fully funded, and $37.0 million was
outstanding under the revolver.
Repayment
Under the senior credit facility, BGF may be required to prepay the term
loan and the revolver if:
. BGF sells assets in transactions outside the ordinary course of business;
. BGF issues debt or equity securities;
. BGF receives insurance proceeds for casualty losses and does not repair
or replace the damaged facilities; or
. BGF's EBITDA for a fiscal year exceeds certain expenditures and payments.
These prepayments would be applied first to the term loan, and upon payment of
the term loan, to permanently pay outstanding loans under the revolver.
The term loan has a quarterly scheduled amortization and is payable on the
following dates in the following amounts:
<TABLE>
<CAPTION>
Term Loan
Payment
Term Loan Payment Date Amount
---------------------- -----------
<S> <C>
December 31, 1999................................................ $ 1,000,000
March 31, 2000................................................... 1,000,000
June 30, 2000.................................................... 1,000,000
September 30, 2000............................................... 1,000,000
December 31, 2000................................................ 1,750,000
March 31, 2001................................................... 1,750,000
June 30, 2001.................................................... 1,750,000
September 30, 2001............................................... 1,750,000
December 31, 2001................................................ 2,500,000
March 31, 2002................................................... 2,500,000
June 30, 2002.................................................... 2,500,000
September 30, 2002............................................... 2,500,000
December 31, 2002................................................ 3,250,000
March 31, 2003................................................... 3,250,000
June 30, 2003.................................................... 3,250,000
September 30, 2003............................................... 3,250,000
December 31, 2003................................................ 4,000,000
March 31, 2004................................................... 4,000,000
June 30, 2004.................................................... 4,000,000
September 30, 2004............................................... 4,000,000
-----------
$50,000,000
===========
</TABLE>
49
<PAGE>
Security
The senior credit facility is secured by a first priority lien on
substantially all of BGF's real and personal property. The lien also covers (1)
100% of the capital stock of each direct or indirect domestic subsidiary of
BGF, (2) 65% of the capital stock of each first tier foreign subsidiary of BGF
and (3) certain promissory notes issued by affiliates of BGF. The senior credit
facility is also secured by a non-recourse pledge by Glass Holdings, the parent
of BGF, of capital stock of certain affiliates of BGF.
Interest and Fees
The annual interest rate applicable to the revolver and the term loan is a
fluctuating rate of interest measured, at BGF's option, by reference to either
(1) LIBOR or (2) the greater of the published prime rate of First Union
National Bank or the overnight federal funds rate plus 0.5% ("ABR"), plus, in
either case, an additional amount which fluctuates based upon the leverage
ratio of BGF. This additional amount ranges from 2.00% to 2.75% for LIBOR based
borrowings and 0.75% to 1.50% for ABR based borrowings. BGF has entered into an
interest rate hedging agreement that effectively fixes the interest rate on the
term loan at 5.04% per annum plus the applicable additional amount.
The senior credit facility provides for an annual administrative fee to be
paid to the Agent, an unused commitment fee payable to the lenders and certain
other fees payable in connection with letters of credit issued under the
revolver.
Covenants and Events of Default
The senior credit facility contains affirmative and negative covenants
customary for agreements of this type, including, among others, covenants
restricting BGF and its subsidiaries with respect to the incurrence of debt
(including guarantees); the creation of liens; substantially changing the
nature of BGF's or its subsidiaries' businesses; the consummation of certain
transactions such as dispositions of substantial assets, mergers, acquisitions,
reorganizations and recapitalizations; the making of certain investments and
loans, non-ordinary course asset sales and capital expenditures; the making of
dividends and other distributions; transactions with affiliates and BGF's
ability to prepay certain debt.
BGF is also required to comply with certain financial tests and maintain
certain financial ratios. These financial tests and ratios include requirement
to maintain a: (1) maximum Leverage Ratio; (2) minimum Consolidated Net Worth;
(3) minimum Interest Coverage Ratio; and (4) minimum Fixed Charge Coverage
Ratio (in each case as defined in the senior credit facility).
The senior credit facility also contains customary events of default. An
event of default under the senior credit facility permits the lenders to
accelerate (or, in certain events, triggers an automatic acceleration of) the
maturity of the indebtedness under the senior credit facility and may restrict
the ability of BGF and the Note Guarantors (as defined herein) to meet their
obligations to the holders of the notes.
Senior Subordinated Credit Facility
On September 30, 1998, BGF entered into a senior subordinated credit
agreement with First Union Investors, Inc. as Agent (the senior subordinated
credit facility). Subsequently, other institutions became lenders under the
senior subordinated credit facility. The senior subordinated credit facility,
which provided BGF with $65.0 million of credit, was fully drawn by BGF in
connection with the closing of the affiliated transaction. The senior
subordinated credit facility is an unsecured senior subordinated obligation of
BGF. As of September 30, 1998, amounts outstanding under the senior
subordinated credit facility accrued interest at a rate of 9.56% per annum. The
senior subordinated credit facility was repaid in full with the net proceeds of
the offering. See "Use of Proceeds."
50
<PAGE>
DESCRIPTION OF EXCHANGE NOTES
The exchange notes will be issued under the indenture, dated as of the Issue
Date, among BGF and The Bank of New York, as trustee. The following summary of
certain provisions of the indenture does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act of 1939, as amended (the "TIA"), and to all of the provisions of
the indenture, including the definitions of certain terms therein and those
terms made a part of the indenture by reference to the TIA as in effect on the
date of the indenture. The definitions of certain capitalized terms used in the
following summary are set forth below under "--Certain Definitions." References
in this "Description of Exchange Notes" section to BGF mean only BGF
Industries, Inc. (or any successor or assignee thereof that has become such in
accordance with the terms of the indenture) and not any existing or future
Subsidiaries of BGF.
The exchange notes will be issued solely in exchange for an equal principal
amount of old notes pursuant to the exchange offer. The form and terms of the
exchange notes will be identical in all material respects to the form and terms
of the old notes except that: (i) the exchange notes will have been registered
under the Securities Act and (ii) the registration rights and liquidated
damages provisions applicable to the old notes are not applicable to the
exchange notes.
The exchange notes will be unsecured senior subordinated obligations of BGF.
The exchange notes will be unconditionally guaranteed, jointly and severally on
an unsecured senior subordinated basis by all future direct and indirect
Restricted Subsidiaries other than Foreign Subsidiaries of BGF (each such
guarantee is referred to as a "Note Guarantee" and such guarantees are
collectively referred to as the "Note Guarantees"; each Subsidiary that
provides a Note Guarantee is referred to as a "Note Guarantor" and such
Subsidiaries are collectively referred to as the "Note Guarantors"). As of the
date hereof, BGF has one Subsidiary, which is a Foreign Subsidiary and which
will be a Restricted Subsidiary.
Initially, the trustee will act as paying agent and registrar for the
exchange notes. BGF may change any paying agent and registrar without notice to
holders of the exchange notes. Holders must surrender notes to a paying agent
to collect principal payments and premium, if any. Principal, premium, if any,
and interest on the exchange notes will be paid by check mailed to the
registered holders at their registered addresses; provided, however, that all
payments with respect to exchange notes the holders of which have given wire
transfer instructions to BGF will be made by wire transfer of immediately
available funds to the accounts specified by the holders thereof.
Principal, Maturity and Interest
The exchange notes will mature on January 15, 2009. Interest on the exchange
notes will accrue at the rate of 10 1/4% per annum and will be payable semi-
annually in arrears on each January 15 and July 15 commencing on July 15, 1999,
to the persons who are registered holders at the close of business on January 1
and July 1, respectively, immediately preceding the applicable interest payment
date. Interest on the exchange notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from and
including the date of issuance. The exchange notes will not be entitled to the
benefit of any mandatory sinking fund.
Additional Notes
Subject to the limitations set forth under "--Certain Covenants--Limitation
on Incurrence of Additional Indebtedness," BGF may Incur additional
Indebtedness which, at its option, may consist of additional notes, in one or
more series, having identical terms as old notes or exchange notes (the
"Additional Notes"). Holders of such Additional Notes will have the right to
vote together with holders of the old notes and the exchange notes as one
class. No offering of any such Additional Notes is being or shall be deemed to
be made by this prospectus. In addition, there can be no assurance as to when
or whether BGF will issue any such Additional Notes or as to the aggregate
principal amount of such Additional Notes.
51
<PAGE>
Ranking
The exchange notes will rank junior to, and be subordinated in right of
payment to, all existing and future Senior Indebtedness of BGF, pari passu in
right of payment with all Senior Subordinated Indebtedness of BGF and senior in
right of payment to all Subordinated Indebtedness of BGF. As of September 30,
1998, as adjusted for the affiliated transaction and the offering of the old
notes, BGF had approximately $58.6 million of Senior Indebtedness outstanding
(exclusive of unused commitments). All debt Incurred under the senior credit
facility is Senior Indebtedness of BGF, is guaranteed by all Note Guarantors on
a senior basis and is secured by substantially all of the assets of BGF.
Note Guarantees
In the event that any Person shall become a Restricted Subsidiary (other
than Foreign Subsidiaries including, without limitation, upon a Revocation of
the Designation of a Subsidiary as an Unrestricted Subsidiary), BGF will cause
such Restricted Subsidiary to execute and deliver to the trustee a supplemental
indenture in form reasonably satisfactory to the trustee pursuant to which such
Restricted Subsidiary shall become a party to the indenture and thereby
unconditionally guarantee all of BGF's Obligations under the exchange notes and
the indenture on the terms set forth therein. Thereafter, such Restricted
Subsidiary shall (unless released in accordance with the terms of the
indenture) be a Note Guarantor for all purposes of the indenture.
Each Note Guarantor will irrevocably and unconditionally guarantee, jointly
and severally, on an unsecured senior subordinated basis the punctual payment
when due, whether at Stated Maturity, by acceleration or otherwise, of all
obligations of BGF under the indenture and the exchange notes, whether for
principal of, premium, if any, or interest on the exchange notes, expenses,
indemnification or otherwise (all such obligations guaranteed by a Note
Guarantor being herein called the "Guaranteed Obligations"). Each Note
Guarantor will agree to pay, on a senior subordinated basis and in addition to
the amounts stated above, any and all expenses (including reasonable counsel
fees and expenses) incurred by the trustee or the holders in enforcing any
rights under such Note Guarantor's Note Guarantee.
The Guaranteed Obligations will rank junior to, and be subordinated in right
of payment to, all existing and future Senior Indebtedness of the Note
Guarantors, pari passu in right of payment with all Senior Subordinated
Indebtedness of the Note Guarantors and senior in right of payment to all
Subordinated Indebtedness of the Note Guarantors. All debt Incurred under the
senior credit facility will be guaranteed by each Note Guarantor on a senior
basis and will be secured by substantially all of the assets of each Note
Guarantor.
The Guaranteed Obligations of each Note Guarantor will be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Note Guarantor (including, without limitation, any
guarantees under the senior credit facility and any Senior Indebtedness
Incurred after the Issue Date) and after giving effect to any collections from
or payments made by or on behalf of any other Note Guarantor in respect of the
Guaranteed Obligations of such other Note Guarantor under its Note Guarantee or
pursuant to its contribution obligations under the indenture, result in the
Guaranteed Obligations of such Note Guarantor not constituting a fraudulent
conveyance or fraudulent transfer under federal, state or other applicable law.
Each Note Guarantor that makes a payment or distribution under a Note Guarantee
will be entitled to a contribution from each other Note Guarantor in a pro rata
amount, based on the net assets of each Note Guarantor determined in accordance
with GAAP. For further information, you should review the section "Risk
Factors" under the heading "Issuance of Old Notes and any Note Guarantee May Be
Subject to Fraudulent Conveyance Laws."
In the event (i) there is a Legal Defeasance of the exchange notes as
described under "Legal Defeasance and Covenant Defeasance," (ii) there is a
sale or other disposition of all or substantially all of the assets of any Note
Guarantor, (iii) there is a sale or other disposition of all of the Capital
Stock of any Note Guarantor or
52
<PAGE>
(iv) a Note Guarantor is designated as an Unrestricted Subsidiary as described
under "Certain Covenants-- Designation of Unrestricted Subsidiaries," such Note
Guarantor will be released and relieved of its obligations under its Note
Guarantee; provided, however, in the case of clauses (ii) or (iii), that such
transaction is carried out pursuant to and in accordance with "Certain
Covenants--Limitation on Asset Sales" and, if applicable, "Certain Covenants--
Merger, Consolidation and Sale of Assets."
Subordination of the Exchange Notes and the Note Guarantees
The payment of the principal of, premium, if any, and interest on the
exchange notes is subordinated in right of payment, as set forth in the
indenture, to the prior payment in full in cash of all existing and future
Obligations of BGF in respect of Senior Indebtedness of BGF, whether
outstanding on the Issue Date or thereafter Incurred. In addition, the payment
of the Guaranteed Obligations of each future Note Guarantor, if any, under its
Note Guarantee will be subordinated and junior in right of payment to the prior
payment in full of all Senior Indebtedness of such Note Guarantor to
substantially the same extent as the exchange notes are subordinated to all
existing and future Obligations of BGF in respect of Senior Indebtedness of
BGF. As a result, the exchange notes will be effectively subordinated to all
Senior Indebtedness of any Note Guarantor and to all debt of any other
Subsidiaries that BGF may have in the future.
Upon any payment or distribution of the assets of BGF or a Note Guarantor
upon a total or partial liquidation, dissolution or reorganization of, or
similar proceeding relating to, BGF or its property or a Note Guarantor or its
property, the holders of Senior Indebtedness of BGF or such Note Guarantor will
be entitled to receive payment in full of all Obligations due in respect of
such Senior Indebtedness before the holders are entitled to receive any
payment, and until all Obligations due in respect of the Senior Indebtedness is
paid in full in cash, any payment or distribution to which holders would be
entitled but for the subordination provisions of the indenture will be made to
holders of such Senior Indebtedness of BGF or such Note Guarantor as their
interests may appear. If a distribution is made to holders that, due to the
subordination provisions, should not have been made to them, such holders are
required to hold it in trust for the holders of Senior Indebtedness of BGF or
such Note Guarantor and pay it over to them as their interests may appear.
Notwithstanding anything herein to the contrary, neither BGF nor any Note
Guarantor may pay principal of, premium, if any, or interest on the exchange
notes or make any deposit pursuant to the provisions described under "Legal
Defeasance and Covenant Defeasance" below or repurchase, redeem or otherwise
retire any exchange notes (collectively, "pay the exchange notes") if (i) any
Designated Senior Indebtedness is not paid when due or (ii) any other default
on Designated Senior Indebtedness occurs and the maturity of such Designated
Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, the default has been cured or waived and any such acceleration has
been rescinded or such Designated Senior Indebtedness has been paid in full in
cash. However, BGF and any Note Guarantor may pay the exchange notes without
regard to the foregoing if BGF and such Note Guarantor and the trustee receive
written notice approving such payment from the Representative of the Designated
Senior Indebtedness with respect to which either of the events set forth in
clause (i) or (ii) of the immediately preceding sentence has occurred and is
continuing. During the continuance of any default (other than a default
described in clause (i) or (ii) of the second preceding sentence) with respect
to any Designated Senior Indebtedness pursuant to which the maturity thereof
may be accelerated immediately without further notice (except such notice as
may be required to effect such acceleration) or the expiration of any
applicable grace periods, neither BGF nor any Note Guarantor may pay the
exchange notes for a period (a "Payment Blockage Period") commencing upon the
receipt by the trustee (with a copy to BGF and each Note Guarantor) of written
notice (a "Blockage Notice") of such default from the Representative of the
holders of such Designated Senior Indebtedness specifying an election to effect
a Payment Blockage Period and ending 179 days thereafter (or earlier if such
Payment Blockage Period is terminated (i) by written notice to the trustee, the
Note Guarantors and BGF from the Person or Persons who gave such Blockage
Notice, (ii) because the Representative of the holders of such Designated
Senior Indebtedness has notified the trustee that the default giving rise to
such Blockage Notice is no longer continuing or (iii) because such Designated
Senior Indebtedness has been repaid in full in cash).
53
<PAGE>
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the first sentence of this paragraph), unless the holders of
such Designated Senior Indebtedness or the Representative of such holders have
accelerated the maturity of such Designated Senior Indebtedness, BGF and any
Note Guarantors may resume payments on the exchange notes after the end of such
Payment Blockage Period. The exchange notes and any Note Guarantees shall not
be subject to more than one Payment Blockage Period in any consecutive 360-day
period, irrespective of the number of defaults with respect to Designated
Senior Indebtedness during such period.
If payment of the exchange notes is accelerated because of an Event of
Default, BGF or the trustee shall promptly notify the holders of Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
By reason of the subordination provisions contained in the indenture, in the
event of an insolvency, bankruptcy, reorganization, or liquidation of BGF, or
upon the occurrence of a Change of Control or an Asset Sale requiring
repurchase by BGF of any exchange notes or in the event that any Note
Guarantors are required to make payments under their Note Guarantees, there may
not be sufficient assets remaining to satisfy the claims of the holders after
satisfying the claims of creditors of BGF and such Note Guarantors who are
holders of Senior Indebtedness and claims of creditors of BGF's other
Subsidiaries. For more information, you should review "Risk Factors--Your
Exchange Notes Will Be Subordinate to Our Senior Debt."
The terms of the subordination provisions described above will not apply to
any payment or distribution of Permitted Junior Securities or to payment from
money or the proceeds of U.S. government obligations held in trust by the
trustee for the payment of principal of, premium, if any, and interest on the
notes pursuant to the provisions described under "Legal Defeasance and Covenant
Defeasance."
Redemption
Optional Redemption. The exchange notes will be redeemable, at BGF's option,
in whole at any time or in part from time to time, on and after January 15,
2004, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on January 15 of the year
set forth below, plus, in each case, accrued interest to the date of redemption
(subject to the right of holders of record on a record date to receive interest
due on the related interest payment date that is on or prior to such date of
redemption):
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004........................................................... 105.250%
2005........................................................... 103.500%
2006........................................................... 101.750%
2007 and thereafter............................................ 100.000%
</TABLE>
Optional Redemption upon Public Equity Offerings. In addition, at any time,
or from time to time, on or prior to January 15, 2002, BGF may, at its option,
use the net cash proceeds of one or more Public Equity Offerings (as defined
below) to redeem in the aggregate up to 35% of the aggregate principal amount
of the exchange notes originally issued at a redemption price equal to 110.5%
of the principal amount thereof, plus accrued and unpaid interest thereon to
the date of redemption (subject to the right of holders of record on a record
date to receive interest due on the related interest payment date that is on or
prior to such date of redemption); provided, however, that after giving effect
to any such redemption at least 65% of the aggregate principal amount of the
exchange notes originally issued remains outstanding. In order to effect the
foregoing redemption with the proceeds of any Public Equity Offering, BGF shall
make such redemption not more than 60 days after the consummation of such
Public Equity Offering.
54
<PAGE>
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of BGF pursuant to a
registration statement filed with the Commission in accordance with the
Securities Act of 1933, as amended, or any successor statute.
In the event that less than all of the exchange notes are to be redeemed at
any time, selection of such exchange notes for redemption will be made by the
trustee in compliance with the requirements of the principal national
securities exchange, if any, on which such exchange notes are listed or, if
such exchange notes are not then listed on a national securities exchange, on a
pro rata basis, by lot or by such method as the trustee shall deem fair and
appropriate; provided, however, that no exchange notes of a principal amount of
$1,000 or less shall be redeemed in part and exchange notes of a principal
amount in excess of $1,000 may be redeemed in part in multiples of $1,000 only;
and provided, further, that if a partial redemption is made with the proceeds
of a Public Equity Offering, selection of the exchange notes or portions
thereof for redemption shall, subject to the preceding proviso, be made by the
trustee only on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to the procedures of DTC or a successor depositary),
unless such method is otherwise prohibited. Notice 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 exchange notes to be redeemed at its
registered address. If any exchange note is to be redeemed in part only, the
notice of redemption that relates to such exchange note shall state the portion
of the principal amount thereof to be redeemed. A new exchange note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original exchange note. On
and after the redemption date, interest will cease to accrue on exchange notes
or portions thereof called for redemption as long as BGF had deposited with the
paying agent funds in satisfaction of the applicable redemption price pursuant
to the indenture.
Change of Control
The indenture provides that upon the occurrence of a Change of Control, each
holder will have the right to require that BGF purchase all or a portion (in
integral multiples of $1,000) of such holder's notes pursuant to the offer
described below (the "Change of Control Offer"), at a purchase price equal to
101% of the principal amount thereof plus accrued and unpaid interest thereon
to the date of purchase (subject to the right of holders of record on a record
date to receive interest due on the related interest payment date that is on or
prior to such date of purchase). Within 30 days following the date upon which
the Change of Control occurred, BGF must send, by first-class mail, a notice to
each holder, with a copy to the trustee, which notice shall govern the terms of
the Change of Control Offer. Such notice shall state, among other things, the
purchase date, which must be no earlier than 30 days nor later than 60 days
from the date such notice is mailed, other than as may be required by law (the
"Change of Control Payment Date"). Holders electing to have a note purchased
pursuant to a Change of Control Offer will be required to surrender the note,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the note completed, to the paying agent at the address specified in the notice
prior to the close of business on the third business day prior to the Change of
Control Payment Date.
The senior credit facility contains, and future Senior Indebtedness of BGF
may contain, prohibitions on the occurrence of certain events that would
constitute a Change of Control or require such Senior Indebtedness to be repaid
or repurchased upon a Change of Control. Moreover, the exercise by the holders
of their right to require BGF to repurchase the notes would cause a default
under the senior credit facility and could cause a default under such other
Senior Indebtedness even if the Change of Control itself does not, due to the
financial effect of such repurchase on BGF. If a Change of Control Offer is
made, there can be no assurance that BGF will have available funds sufficient
to pay the Change of Control purchase price for all the notes that might be
delivered by holders seeking to accept the Change of Control Offer. In the
event BGF is required to purchase outstanding notes pursuant to a Change of
Control Offer, BGF expects that it would seek third-party financing to the
extent it does not have available funds to meet its purchase obligations and
any other obligations in respect of Senior Indebtedness. However, there can be
no assurance that BGF would be able to obtain such financing.
55
<PAGE>
BGF will comply with the requirements of Rule 14e-1 under the Exchange Act
of 1934, as amended, and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
purchase of notes pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Change of
Control" provisions of the indenture, BGF shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Change of Control" provisions of the indenture by virtue
thereof.
Certain Covenants
The indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. (a) BGF will not, and
will not cause or permit any of its Restricted Subsidiaries to, directly or
indirectly, Incur any Indebtedness (including Acquired Indebtedness) other than
Permitted Indebtedness; provided, however, that BGF and any Note Guarantor may
Incur Indebtedness if, at the time of and immediately after giving pro forma
effect to the Incurrence thereof and the application of the proceeds therefrom,
the Consolidated Fixed Charge Coverage Ratio is greater than 2.0 to 1.0.
(b) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this covenant, the amount of Indebtedness issued at a price
that is less than the principal amount thereof will be equal to the amount of
the liability in respect thereof determined in accordance with GAAP.
Limitation on Restricted Payments. BGF will not, and will not cause or
permit any of its Restricted Subsidiaries to, directly or indirectly, (a)
declare or pay any dividend or make any distribution (other than dividends or
distributions payable in Qualified Capital Stock of BGF or in warrants, rights
or options to purchase or acquire shares of Qualified Capital Stock of BGF or
dividends or distributions payable to BGF or a Restricted Subsidiary and pro
rata dividends or distributions to BGF and/or its Restricted Subsidiaries and
to minority holders of Capital Stock of Restricted Subsidiaries) on or in
respect of shares of Capital Stock of BGF or any Restricted Subsidiary to
holders of such Capital Stock, (b) purchase, redeem or otherwise acquire or
retire for value (other than any such purchase, redemption, acquisition or
retirement that constitutes a Permitted Investment) any Capital Stock of BGF or
any Restricted Subsidiary or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock (other than any such Capital
Stock, warrants, rights or options owned by BGF or any Restricted Subsidiary),
(c) make any principal payment on, purchase, defease, redeem, prepay, decrease
or otherwise acquire or retire for value, prior to any scheduled final
maturity, scheduled repayment or scheduled sinking fund payment, as the case
may be, any Subordinated Indebtedness, or (d) make any Investment (other than
Permitted Investments) (each of the foregoing actions set forth in (but not
excluded from) clauses (a), (b), (c) and (d) being referred to as a "Restricted
Payment"), if at the time of such Restricted Payment or immediately after
giving effect thereto, (i) a Default or an Event of Default shall have occurred
and be continuing or (ii) BGF is not able to Incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
covenant described under "--Limitation on Incurrence of Additional
Indebtedness" or (iii) the aggregate amount of Restricted Payments (including
such proposed Restricted Payment) made subsequent to the Issue Date (the amount
expended for such purposes, if other than in cash, being the Fair Market Value
of such property) shall exceed the sum of: (A) 50% of cumulative Consolidated
Net Income (or if cumulative Consolidated Net Income shall be a loss, minus
100% of such loss) accrued during the period (treated as one accounting period)
beginning on the first day of the fiscal quarter beginning on January 1, 1999
to the end of the most recent fiscal quarter for which consolidated financial
information of BGF is available; plus (B) 100% of the aggregate net cash
proceeds received by BGF from any Person (other than a Restricted Subsidiary of
BGF) from any capital contribution to BGF or issuance and sale (other than to a
Restricted Subsidiary) of Qualified Capital Stock of BGF subsequent to the
Issue Date or any warrants, rights or options to purchase or acquire shares of
Capital Stock of BGF or from the issuance and sale (other than to a Restricted
Subsidiary) subsequent to the Issue Date of any Indebtedness of BGF or any
Restricted Subsidiary that has been converted into or exchanged for Qualified
Capital Stock of BGF (excluding
56
<PAGE>
any net cash proceeds applied in accordance with the following paragraph); plus
(C) without duplication of any amounts included in clause (A) above or clause
(D) below, in the case of the disposition or repayment of, or the receipt by
BGF or any Restricted Subsidiary of any dividends or distributions from, any
Investment constituting a Restricted Payment made after the Issue Date, an
amount equal to the lesser of the amount of such Investment and the amount
received by BGF or any Restricted Subsidiary upon such disposition, repayment,
dividend or distribution; plus (D) without duplication of any amounts included
in clause (C) above, in the event BGF or any Restricted Subsidiary makes any
Investment in a Person that, as a result of or in connection with such
Investment, becomes a Restricted Subsidiary, an amount equal to BGF's or any
Restricted Subsidiary's existing Investment in such Person that was previously
treated as a Restricted Payment; plus (E) so long as the Designation thereof
was treated as a Restricted Payment made after the Issue Date, with respect to
any Unrestricted Subsidiary that has been redesignated as a Restricted
Subsidiary after the Issue Date in accordance with "--Designation of
Unrestricted Subsidiaries," an amount equal to BGF's Investment in such
Unrestricted Subsidiary (provided that such amount shall not in any case exceed
the Designation Amount with respect to such Restricted Subsidiary upon its
Designation); plus (F) $3.0 million; provided, that the amount of Restricted
payments permitted pursuant to this clause (F) shall not be reduced by any
negative amounts occurring pursuant to clause (A) above; minus (G) the
Designation Amount (measured as of the date of Designation) with respect to any
Subsidiary of BGF which has been designated as an Unrestricted Subsidiary after
the Issue Date in accordance with "--Designation of Unrestricted Subsidiaries."
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted on the date of declaration; (2) if no Default or Event of
Default shall have occurred and be continuing, the acquisition of any shares of
Capital Stock of BGF or any warrants, rights or options to purchase or acquire
shares of Capital Stock of BGF, (i) in exchange for shares of Qualified Capital
Stock of BGF or any warrants, rights or options to purchase or acquire shares
of Qualified Capital Stock of BGF or (ii) through the application of the net
proceeds of a substantially concurrent sale for cash (other than to a
Restricted Subsidiary of BGF) of shares of Qualified Capital Stock of BGF or
any warrants, rights or options to purchase or acquire shares of Qualified
Capital Stock of BGF; provided, however, that the value of any such Qualified
Capital Stock or warrants, rights and options issued in exchange for such
acquired capital stock, warrants, rights or options and any such net cash
proceeds shall be excluded from clause (iii)(B) of the preceding paragraph (and
were not included therein at any time); (3) if no Default or Event of Default
shall have occurred and be continuing, the voluntary prepayment, purchase,
defeasance, redemption or other acquisition or retirement for value of any
Subordinated Indebtedness (i) solely in exchange for shares of Capital Stock of
BGF or any warrants, rights or options to purchase or acquire shares of Capital
Stock of BGF; provided, however, that if such Capital Stock is, or such
warrants, rights or options to purchase such Capital Stock are convertible into
or exchangeable at the option of the holder thereof for, Disqualified Capital
Stock, then such Disqualified Capital Stock shall not (A) by its terms, or upon
the happening of any event, mature or be mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, or be redeemable at the option of the
holder thereof, in any case, on or prior to the final maturity of the
Indebtedness permitted to be prepaid, purchased, defeased, redeemed or acquired
pursuant to this clause (3) and (B) have a Weighted Average Life to Maturity
less than the Indebtedness permitted to be prepaid, purchased, defeased,
redeemed or acquired pursuant to this clause (3) or (ii) in exchange for
Refinancing Indebtedness or through the application of net proceeds of a
substantially concurrent sale for cash (other than to a Restricted Subsidiary
of BGF) of (A) shares of Qualified Capital Stock of BGF or any warrants, rights
or options to purchase or acquire shares of Qualified Capital Stock of BGF or
(B) Refinancing Indebtedness; and provided, further, that the value of such
Capital Stock or warrants, rights or options issued in exchange for such
Subordinated Indebtedness and any such net cash proceeds shall be excluded from
clause (iii)(B) of the preceding paragraph (and were not included therein at
any time); (4) the making of loans or advances to officers and directors of BGF
or any Restricted Subsidiary entered into in the ordinary course of business in
an amount not to exceed $1.0 million at any one time outstanding; (5) the
repurchase, redemption or other acquisition or retirement for value of (i) any
Capital Stock (or interests under any stock appreciation rights plan) of BGF
held by any member of BGF's management pursuant to any management equity
subscription agreement or stock option agreement in effect as of the date of
57
<PAGE>
the indenture or entered into thereafter with members of the management of any
Person acquired after the Issue Date in connection with the acquisition of such
Person or (ii) Capital Stock of BGF held by employees, former employees,
directors or former directors pursuant to the terms of agreements (including
employment agreements) approved by the Board of Directors; provided, however,
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Capital Stock (or interests under any stock appreciation rights plan)
set forth in clauses (i) and (ii) shall not exceed $750,000 in any twelve-month
period and no Default or Event of Default shall have occurred and be continuing
immediately after any such transaction and (6) the making of book-entry
dividends to GHC to make payments of interest on the Acquisition Loan so long
as (A) GHC makes a book-entry contribution to AGY Holdings to enable AGY
Holdings to pay interest on the Purchase Price Loan, (B) AGY Holdings uses such
contribution to pay interest on the Purchase Price Loan, (C) GHC applies such
interest payment to the payment of interest on the Acquisition Loan and (D)
after giving effect to such dividend and the application of the interest
payment on the Acquisition Loan, there is no change to the retained earnings of
BGF or Consolidated Net Income of BGF solely as a result of the making of such
dividend and the payment of such interest. In determining the aggregate amount
of Restricted Payments made subsequent to the Issue Date in accordance with
clause (iii) of the immediately preceding paragraph, amounts expended pursuant
to clauses (1) (without duplication for the declaration of the relevant
dividend), (4) and (5) shall be included in such calculation and amounts
expended pursuant to clauses (2), (3) and (6) shall not be included in such
calculation.
Limitation on Asset Sales. BGF will not, and will not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) BGF or the
applicable 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 sold or otherwise disposed of and (ii) at least 75% of the consideration
received for the assets sold by BGF or the Restricted Subsidiary, as the case
may be, in such Asset Sale shall be in the form of (A) cash or Cash Equivalents
or (B) (1) long-term assets (including intellectual property associated with
the use of such long-term assets) to be used by BGF or any Restricted
Subsidiary in a Permitted Business or (2) Capital Stock of a Restricted
Subsidiary or a Person engaged primarily in a Permitted Business that will
become, upon such purchase, a Restricted Subsidiary (collectively, "Replacement
Assets"); provided that any securities, notes or other obligations received by
BGF or a Restricted Subsidiary from such transfers that are converted within 90
days of receipt thereof by BGF or such Restricted Subsidiary into cash or Cash
Equivalents (to the extent so received), shall be deemed to be cash or Cash
Equivalents for purposes of this provision. The amount of any Indebtedness of
BGF or such Restricted Subsidiary (other than Subordinated Indebtedness) that
is actually assumed by the transferee in such Asset Sale and from which BGF or
such Restricted Subsidiary is fully and unconditionally released shall be
deemed to be cash for purposes of determining the percentage of cash
consideration received by BGF or such Restricted Subsidiary. BGF or such
Restricted Subsidiary, as the case may be, may apply the Net Cash Proceeds of
any such Asset Sale within 270 days of such Asset Sale to (x) repay any Senior
Indebtedness and permanently reduce the commitments, if any, with respect
thereto, (y) to purchase from a Person other than BGF and its Restricted
Subsidiaries Replacement Assets or (z) any combination of (x) and (y);
provided, however, that if BGF or a Restricted Subsidiary makes an investment
in Replacement Assets not earlier than 90 days prior to such Asset Sale (or the
execution by BGF or a Restricted Subsidiary of a binding commitment to
consummate such Asset Sale, which commitment is not subject to any conditions
precedent other than obtaining necessary financing and the closing in respect
of the Asset Sale that is the subject of such binding commitment occurs within
90 days of the date such commitment is executed), then such investment shall
satisfy, to the extent of the amount of such investment, the requirements of
clause (y) above.
To the extent all or a portion of the Net Cash Proceeds of any Asset Sale
are not applied within 270 days of such Asset Sale as described in clause (x),
(y) or (z) of the immediately preceding paragraph (the "Net Proceeds Offer
Trigger Date"), BGF will make an offer to purchase (the "Net Proceeds Offer")
on a date (the "Net Proceeds Offer Payment Date") not less than 20 business
days following the date on which such offer is made (or such longer period as
may be required by law) nor more than 60 days following such Net Proceeds Offer
Trigger Date, from all holders on a pro rata basis (and on a pro rata basis
with the holders of any other
58
<PAGE>
Senior Subordinated Indebtedness with similar provisions requiring BGF to offer
to purchase such Senior Subordinated Indebtedness with the proceeds of Asset
Sales), that principal amount of notes and such other Indebtedness equal to
such unapplied Net Cash Proceeds at a price, in the case of the notes, equal to
100% of the principal amount of the notes to be purchased, plus accrued and
unpaid interest thereon, to the date of purchase (subject to the right of
holders of record on a record date to receive interest due on an interest
payment date that is on or prior to such date of purchase). Notwithstanding the
forgoing, BGF may defer the Net Proceeds Offer until there is an aggregate
amount of unapplied Net Cash Proceeds equal to or in excess of $5.0 million
resulting from one or more Asset Sales (at which time, the entire amount of
unapplied Net Cash Proceeds, and not just the amount in excess of $5.0 million,
shall be applied as required pursuant to this paragraph).
Each Net Proceeds Offer will be mailed to the record holders as shown on the
register of holders within 30 days following the Net Proceeds Offer Trigger
Date, with a copy to the trustee, and shall comply with the procedures set
forth in the indenture. Upon receiving notice of the Net Proceeds Offer,
holders may elect to tender their notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent holders of notes and
holders of other Senior Subordinated Indebtedness, if any, which are or is the
subject of a Net Proceeds Offer properly tender notes or such other Senior
Subordinated Indebtedness in an aggregate amount exceeding the amount of
unapplied Net Cash Proceeds, notes of tendering holders and such other Senior
Subordinated Indebtedness of tendering holders will be purchased on a pro rata
basis (based on amounts tendered).
BGF 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 purchase of notes
pursuant to a Net Proceeds Offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Asset Sale" provisions of the
indenture, BGF shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under the "Asset Sale"
provisions of the indenture by virtue thereof.
Upon completion of a Net Proceeds Offer, the amount of Net Cash Proceeds
will be reset at zero. Accordingly, to the extent that the aggregate amount of
notes and other Senior Subordinated Indebtedness tendered pursuant to a Net
Proceeds Offer is less than the aggregate amount of unapplied Net Cash
Proceeds, BGF may use any remaining Net Cash Proceeds for general corporate
purposes.
In the event of the transfer of substantially all (but not all) of the
property and assets of BGF and its Restricted Subsidiaries as an entirety to a
Person in a transaction permitted under "--Merger, Consolidation and Sale of
Assets," the Surviving Entity shall be deemed to have sold the properties and
assets of BGF and its Restricted Subsidiaries not so transferred for purposes
of this covenant, and shall comply with the provisions of this covenant with
respect to such deemed sale as if it were an Asset Sale. In addition, the Fair
Market Value of such properties and assets of BGF or its Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this covenant. If at any time any non-cash consideration received
by BGF or any Restricted Subsidiary, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash (other
than interest received with respect to any such non-cash consideration), then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. BGF will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions on
or in respect of its Capital Stock to BGF or any other Restricted Subsidiary or
pay any Indebtedness owed to BGF or any other Restricted Subsidiary; (b) make
loans or advances to, or guarantee any Indebtedness or other obligations of, or
make any Investment in, BGF or any other Restricted Subsidiary; or (c) transfer
any of its property or assets to BGF or any other Restricted Subsidiary, except
for such encumbrances or restrictions existing under or by reason of:
59
<PAGE>
(1) applicable law; (2) the indenture; (3) the senior credit facility as in
effect on the Issue Date, and any amendments or restatements thereof; provided,
however, that any such amendment or restatement is not materially more
restrictive with respect to such encumbrances or restrictions than those in
existence on the Issue Date; (4) customary non-assignment provisions of any
contract and customary provisions restricting assignment or subletting in any
lease governing a leasehold interest of any Restricted Subsidiary, or any
customary restriction on the ability of a Restricted Subsidiary to dividend,
distribute or otherwise transfer any asset which secures Purchase Money
Indebtedness of such Restricted Subsidiary; (5) any instrument governing
Acquired Indebtedness, which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the Person or
the properties or assets of the Person so acquired; (6) restrictions with
respect to a Restricted Subsidiary of BGF imposed pursuant to a binding
agreement which has been entered into for the sale or disposition of Capital
Stock or assets of such Subsidiary; provided however, that such restrictions
apply solely to the Capital Stock or assets of such Restricted Subsidiary which
are being sold; (7) customary restrictions imposed on the transfer of
copyrighted or patented materials; (8) secured Indebtedness otherwise permitted
to be incurred pursuant to the covenants described under "--Limitation on the
Incurrence of Additional Indebtedness" and "--Limitation on Liens," which
encumbrance or restriction is not applicable to any property or assets other
than the property or assets subject to the Lien securing such Indebtedness; or
(9) an agreement governing Indebtedness Incurred to Refinance the Indebtedness
issued, assumed or Incurred pursuant to an agreement referred to in clause (3),
(5) or (8) above; provided, however, that such refinancing agreement is not
materially more restrictive with respect to such encumbrances or restrictions
than those contained in the agreement referred to in such clause (3), (5) or
(8) as determined by the Board of Directors in their reasonable good faith
judgment.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. BGF will not sell or otherwise dispose of any shares of Capital
Stock of a Restricted Subsidiary, and will not cause or permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of
any shares of its Capital Stock, except (i) to BGF or a Wholly Owned Restricted
Subsidiary; (ii) the sale of 100% of the shares of the Capital Stock of any
Restricted Subsidiary owned by BGF or any Restricted Subsidiary effected in
accordance with the covenants described under "--Limitation on Asset Sales" and
"--Merger, Consolidation and Sale of Assets"; (iii) in the case of Restricted
Subsidiaries other than Wholly Owned Restricted Subsidiaries, issuance of
Capital Stock on a pro rata basis to BGF and its Restricted Subsidiaries and
minority shareholders of such Restricted Subsidiary (or on less than a pro rata
basis to any such minority holder if such minority holder does not acquire its
pro rata amount); (iv) the sale of Capital Stock of a Restricted Subsidiary or
issuance by a Restricted Subsidiary of Capital Stock if following such sale or
issuance, (x) such Restricted Subsidiary is no longer a Subsidiary, (y) BGF's
continuing Investment in such former Restricted Subsidiary is in compliance
with "--Limitations on Restricted Payments" and (z) any sale of Capital Stock
by BGF or such Restricted Subsidiary is made in compliance with the covenant
described under "--Limitation on Asset Sales".
Designation of Unrestricted Subsidiaries. BGF may designate after the Issue
Date any Subsidiary of BGF as an "Unrestricted Subsidiary" under the indenture
(a "Designation") only if:
(i) no Default or Event of Default shall have occurred and be continuing
at the time of or after giving effect to such Designation:
(ii) at the time of and after giving effect to such Designation, BGF
could Incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the covenant described under "--Limitation on
Incurrence of Additional Indebtedness"; and
(iii) BGF would be permitted to make an Investment at the time of
Designation (assuming the effectiveness of such Designation and treating
such Designation as an Investment at such time) pursuant to the first
paragraph of "--Limitation on Restricted Payments" in an amount (the
"Designation Amount") equal to the amount of BGF's Investment in such
Subsidiary on such date.
Neither BGF nor any Restricted Subsidiary shall at any time (x) provide
credit support for, subject any of its property or assets (other than the
Capital Stock of any Unrestricted Subsidiary) to the satisfaction of, or
60
<PAGE>
guarantee, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness) unless such
credit support or guarantee constitutes an Investment permitted pursuant to the
covenant described under "--Limitation on Restricted Payments," (y) be directly
or indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z)
be directly or indirectly liable for any Indebtedness which provides that the
holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to its
final scheduled maturity upon the occurrence of a default with respect to any
Indebtedness of any Unrestricted Subsidiary, except for any non-recourse
guarantee given solely to support the pledge by BGF or any Restricted
Subsidiary of the Capital Stock of any Unrestricted Subsidiary. For purposes of
the foregoing, the Designation of a Subsidiary of BGF as an Unrestricted
Subsidiary shall be deemed to include the Designation of all of the
Subsidiaries of such Subsidiary.
BGF may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary
(a "Revocation") only if:
(i) No Default or Event of Default shall have occurred and be continuing
at the time of and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of the
indenture.
All Designations and Revocations must be evidenced by resolutions of the
Board of Directors of BGF, delivered to the trustee certifying compliance with
the foregoing provisions.
Limitation on Layered Indebtedness: BGF shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness that
is subordinate in right of payment to any other Indebtedness, unless such
Indebtedness is subordinate in right of payment to, or ranks pari passu with,
the notes or, in the case of Restricted Subsidiaries that are Note Guarantors,
such Indebtedness is subordinate in right of payment to, or ranks pari passu
with, the Note Guarantees of such Note Guarantors.
No Note Guarantor will, directly or indirectly, Guarantee any Indebtedness
of BGF that is subordinate in right of payment to any other Indebtedness of BGF
unless such Guarantee is subordinate in right of payment to, or ranks pari
passu with, the Note Guarantee of such Note Guarantor.
Limitation on Liens. BGF will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, Incur any Liens of any kind
against or upon any of their respective properties or assets, whether owned on
the Issue Date or acquired after the Issue Date, or any proceeds therefrom, to
secure any Indebtedness unless contemporaneously therewith effective provision
is made, (i) in the case of BGF to secure the notes and all other amounts due
under the indenture and (ii) in the case of a Note Guarantor, to secure such
Note Guarantor's Note Guarantee and all other amounts due under the indenture,
in each case, equally and ratably with such Indebtedness (or, in the event that
such Indebtedness is subordinated in right of payment to the notes or such Note
Guarantee, prior to such Indebtedness) with a Lien on the same properties and
assets securing such Indebtedness for so long as such Indebtedness is secured
by such Lien, except for (A) Liens securing Senior Indebtedness (including,
without limitation, Indebtedness Incurred under the senior credit facility) and
(B) Permitted Liens.
Merger, Consolidation and Sale of Assets. BGF will not, in a single
transaction or series of related transactions, consolidate or merge with or
into any Person (whether or not BGF is the surviving Person), or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of BGF's and its Restricted Subsidiaries'
properties and assets (determined on a consolidated basis for BGF and its
Restricted Subsidiaries) to any Person unless:
(i) either (1) BGF shall be the surviving or continuing entity or (2)
the Person (if other than BGF) formed by such consolidation or into which
BGF is merged or the Person which acquires by sale,
61
<PAGE>
assignment, transfer, lease, conveyance or other disposition the properties
and assets of BGF and of BGF's Restricted Subsidiaries substantially as an
entirety (the "Surviving Entity") (x) shall be a corporation organized and
validly existing under the laws of the United States or any State thereof
and (y) shall expressly assume, by supplemental indenture (in form and
substance satisfactory to the trustee), executed and delivered to the
trustee, the due and punctual payment of the principal of, and premium, if
any, and interest on all of the notes and the performance and observance of
every covenant of the notes and the indenture and the registration rights
agreement on the part of BGF to be performed or observed;
(ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect
on a pro forma basis to any Indebtedness, including any Acquired
Indebtedness, Incurred in connection with or in respect of such
transaction), (A) BGF or such Surviving Entity, as the case may be, shall
be able to Incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the covenant described under "--
Limitation on Incurrence of Additional Indebtedness" or (B) the
Consolidated Fixed Charge Coverage Ratio for BGF or such Surviving Entity,
as the case may be, would be greater than the Consolidated Fixed Charge
Coverage Ratio for BGF immediately prior to such transaction;
(iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect on a pro forma basis to any
Indebtedness, including any Acquired Indebtedness, Incurred and any Lien
granted in connection with or in respect of the transaction), no Default or
Event of Default shall have occurred or be continuing;
(iv) each Note Guarantor (including Persons which become Note Guarantors
as a result of the transaction) shall have confirmed by supplemental
indenture that its Note Guarantee shall apply for such Person's Obligations
in respect of the indenture and the notes; and
(v) BGF or the Surviving Entity shall have delivered to the trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or
other disposition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture, comply with
the applicable provisions of the indenture and that all conditions
precedent in the indenture relating to such transaction have been
satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of BGF, the Capital Stock of which constitutes all or
substantially all of the properties and assets of BGF, shall be deemed to be
the transfer of all or substantially all of the properties and assets of BGF.
The provisions of clause (ii) above shall not apply to (x) any transfer of
the properties or assets of a Restricted Subsidiary of BGF to BGF or to a
Wholly Owned Restricted Subsidiary, (y) any merger of a Restricted Subsidiary
into BGF or (z) any merger of BGF into a Restricted Subsidiary.
The indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the properties and assets of BGF
and its Restricted Subsidiaries in accordance with the foregoing, in which BGF
is not the continuing corporation, the successor Person formed by such
consolidation or into which BGF is merged or to which such conveyance, lease or
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, BGF under the indenture and the notes with the same
effect as if such surviving entity had been named as such.
Each Note Guarantor (other than any Note Guarantor whose Note Guarantee is
to be released in accordance with the terms described under "Note Guarantees"
will not, and BGF will not cause or permit any Note Guarantor to, consolidate
with or merge into any Person that is not a Note Guarantor unless such Person
(if such Person is the surviving entity) assumes by supplemental indenture all
of the obligations of such Note Guarantor in respect of its Note Guarantee.
62
<PAGE>
Limitations on Transactions with Affiliates. (a) BGF will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its Affiliates
(each an "Affiliate Transaction"), unless: (i) the terms of such Affiliate
Transaction are no less favorable than those that could reasonably be expected
to be obtained in a comparable transaction at such time on an arm's-length
basis from a Person that is not an Affiliate of BGF; (ii) in the event that
such Affiliate Transaction involves aggregate payments, or transfers of
property or services with a Fair Market Value in excess of $2.5 million during
any twelve-month period, the terms of such Affiliate Transaction shall be
approved by a majority of the members of the Board of Directors of BGF
(including a majority of the disinterested members thereof), such approval to
be evidenced by a Board Resolution stating that such Board of Directors has
determined that such transaction complies with the foregoing provisions and
(iii) in the event that such Affiliate Transaction involves aggregate payments,
or transfer of property or services with a fair market value, in excess of $7.0
million during any twelve-month period, BGF shall, prior to the consummation
thereof, obtain a favorable opinion as to the fairness of such transaction or
series of related transactions to BGF and the relevant Restricted Subsidiary
(if any) from a financial point of view from an Independent Financial Advisor
and file the same with the trustee.
(b) Notwithstanding the foregoing, the restrictions set forth in paragraph
(a) shall not apply to (i) transactions with or among BGF and any Restricted
Subsidiary or between or among Restricted Subsidiaries; (ii) reasonable fees
and compensation paid to, and any indemnity provided on behalf of, officers,
directors, employees, consultants or agents of BGF or any Restricted Subsidiary
as determined in good faith by BGF's Board of Directors; (iii) any transactions
undertaken pursuant to any contractual obligations or rights in existence on
the Issue Date (as in effect on the Issue Date); (iv) any Restricted Payments
made in compliance with "Limitation on Restricted Payments"; (v) loans and
advances to officers, directors and employees of BGF or any Restricted
Subsidiary for travel, entertainment, moving and other relocation expenses, in
each case made in the ordinary course of business; and (vi) the entering into
by BGF and any of its consolidated Restricted Subsidiaries of a tax sharing or
similar arrangement.
Conduct of Business. BGF and its Restricted Subsidiaries will not engage in
any businesses other than a Permitted Business.
Reports to Holders. Notwithstanding that BGF may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, so long as
any notes remain outstanding, BGF shall (i) provide the trustee, the holders
and the Initial Purchaser (as defined below) with such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections within 15 days after the times specified for the filing of such
information, documents and reports under such Sections and (ii) beginning on
the earlier of (x) the effective date of the Exchange Offer Registration
Statement (as defined below) and (y) 150 days following the Issue Date, file
with the Commission, to the extent permitted, the information, documents and
reports referred to in clause (i) within the periods specified under such
Sections. In addition, at any time when BGF is subject to or is not current in
its reporting obligations under clause (ii) of the preceding sentence, BGF will
make available, upon request, to any holder and any prospective purchaser of
notes the information required pursuant to Rule 144A(d)(4) under the Securities
Act.
Payments for Consent. Neither BGF nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of any notes for or as an
inducement to any consent, waiver or amendment of any terms or provisions of
the notes, unless such consideration is offered to be paid or agreed to be paid
to all holders of the notes that so consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
63
<PAGE>
Events of Default
The following events are defined in the indenture as "Events of Default":
(i) the failure to pay the principal of (or premium, if any, on) any note
when due, at Stated Maturity, upon redemption or otherwise (including the
failure to make a required payment to purchase notes tendered pursuant to a
Change of Control Offer or a Net Proceeds Offer) and whether or not prohibited
by the provisions of the indenture described under "Subordination of the Notes
and the Note Guarantees");
(ii) the failure to pay any interest on any Notes when due, continued for 30
days or more (whether or not prohibited by the provisions of the indenture
described under "Subordination of the Notes and the Note Guarantees");
(iii) the failure to perform or comply with any of the provisions described
under "Certain Covenants--Merger, Consolidation and Sales of Assets";
(iv) the failure to perform or comply with any other covenant or agreement
contained in the indenture or in the notes continued for 30 days or more after
written notice to BGF from the trustee or the holders of at least 25% in
aggregate principal amount of the outstanding notes;
(v) the failure to pay at final maturity (giving effect to any applicable
grace periods and any extensions thereof) the principal amount of any
Indebtedness of BGF or any Restricted Subsidiary, or the acceleration of the
final stated maturity of any such Indebtedness by reason of a default or event
of default in respect of such Indebtedness, in any case if the aggregate
principal amount of such Indebtedness, together with the principal amount of
any other such Indebtedness in default for failure to pay principal at final
maturity or which has been so accelerated, aggregates $5.0 million or more at
any time;
(vi) one or more judgments in an aggregate amount in excess of $5.0 million
(to the extent not covered by third-party insurance as to which a financially
sound insurer has not disclaimed coverage) shall have been rendered against BGF
or any of its Restricted Subsidiaries and such judgment or judgments remain
undischarged, unpaid or unstayed for a period of 60 days after such judgment or
judgments become final and non-appealable;
(vii) certain events of bankruptcy affecting BGF or any of its Significant
Subsidiaries or group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary; or
(viii) the Note Guarantee of any Note Guarantor is held or declared to be
unenforceable or invalid in a judicial proceeding or ceases for any reason to
be in full force and effect (other than by reason of a release of such Note
Guarantor from its Note Guarantee in accordance with the terms of the
indenture) or any Note Guarantor or any Person acting on behalf of any Note
Guarantor denies or disaffirms such Note Guarantor's obligations under its Note
Guarantee (other than by reason of a release of such Note Guarantor from its
Note Guarantee in accordance with the terms of the indenture); or
(ix) at any time prior to the repayment in full of the Acquisition Loan, the
Acquisition Loan Pledge is held or declared to be unenforceable or invalid in a
judicial proceeding or ceases for any reason to be in full force and effect.
If an Event of Default (other than an Event of Default relating to BGF
specified in clause (vii) above) shall occur and be continuing, the trustee or
the holders of at least 25% in principal amount of outstanding notes may
declare the principal of (and premium, if any) and accrued and unpaid interest
on all the notes to be due and payable by notice in writing to BGF and the
trustee specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice"), and the same shall become
immediately due and payable. If an Event of Default specified in clause (vii)
relating to BGF above occurs and is continuing, then all unpaid principal of,
and premium, if any, and accrued and unpaid interest on all of the outstanding
notes shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the trustee or any holder.
64
<PAGE>
The indenture provides that, at any time after a declaration of acceleration
with respect to the notes as described in the preceding paragraph, the holders
of a majority in principal amount of the notes may rescind and cancel such
declaration and its consequences (i) if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of the acceleration, (ii) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
principal, which has become due otherwise than by such declaration of
acceleration, has been paid and (iii) if BGF has paid the trustee its
reasonable compensation and reimbursed the trustee for its reasonable expenses,
disbursements and advances. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
The holders of a majority in principal amount of the notes may waive any
existing Default or Event of Default under the indenture, and its consequences,
except a default in the payment of the principal of, premium, if any, or
interest on any notes.
Subject to the provisions of the indenture relating to the duties of the
trustee, the trustee is under no obligation to exercise any of its rights or
powers under the indenture at the request, order or direction of any of the
holders, unless such holders have offered to the trustee reasonable indemnity.
Subject to all provisions of the indenture and applicable law, the holders of a
majority in aggregate principal amount of the then outstanding notes have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust or power conferred on
the trustee.
No holder of any notes will have any right to institute any proceeding with
respect to the indenture or for any remedy thereunder, unless (i) such holder
gives to the trustee written notice of a continuing Event of Default, (ii)
holders of at least 25% in principal amount of the then outstanding notes make
a written request to pursue the remedy, (iii) such holders of the notes provide
to the trustee satisfactory indemnity, (iv) the trustee does not comply within
60 days and (v) during such 60 day period the holders of a majority in
principal amount of the outstanding notes do not give the trustee a written
direction which, in the opinion of the trustee, is inconsistent with the
request. Otherwise, no holder of any note will have any right to institute any
proceeding with respect to the indenture or for any remedy thereunder, except
(i) a holder of a note may institute suit for enforcement of payment of the
principal of and premium, if any, or interest on such note on or after the
respective due dates expressed in such note or (ii) the institution of any
proceeding with respect to the indenture or any remedy thereunder, including,
without limitation, acceleration, by the holders of a majority in principal
amount of the outstanding notes; provided, however, that upon institution of
any proceeding or exercise of any remedy, such holder or holders provide the
trustee with prompt notice thereof.
BGF is required to deliver to the trustee written notice of any event which
would constitute certain Defaults, their status and what action BGF is taking
or proposes to take in respect thereof. In addition, BGF is required to deliver
to the trustee, within 120 days after the end of each fiscal year, a
certificate indicating whether the signers thereof know of any Default that
occurred during the previous fiscal year. The indenture provides that if a
Default occurs, is continuing and is known to the trustee, the trustee must
mail to each holder notice of the Default within five days after it is known to
a trust officer or written notice of it is received by the trustee. Except in
the case of a Default in the payment of principal of, premium, if any, or
interest on any note, the trustee may withhold notice if and so long as a
committee of its trust officers in good faith determines that withholding
notice is not opposed to the interest of the holders.
Legal Defeasance and Covenant Defeasance
BGF may, at its option and at any time, elect to have its obligations
discharged with respect to the outstanding notes ("Legal Defeasance"). Such
Legal Defeasance means that BGF shall be deemed to have paid and discharged the
entire Indebtedness represented by the outstanding notes, except for (i) the
rights of holders to receive payments in respect of the principal of, premium,
if any, and interest on the notes when such payments are due, (ii) BGF's
obligations with respect to the notes concerning issuing temporary notes,
registration of notes, mutilated, destroyed, lost or stolen notes and the
maintenance of an office or agency for
65
<PAGE>
payments, (iii) the rights, powers, trust, duties and immunities of the trustee
and BGF's obligations in connection therewith and (iv) the Legal Defeasance
provisions of the indenture. In addition, BGF may, at its option and at any
time, elect to have the obligations of BGF released with respect to certain
covenants that are described in the indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization 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, (i) BGF
must irrevocably deposit with the trustee, in trust, for the benefit of the
holders cash in U.S. dollars, certain direct non-callable obligations of, or
guaranteed by, the United States, 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 notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be; (ii) in the case of Legal
Defeasance, BGF shall have delivered to the trustee an Opinion of Counsel in
the United States reasonably acceptable to the trustee to the effect that (A)
BGF has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the Issue Date, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall state that, the holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, BGF shall have delivered to the trustee an Opinion of Counsel in
the United States reasonably acceptable to the trustee to the effect that the
holders will not recognize income, gain or loss for federal income tax purposes
as a result of such Covenant Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred; (iv) the trustee
shall have received an Officers' Certificate stating that no Default or Event
of Default shall have occurred and be continuing on the date of such deposit or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit; (v) the trustee shall have received an Officers' Certificate stating
that such Legal Defeasance or Covenant Defeasance shall not result in a breach
or violation of, or constitute a default under the indenture or any other
material agreement or instrument to which BGF or any of its Subsidiaries is a
party or by which BGF or any of its Subsidiaries is bound (and in that
connection, the trustee shall have received a certificate from the agent under
the senior credit facility to that effect with respect to the senior credit
facility then in effect); (vi) BGF shall have delivered to the trustee an
Officers' Certificate stating that the deposit was not made by BGF with the
intent of preferring the holders over any other creditors of BGF or any
Subsidiary of BGF or with the intent of defeating, hindering, delaying or
defrauding any other creditors of BGF or others; (vii) BGF shall have delivered
to the trustee an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with; (viii) BGF 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; and (ix) certain other customary
conditions precedent are satisfied.
Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
notes, as expressly provided for in the indenture) as to all outstanding notes
when (i) either (a) all the 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 BGF and thereafter repaid to BGF or discharged
from such trust) have been delivered to the trustee for cancellation or (b) all
notes not theretofore delivered to the trustee for
66
<PAGE>
cancellation have become due and payable, or will be due and payable within one
year or are to be called for redemption within one year under arrangements
satisfactory to the trustee for the giving of notice of redemption, and BGF has
irrevocably deposited or caused to be deposited with the trustee funds or
certain direct, non-callable obligations of, or guaranteed by, the United
States 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 earlier of the Stated
Maturity or the redemption date together with irrevocable instructions from BGF
directing the trustee to apply such funds and/or the proceeds of such direct,
non-callable obligations to the payment thereof at maturity or redemption, as
the case may be; (ii) BGF has paid all other sums payable under the indenture
by BGF; and (iii) BGF has delivered to the trustee an Officers' Certificate
stating that all conditions precedent under the indenture relating to the
satisfaction and discharge of the indenture have been complied with.
Modification of the Indenture
From time to time, BGF and the trustee, without the consent of the holders,
may amend the indenture or the notes for certain specified purposes, including
curing ambiguities, defects or inconsistencies, providing for Note Guarantors
and making other changes which do not, in the opinion of the trustee, adversely
affect the rights of any of the holders in any material respect. In formulating
its opinion on such matters, the trustee will be entitled to rely on such
evidence as it deems appropriate, including, without limitation, solely on an
Opinion of Counsel. Other modifications and amendments of the indenture or the
notes may be made with the consent of the holders of a majority in principal
amount of the then outstanding notes issued under the indenture, except that,
without the consent of each holder affected thereby, no amendment may: (i)
reduce the amount of notes whose holders must consent to an amendment or
waiver; (ii) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any notes; (iii)
reduce the principal of or change or have the effect of changing the fixed
maturity of any notes, or change the date on which any notes may be subject to
redemption, or reduce the redemption price therefor; (iv) make any notes
payable in money other than that stated in the notes; (v) make any change in
provisions of the indenture entitling each holder to receive payment of
principal of, premium, if any, and interest on such note on or after the due
date thereof or to bring suit to enforce such payment, or permitting holders of
a majority in principal amount of notes to waive Defaults or Events of Default;
(vi) amend, change or modify in any material respect the obligation of BGF to
make and consummate a Change of Control Offer in respect of a Change of Control
that has occurred or make and consummate a Net Proceeds Offer with respect to
any Asset Sale that has been consummated; (vii) modify the subordination
provisions of the indenture with respect to BGF or any Note Guarantor in a
manner that adversely affects the rights of any holder; or (viii) eliminate or
modify in any manner a Note Guarantor's obligations with respect to its Note
Guarantee which adversely affects holders in any material respect. However, no
amendment may be made to the subordination provisions of the indenture that
adversely affects the rights of any holder of Senior Indebtedness of BGF or a
Note Guarantor then outstanding unless the holders of such Senior Indebtedness
(or their representative) consent to such change.
Governing Law
The indenture provides that the indenture and the notes will be governed by,
and construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
The Trustee
The indenture provides that, except during the continuance of an Event of
Default, the trustee will perform only such duties as are specifically set
forth in the indenture. During the existence of an Event of Default, the
trustee will exercise such rights and powers vested in it by the indenture, and
use the same degree of care and skill in its exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
67
<PAGE>
The indenture and the provisions of the TIA contain certain limitations on
the rights of the trustee, should it become a creditor of BGF, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
trustee will be permitted to engage in other transactions; provided, however,
that if the trustee acquires any conflicting interest as described in the TIA,
it must eliminate such conflict or resign.
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
indenture. Reference is made to the indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
or at the time it merges or consolidates with BGF or any of its Restricted
Subsidiaries or is assumed in connection with the acquisition of assets from
such Person and in each case not Incurred in connection with, or in
anticipation or contemplation of, such acquisition, merger or consolidation.
Such Indebtedness shall be deemed to have been Incurred at the time such Person
becomes a Restricted Subsidiary or at the time it merges or consolidates with
BGF or a Restricted Subsidiary or at the time such Indebtedness is assumed in
connection with the acquisition of assets from such Person.
"Acquisition Loan" means the secured loan of approximately $136.7 million
from BGF to GHC to fund a portion of the purchase price payable by AGY Holdings
in connection with its acquisition of a 51% interest in AGY.
"Acquisition Loan Pledge" shall mean the pledge by GHC to BGF of all of the
Capital Stock of AGY Holdings and Belmont as security for the Acquisition Loan.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling", "controlled by" and "under common control with" have
meanings correlative of the foregoing; provided, however, that beneficial
ownership of 10% or more of the Voting Stock of a Person shall be deemed to be
control.
"AGY" means Advanced Glassfiber Yarns, LLC, a Delaware limited liability
company.
"AGY Holdings" means AGY Holdings Inc., a Delaware corporation and Wholly-
Owned Subsidiary of GHC.
"Asset Acquisition" means (a) an Investment by BGF or any Restricted
Subsidiary in any other Person pursuant to which such Person shall become a
Restricted Subsidiary, or shall be merged with or into BGF or any Restricted
Subsidiary, or (b) the acquisition by BGF or any Restricted Subsidiary of the
assets of any Person (other than a Subsidiary of BGF) which constitute all or
substantially all of the assets of such Person or comprises any division or
line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, assignment or other transfer for value by BGF or any of its
Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any
Person other than BGF or a Restricted Subsidiary (including a Person that is or
will become a Restricted Subsidiary immediately after such sale, issuance,
conveyance, transfer, assignment or other transfer for value) of (a) any
Capital Stock of any Restricted Subsidiary; or (b) any other property or assets
(other than cash, Cash Equivalents or Capital Stock) of BGF or any Restricted
Subsidiary other than in the ordinary course of
68
<PAGE>
business; provided, however, that Asset Sale shall not include, (i) the sale,
conveyance, disposition or other transfer of all or substantially all of the
assets of BGF and its Restricted Subsidiaries as permitted under "Certain
Covenants--Merger, Consolidation and Sale of Assets," (ii) any sale of Capital
Stock in, or Indebtedness or other securities of an Unrestricted Subsidiary,
(iii) a disposition of inventory or leases in the ordinary course of business,
(iv) dispositions of assets in any fiscal year with a Fair Market Value not to
exceed $2.0 million in the aggregate, (v) for purposes of "Certain Covenants--
Limitation on Asset Sales" only, the making of a Permitted Investment or
Restricted Payment, and (vi) a disposition in the ordinary course of business
of obsolete or worn-out equipment.
"Asset Sale Transaction" means Asset Sales and, whether or not constituting
an Asset Sale, (i) any sale or other disposition of Capital Stock and (ii) any
sale or other disposition excluded from the definition of Asset Sale by clause
(b)(i) or (v) of such definition.
"Belmont" means Belmont of America, Inc., a Delaware corporation.
"Blockage Notice" has the meaning set forth under "--Subordination of the
Exchange Notes and the Note Guarantees."
"Board of Directors" means, (i) in the case of a Person that is a
corporation, the board of directors of such Person or any committee authorized
to act therefor and (ii) in the case of any other Person, the board of
directors, management committee or similar governing body or any authorized
committee thereof responsible for the management of the business and affairs of
such Person.
"Board Resolution" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person (or person
performing a similar function) to have been duly adopted by the Board of
Directors of such Person and to be in full force and effect on the date of such
certification, and delivered to the trustee.
"Capitalized Lease Obligations" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to any
Person that is not a corporation, any and all membership, partnership or other
equity or ownership interests of such Person.
"Cash Equivalents" mean s (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the date of
acquisition thereof combined capital and surplus of not less than $500 million;
(v) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any bank meeting the qualifications specified in clause (iv) above; and
(vi) investments in money market funds which invest substantially all their
assets in securities of the types described in clauses (i) through (v) above.
69
<PAGE>
"Change of Control" means the occurrence of one or more of the following
events:
(i) Prior to the first Public Equity Offering, the permitted holders
cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, in the aggregate at least
of 51% of the total voting power of the Voting Stock of BGF, whether as a
result of issuance of securities of BGF or any parent company of BGF, any
merger, consolidation, liquidation or dissolution of BGF, any direct or
indirect transfer of securities by BGF or otherwise (for purposes of this
clause (i) and clause (ii) below, the permitted holders shall be deemed to
beneficially own any Voting Stock of a corporation (the "specified
corporation") held by any other corporation (the "parent corporation") so
long as the permitted holders beneficially own (as so defined), directly or
indirectly, in the aggregate at least 51% of the voting power of the Voting
Stock of the parent corporation);
(ii) subsequent to the first Public Equity Offering, (A) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than one or more permitted holders, is or becomes the beneficial
owner (as defined in Rule 13d-3 and 13d-5 under the Exchange Act, except
that for purposes of this clause (ii) such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 35% of the total
voting power of the Voting Stock of BGF and (B) the permitted holders
"beneficially own" (as defined in this clause (ii)), directly or
indirectly, in the aggregate a lesser percentage of the total voting power
of the Voting Stock of BGF than such other person (for the purposes of this
clause (ii), such other person shall be deemed to beneficially own any
Voting Stock of a specified corporation held by a parent corporation, if
such other person is the beneficial owner (as defined in this clause (ii),
directly or indirectly, of more than 35% of the voting power of the Voting
Stock of such parent corporation and the permitted holders "beneficially
own" (as defined in this clause (ii), directly or indirectly, in the
aggregate a lesser percentage of the voting power of the Voting Stock of
such parent corporation;
(iii) during any period of two consecutive years (or, in the case this
event occurs within the first two years after the Issue Date, such shorter
period as shall have begun on the Issue Date), individuals who at the
beginning of such period constituted the Board of Directors of BGF
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the shareholders of BGF was approved by
a vote of a majority of the directors of BGF then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of BGF then in office; or
(iv) BGF consolidates with, or merges with or into, another Person
(other than BGF or a Wholly Owned Restricted Subsidiary) or BGF or any of
its Restricted Subsidiaries sell, conveys, assigns, transfers, leases or
otherwise disposes of all or substantially all of the assets of BGF and its
Restricted Subsidiaries (determined on a consolidated basis for BGF and its
Restricted Subsidiaries) to any Person (other than BGF or any Wholly Owned
Restricted Subsidiary), other than any such transaction where immediately
after such transaction the Person or Persons that "beneficially owned" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have "beneficial ownership" of all securities
that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time) immediately
prior to such transaction, directly or indirectly, a majority of the total
voting power of the then outstanding Voting Stock of BGF "beneficially own"
(as so determined), directly or indirectly, a majority of the total voting
power of the then outstanding Voting Stock of the surviving or transferee
Person.
"Change of Control Offer" has the meaning set forth under "Change of
Control."
"Change of Control Payment Date" has the meaning set forth under "Change of
Control."
70
<PAGE>
"Commission" means the Securities and Exchange Commission, or any successor
agency thereto with respect to the regulation or registration of securities.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, for any period, Consolidated Net Income for
such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) Consolidated Income Tax Expense for such period;
(ii) Consolidated Interest Expense for such period; and (iii) Consolidated Non-
cash Charges for such period; less (A) all non-cash items increasing
Consolidated Net Income for such period and (B) all cash payments during such
period relating to non-cash charges that were added back in determining
Consolidated EBITDA in any prior period.
"Consolidated Fixed Charge Coverage Ratio" means, as of any date of
determination, the ratio of the aggregate amount of Consolidated EBITDA for the
four most recent full fiscal quarters for which financial statements are
available ending prior to the date of such determination (the "Four Quarter
Period") to Consolidated Fixed Charges for such Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to (i) the Incurrence or repayment of any Indebtedness of BGF or
any of its Restricted Subsidiaries (and the application of the proceeds
thereof), including the Incurrence of any Indebtedness (and the application of
the proceeds thereof) giving rise to the need to make such determination,
occurring during or after such Four Quarter Period and on or prior to such date
of determination, as if such Incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of such
Four Quarter Period and (ii) any Asset Sale Transactions or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need
to make such determination as a result of BGF or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) Incurring Acquired Indebtedness and including,
without limitation, by giving pro forma effect to any Consolidated EBITDA
(provided that such pro forma Consolidated EBITDA shall be calculated in a
manner consistent with the exclusions in the definition of "Consolidated Net
Income" but without giving effect to clause (C) of the definition of
Consolidated Net Income) attributable to the assets which are the subject of
the Asset Sale Transaction or Asset Acquisition during the Four Quarter Period)
occurring during the Four Quarter Period or at any time subsequent to the last
day of the Four Quarter Period and on or prior to such date of determination,
as if such Asset Sale Transaction or Asset Acquisition (including the
Incurrence of any such Acquired Indebtedness) occurred on the first day of the
Four Quarter Period. If BGF or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the Incurrence of such guaranteed Indebtedness as if BGF
or any of its Restricted Subsidiaries had directly Incurred such guaranteed
Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the date of determination
and which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on such date of determination; (2) if interest on any
Indebtedness actually Incurred on such date of determination may optionally be
determined at an interest rate based upon a factor of a prime or similar rate,
a eurocurrency interbank offered rate, or other rates, then the interest rate
in effect on such date of determination will be deemed to have been in effect
during the Four Quarter Period; and (3) notwithstanding clause (1) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by Hedging Obligations, shall be deemed to accrue at the
rate per annum resulting after giving effect to the operation of such
agreements.
"Consolidated Fixed Charges" means, for any period, the sum, without
duplication, of (i) Consolidated Interest Expense, plus (ii) the product of (x)
the amount of all dividend payments on any series of Preferred
71
<PAGE>
Stock of BGF (other than dividends paid in Qualified Capital Stock) paid,
accrued or scheduled to be paid or accrued during such period times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated federal, state and local tax rate
of BGF, expressed as a decimal.
"Consolidated Income Tax Expense" means, with respect to BGF for any period,
the provision for Federal, state, local and foreign income taxes payable by BGF
and its Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the sum of, without
duplication: (i) the aggregate of cash and non-cash interest expense of BGF and
its Restricted Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP, and in any event shall include, without limitation
(whether or not interest expense in accordance with GAAP), (a) any amortization
of debt discount and any amortization or write off of deferred financing costs,
(b) the net costs under Hedging Obligations related to Indebtedness (including
amortization of fees), (c) all capitalized interest, (d) the interest portion
of any deferred payment obligation, (e) commissions, discounts and other fees
and charges Incurred in respect of letters of credit or bankers' acceptances
and (f) 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 the assets of such Person or one of its Restricted Subsidiaries
(whether or not such guarantee or Lien is called upon); and (ii) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by BGF and its Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the aggregate net income
(or loss) of BGF and its Restricted Subsidiaries for such period on a
consolidated basis, determined in accordance with GAAP; provided, however, that
there shall be excluded therefrom (a) net after-tax gains from Asset Sale
Transactions or abandonments of reserves relating thereto, (b) net after-tax
items classified as extraordinary or non-recurring gains or losses, (c) the net
income of any Person acquired in a "pooling of interests" transaction accrued
prior to the date it becomes a Restricted Subsidiary or is merged or
consolidated with BGF or any Restricted Subsidiary, (d) the net income (but not
loss) of any Restricted Subsidiary to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is restricted by contract, operation of law or otherwise, (e) the net income of
any Person, other than a Restricted Subsidiary, except to the extent of cash
dividends or distributions paid to BGF or to a Restricted Subsidiary by such
Person, (f) any restoration to income of any contingency reserve, except to the
extent that provision for such reserve was made out of Consolidated Net Income
accrued at any time following the Issue Date and (g) all gains and losses from
the cumulative effect of any change in accounting principles.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses of BGF and its
Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such charge which requires an accrual of or
a reserve for cash charges for any future period).
"Covenant Defeasance" has the meaning set forth under "Legal Defeasance and
Covenant Defeasance."
"Currency Agreement" means, in respect of any Person, any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Designated Senior Indebtedness" means, (a) in respect of BGF, the senior
credit facility and any other Senior Indebtedness of BGF which, at the date of
determination, has an aggregate principal amount outstanding of, or under
which, at the date of determination, the holders thereof are committed to lend
up to, at least $25.0 million and is specifically designated by BGF in the
instrument evidencing or governing such Senior
72
<PAGE>
Indebtedness as "Designated Senior Indebtedness" and (b) in respect of any Note
Guarantor, the senior credit facility and any guarantee by such Note Guarantor
of Indebtedness of BGF referred to in clause (a) and (c) any other Senior
Indebtedness of such Note Guarantor which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least $25.0
million and is specifically designated by such Note Guarantor in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness."
"Designation" has the meaning set forth under "--Certain Covenants--
Designation of Unrestricted Subsidiaries" above.
"Designation Amount" has the meaning set forth under "--Certain Covenants--
Designation of Unrestricted Subsidiaries" above.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder 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 sole option of
the holder thereof, in any case, on or prior to the 91st day after the final
maturity date of the Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; provided, however, that the Fair Market
Value of any such asset or assets may be determined conclusively by the Board
of Directors of BGF acting in good faith, and shall be evidenced by a Board
Resolution.
"Foreign Subsidiary" means, with respect to any Person, any direct or
indirect Subsidiary of such Person that is organized under the laws of any
jurisdiction outside the United States, any state thereof or the District of
Columbia.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio" above.
"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 may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"GHC" means Glass Holdings Corp., a Delaware corporation.
"Guaranteed Obligations" has the meaning set forth under "Note Guarantees."
"Hedging Obligations" means the obligations of any Person pursuant to any
Interest Rate Agreement or Currency Agreement.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation on the balance sheet of such Person (and
"Incurrence," "Incurred" and "Incurring" shall have meanings correlative to the
foregoing). Indebtedness of any Person or any of its Subsidiaries existing at
the time such Person becomes a Restricted Subsidiary (or is merged into or
73
<PAGE>
consolidated with BGF or any Restricted Subsidiary), whether or not such
Indebtedness was Incurred in connection with, as a result of, or in
contemplation of, such Acquired Person becoming a Restricted Subsidiary (or
being merged into or consolidated with BGF or any Restricted Subsidiary), shall
be deemed Incurred at the time any such Acquired Person becomes a Restricted
Subsidiary or merges into or consolidates with BGF or any Restricted
Subsidiary. Accrual of interest, the accretion of accreted value and the
payment of regularly scheduled interest in the form of additional Indebtedness
of the same instrument will not be deemed to be an Incurrence of Indebtedness
for purposes of the "Limitation on Incurrence of Additional Indebtedness"
covenant.
"Indebtedness" means with respect to any Person, without duplication, (i)
the principal amount (or, if less, the accreted value) of all obligations of
such Person for borrowed money, (ii) the principal amount (or, if less, the
accreted value) of all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all Capitalized Lease
Obligations of such Person, (iv) all obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations and all obligations under any title retention agreement (but
excluding trade accounts payable and other accrued liabilities arising in the
ordinary course of business that are not overdue by 90 days or more or are
being contested in good faith by appropriate proceedings promptly instituted
and diligently conducted), (v) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (vi) guarantees and other contingent obligations of
such Person in respect of Indebtedness referred to in clauses (i) through (v)
above and clause (viii) below, (vii) all Indebtedness of any other Person of
the type referred to in clauses (i) through (vi) which is secured by any Lien
on any property or asset of such Person, the amount of such Indebtedness being
deemed to be the lesser of the Fair Market Value of such property or asset or
the amount of the Indebtedness so secured, (viii) all obligations under Hedging
Obligations of such Person and (ix) all Disqualified Capital Stock issued by
such Person with the amount of Indebtedness represented by such Disqualified
Capital Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding
accrued dividends, if any. For purposes hereof, the "maximum fixed repurchase
price" of any Disqualified Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Disqualified
Capital Stock as if such Disqualified Capital Stock were purchased on any date
on which Indebtedness shall be required to be determined pursuant to the
indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be the
Fair Market Value thereof.
"Independent Financial Advisor" means an accounting firm, appraisal firm,
investment banking firm or consultant to Persons engaged in a Permitted
Business, in each case, of nationally recognized standing that is, in the
judgment of BGF's Board of Directors, qualified to perform the task for which
it has been engaged and which is independent in connection with the relevant
transaction.
"Interest Rate Agreement" of any Person means any interest rate protection
agreement (including, without limitation, interest rate swaps, caps, floors,
collars, derivative instruments and similar agreements) and/or other types of
interest hedging agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude accounts receivable or
deposits arising in the ordinary course of business. For purposes of the
"Limitation on Restricted Payments" covenant, "Investment" shall include and be
valued at the Fair Market Value of the net assets of any Restricted Subsidiary
at the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that upon a redesignation of such Subsidiary as
a Restricted Subsidiary, BGF will be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(x) the total amount of BGF's "Investments" in such Subsidiary made prior to or
at the time of such redesignation less (y) that portion of the Fair Market
Value of the net assets of such Subsidiary at the time that such Subsidiary is
so re-
74
<PAGE>
designated a Restricted Subsidiary that is proportionate to BGF's equity
interest in such Subsidiary; and (ii) any property transferred to or from an
Unrestricted Subsidiary will be valued at its Fair Market Value at the time of
such transfer. If BGF or any Restricted Subsidiary sells or otherwise disposes
of any Common Stock of a Restricted Subsidiary (including any issuance and sale
of Capital Stock by a Restricted Subsidiary) such that, after giving effect to
any such sale or disposition, such Restricted Subsidiary would cease to be a
Subsidiary of BGF, BGF shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the Fair Market Value of the Common
Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means the first date of issuance of old notes under the
indenture.
"Legal Defeasance" has the meaning set forth under "Legal Defeasance and
Covenant Defeasance."
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement to
give any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
received by BGF or any of its Restricted Subsidiaries from such Asset Sale, net
of (a) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), (b) taxes paid or payable after taking into account any
reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements, (c) repayment of Indebtedness that
is required to be repaid in connection with such Asset Sale, (d) appropriate
amounts to be provided by BGF or any Restricted Subsidiary, as the case may be,
as a reserve, in accordance with GAAP, against any liabilities associated with
such Asset Sale and retained by BGF or any Restricted Subsidiary, as the case
may be, after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
"Net Proceeds Offer" has the meaning set forth under "--Certain Covenants--
Limitation on Asset Sales."
"Net Proceeds Offer Payment Date" has the meaning set forth under "--Certain
Covenants--Limitation on Asset Sales."
"Net Proceeds Offer Trigger Date" has the meaning set forth under "--Certain
Covenants--Limitation on Asset Sales."
"Note Guarantee" has the meaning set forth in the third paragraph of the
introduction to this "Description of Exchange Notes."
"Note Guarantor" has the meaning set forth in the third paragraph of the
introduction to this "Description of Exchange Notes."
"Obligations" means, with respect to any Indebtedness, any principal,
interest (including, without limitation, Post-Petition Interest), penalties,
fees, indemnifications, reimbursements, including, in the case of the notes and
the Note Guarantees in respect thereof, damages, and other liabilities payable
under the documentation governing such Indebtedness.
"OC"means Owens Corning, a Delaware corporation.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the trustee. The counsel may be an employee of or
counsel to BGF or the trustee.
75
<PAGE>
"Payment Blockage Period" has the meaning set forth under "Subordination of
the notes and the Note Guarantees."
"Permitted Business" means the business or businesses conducted by BGF and
its Restricted Subsidiaries as of the Issue Date and any business ancillary,
complementary or reasonably related thereto.
"Permitted holders" means (i) Robert Porcher; (ii) the spouse, parents,
siblings, descendants of Robert Porcher or of such spouse or siblings; (iii) in
the event of incompetence or death of Robert Porcher or any of the Persons
described in (ii) above, such Person's estate, executor, administrator,
committee or other personal representative in each case who at any particular
date shall beneficially own or have the right to acquire, directly or
indirectly, Voting Stock of BGF; (iv) any trusts created for the sole benefit
of Robert Porcher or any of the Persons described in clauses (ii) or (iii)
above or any trust for the benefit of such trust; (v) any Person of which
Robert Porcher or any of the Persons described in clauses (ii) or (iii) above
(x) "beneficially owns" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act) on a fully diluted basis at least 51% of the voting power of the Voting
Stock of such Person or (y) is the sole trustee or general partner, or
otherwise has the sole power to manage the business and affairs, of such
Person.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness in respect of the old notes and exchange notes and any
replacement notes therefor issued pursuant to the indenture, and the Note
Guarantees in respect thereof;
(ii) guarantees by any Note Guarantor of Indebtedness of BGF other than the
notes; provided, however, that if any such guarantee is of Subordinated
Indebtedness, then the Note Guarantee of such Note Guarantor shall be senior to
such Note Guarantor's guarantee of such Subordinated Indebtedness;
(iii) Indebtedness Incurred pursuant to the senior credit facility in an
aggregate principal amount at any time outstanding not to exceed $125.0 million
less the amount of any permanent prepayments of Indebtedness made with the Net
Cash Proceeds of an Asset Sale pursuant to the third sentence under "Certain
Covenants--Limitation on Asset Sales;"
(iv) other Indebtedness of BGF and its Restricted Subsidiaries outstanding
on the Issue Date, reduced by the amount of any scheduled amortization payments
or mandatory prepayments when actually paid or permanent reductions thereto;
(v) Hedging Obligations entered into in the ordinary course of business and
not for speculative purposes;
(vi) Indebtedness of any Restricted Subsidiary owed to and held by BGF or
any Note Guarantor for so long as such Indebtedness is held by BGF or such Note
Guarantor, in each case subject to no Lien securing Indebtedness other than
Permitted Liens; provided, however, that if as of any date any Person other
than BGF or any Note Guarantor holds any such Indebtedness or holds a Lien in
respect of such Indebtedness securing Indebtedness other than Permitted Liens,
such date shall be deemed the Incurrence of Indebtedness not constituting
Permitted Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of BGF owed to and held by any Note Guarantor that is
unsecured and subordinated in right of payment to the payment and performance
of BGF's obligations under any Senior Indebtedness, the indenture, the notes
and the Note Guarantees and subject to no Lien securing Indebtedness other than
Permitted Liens; provided, however, that if as of any date any Person other
than any Note Guarantor owns or holds any such Indebtedness or any Person other
than any Note Guarantor holds a Lien in respect of such Indebtedness securing
Indebtedness other than Permitted Liens, such date shall be deemed the
Incurrence of Indebtedness not constituting Permitted Indebtedness by BGF;
(viii) Indebtedness of BGF or any of its Restricted Subsidiaries arising
from the honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently (except in the case of daylight overdrafts)
drawn against insufficient funds in the ordinary course of business; provided,
however, that such Indebtedness is extinguished within two business days of
Incurrence;
76
<PAGE>
(ix) Indebtedness of BGF or any of its Restricted Subsidiaries represented
by letters of credit for the account of BGF or any Restricted Subsidiary, as
the case may be, in order to provide security for workers' compensation claims,
payment obligations in connection with self-insurance or similar requirements
in the ordinary course of business;
(x) Refinancing Indebtedness in respect of Indebtedness (other than
Permitted Indebtedness) Incurred pursuant to the covenant described under "--
Certain Covenants--Limitation on Incurrence of Additional Indebtedness" or
Indebtedness Incurred pursuant to clause (i) or (iv) of this definition of
Permitted Indebtedness;
(xi) Capitalized Lease Obligations and Purchase Money Indebtedness of BGF
and its Restricted Subsidiaries that do not exceed $5.0 million in the
aggregate at any one time outstanding;
(xii) Indebtedness arising from agreements of BGF or a Restricted Subsidiary
providing for indemnification, adjustment of purchase price or similar
obligations, in each case, incurred in connection with the disposition of any
business, assets, or Restricted Subsidiary, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or 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 BGF and the Restricted Subsidiary in connection with such disposition; and
(xiii) Additional Indebtedness of BGF or any Note Guarantor in an aggregate
principal amount not to exceed $5.0 million at any one time outstanding (which
amount may, but need not, be Incurred in whole or in part under the senior
credit facility).
"Permitted Investments" means (i) Investments by BGF or any Restricted
Subsidiary in any Person that is, or that result in any Person becoming,
immediately after such Investment, a Restricted Subsidiary or constituting a
merger or consolidation of such Person into BGF or with or into a Restricted
Subsidiary; (ii) Investments by any Restricted Subsidiary in BGF; (iii)
Investments in cash and Cash Equivalents; (iv) any extension, modification or
renewal of any Investments existing as of the Issue Date (but not Investments
involving additional advances, contributions or other investments of cash or
property or other increases thereof, other than as a result of the accrual or
accretion of interest or original issue discount or payment-in-kind pursuant to
the terms of such Investment as of the Issue Date); (v) transactions or
arrangements with officers, directors or employees of BGF or any Subsidiary of
BGF entered into in the ordinary course of business (including compensation or
employee benefit arrangements with any officer or director of BGF or any
Subsidiary of BGF permitted under the covenant described under "--Certain
Covenants--Limitations on Transactions with Affiliates"); (vi) Investments
received as a result of the bankruptcy or reorganization of any Person or taken
in settlement of or other resolution of claims or disputes, and, in each case,
extensions, modifications and renewals thereof; (vii) Investments made by BGF
or its Restricted Subsidiaries as a result of non-cash consideration permitted
to be received in connection with an Asset Sale made in compliance with the
covenant described under "--Certain Covenants--Limitation on Asset Sales";
(viii) Investments consisting of consigned inventory in an aggregate amount not
to exceed $5,000,000 at any one time outstanding; (ix) Investments in the form
of intercompany Indebtedness permitted to be issued under the covenant entitled
"Limitation on Incurrence of Additional Indebtedness"; and (x) other
Investments not to exceed $5.0 million at any one time outstanding.
"Permitted Junior Securities" means any securities of BGF or any other
Person that are (i) equity securities without special covenants or (ii) debt
securities expressly subordinated in right of payment to all Senior
Indebtedness that may at the time be outstanding, to substantially the same
extent as, or to a greater extent than, the notes are subordinated as provided
in the indenture, in any event pursuant to a court order so providing and as to
which (a) the rate of interest on such securities shall not exceed the
effective rate of interest on the notes on the Issue Date, (b) such securities
shall not be entitled to the benefits of covenants or defaults materially more
beneficial to the holders of such securities than those in effect with respect
to the notes on the Issue Date and (c) such securities shall not provide for
amortization (including sinking fund and mandatory
77
<PAGE>
prepayment provisions) commencing prior to the date six months following the
final scheduled maturity date of the Senior Indebtedness (as modified by the
plan of reorganization pursuant to which such securities are issued).
"Permitted Liens" means any of the following:
(i) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate provision,
if any, as shall be required by GAAP shall have been made in respect thereof;
(ii) Liens Incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types
of social security, including any Lien securing letters of credit issued in the
ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government performance and return-of-
money bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iii) any interest or title of a lessor under any Capitalized Lease
Obligation; provided, however, that such Liens do not extend to any property
which is not leased property subject to such Capitalized Lease Obligation;
(iv) purchase money Liens to finance property of BGF or a Restricted
Subsidiary acquired in the ordinary course of business; provided, however, that
(A) the related purchase money Indebtedness shall not exceed the cost of such
property and shall not be secured by any property of BGF or any Restricted
Subsidiary other than the property so acquired and (B) the Lien securing such
Indebtedness shall be created within 90 days of such acquisition;
(v) Liens upon specific items of inventory or other goods and proceeds of
any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods;
(vi) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to such
letters of credit and products and proceeds thereof;
(vii) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of BGF or a
Restricted Subsidiary, including rights of offset and set-off;
(viii) Liens securing Hedging Obligations that relate to Indebtedness that
is Incurred in accordance with the covenant described under "Certain
Covenants--Limitation on Incurrence of Additional Indebtedness" and that are
secured by the same assets as secure such Hedging Obligations;
(ix) Liens existing on the Issue Date and Liens to secure any Refinancing
Indebtedness which is Incurred to Refinance any Indebtedness which has been
secured by a Lien permitted under the covenant described under "--Certain
Covenants--Limitation on Liens" and which Indebtedness has been Incurred in
accordance with the covenant described under "--Certain Covenants--Limitation
on Incurrence of Additional Indebtedness"; provided, however, that such new
Liens (A) are not materially less favorable to the holders of notes and are not
materially more favorable to the lienholders with respect to such Liens than
the Liens in respect of the Indebtedness being Refinanced and (B) do not extend
to any property or assets other than the property or assets securing the
Indebtedness Refinanced by such Refinancing Indebtedness;
(x) Liens securing Acquired Indebtedness Incurred in accordance with the
covenant described under "Certain Covenants--Limitation on Incurrence of
Additional Indebtedness"; provided, however, that (A) such Liens secured such
Acquired Indebtedness at the time of and prior to the Incurrence of such
Acquired Indebtedness by BGF or a Restricted Subsidiary and were not granted in
connection with, or in anticipation of the Incurrence of such Acquired
Indebtedness by BGF or a Restricted Subsidiary and (B) such Liens do not extend
to or cover any property of BGF or any Restricted Subsidiary other than the
property that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of BGF or a
78
<PAGE>
Restricted Subsidiary and are no more favorable to the lienholders than the
Liens securing the Acquired Indebtedness prior to the Incurrence of such
Acquired Indebtedness by BGF or a Restricted Subsidiary; and
(xi) Liens securing other Indebtedness not in excess of $3,000,000 at any
one time outstanding.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Post-Petition Interest" means all interest accrued or accruing after the
commencement of any insolvency or liquidation proceeding (and interest that
would accrue but for the commencement of any insolvency or liquidation
proceeding) in accordance with and at the contract rate (including, without
limitation, any rate applicable upon default) specified in the agreement or
instrument creating, evidencing or governing any Indebtedness, whether or not,
pursuant to applicable law or otherwise, the claim for such interest is allowed
as a claim in such insolvency or liquidation proceeding.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights over any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"Public Equity Offering" has the meaning set forth under "Redemption."
"Purchase Money Indebtedness" means Indebtedness of BGF or any Restricted
Subsidiary Incurred for the purpose of financing all or any part of the
purchase price, or other cost of construction or improvement of any property;
provided, however, that the aggregate principal amount of such Indebtedness
does not exceed the lesser of the Fair Market Value of such property or such
purchase price or cost, including any Refinancing of such Indebtedness that
does not increase the aggregate principal amount (or accreted amount, if less)
thereof as of the date of Refinancing.
"Purchase Price Loan" means the loan of approximately $135.3 million from
GHC to AGY Holdings to fund AGY Holdings' acquisition of a 51% interest in AGY.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by BGF or any Restricted
Subsidiary, to the extent that such Refinancing does not (i) result in an
increase in the aggregate principal amount of the Indebtedness of such Person
as of the date of such proposed Refinancing (plus the amount of any premium
required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by BGF in
connection with such Refinancing) or (ii) create Indebtedness with (A) a
Weighted Average Life to Maturity that is less than the Weighted Average Life
to Maturity of the Indebtedness being Refinanced or (B) a final maturity
earlier than the final maturity of the Indebtedness being Refinanced; provided,
however, that (x) if such Indebtedness being Refinanced is Indebtedness of BGF,
then such Refinancing Indebtedness shall be Indebtedness of BGF (y) if such
Indebtedness being Refinanced is Indebtedness of a Note Guarantor, then such
Indebtedness shall be Indebtedness of BGF and/or such Note Guarantor and (z) if
such Indebtedness being Refinanced is subordinate or junior to the notes or any
Note Guarantee, then such Refinancing Indebtedness shall be subordinate to the
notes or such Note Guarantee at least to the same extent and in the same manner
as the Indebtedness being Refinanced.
"Replacement Assets" has the meaning set forth under "Certain Covenants--
Limitation on Asset Sales."
"Representative" means any trustee, agent or representative (if any) for an
issue of Senior Indebtedness of BGF.
79
<PAGE>
"Restricted Payment" has the meaning set forth under "Certain Covenants--
Limitation on Restricted Payments."
"Restricted Subsidiary" of BGF means any Subsidiary of BGF which at the time
of determination is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party providing for the
leasing to BGF or a Restricted Subsidiary of any property, whether owned by BGF
or any Restricted Subsidiary at the Issue Date or later acquired, which has
been or is to be sold or transferred by BGF or such Restricted Subsidiary to
such Person or to any other Person by whom funds have been or are to be
advanced on the security of such Property.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute or statutes thereto.
"Senior Credit Facility" means that certain Credit Agreement dated as of
September 30, 1998 by and between BGF, the guarantors from time to time a party
thereto, the lenders from time to time party thereto and First Union National
Bank, as agent, pursuant to which BGF may, as of the Issue Date, borrow up to
$125,000,000 in the aggregate at any one time outstanding, together with the
documents related thereto, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), as such agreements may be amended (including any amendment and
restatement thereof), supplemented or otherwise modified from time to time,
including any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including adding Subsidiaries of BGF as additional
borrowers guarantors thereunder or increasing the principal amount available
thereunder) all or any portion of the Indebtedness under such agreement(s) or
any successor or replacement agreement and whether by the same or any other
agent, lender or group of lenders.
"Senior Indebtedness" means, at any date, with respect to any Person (a) all
Obligations of such Person under the senior credit facility; (b) all Hedging
Obligations of such Person; (c) all Obligations of such Person under stand-by
letters of credit; and (d) all other Indebtedness of such Person permitted
under the indenture, including principal, premium, if any, and interest
(including Post-Petition Interest) on such Indebtedness, unless the instrument
under which such Indebtedness is Incurred expressly provides that such
Indebtedness is not senior or superior in right of payment to the notes in the
case of BGF or a Note Guarantee in the case of a Note Guarantor, and all
renewals, extensions, modifications, amendments or refinancings thereof in
whole or in part. Notwithstanding the foregoing, Senior Indebtedness shall not
include (a) to the extent that it may constitute Indebtedness, any Obligation
for Federal, state, local or other taxes; (b) any Indebtedness among or between
BGF and any Subsidiary of BGF or any Affiliate of BGF or any of such
Affiliate's Subsidiaries (other than Indebtedness created by BGF in connection
with the guarantee of Indebtedness of a Subsidiary); unless and for so long as
such Indebtedness has been pledged to secure obligations under or in respect of
Senior Indebtedness; (c) to the extent that it may constitute Indebtedness, any
Obligation in respect of any trade payable Incurred for the purchase of goods
or materials, or for services obtained, in the ordinary course of business; (d)
that portion of any Indebtedness that is Incurred in violation of the
indenture; (e) Indebtedness evidenced by the notes or the Note Guarantees; (f)
Indebtedness of BGF or a Note Guarantor that is expressly subordinate or junior
in right of payment to any other Indebtedness of BGF or a Note Guarantor; (g)
to the extent that it may constitute Indebtedness, any obligation owing under
leases (other than Capitalized Lease Obligations) or management agreements; (h)
any obligation that by operation of law is subordinate to any general unsecured
obligations of such Person; and (i) Indebtedness of BGF to the extent such
Indebtedness is owed to and held by any Federal, state, local or other
governmental authority (excluding Indebtedness owing to state or local
governmental authorities in the form of industrial revenue bonds or other state
or local bond financings).
"Senior Subordinated Indebtedness" means, with respect to BGF, the notes
and, with respect to any Note Guarantor, such Note Guarantor's Note Guarantee
and any other Indebtedness of BGF or such Note Guarantor that specifically
provides that such Indebtedness is to rank pari passu in right of payment with
the notes or such Note Guarantee, as the case may be, and is not subordinated
by its terms in right of payment to any Indebtedness or other obligation of BGF
or such Note Guarantor which is not Senior Indebtedness.
80
<PAGE>
"Significant Subsidiary" shall have the meaning set forth in Rule 1-02(w) of
Regulation S-X under the Securities Act.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Indebtedness" means, with respect to BGF or any Note
Guarantor, any Indebtedness of BGF or such Note Guarantor, as the case may be,
which is expressly subordinated in right of payment to the notes or such Note
Guarantor's Note Guarantee, as the case may be.
"Subsidiary," with respect to any Person, means (i) any corporation of which
the outstanding Capital 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 such Person; or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Surviving Entity" has the meaning set forth under "--Certain Covenants--
Merger, Consolidation and Sale of Assets."
"Unrestricted Subsidiary" means any Subsidiary of BGF designated as such
pursuant to "Certain Covenants--Designation of Unrestricted Subsidiaries." Any
such designation may be revoked by a Board Resolution of BGF, subject to the
provisions of such covenant.
"Voting Stock" with respect to any Person, means securities of any class of
Capital Stock of such Person entitling the holders thereof (whether at all
times or only so long as no senior class of stock has voting power by reason of
any contingency) to vote in the election of members of the Board of Directors
(or equivalent governing body) of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
(including any Disqualified Capital Stock) at any date, the number of years
obtained by dividing (a) the sum of the products obtained by multiplying (x)
the amount of each then remaining installment, sinking fund, serial maturity or
other required payment of principal, including payment at final maturity, in
respect thereof, by (y) the number of years (calculated to the nearest one-
twelfth) that will elapse between such date and the making of such payment, by
(b) the then outstanding principal amount or liquidation preference, as
applicable, of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of BGF means any Restricted Subsidiary
of which all the outstanding Capital Stock (other than in the case of a foreign
Restricted Subsidiary, directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable law) are
owned by BGF or any Wholly Owned Restricted Subsidiary.
81
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material federal income tax
consequences expected to result to holders whose old notes are exchanged for
exchange notes in the exchange offer. The following discussion is based upon
current provisions of the Internal Revenue Code of 1986, as amended, applicable
Treasury regulations, judicial authority and administrative rulings and
practice. There can be no assurance that the IRS will not take a contrary view,
and no ruling from the IRS has been or will be sought with respect to the
exchange offer. Legislative, judicial or administrative changes or
interpretations may be forthcoming that could alter or modify the statements
and conclusions set forth herein. Any such changes or interpretations may or
may not be retroactive and could affect the tax consequences to holders.
Certain holders (including insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, foreign corporations, and persons who
are not citizens or residents of the United States) may be subject to special
rules not discussed below.
Each holder of old notes should consult its own tax advisor as to the
particular tax consequences of exchanging old notes for exchange notes,
including the applicability and effect of any state, local or foreign laws.
The exchange of old notes for exchange notes pursuant to the exchange offer
should not be considered a taxable exchange for United States federal income
tax purposes because the exchange notes should not be considered to differ
materially in kind or extent from the old notes. Exchange notes received by a
holder of old notes should be treated as a continuation of the old notes.
Accordingly, there should not be any United States federal income tax
consequences to holders exchanging old notes for exchange notes in the exchange
offer.
82
<PAGE>
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The old notes were originally sold by BGF to First Union Capital Markets
Corp. (the "Initial Purchaser") pursuant to the note purchase agreement between
BGF and the Initial Purchaser dated January 15, 1999. The Initial Purchaser
subsequently placed the old notes with qualified institutional buyers in
reliance upon Rule 144A under the Securities Act. In accordance with a
condition set forth in the purchase agreement, BGF and the Initial Purchaser
entered into a registration rights agreement on the Issue Date pursuant to
which BGF agreed, for the benefit of the holders of the old notes, that it
will, at its cost
. use its best efforts to file, within 60 days after the Issue Date, a
registration statement (the "Exchange Offer Registration Statement") with
the SEC with respect to the exchange offer; and
. use its best efforts to cause the Exchange Offer Registration Statement
to be declared effective within 150 days from the Issue Date.
Promptly after the Exchange Offer Registration Statement has been declared
effective, BGF will offer the exchange notes in exchange for surrender of the
old notes. BGF will keep the exchange offer open for not less than 20 business
days (or longer if required by applicable law) after the date on which notice
of the exchange offer is mailed to the holders of the old notes. For each old
note validly tendered to BGF pursuant to the exchange offer and not withdrawn
by the holder thereof, the holder of such old note will receive an exchange
note having a principal amount equal to the principal amount of such
surrendered old note. Interest on each exchange note will accrue from the last
interest payment date on which interest was paid on the old note surrendered in
exchange therefor or, if no interest has been paid on such exchange note, from
the Issue Date.
Under existing SEC interpretations set forth in several no-action letters to
third parties and unrelated to BGF and the exchange offer, BGF believes that
the exchange notes issued pursuant to the exchange offer in exchange for old
notes may be offered for resale, resold and otherwise transferred by the
holders thereof (other than any such holder which is an "affiliate" of BGF
within the meaning of Rule 405 under the Securities Act) without further
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 or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of such exchange notes. Any holder who is an
affiliate of BGF or who intends to participate in the exchange offer for the
purpose of distributing the exchange notes
. will not be able to rely on the SEC's interpretation set forth in the
above-mentioned no-action letters;
. will not be able to tender its old notes in the exchange offer; and
. must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer transaction
unless such sale or transfer is made pursuant to an exemption from such
requirements.
Failure to comply with such requirements may result in such holder incurring
liability under the Securities Act for which the holder is not indemnified by
BGF.
A participating broker-dealer holding old notes may participate in the
exchange offer provided that it acquired the old notes for its own account as a
result of market-making or other trading activities. In connection with any
resales of exchange notes, any participating broker-dealer who receives
exchange notes for old notes pursuant to the exchange offer may be an
"underwriter" (within the meaning of the Securities Act) and must deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of the exchange notes. The accompanying letter of transmittal states
that any acknowledgment by a participating broker-dealer that it will deliver a
prospectus in connection with any resale of exchange notes, and any such
delivery of a prospectus, shall not be deemed an admission by such
participating broker-dealer that it is an underwriter. The SEC has taken the
position that participating broker-dealers may fulfill their prospectus
83
<PAGE>
delivery requirements with respect to the exchange notes (other than a resale
of an unsold allotment from the original sale of the old notes) with this
prospectus, as it may be amended or supplemented from time to time. Under the
registration rights agreement, BGF is required to allow participating broker-
dealers and other persons, if any, subject to similar prospectus delivery
requirements, to use this prospectus, as it may be amended or supplemented from
time to time, in connection with the resale of such exchange notes for a period
of 180 days.
Each holder of old notes wishing to accept the exchange offer must represent
to BGF:
. that any exchange notes to be received by it will be acquired in the
ordinary course of such holder's business;
. that it is not an "affiliate" of BGF within the meaning of Rule 405 under
the Securities Act;
. that it has no arrangement with any person to participate in the
distribution (within the meaning of the Securities Act) of the exchange
notes; and
. if such holder is a participating broker-dealer that will receive
exchange notes for its own account in exchange for old notes that were
acquired as a result of market-making or other trading activities, that
it will deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of such exchange notes.
By executing the letter of transmittal or an agent's message, each holder will
make the foregoing representations.
In the event that:
. applicable interpretations of the SEC do not permit BGF to effect the
exchange offer;
. for any other reason the exchange offer is not consummated within 30
business days of the date the exchange offer Registration Statement has
become effective;
. the Initial Purchaser so requests with respect to old notes it acquired
directly from BGF on or prior to the 20th business day following the
consummation of the exchange offer;
. any holder notifies BGF on or prior to the 20th business day following
the consummation of the exchange offer that such holder is not eligible
to participate in the exchange offer or the exchange notes such holder
would receive would not be freely tradable; or
. the Initial Purchaser participates in the exchange offer and does not
receive freely tradable exchange notes in exchange for old notes
constituting any portion of an unsold allotment and the Initial Purchaser
notifies BGF on or prior to the 20th business day following the
consummation of the exchange offer,
BGF will, at its expense:
. on or prior to 75 days after such filing obligation arises, file a
registration statement (a "Shelf Registration Statement") covering
resales of the old notes or the exchange notes, as the case may be;
. use its reasonable efforts to cause the Shelf Registration Statement to
be declared effective under the Securities Act on or prior to 135 days
after such filing obligation arises; and
. keep the Shelf Registration Statement effective until the earlier of (i)
the time when the old notes or the exchange notes covered by the Shelf
Registration Statement can be sold pursuant to Rule 144 without any
limitations under clauses (c), (e), (f) and (h) of Rule 144, (ii) two
years from the date on which the Shelf Registration Statement was filed
and (iii) such date as of which all old notes and exchange notes covered
by the Shelf Registration Statement have been sold.
BGF will, in the event a Shelf Registration Statement is filed, among other
things, provide to each holder for whom such Shelf Registration Statement was
filed copies of the prospectus which is a part of the Shelf
84
<PAGE>
Registration Statement, notify each such holder when the Shelf Registration
Statement has become effective and take certain other actions as are required
to permit unrestricted resales of the old notes or the exchange notes, as the
case may be. A holder selling such old notes or exchange notes pursuant to the
Shelf Registration Statement generally would be required to be named as a
selling security holder in the related prospectus and to deliver a prospectus
to Purchaser, will be subject to certain of the civil liability provisions
under the Securities Act in connection with such sales and will be bound by the
provisions of the registration rights agreement which are applicable to such
holder (including certain indemnification obligations).
In the event that any of the following "registration defaults" shall have
occurred:
. BGF fails to file any of the registration statements required by the
registration rights agreement on or before the date specified for such
filing;
. any of such registration statements is not declared effective by the SEC
on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date");
. BGF fails to consummate the exchange offer within 30 business days of the
Effectiveness Target Date with respect to the exchange offer Registration
Statement;
. the Shelf Registration Statement or the Exchange Offer Registration
Statement is declared effective but the SEC shall have issued a stop
order suspending such effectiveness or proceedings have been initiated
under Sections 8(d) or 8(e) of the Securities Act with respect to the
Exchange Offer Registration Statement or Shelf Registration Statement;
. the aggregate number of days in any such suspension period referred to in
the preceding bulletpoint exceeds the number permitted in the
registration rights agreement; or
. the number of suspension periods referred to in the second preceding
bulletpoint exceeds the number permitted in the registration rights
agreement,
then BGF will pay liquidated damages to each holder of old notes, with respect
to the first 90-day period immediately following the occurrence of such
registration default in an amount equal to $0.05 per week per $1,000 principal
amount of old notes held by such holder. The amount of the liquidated damages
for such registration default will increase by an additional $0.05 per week per
$1,000 principal amount of old notes for each subsequent 90-day period until
such registration default has been cured, up to an aggregate maximum amount of
liquidated damages of $0.30 per week per $1,000 principal amount of old notes
for all registration defaults. All accrued liquidated damages will be paid by
BGF on each date that interest must be paid on the old notes. Following the
cure of all registration defaults, the accrual of liquidated damages will cease
and all accrued and unpaid liquidated damages shall be paid promptly
thereafter. At all other times, the old notes will bear interest at the
original interest rate thereof.
The summary herein of certain provisions of the registration rights
agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the registration rights
agreement, which is filed as an exhibit to the registration statement of which
this prospectus is a part.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, BGF will accept any and all old notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
expiration date. BGF will issue $1,000 principal amount of exchange notes in
exchange for each $1,000 principal amount of outstanding old notes accepted in
the exchange offer. Holders may tender some or all of their old notes pursuant
to the exchange offer. However, tenders of old notes must be in a minimum
principal amount of $1,000 or an integral multiple of $1,000 in excess thereof.
The form and terms of the exchange notes will be identical in all material
respects to the form and terms of the old notes, except that:
85
<PAGE>
. the exchange notes will bear a different CUSIP number from the old notes;
. the issuance of the exchange notes will be registered under the
Securities Act and, therefore, the exchange notes will not bear legends
restricting the transfer thereof; and
. the holders of the exchange notes will not be entitled to certain rights
under the registration rights agreement, including the provisions thereof
which provide for liquidated damages payable to the holders of the old
notes in certain circumstances relating to the timing of the exchange
offer, which rights will terminate when the exchange offer is
consummated.
The exchange notes will evidence the same debt as the old notes (which they
replace) and will be issued under and be entitled to the benefits of the
indenture. See "Description of Exchange Notes."
As of the date of this prospectus, $100,000,000 aggregate principal amount
of old notes were outstanding. This prospectus and the letter of transmittal
are being mailed to persons who were holders of old notes on the close of
business on the date of this prospectus. holders of old notes do not have any
appraisal or dissenters' rights under the Delaware General Corporation Law or
the indenture in connection with the exchange offer. BGF intends to conduct the
exchange offer in accordance with the applicable requirements of the
Securities, the Exchange Act and the rules and regulations promulgated
thereunder.
BGF shall be deemed to have accepted validly tendered old notes when, as and
if BGF has given written notice thereof to The Bank of New York, as exchange
agent. The exchange agent will act as agent for the tendering holders for the
purpose of receiving the exchange notes from BGF.
If any tendered old notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted old notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the expiration date.
Holders who tender old notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of old notes for
exchange notes pursuant to the exchange offer. BGF will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the exchange offer. See "--Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "expiration date" shall mean 5:00 p.m., New York City time, on
, 1999, unless BGF in its sole discretion, extends the exchange offer, in
which case the term "expiration date" means the latest date and time to which
the exchange offer is extended.
In order to extend the exchange offer, BGF will notify the exchange agent
thereof by written notice and will make a public announcement of such
extension, each prior to 9:00 a.m., New York City time, on the next business
day after the previously scheduled expiration date.
BGF reserves the right, in its sole discretion:
. to delay accepting any old notes, to extend the exchange offer or to
terminate the exchange offer if any of the conditions set forth below
under "--Conditions" shall not have been satisfied, by giving written
notice of such delay, extension or termination to the exchange agent; or
. to amend the terms of the exchange offer in any manner, whether before or
after any tender of the old notes.
86
<PAGE>
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders.
Interest on Exchange Notes
Interest on each exchange note will accrue from the Issue Date, i.e.,
January 21, 1999, and be payable semiannually in arrears on January 15 and July
15 of each year, commencing July 15, 1999, at the rate of 10 1/4 percent per
annum. Holders whose old notes are accepted for exchange will be deemed to have
waived the right to receive any interest accrued on the old notes.
Procedures for Tendering Old Notes
Only a holder of old notes may tender such old notes in the exchange offer.
Each such holder wishing to accept the exchange offer must complete, sign and
date the accompanying letter of transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and therein, have the
signatures thereon guaranteed if required by the letter of transmittal or
transmit an agent's message in connection with a book-entry transfer, and mail
or otherwise deliver such letter of transmittal or such facsimile or agent's
message, together with the old notes and any other required documents, to the
exchange agent prior to 5:00 p.m., New York City time, on the expiration date.
To be tendered effectively, the old notes, the letter of transmittal or agent's
message and all other required documents must be properly completed and
received by the exchange agent at the address set forth below under "exchange
agent" prior to 5:00 p.m., New York City time, on the expiration date. Delivery
of the old notes may be made by book-entry transfer in accordance with the
procedures described below. Confirmation of such book-entry transfer must be
received by the exchange agent prior to the expiration date.
The term "agent's message" means a message, transmitted by a book-entry
transfer facility to, and received by, the Exchange Agent forming a part of a
confirmation of a book-entry, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer facility tendering the old notes that such participant has
received and agrees: (i) to participate in the Automated Tender Option Program
("ATOP"); (ii) to be bound by the terms of the letter of transmittal; and (iii)
that BGF may enforce such agreement against such participant.
By executing the letter of transmittal, each holder will make the
representations set forth above in the fourth paragraph under the heading "--
Purpose and Effect of the Exchange Offer" to BGF. The tender by a holder and
the acceptance thereof by BGF will constitute an agreement between such holder
and BGF that such holder will participate in the exchange offer in accordance
with the terms and subject to the conditions set forth herein and in the letter
of transmittal.
The method of delivery of the old notes and the letter of transmittal and
all other required documents to the exchange agent is at the election and sole
risk of the holder. As an alternative to delivery by mail, holders may wish to
consider overnight or hand delivery service. In all cases, sufficient time
should be allowed to assure delivery to the exchange agent before the
expiration date. Holders may request their respective brokers, dealers,
commercial banks, trust companies or nominees to effect the above transactions
for such holders.
Any beneficial owner whose old notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf.
Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a savings institution, commercial bank or trust company having an office
or correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act, and
which is, in each case, a member of a recognized signature guarantee program
87
<PAGE>
(i.e., Securities Transfer Agents Medallion Program, Stock Exchange Medallion
Program or New York Stock Exchange Medallion Signature Program) (an "Eligible
Institution"), unless the old notes tendered pursuant thereto are tendered (i)
by a registered holder who has not completed the box entitled "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions" on the letter
of transmittal or (ii) for the account of an Eligible Institution. In the event
that signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantees must be by an
Eligible Institution.
If the letter of transmittal is signed by a person other than the registered
holder of any old notes listed therein, such old notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such old notes with the
signature thereon guaranteed by an Eligible Institution.
If the letter of transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to BGF of
their authority to so act must be submitted with the letter of transmittal.
BGF understands that the exchange agent will make a request promptly after
the date of this prospectus to establish an account through the facilities of
The Depository Trust Company ("DTC") for receipt of the tender of old notes
through book-entry delivery thereof. For the purpose of facilitating the
exchange offer, any financial institution that is a DTC participant may
participate in the exchange offer through book-entry delivery of old notes by
causing DTC to transfer such old notes into the exchange agent's account for
the old notes. Although delivery of the old notes may be effected through book-
entry transfer into the exchange agent's account at DTC, unless an agent's
message is received by the exchange agent in compliance with ATOP, an
appropriate letter of transmittal properly completed and duly executed with any
required signature guarantee and all other required documents must in each case
be transmitted to and received or confirmed by the exchange agent at its
address and in the manner set forth below under "--Exchange Agent" on or prior
to the expiration date, or, if the guaranteed delivery procedures described
below are complied with, within the time period provided under such procedures.
Delivery of documents to DTC does not constitute delivery to the exchange
agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered old notes and withdrawal of tendered old notes
will be determined by BGF in its sole discretion, which determination will be
final and binding. BGF reserves the absolute right to reject any and all old
notes not properly tendered or any old notes BGF's acceptance of which would,
in the opinion of counsel for BGF, be unlawful. BGF also reserves the right in
its sole discretion to waive any defects, irregularities or conditions of
tender as to particular old notes. BGF's interpretation of the terms and
conditions of the exchange offer (including the instructions in the letter of
transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of old notes must be cured
within such time as BGF shall determine. Although BGF intends to notify holders
of defects or irregularities with respect to tenders of old notes, neither BGF,
the exchange agent nor any other person shall incur any liability for failure
to give such notification. Tenders of old notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any old
notes received by the exchange agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the exchange agent to the tendering holders, unless otherwise
provided in the letter of transmittal, as promptly as practicable following the
expiration date.
No letter of transmittal, old notes, notice of guaranteed delivery or other
documents should be sent to BGF or DTC. Delivery thereof to BGF or DTC will not
constitute valid delivery.
88
<PAGE>
Guaranteed Delivery Procedures
Holders of old notes who wish to tender their old notes but who cannot,
prior to 5:00 p.m., New York City time, on the expiration date (i) deliver
their old notes, the letter of transmittal or any other documents required by
the letter of transmittal to the exchange agent or (ii) deliver a confirmation
of the book-entry tender of their old notes into the exchange agent's account
at DTC and otherwise complete the procedures for book-entry transfer, may
effect a tender of old notes if:
. the tender is made through an Eligible Institution;
. prior to 5:00 p.m., New York City time, on the expiration date, the
exchange agent receives from such Eligible Institution a properly
completed and duly executed notice of guaranteed delivery (a form of
which accompanies this prospectus) (by facsimile transmission, registered
or certified mail or hand delivery) setting forth the name and address of
the holder, the certificate number(s) of such old notes and the principal
amount of old notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange
trading days after the expiration date, the letter of transmittal (or
facsimile thereof) together with the certificate(s) representing the old
notes (or a confirmation of book-entry transfer of such old notes into
the exchange agent's account at DTC), and any other documents required by
the letter of transmittal will be deposited by the Eligible Institution
with the exchange agent; and
. such properly completed and duly executed letter of transmittal (or
facsimile thereof), as well as the certificate(s) representing all
tendered old notes in proper form for transfer (or a confirmation of
book-entry transfer of such old notes into the exchange agent's account
at DTC), and all other documents required by the letter of transmittal
are received by the exchange agent within three New York Stock Exchange
trading days after the expiration date.
Upon request to the exchange agent, additional copies of the notice of
guaranteed delivery will be sent to holders.
Acceptance of Old Notes for Exchange; Delivery of Exchange Notes
Upon satisfaction or waiver of all of the conditions to the exchange offer,
BGF will accept, promptly after the expiration date, all old notes properly
tendered and will issue the exchange notes promptly after acceptance of the old
notes. For a description of certain conditions to the exchange offer, see "--
Conditions" below. For purposes of the exchange offer, BGF will be deemed to
have accepted properly tendered old notes for exchange when, as and if BGF has
given written notice thereof to the exchange agent. For each old note accepted
for exchange, the holder of such old note will receive an exchange note having
a principal amount equal to that of the surrendered old note.
In all cases, issuance of exchange notes for old notes that are accepted for
exchange pursuant to the exchange offer will be made only after timely receipt
by the exchange agent of certificates for such old notes (or a timely
confirmation that such old notes have been transferred into the exchange
agent's account at DTC), a properly completed and duly executed letter of
transmittal and all other required documents. If any tendered old notes are not
accepted for any reason set forth in the terms and conditions of the exchange
offer or if old notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged old notes will be
returned without expense to the tendering holder thereof as promptly as
practicable after the expiration or termination of the exchange offer.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of old notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the expiration date.
To withdraw a tender of old notes in the exchange offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
exchange agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the expiration date. Any such notice of withdrawal must:
. specify the name of the person having deposited the old notes to be
withdrawn (the "Depositor");
89
<PAGE>
. identify the old notes to be withdrawn (including the certificate
number(s) and principal amount of such old notes, or, in the case of old
notes tendered by book-entry transfer into the exchange agent's account
at DTC pursuant to the applicable book-entry procedures, the name and
number of the account at DTC to be credited);
. be signed by the holder in the same manner as the original signature on
the letter of transmittal by which such old notes were tendered
(including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the trustee register the
transfer of such old notes into the name of the person withdrawing the
tender; and
. specify the name in which any such old notes are to be registered, if
different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by BGF in its sole discretion,
which determination shall be final and binding. Any old notes so withdrawn will
be deemed not to have been validly tendered for purposes of the exchange offer
and no exchange notes will be issued with respect thereto unless the old notes
so withdrawn are validly retendered. Any old notes which have been tendered but
which are not accepted for exchange will be returned, without expense, to the
holder thereof as promptly as practicable after withdrawal, rejection of tender
or termination of the exchange offer. Properly withdrawn old notes may be
retendered by following one of the procedures described above under "--
Procedures for Tendering old notes" at any time prior to the expiration date.
Conditions
Notwithstanding any other term of the exchange offer, BGF shall not be required
to accept for exchange, or exchange notes for, any old notes, and may terminate
or amend the exchange offer as provided herein before the acceptance of such
old notes, if:
. any action or proceeding is instituted or threatened in any court or by
any governmental or quasi-governmental agency which might materially
impair the ability of BGF to proceed with the exchange offer or any
material adverse development has occurred in any existing action or
proceeding with respect to BGF;
. the exchange offer violates applicable law or any applicable SEC
interpretation; or
. any governmental or quasi-governmental approval has not been obtained,
which approval BGF shall deem necessary for the consummation of the
exchange offer as contemplated hereby.
If BGF determines in its sole discretion that any of the foregoing
conditions are not satisfied, BGF may:
. refuse to accept any old notes and return all tendered old notes to the
tendering holders;
. extend the exchange offer and retain all old notes tendered prior to the
expiration of the exchange offer, subject, however, to the rights of
holders to withdraw such old notes (see "--Withdrawal of Tenders"); or
. waive such unsatisfied conditions and accept all properly tendered old
notes which have not been withdrawn.
In addition, BGF has reserved the right, notwithstanding the satisfaction or
failure of any or all of the foregoing conditions, to terminate or amend the
exchange offer in any manner it shall determine in its sole discretion, which
determination shall be binding.
90
<PAGE>
The exchange offer is not conditioned upon any minimum aggregate principal
amount of old notes being tendered or accepted for exchange.
Exchange Agent
The Bank of New York, which also acts as trustee under the indenture, has
been appointed as exchange agent for the exchange offer. Each holder wishing to
accept the exchange offer must deliver (i) a letter of transmittal, such
holder's tendered old notes and all other required documents or (ii) a notice
of guaranteed delivery and all other documents described under "--Guaranteed
Delivery Procedures," to the exchange agent as follows:
By Mail or Hand Delivery: The Bank of New York 101 Barclay Street New York,
New York 10286 Attention: Reorganization Section
7-E
Facsimile Transmission: (212) 815-6339
Confirm by Telephone: (212) 815-
Delivery to an address other than as set forth above will not constitute
valid delivery.
Questions and requests for assistance, and requests for additional copies of
this prospectus, the letter of transmittal or the notice of guaranteed
delivery, should be directed to the exchange agent at the address and telephone
number set forth in the letter of transmittal.
Fees and Expenses
The expenses of soliciting tenders will be borne by BGF. The principal
solicitation is being made by mail; however, additional solicitation may be
made by telegraph, telecopy, telephone or in person by officers, employees or
agents of BGF and its affiliates. BGF has not retained any dealer-manager in
connection with the exchange offer and will not make any payments to brokers,
dealers or others to solicit acceptances of the exchange offer. BGF, however,
will pay the exchange agent reasonable and customary fees for its services and
will reimburse it for its reasonable out-of-pocket expenses in connection with
the exchange offer. All other expenses to be incurred in connection with the
exchange offer will be paid by BGF. Such expenses include fees and expenses of
the trustee, accounting and legal fees and printing costs, among others.
Accounting Treatment
The exchange notes will be recorded at the same carrying value as the old
notes, which is face value, as reflected in BGF's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by BGF in connection with the exchange offer. The expenses of the
exchange offer will be amortized over the term of the exchange notes.
Consequences of Failure to Exchange
The old notes that are not exchanged for exchange notes pursuant to the
exchange offer will remain restricted securities. Accordingly, such old notes
may not be reoffered, resold, pledged or otherwise transferred except in
accordance with applicable state securities laws and:
. to a person whom the transferor reasonably believes is a qualified
institutional buyer in a transaction meeting the requirements of Rule
144A;
91
<PAGE>
. in an offshore transaction meeting the requirements of Rule 903 or Rule
904 of Regulation S;
. to an institution that is an "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act
in a transaction exempt from the registration requirements of the
Securities Act (if available);
. pursuant to an exemption from registration under the Securities Act
provided by Rule 144 thereunder (if available); or
. pursuant to an effective registration statement under the Securities Act.
Following consummation of the exchange offer, holders of the old notes who
were eligible to participate in the exchange offer but who did not tender their
old notes will generally not have any further registration rights under the
registration rights agreement, and such old notes will continue to be subject
to restrictions on transfer. Accordingly, the liquidity of the market for such
old notes could be adversely affected. See "Risk Factors--Old Notes Outstanding
After the Exchange Offer Will Not Have Registration Rights and We Expect the
Market for the Old Notes to be Illiquid."
92
<PAGE>
PLAN OF DISTRIBUTION
Except as provided herein, this prospectus may not be used for an offer to
resell, a resale or other transfer of exchange notes. Based on existing
interpretations of the Securities Act by the SEC set forth in several no-action
letters to third parties and unrelated to BGF and the exchange offer, BGF
believes that the exchange notes issued pursuant to the exchange offer in
exchange for old notes may be offered for resale, resold and otherwise
transferred by the holders thereof (other than any such holder which is an
"affiliate" of BGF within the meaning of Rule 405 under the Securities Act)
without further 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 or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of such exchange notes.
Any holder who is an affiliate of BGF or who intends to participate in the
exchange offer for the purpose of distributing the exchange notes:
. will not be able to rely on the SEC interpretations set forth in the
above-mentioned no-action letters;
. will not be able to tender its old notes in the exchange offer; and
. must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer transaction
unless such sale or transfer is made pursuant to an exemption from such
requirements.
A participating broker-dealer holding old notes may participate in the
exchange offer provided that it acquired the old notes for its own account as a
result of market-making or other trading activities. In connection with any
resales of exchange notes, any participating broker-dealer who receives
exchange notes for old notes pursuant to the exchange offer may be an
"underwriter" (within the meaning of the Securities Act) and must deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of the exchange notes. The SEC has taken the position that
participating broker-dealers 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 old notes) with this prospectus, as it may be
amended or supplemented from time to time. Under the registration rights
agreement, BGF is required to allow participating broker-dealers and other
persons, if any, subject to similar prospectus delivery requirements, to use
this prospectus, as it may be amended or supplemented from time to time, in
connection with the resale of such exchange notes for a period of 180 days.
Each participating broker-dealer wishing to accept the exchange offer must
represent to BGF that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of exchange notes.
The exchange offer is intended to satisfy certain of BGF's obligations under
the registration rights agreement. BGF will not receive any cash proceeds from
the issuance of the exchange notes offered hereby. In consideration for issuing
the exchange notes as contemplated in this prospectus, BGF will receive a like
principal amount of old notes. The form and terms of the exchange notes will be
identical in all material respects to the form and terms of the old notes,
except as described herein.
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
market prices prevailing at the time of resale, or 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 broker-dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of 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 person that participates in the distribution of such
exchange notes may be deemed an "underwriter" (within the meaning of the
Securities Act) and any profit on any such resale of exchange notes and any
commissions or concessions received by any such broker-dealers may be deemed to
be underwriting compensation under the Securities Act. The letter of
transmittal states that any
93
<PAGE>
acknowledgment by a participating broker-dealer that it will deliver a
prospectus in connection with any resale of exchange notes, and any such
delivery of a prospectus, shall not be deemed an admission by such
participating broker-dealer that it is an underwriter.
For a period of 180 days after the expiration date, BGF will send additional
copies of this prospectus and any amendment or supplement to this prospectus to
any participating broker-dealer that requests such documents in such
participating broker-dealer's letter of transmittal. By acceptance of the
exchange offer, each broker-dealer that receives exchange notes for old notes
pursuant thereto agrees that, upon receipt of notice from BGF 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 make the statements herein not materially misleading (which notice
BGF has agreed to deliver to such broker-dealer), such broker-dealer will
suspend the use of this prospectus until BGF has amended or supplemented this
prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented prospectus to such broker-dealer.
BGF has agreed, pursuant to the registration rights agreement, to pay all
expenses incident to BGF's performance of and compliance with the exchange
offer and the registration rights agreement (other than agency fees and
commissions, underwriting discounts and commissions and the fees and
disbursements of counsel and other advisors and experts retained by the
holders). In addition, BGF has agreed to indemnify the holders of the exchange
notes against certain liabilities, including liabilities under the Securities
Act.
The exchange notes are a new issuance of securities for which there is
currently no trading market. The exchange notes will not be listed on any
national securities exchange or Nasdaq. BGF has been advised by the Initial
Purchaser that they intend to make a market in the exchange notes; however, the
Initial Purchaser are not obligated to do so, and any such market making
activities may be discontinued at any time without notice. Accordingly, there
can be no assurance that an active trading market for the exchange notes will
develop or as to the liquidity of any such market. In addition, if the exchange
notes are traded after their initial issuance, they may trade at a discount
from their initial offering price, depending upon prevailing interest rates,
the market for similar securities, the performance of BGF and other factors.
LEGAL MATTERS
The validity of the exchange notes offered hereby will be passed upon for
BGF by Alston & Bird LLP, Atlanta, Georgia.
EXPERTS
The consolidated balance sheets of BGF as of December 31, 1996 and 1997, and
the consolidated statements of operations, retained earnings, and cash flows
for each of the three years in the period ended December 31, 1997 included in
this prospectus, have been included herein in reliance on the report of
PricewaterhouseCoopers LLP, independent auditors, given on the authority of
that firm as experts in accounting and auditing.
94
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
BGF Industries, Inc.
Report of Independent Accountants....................................... F-2
Consolidated Balance Sheets at December 31, 1996 and 1997 and September
30, 1998 (unaudited)................................................... F-3
Consolidated Statements of Operations and Retained Earnings for the
years ended December 31, 1995, 1996 and 1997 and for the nine months
ended September 30, 1997 (unaudited) and 1998 (unaudited).............. F-4
Consolidated Statement of Cash Flows for the years ended December 1995,
1996 and 1997 and for the nine months ended September 30, 1997
(unaudited) and 1998 (unaudited)....................................... F-5
Notes to Consolidated Financial Statements.............................. F-6
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
BGF Industries, Inc.:
We have audited the accompanying consolidated balance sheets of BGF
Industries, Inc. (a wholly owned subsidiary of Glass Holdings Corp.) as of
December 31, 1996 and 1997, and the related consolidated statements of
operations and retained earnings, and cash flows for each of the three years in
the period ended December 31, 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of BGF Industries, Inc. as of December 31, 1996 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Greensboro, North Carolina
February 27, 1998
F-2
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1997 and September 30, 1998 (unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, December 31, September 30,
1996 1997 1998
------------ ------------ -------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $ 165 $ 29 $ 16
Trade accounts receivable, less
allowance for returns and doubtful
accounts of $1,071, $723 and $1,011,
respectively........................ 25,867 32,686 25,484
Inventories.......................... 36,872 40,866 41,893
Other current assets................. 1,697 3,366 4,371
-------- -------- ----------
Total current assets............... 64,601 76,947 71,764
-------- -------- ----------
Property, plant and equipment:
Land................................. 1,030 1,155 2,315
Buildings............................ 30,085 30,302 34,660
Machinery and equipment.............. 80,999 86,197 89,810
-------- -------- ----------
112,114 117,654 126,785
Less accumulated depreciation........ 58,359 63,870 69,423
-------- -------- ----------
Net property, plant and equipment.. 53,755 53,784 57,362
-------- -------- ----------
Other noncurrent assets................ 5,428 5,745 10,065
-------- -------- ----------
Total assets....................... $123,784 $136,476 $ 139,191
======== ======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Book overdraft....................... $ -- $ 3,468 $ 2,942
Accounts payable..................... 6,895 8,484 8,103
Accrued liabilities.................. 8,478 8,196 7,934
Working capital line of credit....... 9,526 5,000 --
-------- -------- ----------
Total current liabilities.......... 24,899 25,148 18,979
Long-term debt......................... 26,750 20,000 152,000
Deferred income taxes.................. 4,485 6,763 6,763
Postretirement benefit obligation...... 1,170 1,268 1,340
-------- -------- ----------
Total liabilities.................. 57,304 53,179 179,082
-------- -------- ----------
Commitments and contingencies (Note 10)
Stockholder's equity:
Common stock, $1.00 par value.
Authorized 3,000 shares; issued and
outstanding 1,000 shares............ 1 1 1
Capital in excess of par value....... 34,999 34,999 34,999
Retained earnings.................... 31,480 48,297 60,411
Loan to parent....................... -- -- (135,302)
-------- -------- ----------
Total stockholder's equity......... 66,480 83,297 (39,891)
-------- -------- ----------
Total liabilities and stockholder's
equity............................ $123,784 $136,476 $ 139,191
======== ======== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
For the years ended December 31, 1995, 1996 and 1997
and for the nine months ended September 30, 1997 (unaudited) and 1998
(unaudited)
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
December 31, December 31, December 31, --------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net sales............... $176,792 $195,196 $217,889 $160,493 $ 150,711
Cost of goods sold...... 144,323 144,825 170,486 125,931 122,002
-------- -------- -------- --------- ---------
Gross profit.......... 32,469 50,371 47,403 34,562 28,709
Selling, general and
administrative
expenses............... 9,149 10,220 9,739 7,415 7,266
-------- -------- -------- --------- ---------
Operating income...... 23,320 40,151 37,664 27,147 21,443
-------- -------- -------- --------- ---------
Other (income) expenses:
Interest expense...... 2,979 1,993 2,355 1,949 1,751
Other (income)
expenses, net........ 664 (1,868) (73) (76) (6)
-------- -------- -------- --------- ---------
3,643 125 2,282 1,873 1,745
-------- -------- -------- --------- ---------
Income before taxes... 19,677 40,026 35,382 25,274 19,698
Income tax expense...... 7,093 15,996 13,652 9,730 7,584
-------- -------- -------- --------- ---------
Net income............ 12,584 24,030 21,730 15,544 12,114
Retained earnings at
beginning of year...... 10,030 22,614 31,480 31,480 48,297
Distributions to
parent................. -- (15,164) (4,913) (4,913) --
-------- -------- -------- --------- ---------
Retained earnings at end
of year................ $ 22,614 $ 31,480 $ 48,297 $ 42,111 $ 60,411
======== ======== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 1995, 1996, and 1997
and for the nine months ended September 30, 1997 (unaudited) and 1998
(unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
December 31, December 31, December 31, -------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ --------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income............ $ 12,584 $ 24,030 $ 21,730 $ 15,544 $ 12,114
Adjustment to
reconcile net income
to net cash provided
by operating
activities:
Depreciation.......... 8,059 6,048 6,565 5,018 5,553
Amortization.......... 227 94 242 195 170
(Gain) loss on
disposal of
equipment............ 5 (2) 4 -- --
Deferred income
taxes................ (62) 1,077 1,371 -- --
Postretirement
benefit obligation... 150 57 98 57 72
Change in operating
assets and
liabilities:
Marketable
securities-trading
purposes............. (2,650) 4,639 -- -- --
Trade accounts
receivable........... (5,725) 14 (6,819) (3,302) 7,202
Inventories........... 1,841 (11,474) (3,994) (2,697) (1,027)
Other current
assets............... (291) 7 (762) (1,061) (1,005)
Other noncurrent
assets............... (6) (46) (521) (501) 1
Accounts payable...... 1,475 (1,642) 2,266 5,742 (496)
Accrued liabilities... 1,954 (11) (282) 1,232 (262)
-------- -------- -------- --------- ----------
Net cash provided by
operating
activities......... 17,561 22,791 19,898 20,227 22,322
-------- -------- -------- --------- ----------
Cash flows from
investing activities:
Purchases of
property, plant and
equipment............ (8,311) (21,983) (7,275) (5,210) (9,016)
Proceeds from sale of
equipment............ 43 12 -- -- --
Additional
consideration paid
relating to original
purchase............. -- (3,454) -- -- --
-------- -------- -------- --------- ----------
Net cash used in
investing
activities......... (8,268) (25,425) (7,275) (5,210) (9,016)
-------- -------- -------- --------- ----------
Cash flows from
financing activities:
Book overdraft........ 834 (834) 3,468 1,041 (526)
Principal payments of
long-term debt....... (17,500) (8,750) (40,750) (26,750) (20,000)
Proceeds from
borrowing of long-
term debt............ -- -- 34,000 25,000 152,000
Net (repayments)
borrowings on
working capital line
of credit............ -- 27,526 (4,526) (9,526) (5,000)
Debt issuance costs... -- -- (38) -- (4,491)
Loan to parent........ -- -- -- -- (135,302)
Distribution to
parent............... -- (15,164) (4,913) (4,913) --
-------- -------- -------- --------- ----------
Net cash (used in)
provided by
financing
activities........... (16,666) 2,778 (12,759) (15,148) (13,319)
-------- -------- -------- --------- ----------
Net (decrease)
increase in cash and
cash equivalents..... (7,373) 144 (136) (131) (13)
Cash and cash
equivalents at
beginning of
period............... 7,394 21 165 165 29
-------- -------- -------- --------- ----------
Cash and cash
equivalent at end of
period............... $ 21 $ 165 $ 29 $ 34 $ 16
======== ======== ======== ========= ==========
Supplemental
disclosures of cash
flow information:
Cash paid during the
year for interest.... $ 3,088 $ 1,981 $ 2,622
======== ======== ========
Cash paid for income
taxes................ $ 7,452 $ 17,693 $ 11,679
======== ======== ========
Supplemental disclosure
of non-cash investing
activities:
Property and
equipment financed
in accounts
payable.............. $ 987 $ 1,098 $ 421 $ 528 $ 536
======== ======== ======== ========= ==========
Deferred tax
liability increase
due to settlement of
original purchase
consideration........ $ 1,200
========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
1. Summary of Significant Accounting Policies:
General: BGF Industries, Inc. (the "Company") is a wholly owned subsidiary
of Glass Holdings Corp. ("Glass Holdings"), which is a wholly owned subsidiary
of Porcher Industries, S.A. ("Porcher"). These consolidated financial
statements include the accounts of BGF Industries, Inc. and its wholly owned
subsidiary, BGF Overseas, Inc. All intercompany transactions and balances are
eliminated in consolidation. The Company manufactures high-quality glass,
aramid and carbon fiber fabrics for use in a variety of electronic, composite,
insulation, construction, filtration, and commercial applications. The
principal market is the United States.
Cash and Cash Equivalents: For purpose of the statements of cash flows, the
Company considers cash on hand, cash deposited in financial institutions and
money market accounts with maturities of less than ninety days at date of
purchase to be cash equivalents. These are stated at cost which approximates
market value. The book overdrafts in bank accounts consist of outstanding
checks which have not been presented to a bank for payment.
Inventories: Inventories are stated at the lower of cost or market value.
Cost is determined using the first-in, first-out (FIFO) method.
Property, Plant and Equipment: Property, plant and equipment are stated at
cost and depreciated over the estimated useful lives of the related assets
using the straight-line method. Cost includes expenditures for major
improvements and replacements and the net amount of interest cost associated
with significant capital additions. Capitalized interest was $100, $206, and
$32 in 1995, 1996, and 1997, respectively. Total interest incurred in 1995,
1996, and 1997 was $3,079, $2,199, and $2,339, respectively.
The estimated useful lives of the assets are as follows:
<TABLE>
<S> <C>
Buildings........................ 15-40 years
Machinery and equipment.......... 3-10 years
</TABLE>
The costs of renewals and betterments are capitalized, while repair and
maintenance which do not improve or extend useful lives, are charged against
income as incurred. At the time that property, plant and equipment is retired
or otherwise disposed of, the respective cost and accumulated depreciation are
removed from the accounts, and any gain or loss on disposition is recognized.
In the event that facts and circumstances indicate that the cost of long
lived assets may not be recoverable, the estimated future undiscounted cash
flows is compared to the asset's carrying value and if less, an impairment loss
is recognized in an amount by which the carrying value exceeds its fair value.
Income Taxes: Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing
assets and liabilities and their respective tax bases based on enacted tax laws
and statutory rates. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period in which the
legislation is enacted. A valuation allowance against deferred tax assets is
required if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized.
Intangible Assets: The excess of acquisition cost over assigned value of net
assets acquired is being amortized over 40 years, using the straight-line
method. Debt issuance costs are being amortized over the terms
F-6
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)
1. Summary of Significant Accounting Policies--(Continued):
of the respective debt agreements using the interest method. The Company
assesses the recoverability of long-lived assets, including goodwill, by
determining whether the carrying value of the asset balances over their
remaining lives can be recovered through undiscounted future operating cash
flows.
Revenue Recognition: Revenue from product sales and the related cost of
goods sold are recognized at the time of shipment.
Financial Instruments: The fair value of the Company's interest rate swap
agreement is the estimated amount the Company would have to pay to terminate
the swap agreement at the reporting date, taking into account current interest
rates, and is disclosed in Note 10. The interest differentials from these
swaps are recorded in interest expense. Rates currently available to the
Company for debt with similar terms and remaining maturities are used to
estimate fair value of existing debt.
The carrying amounts of the Company's long-term debt approximates fair
value.
Pension Plans and Other Postretirement Benefits: The Company has a
contributory defined benefit pension plan covering most employees. Pension
expense for the plan is determined using the projected unit credit method. The
Company also provides certain retirement health care benefits, the estimated
cost for which is accrued within the employees' active service lives. The
Company's customary funding policy of these plans is to contribute amounts
permitted by the Internal Revenue Code and in conformance with ERISA
guidelines.
Research and Development: The Company expenses research and development
costs as incurred. These costs were approximately $1,148, $1,209, and $1,267
for the years ended December 31, 1995, 1996 and 1997, respectively.
Advertising and Promotion: The Company expenses advertising and promotion
costs as incurred and these costs are included as selling, general and
administrative expenses. Such amounts were not material for 1995, 1996 and
1997.
Foreign Currency Transactions: Gains resulting from foreign currency
transactions are included in other expenses, net and amounted to $322, $66,
and $126 in 1995, 1996, and 1997, respectively.
Use of Estimates: The preparation of the consolidated financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent liabilities at the date
of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
Reclassifications: Certain amounts from the prior consolidated financial
statements have been reclassified to conform to the current presentation.
Recently issued accounting standards: In June 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and
Related Information." SFAS No. 131 requires public business enterprises to
adopt its provisions for fiscal years beginning after December 31, 1997, and
to report certain information about operating segments in complete sets of
financial statements of the enterprise issued to shareholders. Segment
disclosures will also be required in interim financial statements beginning in
the second year of application.
F-7
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)
1. Summary of Significant Accounting Policies--(Continued):
The Company is evaluating the provisions of SFAS No. 131, but has not
determined if additional disclosure will be required.
SFAS No. 132 "Employers' Disclosure about Pensions and Other Postretirement
Benefits," will become effective in 1998. This Statement standardizes the
disclosure requirements for pensions and postretirement benefits and will
require changes in disclosures of benefit obligations and fair values of plan
assets. Comparative disclosures which include prior period information will be
restated to conform with the provisions of SFAS No. 132. The Company will adopt
the provisions of SFAS No. 132 effective December 31, 1998.
On June 15, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999. SFAS 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether
a derivative is designated as part of a hedge transaction and, if it is, the
type of hedge transaction. The Company anticipates that, due to its limited use
of derivative instruments, the adoption of SFAS 133 will not have a significant
effect on the Company's results of operations or its financial position.
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities"
defines such costs and requires that they be expensed as incurred. This
pronouncement is effective for financial statements for fiscal years beginning
after December 15, 1998 although earlier application is encouraged. The Company
will adopt this pronouncement effective January 1, 1999 and does not believe
that it will materially affect reported results of operations or financial
condition upon adoption.
2. Inventories:
Inventories at December 31 consist of the following:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Supplies..................................................... $ 1,452 $ 1,573
Raw materials................................................ 4,794 6,205
Stock-in-process............................................. 9,029 10,043
Finished goods............................................... 21,597 23,045
------- -------
$36,872 $40,866
======= =======
</TABLE>
3. Other Current Assets:
Other current assets at December 31 consist of the following:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Deferred income taxes....................................... $ 1,193 $ 2,100
Prepaid expenses and other.................................. 504 1,266
------- -------
$ 1,697 $ 3,366
======= =======
</TABLE>
F-8
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)
4. Other Noncurrent Assets:
Other noncurrent assets at December 31 consist of the following:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Excess of acquisition cost over assigned value of net
assets acquired (Note 7)............................... $ 5,346 $ 5,809
Debt issuance costs..................................... 890 38
Other identified intangible assets...................... 200 --
------- -------
6,436 5,847
Accumulated amortization................................ (1,212) (364)
------- -------
5,224 5,483
Other................................................... 204 262
------- -------
$ 5,428 $ 5,745
======= =======
</TABLE>
Amortization of deferred financing charges of $63, $57 and $48 for the years
ended December 31, 1995, 1996 and 1997, respectively, have been included in
interest expense. In 1996 and 1997, the Company wrote off $36 and $1,090
respectively of fully amortized noncurrent assets.
5. Accrued Liabilities:
Accrued liabilities at December 31 consist of the following:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Income taxes................................................... $1,373 $2,337
Payroll........................................................ 1,192 287
Pension and 401(k)............................................. 4,705 4,788
Interest....................................................... 358 57
Other.......................................................... 850 727
------ ------
$8,478 $8,196
====== ======
</TABLE>
6. Debt:
In 1997, the Company, with Glass Holdings and its affiliate, Belmont of
America, Inc. ("BOA"), entered into a Global credit agreement which allows
borrowings by the Company up to $35 million. The $35 million of available
borrowings consists of two separate arrangements as follows:
. Revolving credit loan up to $25 million due April 2002 with interest due
monthly. At December 31, 1997, $20 million of revolving credit loans were
outstanding.
. Working capital commitment loans up to $10 million due April 1998,
including up to $5 million of swingline borrowings for use in daily cash
management, with interest due monthly. At December 31, 1997, $5 million
of working capital commitment loans were outstanding.
Both the revolving credit loans and working capital commitment borrowings
bear interest at either prime (8.25% at December 31, 1997) or LIBOR (6% at
December 31, 1997) plus the applicable margin. The applicable margin, which is
based on the Company's financial position, may range from 0 to minus .25% and
.50% to 1.45% for prime rate and LIBOR borrowings, respectively. Swingline
borrowings bear interest at the
F-9
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)
6. Debt--(Continued):
prime rate. In addition, the Company is required to pay a commitment fee on the
unused amounts available under the revolving credit and working capital
commitments arrangements.
The Global credit agreement is collateralized by substantially all the
assets of the Company and the pledge of the Company's common stock and
guaranteed by Glass Holdings. The credit agreement also requires the Company to
maintain specified financial ratios and other covenants. At December 31, 1997,
the Company was in compliance with these covenants.
In connection with the Global credit agreement, the Company paid off in 1997
an 11.67% subordinated note and a revolving term line of credit with balances
of $8,750 and $18,000, respectively, at December 31, 1996. See Note 12 for
subsequent events affecting debt.
7. Income Taxes:
Income tax expense for the years ended December 31, 1995, 1996 and 1997
consists of the following:
<TABLE>
<CAPTION>
1995
---------------------------
Current Deferred Total
-------- -------- --------
<S> <C> <C> <C>
Federal........................................... $ 5,865 $ (57) $ 5,808
State............................................. 1,290 (5) 1,285
-------- ------- --------
$ 7,155 $ (62) $ 7,093
======== ======= ========
<CAPTION>
1996
---------------------------
Current Deferred Total
-------- -------- --------
<S> <C> <C> <C>
Federal........................................... $ 12,819 $ 979 $ 13,798
State............................................. 2,100 98 2,198
-------- ------- --------
$ 14,919 $ 1,077 $ 15,996
======== ======= ========
<CAPTION>
1997
---------------------------
Current Deferred Total
-------- -------- --------
<S> <C> <C> <C>
Federal........................................... $ 10,242 $ 1,340 $ 11,582
State............................................. 2,039 31 2,070
-------- ------- --------
$ 12,281 $ 1,371 $ 13,652
======== ======= ========
</TABLE>
A reconciliation of the difference between the federal statutory rate and
the effective income tax rate as a percentage of income before taxes is as
follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate................................. 35.0% 35.0% 35.0%
State income taxes, net of federal benefit................. 3.6 3.4 3.8
Other...................................................... (2.6) 1.6 (0.2)
---- ---- ----
36.0% 40.0% 38.6%
==== ==== ====
</TABLE>
F-10
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)
7. Income Taxes--(Continued):
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1995, 1996 and 1997 are presented below:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Deferred tax assets:
Inventories..................................... $ 262 $ 792 $ 1,157
Accounts receivable............................. 260 186 --
Accrued liabilities............................. 1,641 538 530
Reserve for self-insured medical claims......... 96 96 96
Other........................................... 192 3 349
------- ------- -------
Total gross deferred tax assets............... 2,451 1,615 2,132
------- ------- -------
Deferred tax liabilities:
Depreciation.................................... (3,356) (4,807) (5,960)
Other........................................... (110) (100) (835)
------- ------- -------
Total gross deferred tax liabilities.......... (3,466) (4,907) (6,795)
------- ------- -------
Net deferred tax liability.................... $(1,015) $(3,292) $(4,663)
======= ======= =======
</TABLE>
In May 1996, the Company settled an Internal Revenue Service (IRS)
examination of its federal income tax returns for fiscal years 1988, 1989, and
1990, related primarily to the valuation of certain intangible assets acquired
in connection with the purchase of the Company in 1988. The Company also
settled an IRS examination of the 1992, 1993, and 1994 tax returns, related
primarily to the rollout of the 1988-1990 adjustment. The adjustment associated
with these settlements resulted in additional current and deferred tax
liabilities resulting in an increase of $4,654 to goodwill (Note 4) in 1996.
Interest of $1,698 related to these IRS settlements was recorded in prior
years.
The Company is included in the consolidated federal tax return of Glass
Holdings. Pursuant to the Company's tax sharing agreement, the Company will be
required to make tax sharing payments to Glass Holdings with respect to the
Company's pro rata share of consolidated federal income tax liabilities which
does not differ significantly from that which would be determined on a stand
alone basis.
8. Employee Benefit Plans:
Defined Contribution Plan: The Company has a savings plan (401(k) Plan) for
all employees which qualifies under Section 401(k) of the Internal Revenue
Code. The 401(k) Plan allows participants to contribute up to a fixed
percentage of their compensation. Company contributions, if any, are made at
the discretion of the Board of Directors. The Company allows participants an
election of receiving their profit sharing, when applicable, in cash or as an
employer contribution to the 401(k) Plan. The Company's contribution to the
401(k) Plan and cash payments to participants for 1995 amounted to $1,686 and
$902, respectively, for 1996 amounted to $2,674 and $1,551, respectively, and
for 1997 amounted to $2,364 and $1,495, respectively.
F-11
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)
8. Employee Benefit Plans:--(Continued):
Defined Benefit Pension Plan: The Company has a defined benefit pension plan
(the "Plan") covering substantially all of its employees. Participating
employees are required to contribute to the Plan. Company contributions to the
Plan for 1995, 1996 and 1997 amounted to $613, $546 and $183, respectively.
The following table sets forth the Plan's funded status and amounts
recognized in the Company's consolidated financial statements at December 31:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................... $ 9,437 $ 10,881
======== ========
Accumulated benefit obligation.......................... $ 9,517 $ 10,991
======== ========
Projected benefit obligation for service rendered to
date..................................................... $ 12,350 $ 14,621
Plan assets at fair value................................. 12,260 14,763
-------- --------
Projected benefit obligation (in excess of) less than plan
assets................................................... (90) 142
Unrecognized net gain..................................... (147) (874)
Unrecognized prior service cost........................... 75 68
-------- --------
Pension liability recognized in the balance sheets...... $ (162) $ (664)
======== ========
Net periodic pension cost included the following
components:
Service cost--benefits earned during period............. $ 800 $ 777
Interest cost on projected benefit obligation........... 744 888
Actual return on assets................................. (1,318) (2,411)
Other................................................... 536 1,430
-------- --------
Net pension cost...................................... $ 762 $ 684
======== ========
</TABLE>
The more significant actuarial assumptions employed were as follows as of
December 31:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Discount rate.................................................... 7.5% 7.0%
Long-term rate of increase in compensation....................... 5.0 5.0
Long-term rate of return on plan assets.......................... 8.0 8.0
</TABLE>
Postretirement Benefits: In addition to providing pension benefits, the
Company provides certain retirement health care benefits to eligible employees.
Employees become eligible for these benefits by attaining specified age and
service requirements.
F-12
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)
8. Employee Benefit Plans--(Continued):
The components of net periodic postretirement benefit expense and
significant assumptions were as follows as of December 31:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Service cost..................................................... $ 39 $ 43
Interest cost.................................................... 59 66
Other components................................................. (11) (11)
---- ----
Net postretirement benefit expense............................. $ 87 $ 98
==== ====
Assumptions used:
Discount rate.................................................. 7.5% 7.0%
Health care.................................................... 8.0 7.0
Ultimate trend rate............................................ 5.5 5.5
</TABLE>
Postretirement benefit obligation, none of which are as yet funded, are
summarized as of December 31:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Retirees...................................................... $ 39 $ 45
Fully eligible active plan participants....................... 279 302
Other active plan participants................................ 607 680
------ ------
925 1,027
Unrecognized net gain......................................... 245 241
------ ------
Total postretirement benefit obligation..................... $1,170 $1,268
====== ======
</TABLE>
If the health care cost trend rate assumption was increased by one
percentage point in each year, the accumulated postretirement benefit
obligation as of December 31, 1997 would increase by 11% and net periodic
postretirement benefit cost for 1997 would increase by 14%.
9. Concentrations:
The Company's cash and cash equivalents are placed in major domestic and
international banks. Deposits in such banks may exceed federally insured
limits.
Substantially all the Company's trade accounts receivable are due from
companies in the electronics, composites, insulation, filtration, construction
and commercial industries. Management periodically performs credit evaluations
of its customers and generally does not require collateral. Credit losses have
historically been within management's expectations.
The following table presents a summary of sales of significant customers as
a percentage of the Company's net sales:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Customer A................................................. 14.0% 15.6% 12.1%
Customer B................................................. 14.2% 14.2% 14.2%
</TABLE>
F-13
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)
10. Commitments:
Financial Instruments: The Company has an interest rate swap transaction
which expires May 30, 1998, on notional amounts ranging from $6,750 to $12,000
in order to limit its exposure to interest rate fluctuations under the lines of
credit (Note 6). Under the swap agreement, the Company pays a fixed rate of
interest of 8.22% on the notional amount outstanding under the swap agreement,
while the rate of interest accruing on the line of credit is the LIBOR floating
rate plus the applicable margin. The fair value of the interest rate swap
agreement representing the estimated amount that the Company would have to pay
to terminate the swap agreement was ($366) and ($277) at December 31, 1996 and
1997, respectively; however, the Company has no intention of terminating the
swap agreement.
Leases: The Company leases facilities and equipment. Generally, such leases
contain renewal options under cancelable and noncancelable operating leases.
Rent expense amounted to $939, $693 and $697 for the years ended December 31,
1995, 1996 and 1997, respectively. Under the terms of noncancelable operating
leases, the Company is committed to the following future minimum lease payments
at December 31, 1997:
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1998.................................... $342
1999.................................... 74
2000.................................... 11
2001.................................... 9
2002.................................... 5
----
$441
====
</TABLE>
Guarantees: In 1997, the Company cosigned a debt facility with Glass
Holdings guaranteeing the payment and performance of the obligations of BOA and
Shanghai Porcher Industries Co., Ltd., affiliates of the Company. The
obligations guaranteed by the Company under the debt facility are a $30,000
five year stand-by letter of credit of Shanghai Porcher Industries, Ltd., and a
$5,000 tax-free variable rate demand note for BOA. At December 31, 1997,
$20,500 of guaranteed obligations were outstanding on the books of these
affiliates.
As of December 31, 1997, the Company has entered into an agreement whereby
BGF Industries Inc. will provide cash and financial support to BOA through
February 28, 1999, if necessary.
F-14
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)
11. Related Party Transactions:
Glass Holdings provides loan guarantees to the Company. At December 31,
1995, 1996, and 1997, the Company was current on all loan guarantee fees to
Glass Holdings.
Related party balances at December 31, 1996, and 1997 and transactions for
the years ended December 31, 1995, 1996 and 1997 were as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------- ------
<S> <C> <C> <C>
Trade accounts receivable from Porcher.................. N/A $ 162 $ 98
======= ======
Trade accounts receivable from other affiliated
companies.............................................. N/A $ 1 $ --
======= ======
Reimbursable expenses payable to Porcher................ $ 68 $ 84 $ 32
====== ======= ======
Sales to Porcher........................................ $ 771 $ 484 $ 329
====== ======= ======
Management fees to subsidiaries of Porcher.............. $1,298 $ 388 $ 202
====== ======= ======
Management fees included in accounts payable............ N/A $ 62 $ 56
======= ======
Management fees overpayment refundable by Porcher....... N/A $ 265 $ --
======= ======
Management fees to Porcher.............................. $ -- $ -- $ 102
====== ======= ======
Fees to a subsidiary of Glass Holdings.................. $ 800 $ 1,050 $1,000
====== ======= ======
Fees included accounts payable.......................... N/A $ 112 $ 13
======= ======
Due from affiliate in other current assets.............. N/A $ -- $ 44
======= ======
Purchases from Porcher and affiliated companies......... $5,889 $ 5,701 $8,081
====== ======= ======
Affiliated purchases included in accounts payable....... N/A $ 965 $ 749
======= ======
Affiliated purchases included in inventory.............. $1,059 $ 974 $1,491
====== ======= ======
Payable to Glass Holdings, for taxes included in accrued
expenses............................................... N/A $ 1,374 $2,337
======= ======
Management accounting and administrative fee income from
a subsidiary of Glass Holdings......................... $ -- $ 13 $ 360
====== ======= ======
Management, technological support and administrative
income from a joint venture of Glass Holdings.......... $ -- $ 705 $ 349
====== ======= ======
Dividends to Glass Holdings............................. $ -- $15,164 $4,913
====== ======= ======
Commissions to Porcher.................................. $ 378 $ 307 $ 380
====== ======= ======
Service fees from subsidiary of Porcher................. $ -- $ 17 $ 23
====== ======= ======
</TABLE>
F-15
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)
12. Events Subsequent to the Date of the Independent Auditors Report
(Unaudited):
The interim consolidated financial data with respect to September 30, 1997
and 1998 have been prepared without audit; however, in the opinion of
management, all adjustments (which included those that are normal and
recurring) necessary to present fairly the consolidated financial position at
September 30, 1998 and the results of operations and cash flows for the nine
month periods ended September 30, 1997 and 1998, have been made. The results
for nine months ended September 30, 1998 are not necessarily indicative of the
results of operations for a full year. Interim financial data does not include
all the disclosures normally required under generally accepted accounting
principles.
Inventories consist of the following at September 30, 1998:
<TABLE>
<S> <C>
Supplies............................. $ 1,539
Raw materials........................ 3,963
Stock-in-process..................... 9,141
Finished goods....................... 27,250
-------
$41,893
=======
</TABLE>
Accrued liabilities consist of the following at September 30, 1998:
<TABLE>
<S> <C>
Income taxes.......................... $1,678
Payroll............................... 1,458
Pension and 401(k).................... 3,882
Interest.............................. 66
Other................................. 850
------
$7,934
======
</TABLE>
In April, 1998, the Company loaned an officer $365,000. The loan bears no
interest and is payable upon the sale of the officer's former residence.
During the second quarter of 1998, the Company received an extension on its
working capital commitment loans to June 29, 1999.
The Company has entered into a credit agreement dated as of September 30,
1998, with a syndicate of lenders and First Union National Bank, as Agent (the
"Senior Credit Facility"). Under the Senior Credit Facility, the lenders have
agreed to provide the Company with a total of up to $125.0 million of credit
consisting of (i) a five-year revolving credit facility for up to $75.0 million
(the "Revolver") and (ii) a six-year amortizing term loan in the amount of
$50.0 million (the "Term Loan"). The Revolver contains two sub facilities: a
$5.0 million swingline facility for working capital requirements and a $20.0
million letter of credit facility. As of September 30, 1998, the Term Loan was
fully funded and $37.0 million was outstanding under the Revolver.
Under the Senior Credit Facility, the Company may be required to prepay the
Term Loan and the Revolver if:
. the Company sells assets in transactions outside the ordinary course of
business;
. the Company issues debt or equity securities;
F-16
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)
12. Events Subsequent to the Date of the Independent Auditors Report
(Unaudited)--(Continued):
. the Company receives insurance proceeds for casualty losses and does not
repair or replace the damaged facilities; or
. the Company's EBITDA for a fiscal year exceeds certain expenditures and
payments.
These prepayments would be applied first to the Term Loan, and upon payment
of the Term Loan, to permanently pay outstanding loans under the Revolver.
The Term Loan has a quarterly scheduled amortization and is payable on the
following dates in the following amounts:
<TABLE>
<CAPTION>
Term Loan
Term Loan Payment Date Payment Amount
---------------------- --------------
<S> <C>
December 31, 1999............................................. $1,000,000
March 31, 2000................................................ 1,000,000
June 30, 2000................................................. 1,000,000
September 30, 2000............................................ 1,000,000
December 31, 2000............................................. 1,750,000
March 31, 2001................................................ 1,750,000
June 30, 2001................................................. 1,750,000
September 30, 2001............................................ 1,750,000
December 31, 2001............................................. 2,500,000
March 31, 2002................................................ 2,500,000
June 30, 2002................................................. 2,500,000
September 30, 2002............................................ 2,500,000
December 31, 2002............................................. 3,250,000
March 31, 2003................................................ 3,250,000
June 30, 2003................................................. 3,250,000
September 30, 2003............................................ 3,250,000
December 31, 2003............................................. 4,000,000
March 31, 2004................................................ 4,000,000
June 30, 2004................................................. 4,000,000
September 30, 2004............................................ 4,000,000
</TABLE>
The Senior Credit Facility is collateralized by a first priority lien on
substantially all of the Company's real and personal property. The lien also
covers (i) 100% of the capital stock of each direct or indirect domestic
subsidiary of the Company, (ii) 65% of the capital stock of each first tier
foreign subsidiary of the Company and (iii) certain promissory notes issued by
affiliates of the Company. The Senior Credit Facility is also collateralized
by a non-recourse pledge by Glass Holdings, the parent of the Company, of
capital stock of certain affiliates of the Company.
The annual interest rate applicable to the Revolver and the Term Loan is a
fluctuating rate of interest measured, at the Company's option, by reference
to either (i) LIBOR or (ii) the greater of the published prime rate of First
Union National Bank or the overnight federal funds rate plus 0.5% ("ABR"),
plus, in either case,
F-17
<PAGE>
BGF INDUSTRIES, INC.
(a wholly owned subsidiary of Glass Holdings Corp.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)
12. Events Subsequent to the Date of the Independent Auditors Report
(Unaudited)--(Continued):
an additional amount which fluctuates based upon the leverage ratio of the
Company. This additional amount ranges from 2.00% to 2.75% for LIBOR based
borrowings and 0.75% to 1.50% for ABR based borrowings.
The Senior Credit Facility provides for an annual administrative fee to be
paid to the Agent, an unused commitment fee payable to the lenders and certain
other fees payable in connection with letters of credit issued under the
Revolver.
On September 30, 1998, the Company also entered into a ten-year senior
subordinated credit agreement with First Union Investors, Inc. as Agent (the
"Senior Subordinated Credit Facility"). Subsequently, other institutions became
lenders under the Senior Subordinated Credit Facility. The Senior Subordinated
Credit Facility, which provided the Company with $65.0 million of credit, was
fully drawn by the Company in connection with the closing of the purchase by
AGY Holdings (an affiliate of the Company) of a 51% ownership interest in
Advanced Glassfiber Yarns LLC. The Senior Subordinated Credit Facility is an
unsecured senior subordinated obligation of the Company. Amounts outstanding
under the Senior Subordinated Credit Facility accrued interest at variable
rates based on either LIBOR or a treasury based rate.
On September 30, 1998, AGY Holdings purchased a 51% ownership interest in
Advanced Glassfiber for aggregate consideration of $338.9 million (including
post-closing adjustments). In connection with the acquisition, the Company
loaned Glass Holdings approximately $138.6 million to provide Glass Holdings a
portion of the capital necessary to fund the acquisition. The Company raised
the proceeds for this loan by borrowing (i) $87.0 million under the Senior
Credit Facility, and (ii) $65.0 million under the Senior Subordinated Credit
Facility. The loan from the Company to Glass Holdings is evidenced in part by
promissory notes that bear interest at the Cost of Funds Rate for the Company
for the calendar year immediately preceding the date on which any interest is
due. With respect to any period of determination, the Cost of Funds Rate means
a rate per annum equal to the blended interest rate (as reasonably calculated
by the Company) applicable to borrowings of the Company during such period in
respect of indebtedness incurred by the Company to fund the loan to Glass
Holdings. Accrued interest is due and payable on the first business day of
February of each year commencing on February 1, 1999 and on any date on which
any principal is due. The promissory notes are payable on October 31, 2008 or
such later date as may be agreed to by the Company and Glass Holdings.
In October 1998, the Company entered into an interest rate swap agreement
which expires September 2004, on an initial notional amount of $50 million in
order to limit its exposure to interest rate fluctuations under the Term Loan
portion of the Senior Credit facility.
Under the swap agreement, the Company has secured a fixed LIBOR rate of
interest of 5.04% on the notional principal amount which is reduced in a manner
consistent with the amortization of the Term Loan principal.
F-18
<PAGE>
$100,000,000
BGF INDUSTRIES, INC.
Offer to Exchange its 10 1/4% Series B Senior Subordinated Notes Due 2009 which
have been registered under the Securities Act for up to $100,000,000 aggregate
principal amount of its outstanding 10 1/4% Senior Subordinated Notes due 2009
, 1999
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Under Section 145 of the General Corporation Law of the State of Delaware, a
corporation may indemnify its directors, officers, employees and agents and its
former directors, officers, employees and agents and those who serve, at the
corporation's request in such capacities with another enterprise, against
expenses (including attorney's fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in which they or
any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. Delaware law
provides, however, that such person must have acted in good faith and in a
manner he or she reasonably believed to be in (or not opposed to) the best
interests of the corporation and, in the case of a criminal action, such person
must have had no reasonable cause to believe his or her conduct was unlawful.
In addition, Delaware law does not permit indemnification of any action or suit
by or in the right of the corporation, where such person has been adjudged
liable to the corporation, unless, and only to the extent that, a court
determines that such person fairly and reasonably is entitled to indemnity for
costs the court deems proper in light of liability adjudication. Indemnity is
mandatory to the extent a claim, issue or matter has been successfully
defended.
Article V of BGF Industries, Inc.'s bylaws provide, under certain
circumstances, for the indemnification of BGF Industries, Inc.'s present or
former directors or officers and persons who, at the request of BGF Industries,
Inc., are or were serving in a similar capacity for another corporation or
entity. These provisions also allow the Board of Directors to purchase and
maintain insurance on behalf of BGF Industries, Inc.'s present or former
directors, officers or persons who are or were serving at the request of BGF
Industries, Inc. as a director or officer of another corporation or entity.
Item 21. Exhibits and Financial Statement Schedules
(a) The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<C> <S>
3.1 Certificate of Incorporation of BGF Industries, Inc., as amended
3.2 Bylaws of BGF Industries, Inc., as amended
4.1 Indenture, dated as of January 21, 1999, among BGF Industries,
Inc. and The Bank of New York, as trustee, relating to $100
million principal amount of 10 1/4% Senior Subordinated Notes due
2009
4.2 Form of 10 1/4% Series A and Series B Senior Subordinated Notes
due 2009 (included in Exhibit 4.1)
4.3 Registration Rights Agreement dated as of January 21, 1999, by and
between BGF Industries, Inc. and the Initial Purchaser
5 Opinion of Alston & Bird LLP regarding legality*
10.1 Deferred Compensation Agreement, dated November 13, 1995, by and
between BGF Industries, Inc. and Graham A. Pope
10.2 Deferred Compensation Agreement, dated April 1, 1998, by and
between BGF Industries, Inc. and Richard L. Cromer
10.3 Deferred Compensation Agreement, dated April 16, 1990, by and
between BGF Industries, Inc. and James R. Henderson
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<C> <S>
10.4 Deferred Compensation Agreement, dated January 28, 1993, by and
between BGF Services, Inc. and Philippe Dorier
10.5 Lease, dated March 20, 1996, between E.R. English, Sr., as lessor,
and BGF Industries, Inc., as lessee
10.6 Purchase Order (Lease), dated November 26, 1996, between K&C
Brokerage, as lessor, and BGF Industries, Inc., as lessee
10.7 Lease, dated November 1, 1991, by and between H.V. Johns, Jr., as
lessor, and BGF Industries, Inc., as lessee
10.8 Agreement between Contractor and Owner (Warehouse Lease), dated
February 1, 1998, between Boyd Warehouse/Emmett Williams, as
lessor, and BGF Industries, Inc., as lessee
10.9 Note Purchase Agreement dated January 15, 1999 between BGF
Industries, Inc. and the Initial Purchaser
10.10 Senior Credit Agreement dated as of September 30, 1998 among BGF
Industries, Inc., as Borrower, its Domestic Subsidiaries from time
to time party thereto, as Guarantors, the Lenders Parties thereto
and First Union National Bank, as Agent
10.11 Senior Subordinated Credit Agreement dated as of September 30,
1998 among BGF Industries, Inc., as Borrower, certain subsidiaries
from time to time party thereto, as Guarantors, and First Union
Investors, Inc., as Agent
10.12 Promissory Note, dated September 30, 1998, from Glass Holdings
Corp. to BGF Industries, Inc. for the original principal amount of
$135,043,844.62
10.13 Promissory Note, dated December 23, 1998, from Glass Holdings
Corp. to BGF Industries, Inc. for the original principal amount of
$ 2,681,000
12 Statement of Computation of Ratios
21 Subsidiaries of BGF
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Alston & Bird LLP (included in Exhibit 5)*
24 Powers of Attorney (included on signature page)
25 Statement of Eligibility and Qualification (Form T-1) of The Bank
of New York, as Trustee
27 Financial Data Schedule
99 Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer
</TABLE>
- --------
* To be filed by amendment
(b) Financial Statement Schedules--None
Item 22. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
II-2
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 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, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liability arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a
Registrant of expenses incurred or paid by a director, officer or controlling
person of such Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(d) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Greensboro, State of
North Carolina, on February 12, 1999.
BGF INDUSTRIES, INC.
/s/ Richard L. Cromer
By: _________________________________
Richard L. Cromer
President
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of BGF Industries, Inc. hereby severally constitute Richard L. Cromer
and Philippe R. Dorier, and each of them singly, our true and lawful attorneys
with full power to them, and each of them singly, to sign for us and in our
names in the capacities indicated below, the Registration Statement filed
herewith and any and all amendments to said Registration Statement, including
any registration statement filed pursuant to Rule 462(b), and generally to do
all such things in our names and in our capacities as officers and directors to
enable BGF Industries, Inc. to comply with the provisions of the Securities Act
of 1933, and all requirements of the Securities and Exchange Commission, hereby
ratifying and confirming our signature as they may be signed by our said
attorneys, or any of them, to said Registration Statement and any and all
amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 12, 1999:
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Robert Porcher Chairman of the Board of
______________________________________ Directors, Chief
Robert Porcher Executive Officer and
Director (Principal
Executive Officer)
/s/ Graham A. Pope Director
______________________________________
Graham A. Pope
/s/ Richard L. Cromer President
______________________________________
Richard L. Cromer
/s/ Philippe R. Dorier Chief Financial Officer
______________________________________ (Principal Financial and
</TABLE> Philippe R. Dorier Accounting Officer)
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<C> <S>
3.1 Certificate of Incorporation of BGF Industries, Inc., as amended
3.2 Bylaws of BGF Industries, Inc., as amended
4.1 Indenture, dated as of January 21, 1999, among BGF Industries,
Inc. and The Bank of New York, as trustee, relating to $100
million principal amount of 10 1/4% Senior Subordinated Notes due
2009
4.2 Form of 10 1/4% Series A and Series B Senior Subordinated Notes
due 2009 (included in Exhibit 4.1)
4.3 Registration Rights Agreement dated as of January 21, 1999, by and
between BGF Industries, Inc. and the Initial Purchaser
5 Opinion of Alston & Bird LLP regarding legality*
10.1 Deferred Compensation Agreement, dated November 13, 1995, by and
between BGF Industries, Inc. and Graham A. Pope
10.2 Deferred Compensation Agreement, dated April 1, 1998, by and
between BGF Industries, Inc. and Richard L. Cromer
10.3 Deferred Compensation Agreement, dated April 16, 1990, by and
between BGF Industries, Inc. and James R. Henderson
10.4 Deferred Compensation Agreement, dated January 28, 1993, by and
between BGF Services, Inc. and Philippe Dorier
10.5 Lease, dated March 20, 1996, between E.R. English, Sr., as lessor,
and BGF Industries, Inc., as lessee
10.6 Purchase Order (Lease), dated November 26, 1996, between K&C
Brokerage, as lessor, and BGF Industries, Inc., as lessee
10.7 Lease, dated November 1, 1991, by and between H.V. Johns, Jr., as
lessor, and BGF Industries, Inc., as lessee
10.8 Agreement between Contractor and Owner (Warehouse Lease), dated
February 1, 1998, between Boyd Warehouse/Emmett Williams, as
lessor, and BGF Industries, Inc., as lessee
10.9 Note Purchase Agreement dated January 15, 1999 between BGF
Industries, Inc. and the Initial Purchaser
10.10 Senior Credit Agreement dated as of September 30, 1998 among BGF
Industries, Inc., as Borrower, its Domestic Subsidiaries from time
to time party thereto, as Guarantors, the Lenders Parties thereto
and First Union National Bank, as Agent
10.11 Senior Subordinated Credit Agreement dated as of September 30,
1998 among BGF Industries, Inc., as Borrower, certain subsidiaries
from time to time party thereto, as Guarantors, and First Union
Investors, Inc., as Agent
10.12 Promissory Note, dated September 30, 1998, from Glass Holdings
Corp. to BGF Industries, Inc. for the original principal amount of
$135,043,844.62
10.13 Promissory Note, dated December 23, 1998, from Glass Holdings
Corp. to BGF Industries, Inc. for the original principal amount of
$ 2,681,000
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<C> <S>
12 Statement of Computation of Ratios
21 Subsidiaries of BGF
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Alston & Bird LLP (included in Exhibit 5)*
24 Powers of Attorney (included on signature page)
25 Statement of Eligibility and Qualification (Form T-1) of The Bank
of New York, as Trustee
27 Financial Data Schedule
99 Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer
</TABLE>
- --------
* To be filed by amendment
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION BEFORE
PAYMENT OF ANY PART OF CAPITAL
OF
BGF GLASS FABRICS, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
BGF GLASS FABRICS. INC.
2. The Corporation has not received any payment for any of its stock.
3. The certificate of incorporation of the Corporation is hereby amended
by striking out ARTICLE FIRST thereof and by substituting in lieu of said
ARTICLE the following new ARTICLE FIRST:
"The name of the corporation is
BGF Industries, Inc."
4. The amendment of the certificate of incorporation of the Corporation
herein certified was duly adopted, pursuant to the provision of Section 241 of
the General Corporation Law of the State of Delaware, by the sole incorporator,
no directors
<PAGE>
having been named in the certificate of incorporation and no directors having
been elected.
/s/ Raymond C. Steckel
-------------------------------------
Raymond C. Steckel, Sole Incorporator
Signed on March 8, 1988
2
<PAGE>
CERTIFICATE OF INCORPORATION
OF
BGF GLASS FABRICS, INC.
I, the undersigned, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware do hereby certify as follows:
FIRST: The name of this corporation is BGF Glass Fabrics, Inc.
-----
SECOND: This corporation's registered office is 229 South State
------
Street, Dover, County of Kent, Delaware 19901. The name of its registered
agent at that address is The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of this corporation is to engage in any lawful act
-----
or activity for which a corporation may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of all classes which this
------
corporation shall have authority to issue is three thousand (3,000), all of
which shall be common shares having a par value of one dollar ($1.00) per
share.
<PAGE>
FIFTH: The name and address of the sole incorporator is as follows:
-----
Name Address
---- -------
Raymond F. Steckel 405 Lexington Avenue - 18th Floor -
New York, New York 10174
SIXTH: The Board of Directors shall have the power without the
-----
assent of vote of the stockholders to make, alter, amend, change, add to or
repeal the By-laws of this corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between
-------
this corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application
in a summary way of this corporation or of any creditor or stockholder
thereof or on the application of any receiver or receivers appointed for
this corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this corporation under the provisions
of Section 279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be,
-2-
<PAGE>
to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement,
the said compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, and the said
reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of this
corporation, as the case may be, and also on this corporation.
EIGHTH: A director of this corporation shall not be liable to this
------
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director. To the fullest extent permitted by Section
102(b) of the Delaware General Corporation Law as it currently exists or as
it may hereafter be amended.
NINTH: This corporation reserves the right to amend, alter, change or
-----
repeal any provision contained in this certificate of incorporation in the
manner now or hereafter prescribed by law, and all rights and powers
conferred herein
-3-
<PAGE>
on stockholders, directors and officers are subject to this reserved power.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of
March, 1988.
/s/ Raymond F. Steckel
-----------------------
Raymond F. Steckel
405 Lexington Avenue
New York, New York 10174
<PAGE>
EXHIBIT 3.2
BGF INDUSTRIES, INC.
WRITTEN CONSENT OF THE SOLE SHAREHOLDER
IN LIEU OF SPECIAL MEETING
The undersigned, being the sole shareholder of BGF Industries, Inc. (the
"Corporation"), and acting pursuant to the Delaware General Corporation Law,
does hereby consent to and adopt the following resolutions without formal
meeting:
Number of Directors
- -------------------
RESOLVED, that Article III of the Bylaws of the Corporation are hereby
amended to reduce the number of directors to two.
Election of Directors
- ---------------------
RESOLVED, that the following persons are hereby elected as directors
of the Corporation to serve until their successor has been duly elected and
qualified:
Robert Porcher
Graham A. Pope
WITNESS the signature of the undersigned, this the 11th day of October,
1991.
GLASS HOLDINGS, INC.
By: /s/ Robert Porcher
-------------------
Robert Porcher
<PAGE>
MINUTES OF
THE BOARD OF DIRECTORS OF
BGF INDUSTRIES, INC.
A meeting of the Board of Directors of BGF Industries, Inc. was held on May
3, 1989, at 10:30 a.m. in the corporate offices at 301 North Elm Street,
Greensboro, North Carolina. All directors were present and participating in the
meeting which included Robert Porcher, Gregoire Giraud, Graham A. Pope, Charles
M. Travis and Paul Chatelus.
Robert Porcher, Chairman and Chief Executive Officer of the Corporation,
presided at the meeting. Howard L. Williams assisted in reviewing requisite
resolutions to be adopted by the Board. The following resolutions, upon motion
made and properly seconded, were unanimously adopted by the Board:
Ratification of Officers and Executive Committee Action
- -------------------------------------------------------
Motion made by Graham A. Pope and seconded by Charles M. Travis.
RESOLVED, the action of the Officers and Executive Committee of the
Corporation taken since the inception of the Corporation is ratified and
approved.
Indemnification of Directors and Officers
- -----------------------------------------
Motion made by Graham A. Pope and seconded by Charles M. Travis.
RESOLVED, bylaws of the Corporation are hereby amended by the
insertion of Article V regarding "Indemnification" of Directors and
Officers and renumbering of the Article V to Article VI and all subsequent
Articles of the bylaws in like manner.
ARTICLE V
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. The corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he
<PAGE>
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent shall not, of itself, create a
---- ----------
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 2. DERIVATIVE SUITS. The corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 3. INDEMNITEE SUCCESSFUL ON THE MERITS. To the extent that a
director or officer of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections 1
or 2 of this Article, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
SECTION 4. DETERMINATION OF RIGHT TO INDEMNITY. Any indemnification under
Sections 1 or 2 of this Article (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in Sections 1 or
2 of this Article. Such determination shall be made (a) by the Board of
Directors by a
2
<PAGE>
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding ("Disinterested Directors"), or (b) if such a quorum
is not obtainable, or, even if obtainable a quorum of Disinterested Directors
so directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
SECTION 5. ADVANCE EXPENSES. Expenses incurred by a director or officer
in defending a civil or criminal action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of such director or officer to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the corporation as authorized in this Article.
SECTION 6. APPLICATION FOR INDEMNITY OR ADVANCES.
(a) A person described in Sections 1 or 2 may apply to the corporation in
writing for indemnification or advance expenses. Such application shall be
addressed to the Secretary or, in the absence of the Secretary, to any officer
of the corporation. The corporation shall respond in writing to such
applications as follows: to a request for indemnity under Sections 1 or 2,
within sixty (60) days after receipt of the application; to a request for
advance expenses under Section 5, within twenty (20) days after receipt of the
application.
(b) The right to indemnification or advance expenses provided herein shall
be enforceable in any court of competent jurisdiction. A legal action may be
commenced if a claim for indemnity or advance expenses is denied in whole or in
part, or upon the expiration of the time periods provided in the preceding
subsection (a). In any such action, the claimant shall be entitled to prevail
upon establishing that he or she is entitled to indemnification or advance
expenses, and the corporation shall have the burden of establishing, as a
defense, that the liability or expense was incurred on account of activities
with respect to which such person did not act in good faith or in a manner he
---
reasonably believed to be in or not opposed to the best interests of the
corporation, or with respect to any criminal action or proceeding, had
reasonable cause to believe his conduct was unlawful. In any such action, if
the claimant establishes the right to indemnification, he or she shall also have
the right to be indemnified against the litigation expense (including a
reasonable attorneys' fee) of such action.
SECTION 7. NON-EXCLUSIVITY AND SURVIVAL OF RIGHTS. The indemnification
provided by this Article shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any bylaw, agreement,
vote
3
<PAGE>
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 and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 8. INSURANCE. The corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director or officer,
or is or was serving at the request of the corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of this Article.
SECTION 9. DEFINITIONS. For purposes of this Article, the term "other
enterprise" shall include an employee benefit plan; the term "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and the term "serving at the request of the corporation" shall
include any service as a director of the corporation which imposes duties on, or
involves services by, such director with respect to an employee benefit plan,
its participants, or beneficiaries; and a person who acted in good faith and in
a manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article.
SECTION 10. SAVINGS CLAUSE. If this Article or any portion hereof shall
be invalidated on any ground by any court or agency of competent jurisdiction,
then the corporation shall nevertheless indemnify each person described in
Sections 1 and 2 to the full extent permitted by the portion of this Article
that is not invalidated and also to the full extent (not exceeding the benefits
described herein) permitted or required by other applicable law.
Executive Committee
- -------------------
Motion made by Graham A. Pope and seconded by Charles M. Travis.
RESOLVED, Section 8 of Article III of the By-Laws shall be amended by
inserting the following unnumbered paragraph at the end of Section 8:
The following officers, Chairman, Vice-Chairman, and President, shall
be designated and shall constitute an Executive Committee, which committee
shall have and may
4
<PAGE>
exercise all the authority (including the payment of dividends) of the
Board of Directors in the management of the Corporation in meetings of the
Board of Directors. The Executive Committee shall keep regular minutes of
its proceedings and report the same to the Board of Directors when
required.
Election of officers
- --------------------
Motion made by Charles M. Travis and seconded by Graham A. Pope.
RESOLVED, that the following persons be, and they hereby are, elected
as officers of the Corporation to serve as such until their successors
shall have been duly elected and qualified:
Chairman, Chief Executive Officer Robert Porcher
Vice Chairman Gregoire Giraud
President, Chief Operating officer Graham A. Pope
Vice President of
Administration and Finance R. Richard Sipe
Secretary Philippe Dorier
Assistant Secretary R. Richard Sipe
Contribution to Tax Savings and Profit Sharing Plan
- ---------------------------------------------------
Motion made by Paul Chatelus and seconded by Charles M. Travis.
RESOLVED, a contribution of an amount equal to three percent (3%) of
compensation for all eligible employees of the Tax Savings and Profit
Sharing Plan for the calendar year 1988 is approved and ratified.
Appointment of Auditors
- -----------------------
Motion made by Charles M. Travis and seconded by Graham A. Pope.
RESOLVED, the firm of Peat Marwick Main & Co. is appointed auditors
for the Corporation.
Following the adoption of the resolutions, R. Richard Sipe reviewed
the financial statements of the corporation citing the increase in sales from
previous years and the projected sales volume for the 1989 year. In addition to
the review of financial statements, Mr. Sipe reviewed the new on-line computer
cash management service that was available through Wachovia Bank & Trust Co. He
further reported that the company was in compliance with all of the covenants of
the acquisition indebtedness.
Graham A. Pope, President, reported on business operations citing the
influx of new people and new responsibilities that people were assuming for the
forthcoming year.
5
<PAGE>
After the formal discussion, the meeting was adjourned for informal
discussion among directors and officers of the corporation.
These minutes were recorded as of the 3rd day of May, 1989.
/s/ Howard L. Williams
-------------------------
Howard L. Williams
Recorder
Approved:
10-9-90
- ---------------
Date
6
<PAGE>
BGF INDUSTRIES, INC.
WRITTEN CONSENT
BY THE SOLE STOCKHOLDER
IN LIEU OF SPECIAL MEETING
The undersigned, being the sole stockholder of BGF Industries, Inc.
(the "Corporation"), acting pursuant to Section 228 of Delaware General
corporation Law, does hereby consent to and adopt the following resolutions
without formal meeting:
RESOLVED, Section 8 of Article III of the By-Laws shall be amended by
inserting the following unnumbered paragraph at the end of Section 8:
The following officers, Chairman, Vice-Chairman, President, and Vice-
President of Manufacturing, shall be designated and shall constitute an
Executive Committee, which committee shall have and may exercise all the
authority of the Board of Directors in the management of the corporation in
meetings of the Board of Directors. The Executive Committee shall keep
regular minutes of its proceedings and report the same to the Board of
Directors when required.
IN WITNESS WHEREOF, the undersigned has executed this consent as of the
13th day of September, 1988.
GLASS HOLDINGS CORP.
By: /s/ Robert Porcher
-------------------
Robert Porcher
<PAGE>
BY-LAWS
of
BGF INDUSTRIES, INC.
<PAGE>
STATEMENT OF ORGANIZATION
BY SOLE INCORPORATOR
OF
BGF INDUSTRIES, INC.
I, the undersigned, as sole incorporator of BGF INDUSTRIES, INC. (the
"CORPORATION"), do hereby take the following actions to organize the
Corporation:
FIRST: The name of the Corporation is BGF INDUSTRIES, INC.
SECOND: The Certificate of Incorporation of the Corporation (then
named BGF Glass Fabrics, Inc.) was duly filed in the office of the
Secretary of State of Delaware on the 2nd day of March, 1988.
THIRD: The By-Laws which are annexed hereto are hereby adopted as the
By-Laws of the Corporation for the regulation of its affairs.
FOURTH: The following named persons are hereby elected the directors
of the Corporation, to hold office until the first annual
stockholders' meeting and until their successors are duly elected and
qualified:
Robert Porcher Chairman
Gregoire Giraud Vice Chairman
I hereby execute this Statement as of this 9th day of March, 1988.
/s/ Raymond F. Steckel
------------------------
Raymond F. Steckel
<PAGE>
BY-LAWS
OF
BGF INDUSTRIES, INC.
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I - Offices
Section 1 - Registered Office 1
Section 2 - Other Offices 1
ARTICLE II - Meetings of Stockholders
Section 1 - Annual Meetings 1
Section 2 - Other Meetings 1
Section 3 - Voting 2
Section 4 - Quorum 2
Section 5 - Special Meetings 2
Section 6 - Notice of Meetings 3
Section 7 - Action Without Meeting 3
ARTICLE III - Directors
Section 1 - Number and Term 3
Section 2 - Resignations 3
Section 3 - Vacancies 3
Section 4 - Removal 4
Section 5 - Increase or Decrease of Number 4
Section 6 - Powers 4
Section 7 - Conference Call 4
Section 8 - Committees 4
Section 9 - Meetings 5
Section 10 - Quorum 5
Section 11 - Compensation 5
Section 12 - Action Without Meeting 5
ARTICLE IV - Officers
Section 1 - Officers 6
Section 2 - Other Officers and Agents 6
Section 3 - Chairman 6
Section 4 - President 6
Section 5 - Vice President 7
Section 6 - Treasurer 7
Section 7 - Secretary 7
Section 8 - Assistant Treasurers and
Assistant Secretaries 7
(i)
<PAGE>
ARTICLE V - Miscellaneous
Section 1 - Certificate of Stock 8
Section 2 - Lost Certificates 8
Section 3 - Transfer of Shares 8
Section 4 - Stockholders Record Date 8
Section 5 - Dividends 9
Section 6 - Seal 9
Section 7 - Fiscal Year 9
Section 8 - Checks 9
Section 9 - Notice and Waiver of Notice 9
ARTICLE VI - Amendments 10
(ii)
<PAGE>
BY-LAWS
OF
BGF INDUSTRIES, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office shall be located
at 229 South State Street, City of Dover, County of Kent, State of Delaware
19901. The Prentice-Hall Corporation System, Inc. shall be the registered agent
of the corporation.
SECTION 2. OTHER OFFICES. The corporation may have other offices
either within or without the State of Delaware at such place or places as the
Board of Directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting, shall be held at such place, either within or without the State
of Delaware, and at such time and date as the Board of Directors, by resolution,
shall determine and as set forth in the notice of the meeting. In the event the
Board of Directors fails so to determine the time, date and place of meeting,
the annual meeting of stockholders shall be held at the registered office of the
corporation in Delaware on the last Monday in June of the year in question.
If the date of the annual meeting shall fall upon a legal holiday, the
meeting shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect a Board of Directors and
may transact such other corporate business as shall be stated in the notice of
the meeting.
SECTION 2. OTHER MEETINGS. Meetings of stockholders for any purpose
other than the election of directors may be held at such time and place, within
or without the State of Delaware, as shall be stated in the notice of the
meeting.
<PAGE>
SECTION 3. VOTING. Except as otherwise provided in the Certificate
of Incorporation each stockholder entitled to vote in accordance with the terms
of the Certificate of Incorporation and in accordance with the provisions of
these By-Laws shall be entitled to one vote, in person or by proxy for each
share of capital stock held by such stockholder, but no proxy shall be voted
after three years from its date unless such proxy provides for a longer period.
Upon the demand of any stockholder or director, the vote for directors and the
vote upon any question before the meeting shall be by ballot, but otherwise
voting may be by voice vote. All elections for directors shall be decided by
plurality vote of each class of stock voting separately as a class; all other
questions shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 4. QUORUM. Except as otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the presence, in person or by
proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote thereat, present in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote shall be present. At any such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof.
SECTION 5. SPECIAL MEETINGS. Special meetings of the stockholders
for any purpose or purposes may be called by the Chairman or Secretary, or by
resolution of the directors.
<PAGE>
SECTION 6. NOTICE OF MEETINGS. Written notice, stating the place,
date and time of the meeting, and the general nature of the business to be
considered, shall be given to each stockholder entitled to vote thereat at his
address as it appears on the records of the corporation, not less than ten nor
more than sixty days before the date of the meeting. No business other than
that stated in the notice shall be transacted at any meeting without the
unanimous consent of all the stockholders entitled to vote thereat.
SECTION 7. ACTION WITHOUT MEETING. Unless otherwise provided by the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM. The number of directors initially shall
be five. The Board of Directors, by resolution, may from time to time change
the number of directors. The directors shall, except for filling vacancies, be
elected at the annual meeting of the stockholders and each director shall be
elected to serve until his successor is elected and qualifies. Directors need
not be stockholders.
SECTION 2. RESIGNATIONS. Any director, member of a committee or
other officer may resign at any time. Such resignation shall be made in
writing, and shall take effect at the time specified therein, and if no time be
specified, at the time of its receipt by the Chairman, President or Secretary.
The acceptance of a resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES. If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in office,
though less than a quorum, by a majority vote may appoint any qualified person
to fill such vacancy, who shall hold office for the unexpired term and until his
successor shall be duly chosen.
<PAGE>
SECTION 4. REMOVAL. Any director or directors may be removed either
for or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote, at a
special meeting of the stockholders called for the purpose, and the vacancies
thus created may be filled at the meeting held for the purpose of removal by the
affirmative vote of a majority in interest of the stockholders entitled to vote.
SECTION 5. INCREASE OR DECREASE OF NUMBER. The number of directors
may be increased or decreased by the affirmative vote of a majority of the
directors, though less than a quorum, or by the affirmative vote of a majority
in interest of the stockholders at the annual meeting or at a special meeting
called for the purpose. Any newly created directorships may be filled in the
same manner as a vacancy.
SECTION 6. POWERS. The Board of Directors shall exercise all of the
powers of the corporation except such as are by law, or by the Certificate of
Incorporation of the corporation or by these By-Laws conferred upon or reserved
to the stockholders.
SECTION 7. CONFERENCE CALL. Members of the Board of Directors or any
committee designated by such Board may participate in a meeting of the Board or
Committee by means of telephone conference or similar communication equipment by
means of which all persons participating in the meeting can hear each other, and
participation pursuant to this section shall constitute presence at such
meeting.
SECTION 8. COMMITTEES. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of two or more of the directors of the
corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of any member of
such committee or committees, the member or members thereof present at any such
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, or in these By-Laws, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation
<PAGE>
to be affixed to all papers which may require it; but no such committee shall
have the power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
By-Laws of the corporation; and, unless the resolution, these By-Laws, or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
SECTION 9. MEETINGS. The newly elected directors may hold their
first meeting for the purpose of organization and the transaction of business,
if a quorum be present, immediately after the annual meeting of the
stockholders; or the time and place of such meeting may be fixed by consent in
writing of all the directors.
Regular meetings of the directors may be held without notice at such
place and times as shall be determined from time to time by resolution of the
directors.
Special meetings of the board may be called by the Chairman or by the
Secretary on the written request of any two directors on at least two days'
notice to each director and shall be held at such place or places as may be
determined by the directors, or as shall be stated in the call of the meeting.
SECTION 10. QUORUM. A majority of the directors shall constitute a
quorum for the transaction of business. If at any meeting of the board there
shall be less than a quorum present, a majority of those present may adjourn the
meeting from time to time until a quorum is obtained, and no further notice
thereof need be given other than by announcement at the meeting which shall be
so adjourned.
SECTION 11. COMPENSATION. Directors shall not receive any stated
salary for their services as directors or as members of committees, but by
resolution of the board a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
SECTION 12. ACTION WITHOUT MEETING. Any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a
<PAGE>
meeting, if prior to such action a written consent thereto is signed by all
members of the board or of such committee as the case may be, and such written
consent is filed with the minutes of proceedings of the board or committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a
Chairman, President, Treasurer and Secretary, all of whom shall be elected by
the Board of Directors and who shall hold office until their successors are
elected and qualified. In addition, the Board of Directors may elect one or
more Vice Presidents, and such Assistant Secretaries and Assistant Treasurers as
they may deem proper. None of the officers of the corporation need be
directors. The officers shall be elected at the first meeting of the Board of
Directors after each annual meeting. Two or more offices may be held by the
same person.
SECTION 2. OTHER OFFICERS AND AGENTS. The Board of Directors may
appoint such other officers and agents as it may deem advisable, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. The Chairman shall be the chief executive
officer of the corporation, and shall have the general powers and duties of
supervision and management usually vested in the office of President of a
corporation. He shall preside at all meetings of the Board of Directors and the
stockholders if present thereat, and shall have general supervision, direction
and control of the business of the corporation. Except as the Board of
Directors shall authorize the execution thereof in some other manner, he shall
execute bonds, mortgages and other contracts in behalf of the corporation, and
shall cause the seal to be affixed to any instrument requiring it and when so
affixed the seal shall be attested by the signature of the Secretary or the
Treasurer or an Assistant Secretary or an Assistant Treasurer.
SECTION 4. PRESIDENT. The President shall be the chief-operating
officer of the corporation. He shall have and perform such other duties as from
time to time may be assigned to him by the Board of Directors.
SECTION 5. VICE PRESIDENT. Each Vice President shall have such
powers and shall perform such duties as shall be assigned to him by the
directors.
<PAGE>
SECTION 6. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, or the Chairman or President, taking proper
vouchers for such disbursements. He shall render to the President and Board of
Directors at the regular meetings of the Board of Directors, or whenever they
may request it, an account of all his transactions as Treasurer and of the
financial condition of the corporation. If required by the Board of Directors,
he shall give the corporation a bond for the faithful discharge of his duties in
such amount and with such surety as the board shall prescribe.
SECTION 7. SECRETARY. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and directors, and all other
notices required by law or by these By-Laws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the President, or by the directors, or stockholders, upon
whose requisition the meeting is called as provided in these By-Laws. He shall
record all the proceedings of the meetings of the corporation and of the
directors in a book to be kept for that purpose, and shall perform such other
duties as may be assigned to him by the directors or the Chairman. He shall
have the custody of the seal of the corporation and shall affix the same to all
instruments requiring it, when authorized by the directors or the Chairman, and
attest the same.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. A certificate of stock, signed by
the Chairman, President or Vice President, and the Treasurer or an Assistant
Treasurer, or Secretary or an Assistant Secretary, shall be issued to each
stockholder certifying the number of shares owned by him in the corporation.
When such certificates are countersigned (i) by a
<PAGE>
transfer agent other than the corporation or its employee, or (ii) by a
registrar other than the corporation or its employee, the signatures of such
officers may be facsimiles.
SECTION 2. LOST CERTIFICATES. A new certificate of stock may be
issued in the place of any certificate theretofore issued by the corporation,
alleged to have been lost or destroyed, and the directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss of
any such certificate, or the issuance of any such new certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock of the
corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
such transfer the old certificates shall be surrendered to the corporation by
the delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the directors may designate, by whom they
shall be cancelled and new certificates shall thereupon be issued. A record
shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. In order that the corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 5. DIVIDENDS. Subject to the provisions of the Certificate
of Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the
<PAGE>
directors from time to time in their discretion deem proper for working capital
or as a reserve fund to meet contingencies or for equalizing dividends or for
such other purposes as the directors shall deem conducive to the interests of
the corporation.
SECTION 6. SEAL. The corporate seal of the corporation shall bear
the name of the corporation and the words "Delaware 1988". The corporation may
also have such other seals as the Board of Directors shall deem appropriate,
including "OFFICIAL CORPORATE SEAL". A corporate seal may be used by causing it
or a facsimile thereof to be impressed or affixed or reproduced.
SECTION 7. FISCAL YEAR. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
SECTION 8. CHECKS. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation shall be signed by such officer or officers, agent or agents of
the corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE. Whenever any notice is
required by these By-Laws to be given, personal notice is not meant unless
expressly so stated, and any notice so required shall be deemed to be sufficient
if given by depositing the same in the United States mail, postage paid,
addressed to the person entitled thereto at his address as it appears on the
records of the corporation and such notice shall be deemed to have been given on
the day of such mailing. Stockholders not entitled to vote shall not be
entitled to receive notice of any meetings except as otherwise provided by
statute.
Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation of the corporation or these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at
any annual meeting of the stockholders or at any special meeting thereof, if
notice of the proposed alteration or
<PAGE>
repeal of By-Law or By-Laws to be made be contained in the notice of such
special meeting, by the affirmative vote of a majority of the stock issued and
outstanding and entitled to vote thereat, or by the affirmative vote of a
majority of the Board of Directors at any regular meeting of the Board of
Directors, or at any special meeting of the Board of Directors, if notice of the
proposed alteration or repeal, or By-Law or By-Laws to be made, be contained in
the notice of such special meeting.
<PAGE>
EXHIBIT 4.1
EXECUTION COPY
===========================================
BGF INDUSTRIES, INC.
AND
THE BANK OF NEW YORK,
AS TRUSTEE
10 1/4% SENIOR SUBORDINATED NOTES DUE 2009
===============
INDENTURE
Dated as of January 21, 1999
===============
===========================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions................................................................. 1
Section 1.2. Other Definitions........................................................... 22
Section 1.3. Incorporation by Reference of Trust Indenture Act........................... 23
Section 1.4. Rules of Construction....................................................... 23
ARTICLE II
THE NOTES
Section 2.1. Form and Dating............................................................. 24
Section 2.2. Execution and Authentication................................................ 26
Section 2.3. Registrar and Paying Agent.................................................. 27
Section 2.4. Deposit of Monies; Paying Agent to Hold Money in Trust...................... 27
Section 2.5. Noteholder Lists............................................................ 28
Section 2.6. Book-Entry Provisions....................................................... 28
Section 2.7. Legends..................................................................... 29
Section 2.8. Transfer and Exchange....................................................... 29
Section 2.9. Mutilated, Destroyed, Lost or Stolen Notes.................................. 35
Section 2.10. Temporary Notes............................................................ 36
Section 2.11. Cancellation............................................................... 36
Section 2.12. Payment of Interest; Defaulted Interest.................................... 36
Section 2.13. Computation of Interest.................................................... 37
Section 2.14. Add On Notes............................................................... 37
Section 2.15. CUSIP Numbers.............................................................. 38
ARTICLE III
COVENANTS
Section 3.1. Payment of Notes............................................................ 38
Section 3.2. Maintenance of Office or Agency............................................. 38
Section 3.3. Corporate Existence......................................................... 39
Section 3.4. Payment of Taxes and Other Claims........................................... 39
Section 3.5. Compliance Certificate...................................................... 39
Section 3.6. Maintenance of Properties................................................... 40
Section 3.7. Further Instruments and Acts................................................ 40
Section 3.8. Waiver of Stay, Extension or Usury Laws..................................... 40
Section 3.9. Limitation on Incurrence of Additional Indebtedness......................... 40
Section 3.10. Limitation on Restricted Payments.......................................... 41
Section 3.11. Limitation on Asset Sales.................................................. 43
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 3.12. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries............................................... 45
Section 3.13. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries............................................... 46
Section 3.14. Designation of Unrestricted Subsidiaries................................... 46
Section 3.15. Limitation on Layered Indebtedness......................................... 47
Section 3.16. Limitation on Liens........................................................ 48
Section 3.17. Limitation on Transactions with Affiliates................................. 48
Section 3.18. Change of Control.......................................................... 49
Section 3.19. Conduct of Business Transactions with Affiliates........................... 49
Section 3.20. Reports to Holders......................................................... 49
Section 3.21. Payments for Consent....................................................... 50
ARTICLE IV
SUCCESSOR COMPANY
Section 4.1. Merger, Consolidation and Sale of Assets.................................... 50
ARTICLE V
REDEMPTION OF NOTES
Section 5.1. Optional Redemption......................................................... 52
Section 5.2. Applicability of Article.................................................... 52
Section 5.3. Election to Redeem; Notice to Trustee....................................... 52
Section 5.4. Notice of Redemption........................................................ 53
Section 5.5. Section Deposit of Redemption Price......................................... 54
Section 5.6. Notes Payable on Redemption Date............................................ 54
Section 5.7. Notes Redeemed in Part...................................................... 54
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1. Events of Default........................................................... 54
Section 6.2. Acceleration................................................................ 57
Section 6.3. Other Remedies.............................................................. 57
Section 6.4. Waiver of Past Defaults..................................................... 57
Section 6.5. Control by Majority......................................................... 58
Section 6.6. Limitation on Suits......................................................... 58
Section 6.7. Rights of Holders to Receive Payment........................................ 58
Section 6.8. Collection Suit by Trustee.................................................. 58
Section 6.9. Trustee May File Proofs of Claim............................................ 59
Section 6.10. Priorities................................................................. 59
Section 6.11. Undertaking for Costs...................................................... 59
ARTICLE VII
TRUSTEE
Section 7.1. Duties of Trustee........................................................... 60
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 7.2. Rights of Trustee........................................................... 61
Section 7.3. Individual Rights of Trustee................................................ 61
Section 7.4. Trustee's Disclaimer........................................................ 62
Section 7.5. Notice of Defaults.......................................................... 62
Section 7.6. Reports by Trustee to Holders............................................... 62
Section 7.7. Compensation and Indemnity.................................................. 62
Section 7.8. Replacement of Trustee...................................................... 63
Section 7.9. Successor Trustee by Merger................................................. 64
Section 7.10. Eligibility; Disqualification.............................................. 64
Section 7.11. Preferential Collection of Claims Against Company.......................... 64
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.1. Termination of the Company's Obligations.................................... 65
Section 8.2. Legal Defeasance and Covenant Defeasance.................................... 66
Section 8.3. Conditions to Defeasance.................................................... 67
Section 8.4. Application of Trust Money.................................................. 68
Section 8.5. Repayment to Company........................................................ 68
Section 8.6. Indemnity for U.S. Government Obligations................................... 68
Section 8.7. Reinstatement............................................................... 69
ARTICLE IX
AMENDMENTS
Section 9.1. Without Consent of Holders.................................................. 69
Section 9.2. With Consent of Holders..................................................... 70
Section 9.3. Compliance with Trust Indenture Act......................................... 71
Section 9.4. Revocation and Effect of Consents and Waivers............................... 71
Section 9.5. Notation on or Exchange of Notes............................................ 71
Section 9.6. Trustee to Sign Amendments.................................................. 72
ARTICLE X
SUBORDINATION OF THE NOTES
Section 10.1. Agreement to Subordinate................................................... 72
Section 10.2. Liquidation, Dissolution, Bankruptcy....................................... 72
Section 10.3. Default on Senior Indebtedness of the Company.............................. 72
Section 10.4. Acceleration of Payment of Notes........................................... 73
Section 10.5. When Distribution Must Be Paid Over........................................ 73
Section 10.6. Subrogation................................................................ 74
Section 10.7. Relative Rights............................................................ 74
Section 10.8. Subordination May Not Be Impaired by Company............................... 74
Section 10.9. Rights of Trustee and Paying Agent......................................... 74
Section 10.10. Distribution or Notice to Representative.................................. 75
Section 10.11. Article X Not to Prevent Events of Default or Limit Right to Accelerate... 75
Section 10.12. Trust Moneys Not Subordinated............................................. 75
Section 10.13. Trustee Entitled to Rely.................................................. 75
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 10.14. Trustee to Effectuate Subordination....................................... 75
Section 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness.................. 76
Section 10.16. Reliance by Holders of Senior Indebtedness on Subordination Provisions.... 76
ARTICLE XI
GUARANTEE
Section 11.1. Guarantee.................................................................. 76
Section 11.2. Limitation on Liability; Termination, Release and Discharge................ 78
Section 11.3. Right of Contribution...................................................... 79
Section 11.4. No Subrogation............................................................. 79
Section 11.5. Additional Note Guarantees................................................. 79
ARTICLE XII
SUBORDINATION OF THE NOTE GUARANTEES
Section 12.1. Agreement to Subordinate................................................... 80
Section 12.2. Liquidation, Dissolution, Bankruptcy....................................... 80
Section 12.3. Default on Senior Indebtedness of Note Guarantors.......................... 80
Section 12.4. Demand for Payment......................................................... 81
Section 12.5. When Distribution Must Be Paid Over........................................ 81
Section 12.6. Subrogation................................................................ 81
Section 12.7. Relative Rights............................................................ 82
Section 12.8. Subordination May Not Be Impaired by Note Guarantors....................... 82
Section 12.9. Rights of Trustee and Paying Agent......................................... 82
Section 12.10. Distribution or Notice to Representative.................................. 82
Section 12.11. Article XII Not to Prevent Defaults Under the Note Guarantees or Limit
Right to Demand Payment............................................... 83
Section 12.12. Trustee Entitled to Rely.................................................. 83
Section 12.13. Trustee to Effectuate Subordination....................................... 83
Section 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of Note Guarantor 83
Section 12.15. Reliance by Holders of Senior Indebtedness on Subordination Provisions.... 84
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Trust Indenture Act Controls............................................... 84
Section 13.2. Notices.................................................................... 84
Section 13.3. Communication by Holders with Other Holders................................ 85
Section 13.4. Certificate and Opinion as to Conditions Precedent......................... 85
Section 13.5. Statements Required in Certificate or Opinion.............................. 85
Section 13.6. Rules by Trustee, Paying Agent and Registrar............................... 86
Section 13.7. GOVERNING LAW, ETC......................................................... 86
Section 13.8. No Recourse Against Others................................................. 86
Section 13.9. Successors................................................................. 86
Section 13.10. Multiple Originals........................................................ 86
Section 13.11. Severability.............................................................. 87
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Section 13.12. Qualification of Indenture................................................ 87
Section 13.13. Table of Contents; Headings............................................... 87
</TABLE>
EXHIBIT A FORM OF INITIAL NOTE
EXHIBIT B FORM OF EXCHANGE NOTE
EXHIBIT C FORM OF TRANSFER CERTIFICATE FOR TRANSFER TO QIBs
EXHIBIT D FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS TO INSTITUTIONAL ACCREDITED
INVESTORS
EXHIBIT E FORM OF CERTIFICATE TO BE DELIVERED BY HOLDERS OF
BENEFICIAL INTERESTS IN THE REGULATION S
TEMPORARY GLOBAL NOTE
EXHIBIT F FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS PURSUANT TO REGULATION S
EXHIBIT G FORM OF NOTE GUARANTEE
v
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- --------------- ----------------
<S> <C>
310(a)(1) ............................................................. 7.10
(a)(2) ............................................................. 7.10
(a)(3) ............................................................. N.A.
(a)(4) ............................................................. N.A.
(b) ............................................................. 7.8; 7.10
(c) ............................................................. N.A.
311(a) ............................................................. 7.11
(b) ............................................................. 7.11
(c) ............................................................. N.A.
312(a) ............................................................. 2.5
(b) ............................................................. 13.3
(c) ............................................................. 13.3
313(a) ............................................................. 7.6
(b)(1) ............................................................. N.A.
(b)(2) ............................................................. 7.6
(c) ............................................................. 7.6
(d) ............................................................. 7.6
314(a) ............................................................. 3.20
(b) ............................................................. N.A.
(c)(1) ............................................................. 13.4
(c)(2) ............................................................. 13.4
(c)(3) ............................................................. N.A.
(d) ............................................................. N.A.
(e) ............................................................. 13.5
315(a) ............................................................. 7.2
(b) ............................................................. 13.2
(c) ............................................................. 7.1
(d) ............................................................. 7.1
(e) ............................................................. 6.11
316(a)(last sentence) ............................................................. 11.1
(a)(1)(A) ............................................................. 6.5
(a)(1)(B) ............................................................. 6.4
(a)(2) ............................................................. N.A.
(b) ............................................................. 6.7
317(a)(1) ............................................................. 6.8
(a)(2) ............................................................. 6.9
(b) ............................................................. 2.4
318(a) ............................................................. 13.1
</TABLE>
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
vi
<PAGE>
EXECUTION COPY
INDENTURE dated as of January 21, 1999, among BGF Industries, Inc., a
Delaware corporation (the "Company") and The Bank of New York, as trustee (the
-------
"Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the holders (the "Holders" or
-------
"Noteholders") of: (i) the Company's 10 1/4% Senior Subordinated Notes due 2009
-----------
on the date hereof (the "Initial Notes"), (ii) any Add On Notes that may be
-------------
issued after the Issue Date (all such securities in clauses (i) and (ii) being
referred to collectively as "Initial Notes") and (iii) if and when issued in
-------------
exchange for Initial Notes as provided in the Registration Rights Agreement or a
similar agreement relating to Initial Notes (as hereinafter defined), the
Company's 10 1/4% Senior Subordinated Notes due 2009(the "Exchange Notes", and
--------------
together with the Initial Notes, the "Notes").
-----
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
-----------
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with the Company or any of its Restricted
Subsidiaries or is assumed in connection with the acquisition of assets from
such Person and in each case not Incurred in connection with, or in anticipation
or contemplation of, such acquisition, merger or consolidation. Such
Indebtedness shall be deemed to have been Incurred at the time such Person
becomes a Restricted Subsidiary or at the time it merges or consolidates with
the Company or a Restricted Subsidiary or at the time such Indebtedness is
assumed in connection with the acquisition of assets from such Person.
"Acquisition Loan" means the secured loan of approximately $136.7
million from the Company to GHC to fund a portion of the purchase price payable
by AGY Holdings in connection with its acquisition of a 51% interest in AGY.
"Acquisition Loan Pledge" shall mean the pledge by GHC to the Company
of all of the Capital Stock of AGY Holdings and Belmont as security for the
Acquisition Loan.
"Affiliate" means, with respect to any specified Person, any other
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person.
The term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling", "controlled by" and "under common control with"
have meanings correlative of the foregoing; provided, however, that beneficial
ownership of 10% or more of the Voting Stock of a Person shall be deemed to be
control.
"AGY" means Advanced Glassfiber Yarns, LLC, a Delaware limited
liability company.
<PAGE>
"AGY Holdings" means AGY Holdings, Inc., a Delaware corporation and
wholly owned Subsidiary of GHC.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary, or shall be merged with or into the Company or
any Restricted Subsidiary, or (b) the acquisition by the Company or any
Restricted Subsidiary of the assets of any Person (other than a Subsidiary of
the Company) which constitute all or substantially all of the assets of such
Person or comprises any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, assignment or other transfer for value by the Company or any of its
Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any
Person other than the Company or a Restricted Subsidiary (including a Person
that is or will become a Restricted Subsidiary immediately after such sale,
issuance, conveyance, transfer, assignment or other transfer for value) of (a)
any Capital Stock of any Restricted Subsidiary; or (b) any other property or
assets (other than cash, Cash Equivalents or Capital Stock) of the Company or
any Restricted Subsidiary other than in the ordinary course of business;
provided, however, that Asset Sale shall not include, (i) the sale, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company and its Restricted Subsidiaries as permitted under Section 4.1, (ii) any
-----------
sale of Capital Stock in, or Indebtedness or other securities of an Unrestricted
Subsidiary, (iii) a disposition of inventory or leases in the ordinary course of
business, (iv) dispositions of assets in any fiscal year with a Fair Market
Value not to exceed $2.0 million in the aggregate, (v) for purposes of Section
-------
3.11 only, the making of a Permitted Investment or Restricted Payment, and (vi)
- ----
a disposition in the ordinary course of business of obsolete or worn-out
equipment.
"Asset Sale Transaction" means Asset Sales and, whether or not
constituting an Asset Sale, (i) any sale or other disposition of Capital Stock
and (ii) any sale or other disposition excluded from the definition of Asset
Sale by clause (b)(i) or (v) of such definition.
"Bankruptcy Law" means Title 11, United States Code, or any other
applicable federal, state, or foreign bankruptcy, insolvency or similar law as
nor or hereafter constituted.
"Belmont" means Belmont of America, Inc., a Delaware corporation.
"Board of Directors" means, (i) in the case of a Person that is a
corporation, the board of directors of such Person or any committee authorized
to act therefor and (ii) in the case of any other Person, the board of
directors, management committee or similar governing body or any authorized
committee thereof responsible for the management of the business and affairs of
such Person.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
(or person performing a similar function) to have been duly adopted by the Board
of Directors of such Person and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
2
<PAGE>
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banking institutions are authorized or required by law to
close in New York City.
"Capitalized Lease Obligations" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all membership,
partnership or other equity or ownership interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $500 million; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Certificated Notes" means Notes held in certificated form, other than
Global Notes, including IAI Notes.
"Change of Control" means the occurrence of one or more of the
following events:
(i) Prior to the first Public Equity Offering, the Permitted Holders
cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, in the aggregate at least
of 51% of the total voting power of the Voting Stock of the Company,
whether as a result of issuance of securities of the Company or any parent
company of the Company, any merger, consolidation, liquidation or
dissolution of the Company, any direct or indirect transfer of securities
by the
3
<PAGE>
Company or otherwise (for purposes of this clause (i) and clause (ii)
below, the Permitted Holders shall be deemed to beneficially own any Voting
Stock of a corporation (the "specified corporation") held by any other
corporation (the "parent corporation") so long as the Permitted Holders
beneficially own (as so defined), directly or indirectly, in the aggregate
at least 51% of the voting power of the Voting Stock of the parent
corporation);
(ii) subsequent to the first Public Equity Offering, (A) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in Rule 13d-3 and 13d-5 under the Exchange
Act, except that for purposes of this clause (ii) such person shall be
deemed to have "beneficial ownership" of all shares that any such person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than 35%
of the total voting power of the Voting Stock of the Company and (B) the
Permitted Holders "beneficially own" (as defined in this clause (ii)),
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Company than such other person (for
the purposes of this clause (ii), such other person shall be deemed to
beneficially own any Voting Stock of a specified corporation held by a
parent corporation, if such other person is the beneficial owner (as
defined in this clause (ii)), directly or indirectly, of more than 35% of
the voting power of the Voting Stock of such parent corporation and the
Permitted Holders "beneficially own" (as defined in this clause (ii)),
directly or indirectly, in the aggregate a lesser percentage of the voting
power of the Voting Stock of such parent corporation;
(iii) during any period of two consecutive years (or, in the case
this event occurs within the first two years after the Issue Date, such
shorter period as shall have begun on the Issue Date), individuals who at
the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of a majority of the directors of the
Company then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office; or
(iv) the Company consolidates with, or merges with or into, another
Person (other than the Company or a Wholly Owned Restricted Subsidiary) or
the Company or any of its Restricted Subsidiaries sells, conveys, assigns,
transfers, leases or otherwise disposes of all or substantially all of the
assets of the Company and its Restricted Subsidiaries (determined on a
consolidated basis for the Company and its Restricted Subsidiaries) to any
Person (other than the Company or any Wholly Owned Restricted Subsidiary),
other than any such transaction where immediately after such transaction
the Person or Persons that "beneficially owned" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a Person shall be deemed to
have "beneficial ownership" of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or only
after the passage of time) immediately prior to such transaction,
4
<PAGE>
directly or indirectly, a majority of the total voting power of the then
outstanding Voting Stock of the Company "beneficially own (as so
determined), directly or indirectly, a majority of the total voting power
of the then outstanding Voting Stock of the surviving or transferee Person.
"Closing Date" means, with respect to any Initial Notes, the date on
which such Initial Notes are originally issued.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means BGF Industries, Inc., a Delaware corporation.
"Commission" means the Securities and Exchange Commission, or any
successor agency thereto with respect to the regulation or registration of
securities.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, for any period, Consolidated Net Income
for such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) Consolidated Income Tax Expense for such period;
(ii) Consolidated Interest Expense for such period; and (iii) Consolidated Non-
cash Charges for such period; less (A) all non-cash items increasing
Consolidated Net Income for such period and (B) all cash payments during such
period relating to non-cash charges that were added back in determining
Consolidated EBITDA in any prior period.
"Consolidated Fixed Charge Coverage Ratio" means, as of any date of
determination, the ratio of the aggregate amount of Consolidated EBITDA for the
four most recent full fiscal quarters for which financial statements are
available ending prior to the date of such determination (the "Four Quarter
Period") to Consolidated Fixed Charges for such Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to (i) the Incurrence or repayment of any Indebtedness of the
Company or any of its Restricted Subsidiaries (and the application of the
proceeds thereof), including the Incurrence of any Indebtedness (and the
application of the proceeds thereof) giving rise to the need to make such
determination, occurring during or after such Four Quarter Period and on or
prior to such date of determination, as if such Incurrence or repayment, as the
case may be (and the application of the proceeds thereof), occurred on the first
day of such Four Quarter Period and (ii) any Asset Sale Transactions or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving rise
to the need to make such determination as a result of the Company or one of its
Restricted Subsidiaries (including any Person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) Incurring Acquired Indebtedness
and including, without limitation, by giving pro forma effect to any
Consolidated EBITDA (provided that such pro forma Consolidated EBITDA shall be
5
<PAGE>
calculated in a manner consistent with the exclusions in the definition of
"Consolidated Net Income" but without giving effect to clause (C) of the
definition of Consolidated Net Income) attributable to the assets which are the
subject of the Asset Sale Transaction or Asset Acquisition during the Four
Quarter Period) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to such
date of determination, as if such Asset Sale Transaction or Asset Acquisition
(including the Incurrence of any such Acquired Indebtedness) occurred on the
first day of the Four Quarter Period. If the Company or any of its Restricted
Subsidiaries directly or indirectly guarantees Indebtedness of a third Person,
the preceding sentence shall give effect to the Incurrence of such guaranteed
Indebtedness as if the Company or any of its Restricted Subsidiaries had
directly Incurred such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of the
date of determination and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on such date of determination; (2) if
interest on any Indebtedness actually Incurred on such date of determination may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on such date of determination will be deemed to have
been in effect during the Four Quarter Period; and (3) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by Hedging Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, for any period, the sum, without
duplication, of (i) Consolidated Interest Expense, plus (ii) the product of (x)
the amount of all dividend payments on any series of Preferred Stock of the
Company (other than dividends paid in Qualified Capital Stock) paid, accrued or
scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local tax rate of the Company,
expressed as a decimal.
"Consolidated Income Tax Expense" means, with respect to the Company
for any period, the provision for Federal, state, local and foreign income taxes
payable by the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the sum of,
without duplication: (i) the aggregate of cash and non-cash interest expense of
the Company and its Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, and in any event shall include,
without limitation (whether or not interest expense in accordance with GAAP),
(a) any amortization of debt discount and any amortization or write off of
deferred financing costs, (b) the net costs under Hedging Obligations related to
Indebtedness (including amortization of fees), (c) all capitalized interest, (d)
the interest portion of any deferred payment obligation, (e) commissions,
discounts and other fees and charges Incurred in
6
<PAGE>
respect of letters of credit or bankers' acceptances and (f) 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 the assets of such
Person or one of its Restricted Subsidiaries (whether or not such guarantee or
Lien is called upon); and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by the Company
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries for such period
on a consolidated basis, determined in accordance with GAAP; provided, however,
that there shall be excluded therefrom (a) net after-tax gains from Asset Sale
Transactions or abandonments of reserves relating thereto, (b) net after-tax
items classified as extraordinary or non-recurring gains or losses, (c) the net
income of any Person acquired in a "pooling of interests" transaction accrued
prior to the date it becomes a Restricted Subsidiary or is merged or
consolidated with the Company or any Restricted Subsidiary, (d) the net income
(but not loss) of any Restricted Subsidiary to the extent that the declaration
of dividends or similar distributions by that Restricted Subsidiary of that
income is restricted by contract, operation of law or otherwise, (e) the net
income of any Person, other than a Restricted Subsidiary, except to the extent
of cash dividends or distributions paid to the Company or to a Restricted
Subsidiary by such Person, (f) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date and (g) all
gains and losses from the cumulative effect of any change in accounting
principles.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses of the Company and its
Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such charge which requires an accrual of or
a reserve for cash charges for any future period).
"Currency Agreement" means, in respect of any Person, any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party.
"Custodian" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Designated Senior Indebtedness" means, (a) in respect of the Company,
the Senior Credit Facility and any other Senior Indebtedness of the Company
which, at the date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to, at least $25.0 million and is specifically
designated by the Company in the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" and (b) in respect of any Note
Guarantor, the Senior Credit Facility and any guarantee by such Note Guarantor
of Indebtedness of the
7
<PAGE>
Company referred to in clause (a) and (c) any other Senior Indebtedness of such
Note Guarantor which, at the date of determination, has an aggregate principal
amount outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to, at least $25.0 million and is specifically
designated by such Note Guarantor in the instrument evidencing or governing such
Senior Indebtedness as "Designated Senior Indebtedness."
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder
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 sole option of the holder thereof, in any case, on or prior to the 91st
day after the final maturity date of the Notes.
"DTC" means The Depository Trust Company, its nominees and their
respective successors and assigns, or such other depository institution
hereinafter appointed by the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute or statutes thereto.
"Exchange Offer Registration Statement" has the meaning assigned to it
in the Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; provided, however, that the Fair Market
Value of any such asset or assets may be determined conclusively by the Board of
Directors of the Company acting in good faith, and shall be evidenced by a Board
Resolution.
"Foreign Subsidiary" means, with respect to any Person, any direct or
indirect Subsidiary of such Person that is organized under the laws of any
jurisdiction outside the United States, any state thereof or the District of
Columbia.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio" above.
"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 may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"GHC" means Glass Holdings Corp., a Delaware corporation.
8
<PAGE>
"Hedging Obligations" means the obligations of any Person pursuant to
any Interest Rate Agreement or Currency Agreement.
"IAI" means an institutional "accredited investor," as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act, other than a QIB.
"Incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation on the balance sheet of such Person (and
"Incurrence," "Incurred" and "Incurring" shall have meanings correlative to the
foregoing). Indebtedness of any Person or any of its Subsidiaries existing at
the time such Person becomes a Restricted Subsidiary (or is merged into or
consolidated with the Company or any Restricted Subsidiary), whether or not such
Indebtedness was Incurred in connection with, as a result of, or in
contemplation of, such Acquired Person becoming a Restricted Subsidiary (or
being merged into or consolidated with the Company or any Restricted
Subsidiary), shall be deemed Incurred at the time any such Acquired Person
becomes a Restricted Subsidiary or merges into or consolidates with the Company
or any Restricted Subsidiary. Accrual of interest, the accretion of accreted
value and the payment of regularly scheduled interest in the form of additional
Indebtedness of the same instrument will not be deemed to be an Incurrence of
Indebtedness for purposes of Section 3.9.
-----------
"Indebtedness" means with respect to any Person, without duplication,
(i) the principal amount (or, if less, the accreted value) of all obligations of
such Person for borrowed money, (ii) the principal amount (or, if less, the
accreted value) of all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all Capitalized Lease
Obligations of such Person, (iv) all obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations and all obligations under any title retention agreement (but
excluding trade accounts payable and other accrued liabilities arising in the
ordinary course of business that are not overdue by 90 days or more or are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted), (v) all obligations of such Person for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations of such Person in
respect of Indebtedness referred to in clauses (i) through (v) above and clause
(viii) below, (vii) all Indebtedness of any other Person of the type referred to
in clauses (i) through (vi) which is secured by any Lien on any property or
asset of such Person, the amount of such Indebtedness being deemed to be the
lesser of the Fair Market Value of such property or asset or the amount of the
Indebtedness so secured, (viii) all obligations under Hedging Obligations of
such Person and (ix) all Disqualified Capital Stock issued by such Person with
the amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if any.
For purposes hereof, the "maximum fixed repurchase price", of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair
9
<PAGE>
market value of such Disqualified Capital Stock, such fair market value shall be
the Fair Market Value thereof.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Independent Financial Advisor" means an accounting firm, appraisal
firm, investment banking firm or consultant to Persons engaged in a Permitted
Business, in each case, of nationally recognized standing that is, in the
judgment of the Company's Board of Directors, qualified to perform the task for
which it has been engaged and which is independent in connection with the
relevant transaction.
"Interest Rate Agreement" of any Person means any interest rate
protection agreement (including, without limitation, interest rate swaps, caps,
floors, collars, derivative instruments and similar agreements) and/or other
types of interest hedging agreements.
"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude accounts receivable or deposits
arising in the ordinary course of business. For purposes of Section 3.10,
------------
"Investment" shall include and be valued at the Fair Market Value of the net
assets of any Restricted Subsidiary at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company will be
deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) the total amount of the
Company's "Investments" in such Subsidiary made prior to or at the time of such
redesignation less (y) that portion of the Fair Market Value of the net assets
of such Subsidiary at the time that such Subsidiary is so re-designated a
Restricted Subsidiary that is proportionate to the Company's equity interest in
such Subsidiary; and (ii) any property transferred to or from an Unrestricted
Subsidiary will be valued at its Fair Market Value at the time of such transfer.
If the Company or any Restricted Subsidiary sells or otherwise disposes of any
Common Stock of a Restricted Subsidiary (including any issuance and sale of
Capital Stock by a Restricted Subsidiary) such that, after giving effect to any
such sale or disposition, such Restricted Subsidiary would cease to be a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the Fair Market
Value of the Common Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means January 21, 1999.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
10
<PAGE>
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents, including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents received by the Company or any of its Restricted Subsidiaries from
such Asset Sale, net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to available
tax credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale,
(d) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
"Non-U.S. Person" means a person who is not a U.S. person, as defined
in Regulation S.
"Note Custodian" means, with respect to each Global Note, the
custodian with respect to such Global Note (as appointed by DTC), or any
successor Person thereto and shall initially be the Trustee.
"Note Guarantee" means the guarantee of the Notes by each Note
Guarantor under Article 11 hereof.
"Note Guarantor" means all direct and indirect Restricted
Subsidiaries, other than Foreign Subsidiaries.
"Note Register" means the register of Notes, maintained by the
Trustee, pursuant to Section 2.3.
-----------
"Obligations" means, with respect to any Indebtedness, any principal,
interest (including, without limitation, Post-Petition Interest), penalties,
fees, indemnifications, reimbursements, including, in the case of the Notes and
the Note Guarantees in respect thereof, damages, and other liabilities payable
under the documentation governing such Indebtedness.
"OC" means Owens Corning, a Delaware corporation.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, any Vice President, the
Treasurer, the Controller or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and either an Assistant Treasurer or an Assistant Secretary of the
Company.
11
<PAGE>
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture, except:
(i) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Notes; provided that, if the Notes
are to be redeemed, notice of such redemption has been duly given pursuant
to this Indenture or provision therefor satisfactory to the Trustee has
been made;
(iii) Notes which have been paid pursuant to Section 2.9 or in
-----------
exchange for or in lieu of which other Notes have been authenticated and
delivered pursuant to this Indenture, other than any such Notes in respect
of which there shall have been presented to the Trustee proof satisfactory
to it that such Notes are held by a bona fide purchaser in whose hands such
Notes are valid obligations of the Company; and
(iv) Notes which have been defeased pursuant to Article VIII;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or of such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Notes which a Trust Officer of the Trustee actually knows to be so
owned shall be so disregarded. Notes so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Notes and that the pledgee is not the Company or any other obligor upon the
Notes or any Affiliate of the Company or of such other obligor.
"Permitted Business" means the business or businesses conducted by the
Company and its Restricted Subsidiaries as of the Issue Date and any business
ancillary, complementary or reasonably related thereto.
"Permitted Holders" means (i) Robert Porcher; (ii) the spouse,
parents, siblings, descendants of Robert Porcher or of such spouse or siblings;
(iii) in the event of incompetence or death of Robert Porcher or any of the
Persons described in (ii) above, such Person's estate, executor, administrator,
committee or other personal representative in each case who at any particular
date shall beneficially own or have the right to acquire, directly or
indirectly, Voting
12
<PAGE>
Stock of the Company; (iv) any trusts created for the sole benefit of Robert
Porcher or any of the Persons described in clauses (ii) or (iii) above or any
trust for the benefit of such trust; (v) any Person of which Robert Porcher or
any of the Persons described in clauses (ii) or (iii) above (x) "beneficially
owns" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) on a fully
diluted basis at least 51% of the voting power of the Voting Stock of such
Person or (y) is the sole trustee or general partner, or otherwise has the sole
power to manage the business and affairs, of such Person.
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness in respect of the Notes issued on the Issue Date
and Exchange Notes and any replacement Notes therefor, and the Note
Guarantees in respect thereof;
(ii) guarantees by any Note Guarantor of Indebtedness of the Company
other than the Notes; provided, however, that if any such guarantee is of
Subordinated Indebtedness, then the Note Guarantee of such Note Guarantor
shall be senior to such Note Guarantor's guarantee of such Subordinated
Indebtedness;
(iii) Indebtedness Incurred pursuant to the Senior Credit Facility in
an aggregate principal amount at any time outstanding not to exceed $125.0
million less the amount of any permanent prepayments of Indebtedness made
with the Net Cash Proceeds of an Asset Sale pursuant to the third sentence
of Section 3.11;
------------
(iv) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date, reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid
or permanent reductions thereto;
(v) Hedging Obligations entered into in the ordinary course of
business and not for speculative purposes;
(vi) Indebtedness of any Restricted Subsidiary owed to and held by
the Company or any Note Guarantor for so long as such Indebtedness is held
by the Company or such Note Guarantor; in each case subject to no Lien
securing Indebtedness other than Permitted Liens; provided, however, that
if as of any date any Person other than the Company or any Note Guarantor
holds any such Indebtedness or holds a Lien in respect of such Indebtedness
securing Indebtedness other than Permitted Liens, such date shall be deemed
the Incurrence of Indebtedness not constituting Permitted Indebtedness by
the issuer of such Indebtedness;
(vii) Indebtedness of the Company owed to and held by any Note
Guarantor that is unsecured and subordinated in right of payment to the
payment and performance of the Company's obligations under any Senior
Indebtedness, the Indenture, the Notes and the Note Guarantees and subject
to no Lien securing Indebtedness other than Permitted Liens; provided,
however, that if as of any date any Person other than any Note Guarantor
owns or holds any such Indebtedness or any Person other than any Note
Guarantor holds
13
<PAGE>
a Lien in respect of such Indebtedness securing Indebtedness other than
Permitted Liens, such date shall be deemed the Incurrence of Indebtedness
not constituting Permitted Indebtedness by the Company;
(viii) Indebtedness of the Company or any of its Restricted
Subsidiaries arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is
extinguished within two business days of Incurrence;
(ix) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or any Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business;
(x) Refinancing Indebtedness in respect of Indebtedness (other
than Permitted Indebtedness) Incurred pursuant to Section 3.9 or
-----------
Indebtedness Incurred pursuant to clause (i) or (iv) of this definition of
Permitted Indebtedness;
(xi) Capitalized Lease Obligations and Purchase Money Indebtedness
of the Company and its Restricted Subsidiaries that do not exceed $5.0
million in the aggregate at any one time outstanding;
(xii) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred in connection with the
disposition of any business, assets, or Restricted Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or 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 the Company and the Restricted
Subsidiary in connection with such disposition; and
(xiii) Additional Indebtedness of the Company or any Note Guarantor
in an aggregate principal amount not to exceed $5.0 million at any one time
outstanding (which amount may, but need not, be Incurred in whole or in
part under the Senior Credit Facility).
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary in any Person that is, or that result in any Person
becoming, immediately after such Investment, a Restricted Subsidiary or
constituting a merger or consolidation of such Person into the Company or with
or into a Restricted Subsidiary; (ii) Investments by any Restricted Subsidiary
in the Company; (iii) Investments in cash and Cash Equivalents; (iv) any
extension, modification or renewal of any Investments existing as of the Issue
Date (but not Investments involving additional advances, contributions or other
investments of cash or property or other
14
<PAGE>
increases thereof, other than as a result of the accrual or accretion of
interest or original issue discount or payment-in-kind pursuant to the terms of
such Investment as of the Issue Date); (v) transactions or arrangements with
officers, directors or employees of the Company or any Subsidiary of the Company
entered into in the ordinary course of business (including compensation or
employee benefit arrangements with any officer or director of the Company or any
Subsidiary of the Company permitted under Section 3.17); (vi) Investments
------------
received as a result of the bankruptcy or reorganization of any Person or taken
in settlement of or other resolution of claims or disputes, and, in each case,
extensions, modifications and renewals thereof; (vii) Investments made by the
Company or its Restricted Subsidiaries as a result of non-cash consideration
permitted to be received in connection with an Asset Sale made in compliance
with Section 3.11; (viii) Investments consisting of consigned inventory in an
------------
aggregate amount not to exceed $5,000,000 at any one time outstanding; (ix)
Investments in the form of intercompany Indebtedness permitted to be issued
under Section 3.9; and (x) other Investments not to exceed $5.0 million at any
-----------
one time outstanding.
"Permitted Junior Securities" means any securities of the Company or
any other Person that are (i) equity securities without special covenants or
(ii) debt securities expressly subordinated in right of payment to all Senior
Indebtedness that may at the time be outstanding, to substantially the same
extent as, or to a greater extent than, the Notes are subordinated as provided
herein, in any event pursuant to a court order so providing and as to which (a)
the rate of interest on such securities shall not exceed the effective rate of
interest on the Notes on the Issue Date, (b) such securities shall not be
entitled to the benefits of covenants or defaults materially more beneficial to
the holders of such securities than those in effect with respect to the Notes on
the Issue Date and (c) such securities shall not provide for amortization
(including sinking fund and mandatory prepayment provisions) commencing prior to
the date six months following the final scheduled maturity date of the Senior
Indebtedness (as modified by the plan of reorganization pursuant to which such
securities are issued).
"Permitted Liens" means any of the following:
(i) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(ii) Liens Incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations surety and appeal bonds, bids, leases, government
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
15
<PAGE>
(iii) any interest or title of a lessor under any Capitalized Lease
Obligation; provided, however, that such Liens do not extend to any
property which is not leased property subject to such Capitalized Lease
Obligation;
(iv) purchase money Liens to finance property of the Company or a
Restricted Subsidiary acquired in the ordinary course of business;
provided, however, that (A) the related purchase money Indebtedness shall
not exceed the cost of such property and shall not be secured by any
property of the Company or any Restricted Subsidiary other than the
property so acquired and (B) the Lien securing such Indebtedness shall be
created within 90 days of such acquisition;
(v) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(vi) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(vii) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the Company
or a Restricted Subsidiary, including rights of offset and set-off;
(viii) Liens securing Hedging Obligations that relate to Indebtedness
that is Incurred in accordance with the covenant described under Section 3.9 and
-----------
that are secured by the same assets as secure such Hedging Obligations;
(ix) Liens existing on the Issue Date and Liens to secure any
Refinancing Indebtedness which is Incurred to Refinance any Indebtedness
which has been secured by a Lien permitted under the covenant described
under Section 3.16 and which Indebtedness has been Incurred in accordance
------------
with the covenant described under Section 3.9; provided, however, that such
-----------
new Liens (A) are not materially less favorable to the Holders of Notes and
are not materially more favorable to the lienholders with respect to such
Liens than the Liens in respect of the Indebtedness being Refinanced and
(B) do not extend to any property or assets other than the property or
assets securing the Indebtedness Refinanced by such Refinancing
Indebtedness;
(x) Liens securing Acquired Indebtedness Incurred in accordance with
Section 3.9; provided, however, that (A) such Liens secured such Acquired
-----------
Indebtedness at the time of and prior to the Incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary and were not granted
in connection with, or in anticipation of the Incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary and (B) such Liens
do not extend to or cover any property of the Company or any Restricted
Subsidiary other than the property that secured the Acquired Indebtedness
prior to the time such Indebtedness became Acquired Indebtedness of the
Company or a Restricted
16
<PAGE>
Subsidiary and are no more favorable to the lienholders than the Liens
securing the Acquired Indebtedness prior to the Incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary; and
(xi) Liens securing other Indebtedness not in excess of $3,000,000 at
any one time outstanding.
"Person" means an individual, partnership, corporation limited
liability company unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Post-Petition Interest" means all interest accrued or accruing after
the commencement of any insolvency or liquidation proceeding (and interest that
would accrue but for the commencement of any insolvency or liquidation
proceeding) in accordance with and at the contract rate (including without
limitation, any rate applicable upon default) specified in the agreement or
instrument creating, evidencing or governing any Indebtedness, whether or not,
pursuant to applicable law or otherwise, the claim for such interest is allowed
as a claim in such insolvency or liquidation proceeding.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights over any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"Private Exchange Notes" means any Initial Notes exchanged for
Exchange Notes with a Private Placement Legend pursuant to the Registration
Rights Agreement.
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price, or other cost of construction or improvement of any
property; provided, however, that the aggregate principal amount of such
Indebtedness does not exceed the lesser of the Fair Market Value of such
property or such purchase price or cost, including any Refinancing of such
Indebtedness that does not increase the aggregate principal amount (or accreted
amount, if less) thereof as of the date of Refinancing.
"Purchase Price Loan" means the loan of approximately $135.3 million
from GHC to AGY Holdings to fund AGY Holdings' acquisition of a 51% interest in
AGY.
"QIB" means any "qualified institutional buyer" (as defined in Rule
144A under the Securities Act).
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Redemption Date" means, with respect to any redemption of Notes, the
date of redemption with respect thereto.
17
<PAGE>
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary, to the extent that such Refinancing does not (i) result
in an increase in the aggregate principal amount of the Indebtedness of such
Person as of the date of such proposed Refinancing (plus the amount of any
premium required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by the Company
in connection with such Refinancing) or (ii) create Indebtedness with (A) a
Weighted Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier
than the final maturity of the Indebtedness being Refinanced; provided, however,
that (x) if such Indebtedness being Refinanced is Indebtedness of the Company,
then such Refinancing Indebtedness shall be Indebtedness of the Company (y) if
such Indebtedness being Refinanced is Indebtedness of a Note Guarantor, then
such Indebtedness shall be Indebtedness of the Company and/or such Note
Guarantor and (z) if such Indebtedness being Refinanced is subordinate or junior
to the Notes or any Note Guarantee, then such Refinancing Indebtedness shall be
subordinate to the Notes or such Note Guarantee at least to the same extent and
in the same manner as the Indebtedness being Refinanced.
"Registered Exchange Offer" means the registration by the Company
under the Securities Act pursuant to a registration statement of the offer by
the Company to each Holder of the Initial Notes to exchange all the Initial
Notes held by such Holder for the Exchange Notes in an aggregate principal
amount equal to the aggregate principal amount of the Initial Notes held by such
Holder, all in accordance with the terms and conditions of the Registration
Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement dated January 21, 1999 between the Company and First Union Capital
Markets.
"Regulation S" means Regulation S under the Securities Act or any
successor regulation.
"Representative" means any trustee, agent or representative (if any)
for an issue of Senior Indebtedness of the Company.
"Restricted Add-On Notes" means Add-On Notes initially issued other
than in a public offering registered under the Securities Act.
"Restricted Period" means, with respect to any Initial Notes offered
and sold outside the United States in reliance on Regulation S, the 40
consecutive days beginning on and including the later of (A) the day on which
such Initial Notes are offered to persons other than distributors (as defined in
Regulation S under the Securities Act) and (B) the Closing Date for such Initial
Notes.
18
<PAGE>
"Restricted Subsidiary" of the Company means any Subsidiary of the
Company which at the time of determination is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act or any successor
rule.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party providing for
the leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person or to any other Person by whom funds have
been or are to be advanced on the security of such Property.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute or statutes thereto.
"Senior Credit Facility" means that certain Credit Agreement dated as
of September 30, 1998 by and between the Company, the guarantors from time to
time a party thereto, the lenders from time to time party thereto and First
Union National Bank, as agent, pursuant to which the Company may, as of the
Issue Date, borrow up to $125,000,000 in the aggregate at any one time
outstanding, together with the documents related thereto, together with the
related documents thereto (including, without limitation, any guarantee
agreements and security documents), as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including adding Subsidiaries of the
Company as additional borrowers or guarantors thereunder or increasing the
principal amount available thereunder) all or any portion of the Indebtedness
under such agreement(s) or any successor or replacement agreement and whether by
the same or any other agent, lender or group of lenders.
"Senior Indebtedness" means, at any date, with respect to any Person
(a) all Obligations of such Person under the Senior Credit Facility; (b) all
Hedging Obligations of such Person; (c) all Obligations of such Person under
stand-by letters of credit; and (d) all other Indebtedness of such Person
permitted under this Indenture, including principal, premium, if any, and
interest (including Post-Petition Interest) on such Indebtedness, unless the
instrument under which such Indebtedness is Incurred expressly provides that
such Indebtedness is not senior or superior in right of payment to the Notes in
the case of the Company or a Note Guarantee in the case of a Note Guarantor, and
all renewals, extensions, modifications, amendments or refinancings thereof in
whole or in part. Notwithstanding the foregoing, Senior Indebtedness shall not
include (a) to the extent that it may constitute Indebtedness, any Obligation
for Federal, state, local or other taxes; (b) any Indebtedness among or between
the Company and any Subsidiary of the Company or any Affiliate of the Company or
any of such Affiliate's Subsidiaries (other than Indebtedness created by the
Company in connection with the guarantee of Indebtedness of a Subsidiary);
unless and for so long as such Indebtedness has been pledged to secure
obligations under or in respect of Senior Indebtedness; (c) to the extent that
it may
19
<PAGE>
constitute Indebtedness, any Obligation in respect of any trade payable Incurred
for the purchase of goods or materials, or for services obtained, in the
ordinary course of business; (d) that portion of any Indebtedness that is
Incurred in violation of this Indenture; (e) Indebtedness evidenced by the Notes
or the Note Guarantees; (f) Indebtedness of the Company or a Note Guarantor that
is expressly subordinate or junior in right of payment to any other Indebtedness
of the Company or a Note Guarantor; (g) to the extent that it may constitute
Indebtedness, any obligation owing under leases (other than Capitalized Lease
Obligations) or management agreements; (h) any obligation that by operation of
law is subordinate to any general unsecured obligations of such Person, and (i)
Indebtedness of the Company to the extent such Indebtedness is owed to and held
by any Federal, state, local or other governmental authority (excluding
Indebtedness owing to state or local governmental authorities in the form of
industrial revenue bonds or other state or local bond financings).
"Senior Subordinated Indebtedness" means, with respect to the Company,
the Notes and, with respect to any Note Guarantor, such Note Guarantor's Note
Guarantee and any other Indebtedness of the Company or such Note Guarantor that
specifically provides that such Indebtedness is to rank pari passu in right of
payment with the Notes or such Note Guarantee, as the case may be, and is not
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company or such Note Guarantor which is not Senior
Indebtedness.
"Significant Subsidiary" shall have the meaning set forth in Rule 1-
02(w) of Regulation S-X under the Securities Act.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Indebtedness" means, with respect to the Company or any
Note Guarantor, any Indebtedness of the Company or such Note Guarantor, as the
case may be, which is expressly subordinated in right of payment to the Notes or
such Note Guarantor's Note Guarantee, as the case may be.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital 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 such Person; or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939
(15 U.S.C. (S)(S) 77aaa-77bbbb), as in effect on the date of this Indenture
------
(except as otherwise provided in this Indenture).
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
20
<PAGE>
"Trust Officer" means, when used with respect to the Trustee, any
officer within the corporate trust department of the Trustee, including any vice
president, assistant vice president, assistant secretary, assistant treasurer,
trust officer or any other officer of the Trustee who customarily performs
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of such person's knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration of this
Indenture.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" with respect to any Person, means securities of any
class of Capital Stock of such Person entitling the holders thereof (whether at
all times or only so long as no senior class of stock has voting power by reason
of any contingency) to vote in the election of members of the Board of Directors
(or equivalent governing body) of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness (including any Disqualified Capital Stock) at any date, the number
of years obtained by dividing (a) the sum of the products obtained by
multiplying (x) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including payment at
final maturity, in respect thereof, by (y) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment, by (b) the then outstanding principal amount or liquidation
preference, as applicable, of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of the Company means any
Restricted Subsidiary of which all the outstanding Capital Stock (other than in
the case of a foreign Restricted Subsidiary, directors' qualifying shares or an
immaterial amount of shares required to be owned by other Persons pursuant to
applicable law) are owned by the Company or any Wholly Owned Restricted
Subsidiary.
21
<PAGE>
Section 1.2. Other Definitions.
-----------------
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Additional Guarantee"........................................................ 11.5
"Additional Guarantor" 11.5
"Acceleration Notice"......................................................... 6.2
"Add On Notes"................................................................ 2.14
"Affiliate Transaction"....................................................... 3.17
"Agent Member"................................................................ 2.6(b)
"Authenticating Agent"........................................................ 2.2(d)
"Blockage Notice"............................................................. 10.3
"Change of Control Offer"..................................................... 3.18(a)
"Change of Control Payment Date".............................................. 3.18(a)
"Company"..................................................................... Introduction
"Company Order"............................................................... 2.2(c)
"Corporate Trust Office"...................................................... 3.2(a)
"Covenant Defeasance"......................................................... 8.2(c)
"Defaulted Interest".......................................................... 2.12(b)
"Designation"................................................................. 3.14(a)
"Designation Amount".......................................................... 3.14(a)
"Event of Default"............................................................ 6.1
"Exchange Global Note"........................................................ 2.1(g)
"Exchange Notes".............................................................. Introduction
"Global Note"................................................................. 2.6(a)
"Guaranteed Obligations"...................................................... 11.1(a)
"Holders"..................................................................... Introduction
"Initial Notes"............................................................... Introduction
"IAI Note".................................................................... 2.1(f)
"Legal Defeasance"............................................................ 8.2(b)
"Net Proceeds Offer Trigger Date"............................................. 3.11
"Net Proceeds Offer".......................................................... 3.11
"Net Proceeds Offer Payment Date"............................................. 3.11
"Note Register"............................................................... 2.3(a)
"Noteholders"................................................................. Introduction
"Notes"....................................................................... Introduction
"Paying Agent"................................................................ 2.3(a)
"Payment Blockage Period"..................................................... 10.3
"Private Placement Legend".................................................... 2.7(b)
"Public Equity Offering"...................................................... Exhibit A
"Registrar"................................................................... 2.3(a)
"Regulation S Certification".................................................. 2.1(e)
"Regulation S Global Note".................................................... 2.1(e)
"Regulation S Permanent Global Note".......................................... 2.1(e)
"Regulation S Temporary Global Note".......................................... 2.1(e)
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
"Release Date"................................................................ 2.1(e)
"Replacement Assets".......................................................... 3.11
"Resale Restriction Termination Date"......................................... 2.7(b)
"Restricted Payment".......................................................... 3.10
"Rule 144A Global Note"....................................................... 2.1(d)
"Special Interest Payment Date"............................................... 2.12
"Special Record Date"......................................................... 2.12
"Surviving Entity"............................................................ 4.1(a)
</TABLE>
Section 1.3. Incorporation by Reference of Trust Indenture Act. This
-------------------------------------------------
Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined in the TIA by reference to another statute or defined by SEC rule
have the meanings assigned to them by such definitions.
Section 1.4. Rules of Construction. Unless the context otherwise
---------------------
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular; and
(6) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP.
23
<PAGE>
ARTICLE II
THE NOTES
Section 2.1. Form and Dating . (a) The Initial Notes are being
---------------
offered and sold by the Company pursuant to the Purchase Agreement. The Initial
Notes and the Trustee's certificate of authentication shall be substantially in
the form of Exhibit A hereto. The Exchange Notes and the Trustee's certificate
---------
of authentication shall be substantially in the form of Exhibit B hereto.
---------
(b) The terms and provisions contained in the Notes shall constitute,
and are hereby expressly made, a part of this Indenture and, to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
The Notes may have notations, legends or endorsements required by law, stock
exchange rule or DTC rule or usage. The Company and the Trustee shall approve
the form of the Notes and any notation, legend or endorsement on them. Each
Note shall be dated the date of its authentication.
(c) The Notes shall be issuable only in fully registered form,
without coupons, and only in denominations of $1,000 and any integral multiple
thereof, provided that, except as provided in Section 5.7, each IAI Note shall
-----------
be in a minimum denomination of $250,000.
(d) Initial Notes offered and sold to QIBs in the United States of
America in reliance on Rule 144A will be issued in the form of a permanent
global Note, in fully registered form without interest coupons, substantially in
the form of Exhibit A (the "Rule 144A Global Note"). The Rule 144A Global Note
--------- ---------------------
will be duly executed by the Company, authenticated by the Trustee as
hereinafter provided and deposited with the Trustee, as Note Custodian. The
Rule 144A Global Note may be represented by more than one certificate, if so
required by DTC's rules regarding the maximum principal amount to be represented
by a single certificate. The aggregate principal amount of the Rule 144A Global
Note may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as Note Custodian, as hereinafter provided.
(e) Initial Notes offered and sold outside the United States of
America in reliance on Regulation S will be issued on a Closing Date in the form
of a temporary global Note, in fully registered form without interest coupons,
substantially in the form set forth in Exhibit A (a "Regulation S Temporary
--------- ----------------------
Global Note"). Beneficial interests in a Regulation S Temporary Global Note
- -----------
will be exchangeable for beneficial interests in a single permanent global Note,
in fully registered form without interest coupons (the "Regulation S Permanent
----------------------
Global Note", together with the Regulation S Temporary Global Note, the
- -----------
"Regulation S Global Note") on or after the expiration of the Restricted Period
- -------------------------
(the "Release Date") upon the receipt by the Trustee or its agent of a
------------
certification substantially in the form set forth in Exhibit E (a "Regulation S
--------- ------------
Certification"). Upon receipt by the Trustee or Paying Agent of a Regulation S
- -------------
Certification, (i) with respect to the first such Regulation S Certification,
the Company shall execute and upon receipt of a Company Order for
authentication, the Trustee or Authenticating Agent shall authenticate and
deliver to the Note Custodian, the applicable Regulation S Permanent Global
24
<PAGE>
Note and (ii) with respect to the first and all subsequent Regulation S
Certifications, the Note Custodian shall exchange on behalf of the applicable
beneficial owners the portion of the Regulation S Temporary Global Note covered
by such Regulation S Certifications for a comparable portion of the applicable
Regulation S Permanent Global Note. Upon any exchange of a portion of a
Regulation S Temporary Global Note for a comparable portion of a Regulation S
Permanent Global Note, the Note Custodian shall endorse on the schedules affixed
to each of such Regulation S Global Note (or on continuations of such schedules
affixed to each of such Regulation S Global Note and made parts thereof)
appropriate notations evidencing the date of transfer and:
(x) with respect to the applicable Regulation S Temporary Global Note,
a decrease in the principal amount thereof equal to the amount covered
by the applicable certification;
and (y) with respect to the applicable Regulation S Permanent Global
Note, an increase in the principal amount thereof equal to the
principal amount of the decrease in the applicable Regulation S
Temporary Global Note pursuant to clause (x) above.
Each Regulation S Global Note will be duly executed by the Company,
authenticated by the Trustee as hereinafter provided and deposited with the
Trustee, as Note Custodian. The Regulation S Global Note may be represented by
more than one certificate, if so required by DTC's rules regarding the maximum
principal amount to be represented by a single certificate. The aggregate
principal amount of the Regulation S Global Note may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
Note Custodian, as hereinbefore or hereinafter provided.
(f) Initial Notes offered and sold or otherwise transferred to IAIs
in the United States of America will be issued in non-global, fully registered
form, without interest coupons, substantially in the form set forth in Exhibit
-------
A, duly executed by the Company and authenticated by the Trustee or
Authenticating Agent as hereinafter provided (each, an "IAI Note"). Upon such
--------
issuance, the Trustee shall register such IAI Note in the name of the beneficial
owner or owners of such note (or the nominee of such beneficial owner or owners)
and deliver the certificates for such IAI Notes to, or as directed by, the
respective beneficial owner or owners.
(g) All or part of any Rule 144A Global Note, Regulation S Global
Note and any IAI Note exchanged in the Registered Exchange Offer will be
exchanged for a permanent global Note in fully registered form, without interest
coupons (or beneficial interest therein) substantially in the form of Exhibit B,
---------
deposited with the Trustee, as Note Custodian, duly executed by the Company and
authenticated by the Trustee, as hereinafter provided (the "Exchange Global
---------------
Note"). The Exchange Global Note may be represented by more than one
certificate, if so required by DTC's rules regarding the maximum principal
amount to be represented by a single certificate. The aggregate principal
amount of the Exchange Global Note may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as Note Custodian,
as hereinafter provided.
25
<PAGE>
Section 2.2. Execution and Authentication. (a) Two Officers, one of
----------------------------
whom shall be the Chairman of the Board, the President, the Chief Executive
Officer or the Chief Financial Officer of the Company, shall sign the Notes for
the Company by manual or facsimile signature. If an Officer whose signature is
on a Note no longer holds that office at the time the Trustee authenticates the
Note, the Note shall be valid nevertheless.
(b) A Note shall not be valid until an authorized signatory of the
Trustee manually authenticates the Note. The signature of the Trustee on a Note
shall be conclusive evidence that such Note has been duly and validly
authenticated and issued under this Indenture.
(c) At any time and from time to time after the execution and
delivery of this Indenture, the Trustee shall authenticate and make available
for delivery: (1) Initial Notes for original issue on the Issue Date in an
aggregate principal amount of $100,000,000, (2) Exchange Notes for issue only in
a Registered Exchange Offer pursuant to the Registration Rights Agreement, and
only in exchange for Initial Notes of an equal principal amount and (3) Add On
Notes in unlimited aggregate principal amount, and, if applicable, the related
exchange of Initial Notes for Exchange Notes, in each case upon a written order
of the Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company (a "Company Order"). Such
-------------
Company Order shall specify the amount of the Notes to be authenticated and the
date on which the original issue of Notes is to be authenticated and whether the
Notes are to be Initial Notes or Exchange Notes. The aggregate principal amount
of Notes which may be authenticated and delivered under this Indenture is
unlimited. Except as permitted in Section 2.14 or Section 2.15(b), all Notes
------------ ---------------
issued on the Issue Date and all Add On Notes shall be identical in all respects
other than issue dates, the date from which interest accrues and any changes
relating thereto. Notwithstanding anything to the contrary contained in this
Indenture, all Notes issued 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.
(d) The Trustee may appoint an agent (the "Authenticating Agent")
--------------------
reasonably acceptable to the Company to authenticate the Notes. Unless limited
by the terms of such appointment, any such Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by the Authenticating
Agent.
(e) In case the Company, pursuant to Article IV, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article IV, any of the Notes
authenticated or delivered prior to such consolidation, merger, conveyance,
transfer, lease or other disposition may, from time to time, at the request of
the successor Person, be exchanged for other Notes executed in the name of the
successor Person with such changes in phraseology and form as may be
appropriate, but otherwise in substance of
26
<PAGE>
like tenor as the Notes surrendered for such exchange and of like principal
amount; and the Trustee, upon Company Order of the successor Person, shall
authenticate and deliver Notes as specified in such order for the purpose of
such exchange. If Notes shall at any time be authenticated and delivered in any
new name of a successor Person pursuant to this Section 2.2 in exchange or
-----------
substitution for or upon registration of transfer of any Notes, such successor
Person, at the option of the Holders but without expense to them, shall provide
for the exchange of all Notes at the time Outstanding for Notes authenticated
and delivered in such new name.
Section 2.3. Registrar and Paying Agent. (a) The Company shall
--------------------------
maintain an office or agency in the Borough of Manhattan, City of New York,
where Notes may be presented for registration of transfer or for exchange (the
"Registrar"), where Notes may be presented for payment (the "Paying Agent") and
--------- ------------
for the service of notices and demands to or upon the Company in respect of the
Notes and this Indenture. The Registrar shall keep a register of the Notes and
of their transfer and exchange (the "Note Register"). The Company may have one
-------------
or more co-registrars and one or more additional paying agents. The term
"Paying Agent" includes any additional paying agent.
(b) The Company shall enter into an appropriate agency agreement with
any Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall
notify the Trustee of the name and address of each such agent. If the Company
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and
shall be entitled to appropriate compensation therefor pursuant to Section 7.7.
-----------
The Company may act as Paying Agent, Registrar or co-registrar.
(c) The Company initially appoints the Trustee at its principal
corporate trust office in the Borough of Manhattan, City of New York (the
"Corporate Trust Office") as Registrar, Paying Agent and agent for service of
----------------------
demands and notices in connection with the Notes and this Indenture, until such
time as the Trustee has resigned or a successor Trustee has been appointed or
until a successor Registrar, Paying Agent or agent for service of demands and
notices in connection with the Notes and this Indenture has been appointed.
Section 2.4. Deposit of Monies; Paying Agent to Hold Money in Trust.
------------------------------------------------------
By at least 10:00 a.m. (New York City time) on the date on which any principal
of or interest on any Note is due and payable, the Company shall deposit with
the Paying Agent in immediately available funds money sufficient to pay such
principal or interest when due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that such Paying Agent shall hold
in trust for the benefit of Noteholders or the Trustee all money held by such
Paying Agent for the payment of principal of or interest on the Notes and shall
notify the Trustee in writing of any default by the Company in making any such
payment. If the Company acts as Paying Agent, it shall segregate the money held
by it as Paying Agent and hold it as a separate trust fund. The Company at any
time may require a Paying Agent (other than the Trustee) to pay all money held
by it to the Trustee and to account for any funds disbursed by such Paying
Agent. Upon complying with this Section, the Paying Agent (if other than the
Company) shall have no further liability for the money delivered to the Trustee.
At any time that the Company is serving
27
<PAGE>
as Paying Agent for the Notes, upon any bankruptcy, reorganization or similar
proceeding with respect to the Company, the Trustee shall serve as Paying Agent
for the Notes.
Section 2.5. Noteholder Lists. The Trustee shall preserve in as
----------------
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Noteholders. If the Trustee is not the Registrar,
or to the extent otherwise required under the TIA, the Company shall furnish to
the Trustee, in writing 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 Noteholders.
Section 2.6. Book-Entry Provisions. (a) Each Rule 144A Global Note
---------------------
and Regulation S Global Note (each, a "Global Note" and collectively, the
"Global Notes") initially shall (i) be registered in the name of DTC or the
nominee of DTC, (ii) be delivered to the Note Custodian and (iii) bear the
appropriate legends, as set forth in Exhibit A or Exhibit B, as the case may be.
--------- ---------
(b) Members of, or participants in, DTC ("Agent Members") shall have
-------------
no rights under this Indenture with respect to any Global Note held on their
behalf by DTC or by the Note Custodian or under such Global Note, and DTC may be
treated by the Company, the Trustee and any agent of the Company or the Trustee
as the absolute owner of such Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by DTC or impair,
as between DTC and its Agent Members, the operation of customary practices of
DTC governing the exercise of the rights of a Holder of a beneficial interest in
any Global Note. The registered Holder of a Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
(c) Except as provided below, owners of beneficial interests in
Global Notes will not be entitled to receive Certificated Notes. If required to
do so pursuant to any applicable law or regulation, beneficial owners may obtain
Certificated Notes in exchange for their beneficial interests in a Global Note
upon written request in accordance with DTC's and the Registrar's procedures.
In addition, Certificated Notes (in the form of Exhibit A or Exhibit B, as
--------- ---------
applicable) shall be transferred to all beneficial owners in exchange for their
beneficial interests in a Global Note if:
(i) DTC notifies the Company that it is unwilling or unable to
continue as depositary for such Global Note or DTC ceases to be a clearing
agency registered under the Exchange Act at a time when DTC is required to
be so registered in order to act as depositary, and in each case a
successor depositary is not appointed by the Company within 90 days of such
notice,
(ii) the Company executes and delivers to the Trustee and Registrar
an Officers' Certificate stating that such Global Note shall be so
exchangeable, or
28
<PAGE>
(iii) an Event of Default has occurred and is continuing and the
Registrar has received a request from DTC.
In connection with the transfer of an entire Global Note to the beneficial
owners thereof pursuant to this subsection (c), such Global Note shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by DTC in exchange for its beneficial interest in such Global
Note, an equal aggregate principal amount of definitive Notes of authorized
denominations.
(d) In connection with the exchange of a portion of a Certificated
Note for a beneficial interest in a Global Note, the Trustee shall cancel such
Certificated Note, and the Company shall execute, and the Trustee shall
authenticate and deliver, to the transferring Holder a new Certificated Note
representing the principal amount not so transferred.
Section 2.7 Legends.
-------
(a) Each Global Note shall bear the legend specified therefor in
Exhibit A or Exhibit B, as the case may be, on the face thereof.
- --------- ---------
(b) Initial Notes that are not Regulation S Global Notes shall,
prior to the date which is two years after the Issue Date (or, in the case of
Restricted Add On Notes that are not Regulation S Global Notes, the Closing Date
therefor) (the "Resale Restriction Termination Date") and each Regulation S
-----------------------------------
Temporary Global Note shall, bear the Private Placement Legend specified in
Exhibit A on the face thereof (the "Private Placement Legend.")
- --------- ------------------------
(c) Each Regulation S Temporary Global Note shall bear the legend
specified therefor in Exhibit A on the face thereof.
---------
Section 2.8. Transfer and Exchange.
---------------------
(a) The following provisions shall apply with respect to any proposed
transfer of a beneficial interest in a Rule 144A Global Note or an IAI Note
prior to the Resale Restriction Termination Date therefor:
(i) if the Holder of one or more IAI Note(s) wishes to transfer such
IAI Note(s) (or a portion thereof) to a QIB pursuant to Rule 144A, (x) upon
receipt by the Registrar of:
(A) such IAI Note(s), duly endorsed as provided herein,
(B) instructions from such Holder directing the Registrar to
credit or cause to be credited a beneficial interest in the
Rule 144A Global Note equal to the principal amount (or
portion thereof) of such IAI Note(s) to be transferred,
specifying the participant account at DTC to be credited
with such increase, and, if the entire principal amount of
such IAI Note(s) is not being transferred,
29
<PAGE>
to issue one or more IAI Notes to the transferor IAI in a
principal amount equal to the principal amount not transferred,
and
(C) a certificate in the form of Exhibit C duly executed by the
transferor, and
(y) subject to the rules and procedures of DTC, the Registrar shall:
(1) cancel the IAI Notes delivered to it;
(2) increase the Rule 144A Global Note and credit or cause
to be credited the participant account at DTC in accordance
with the foregoing; and
(3) if applicable, authenticate and deliver to the IAI
transferor one or more IAI Note(s) in accordance with the
foregoing.
(ii) If the Holder of one or more IAI Notes wishes to transfer such
IAI Note(s) (or any portion thereof) to an IAI, upon receipt by the
Registrar of:
(A) such IAI Note(s), duly endorsed as provided herein;
(B) instructions from such Holder directing the Registrar to
issue one or more IAI Notes in the amounts specified to the
transferee IAI and, if the entire principal amount of such IAI
Note(s) is not being transferred, the transferor IAI in an amount
equal to the principal amount not transferred; and
(C) a certificate in the form of Exhibit D duly executed by the
---------
transferee.
(iii) If the holder of a beneficial interest in a Rule 144A Global
Note wishes to transfer such interest (or a portion thereof) to an IAI, (x)
upon receipt by the Registrar of:
(A) instructions from the Holder of the Rule 144A Global Note
directing the Registrar to issue one or more IAI Notes in the
amounts specified to the transferee IAI, debit or cause to be
debited an equivalent amount of beneficial interest in the Rule
144A Global Note and specifying the participant account at DTC to
be debited with such decrease and
(B) a certificate in the form of Exhibit D from the IAI
---------
transferee,
and (y) subject to the rules and procedures of DTC, the Registrar shall:
(A) authenticate and deliver to the IAI transferee IAI Note(s) in
a principal amount equivalent to the principal amount of the
beneficial interest in the Rule 144A Global Note being
transferred in accordance with the foregoing and
30
<PAGE>
(B) decrease the Rule 144A Global Note and debit the account of
the specified participant account at DTC for such amount in
accordance with the foregoing.
(iv) If (1) the holder of a beneficial interest in a Rule 144A Global
Note wishes to transfer such interest (or any portion thereof) to a Non-
U.S. Person pursuant to Regulation S and (2) such Non-U.S. Person wishes to
hold its interest in the Notes through a beneficial interest in the
Regulation S Global Note, (x) upon receipt by the Registrar of:
(A) instructions from the Holder of the Rule 144A Global Note
directing the Registrar to credit or cause to be credited a
beneficial interest in the Regulation S Global Note equal to the
principal amount of the beneficial interest in the Rule 144A
Global Note to be transferred, specifying the participant
accounts with DTC to be credited and debited and
(B) a certificate in the form of Exhibit F from the transferor
---------
and (y) subject to the rules and procedures of DTC, the Registrar shall:
(1) increase the Regulation S Global Note and credit or caused to be
credited the specified participant account at DTC for such amount in
accordance with the foregoing, and
(2) decrease the Rule 144A Global Note for such amount and debit or
cause to be debited the specified participant account at DTC for such
amount in accordance with the foregoing.
(v) Transfers of beneficial interests in the Rule 144A Global Note
not described in this Section 2.8 shall be made in accordance with the
-----------
rules and procedures of DTC.
(vi) After the expiration of the Resale Restriction Termination date,
beneficial interests in Rule 144A Global Notes and IAI Notes may be
transferred without requiring the certifications described above or any
additional certification.
(b) The following provisions shall apply with respect to any proposed
transfer of a beneficial interest in a Regulation S Temporary Global Note:
(i) if the holder of a beneficial interest in a Regulation S
Temporary Global Note wishes to transfer such interest (or any portion
thereof) to a QIB pursuant to Rule 144A, (x) upon receipt by the Registrar
of:
(A) instructions from the Holder of the Regulation S Temporary Global
Note directing the Registrar to credit or cause to be credited a
beneficial interest in the Rule 144A Global Note equal to the
principal amount of the beneficial interest in
31
<PAGE>
the Regulation S Temporary Global Note to be transferred, specifying
the participant accounts at DTC to be credited and debited, and
(B) a certificate in the form of Exhibit C duly executed by the
---------
transferor, and
(y) in accordance with the rules and procedures of DTC, the Registrar
shall:
(1) increase the Rule 144A Global Note and credit or caused to be
credited the specified participant account at DTC for such amount in
accordance with the foregoing, and
(2) decrease the Regulation S Temporary Global Note amount and debit
or cause to be debited the specified participant account at DTC for
such amount in accordance with the foregoing.
(ii) if the holder of a beneficial interest in a Regulation S
Temporary Global Note wishes to transfer such interest (or a portion
thereof) to an IAI, (x) upon receipt by the Registrar of:
(A) instructions from the Holder directing the Registrar to issue
one or more IAI Notes in specified amounts in the name of the
transferee IAI, debit or cause to be debited an equivalent amount of
beneficial interest in the Regulation S Temporary Global Note and
specifying the participant account with DTC to be debited with such
decrease and
(B) a certificate in the form of Exhibit D from the IAI transferee,
---------
and (y) subject to the rules and procedures of DTC, the Registrar shall:
(1) authenticate and deliver to the IAI transferee IAI Note(s) in an
equivalent amount to the beneficial interest in the Regulation S
Temporary Global Note being transferred in accordance with the
foregoing, and
(2) decrease the Regulation S Temporary Global Note debited to the
account of the specified participant for such amount in accordance
with the foregoing.
(ii) except for transfers of beneficial interests in the Regulation S
Temporary Global Note described in this Section 2.8, transfers of
beneficial interests in the Regulation S Temporary Global Note shall be
made in accordance with the rules and procedures of DTC.
(iii) Interests in a Regulation S Permanent Global Note may be
transferred without requiring the certification described above or any
additional certification.
(c) Any other transfer of (i) Initial Notes (other than the
Regulation S Temporary Global Note) prior to the expiration of the Resale
Restriction Termination Date therefor or (ii) a Regulation S Temporary Global
Note, shall be made only upon receipt by the Registrar and the
32
<PAGE>
Company of such Opinions of Counsel, certifications and/or other information
satisfactory to each of them in order to ensure compliance with the Securities
Act.
(d) Upon the transfer, exchange or replacement of Notes (or
beneficial interests in a Global Note) not bearing a Private Placement Legend,
the Registrar shall deliver Notes (or cause to be increased the principal amount
of a Global Note to reflect increases in the amount of beneficial interests
covered thereby) that do not bear a Private Placement Legend. Upon the
transfer, exchange or replacement of Notes (or beneficial interests in a Global
Note) bearing a Private Placement Legend, the Registrar shall deliver only Notes
that bear a Private Placement Legend unless
(i) such Notes (or beneficial interest) are exchanged in the
Registered Exchange Offer;
(ii) such Notes (or beneficial interest) are transferred pursuant to
an effective Registration Statement;
(iii) such Notes (or beneficial interest) are transferred, replaced
or exchanged following the expiration of the Resale Restriction Termination
Period therefor; or
(iv) in connection with such transfer, the Registrar (and, if the
Company is not then serving as the Registrar, the Company) shall have
received an Opinion of Counsel satisfactory to it to the effect that
neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act.
The Company shall deliver to the Trustee an Officers' Certificate promptly upon
effectiveness, withdrawal or suspension of any Registration Statement applicable
to any Notes.
(e) If one or more Exchange Global Notes have been issued, upon the
transfer of any Note (or beneficial interest therein) for which a Private
Placement Legend would not be required pursuant to clause (d) for such Note (or
beneficial interest) following such transfer, such Note (or beneficial interest
therein) may be exchanged for a beneficial interest in the Exchange Global Note.
If no Exchange Global Note has been issued, upon the transfer of any Note
bearing a Private Placement Legend (or beneficial interest therein) for which a
Private Placement Legend would not be required pursuant to clause (d) for such
Note (or beneficial interest) following such transfer, such Note (or beneficial
interest therein) may be exchanged for a beneficial interest in a Global Note
without a Private Placement Legend.
(f) The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to this Article II. The Company
shall have the right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time upon the giving of
reasonable written notice to the Registrar.
(g) (i) To permit registrations of transfers and exchanges, the
Company shall, subject to the other terms and conditions of this Article
II, execute and the Trustee shall
33
<PAGE>
authenticate Certificated Notes and Global Notes at the Registrar's or co-
registrar's request.
(ii) In accordance with the Registration Rights Agreement, the
Trustee shall, upon receipt of a Company Order, exchange Initial Notes for
Exchange Notes or Private Exchange Notes, as the case may be.
(iii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any such
transfer taxes, assessments or similar governmental charges payable upon
exchange or transfer pursuant to Section 3.11, Section 3.18 or Section
------------ ------------ -------
9.5).
---
(iv) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of any Note for a period beginning (1)
15 days before the mailing of a notice of an offer to repurchase or redeem
Notes and ending at the close of business on the day of such mailing or (2)
15 days before an interest payment date and ending on such interest payment
date.
(v) Prior to the due presentation for registration of transfer
of any Note, the Company, the Trustee, the Paying Agent, the Registrar or
any co-registrar may deem and treat the person in whose name a Note is
registered as the absolute owner of such Note for the purpose of receiving
payment of principal of and interest on such Note and for all other
purposes whatsoever, whether or not such Note is overdue, and none of the
Company, the Trustee, the Paying Agent, the Registrar or any co-registrar
shall be affected by notice to the contrary.
(vi) All Notes issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Notes surrendered
upon such transfer or exchange.
(h) No Obligation of the Trustee.
----------------------------
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Note, a member of, or a participant in, DTC or
other Person with respect to the accuracy of the records of DTC or its
nominee or of any participant or member thereof, with respect to any
ownership interest in the Notes or with respect to the delivery to any
participant, member, beneficial owner or other Person (other than DTC) of
any notice (including any notice of redemption) or the payment of any
amount or delivery of any Notes (or other security or property) under or
with respect to such Notes. All notices and communications to be given to
the Holders and all payments to be made to Holders in respect of the Notes
shall be given or made only to or upon the order of the registered Holders
(which shall be DTC or its nominee in the case of a Global Note). The
rights of beneficial owners in any Global Note shall be exercised only
through DTC subject to the applicable rules and procedures of DTC. The
Trustee may rely and shall be fully
34
<PAGE>
protected in relying upon information furnished by DTC with respect to its
members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Note (including any transfers between or
among Depositary participants, members or beneficial owners in any Global
Note) other than to require delivery of such certificates and other
documentation or evidence as is 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 2.9. Mutilated, Destroyed, Lost or Stolen Notes. If a
------------------------------------------
mutilated Note is surrendered to the Registrar or if the Holder of a Note claims
that the Note has been lost, destroyed or wrongfully taken, the Company shall
issue and the Trustee shall authenticate a replacement Note if the requirements
of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Note is replaced, and, in the absence of notice to the Company
or the Trustee that such Note has been acquired by a bona fide purchaser, the
Company shall execute and upon Company Order the Trustee shall authenticate and
make available for delivery, in exchange for any such mutilated Note or in lieu
of any such destroyed, lost or stolen Note, a new Note of like tenor and
principal amount, bearing a number not contemporaneously Outstanding. In case
any such mutilated, destroyed, lost or stolen Note has become or is about to
become due and payable, the Company in its discretion may, instead of issuing a
new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) in connection therewith.
Every new Note issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, any Note Guarantor (if
applicable) and any other obligor upon the Notes, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
Section 2.10. Temporary Notes. Until definitive Notes are ready for
---------------
delivery, the Company may prepare and the Trustee shall authenticate temporary
Notes. Temporary Notes
35
<PAGE>
shall be substantially in the form of definitive Notes but may have variations
that the Company considers appropriate for temporary Notes. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate definitive
Notes. After the preparation of definitive Notes, the temporary Notes shall be
exchangeable for definitive Notes upon surrender of the temporary Notes at any
office or agency maintained by the Company for that purpose and such exchange
shall be without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Notes, the Company shall execute, and the Trustee shall
authenticate and make available for delivery in exchange therefor, one or more
definitive Notes representing an equal principal amount of Notes. Until so
exchanged, the Holder of temporary Notes shall in all respects be entitled to
the same benefits under this Indenture as a Holder of definitive Notes.
Section 2.11. Cancellation. The Company at any time may deliver
------------
Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall
forward to the Trustee any Notes surrendered to them for registration of
transfer, exchange or payment. The Trustee and no one else shall cancel and
return to the Company all Notes surrendered for registration of transfer,
exchange, payment or cancellation. The Company may not issue new Notes to
replace Notes it has paid or delivered to the Trustee for cancellation for any
reason other than in connection with a transfer or exchange.
Section 2.12. Payment of Interest; Defaulted Interest. (a) Interest
---------------------------------------
on any Note which is payable, and is punctually paid or duly provided for, on
any interest payment date shall be paid to the Person in whose name such Note
(or one or more predecessor Notes) is registered at the close of business on the
regular record date for such interest at the office or agency of the Company
maintained for such purpose pursuant to Section 2.3.
-----------
(b) Any interest on any Note which is payable, but is not paid when
the same becomes due and payable and such nonpayment continues for a period of
30 days shall forthwith cease to be payable to the Holder on the regular record
date by virtue of having been such Holder. Such defaulted interest ("Defaulted
---------
Interest") shall, without regard to any applicable grace periods, be paid by the
- --------
Company at the rate of 2% per annum in excess of the rate shown on the Note, at
its election in each case, as provided in clause (i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Notes (or their respective predecessor
Notes) are registered at the close of business on a Special Record Date (as
defined below) for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Note and the date (not less than 30 days after such notice) of the proposed
payment (the "Special Interest Payment Date"), and at the same time the
-----------------------------
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix a
record date (the "Special Record Date") for the payment of such Defaulted
-------------------
Interest which shall be not
36
<PAGE>
more than 15 days and not less than 10 days prior to the Special Interest
Payment Date and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date, and in the name and at the expense of
the Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date and Special Interest Payment Date
therefor to be given in the manner provided for in Section 13.2 not less
------------
than 10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date and Special
Interest Payment Date therefor having been so given, such Defaulted
Interest shall be paid on the Special Interest Payment Date to the Persons
in whose names the Notes (or their respective predecessor Notes) are
registered at the close of business on such Special Record Date and shall
no longer be payable pursuant to the following clause (ii).
(ii) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the Company
to the Trustee of the proposed payment pursuant to this clause, such manner
of payment shall be deemed practicable by the Trustee.
(c) Subject to the foregoing provisions of this Section 2.12, each
------------
Note delivered under this Indenture upon registration of, transfer of or in
exchange for or in lieu of any other Note shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Note.
Section 2.13. Computation of Interest. Interest on the Notes shall
-----------------------
be computed on the basis of a 360-day year of twelve 30-day months.
Section 2.14. Add On Notes. The Company may, from time to time,
------------
subject to compliance with any other applicable provisions of this Indenture
(including but not limited to Section 3.9), without the consent of the Holders,
-----------
create and issue pursuant to this Indenture additional notes having terms and
conditions identical to those of the Notes except for issue date ("Add On
------
Notes") (or the same except for the payment of interest accruing prior to the
- -----
issue date of such Add On Notes or except for the first payment of interest
following the issue date of such Add On Notes and as provided in the following
sentence), which Add On Notes will be treated, together with any other
Outstanding Notes, as a single issue of securities. The Company may, in
connection with the issuance of any Add On Notes, by Board Resolution or
supplemental indenture make appropriate adjustments to this Article II
applicable to such Add On Notes in order to ensure compliance with the
Securities Act and any registration rights or similar agreement applicable to
such Add On Notes.
Section 2.15. CUSIP Numbers. (a) The Company in issuing the Notes
-------------
may use "CUSIP" or "ISIN" numbers (if then generally in use) and, if so, the
Trustee shall use CUSIP or ISIN numbers in notices of redemption as a
convenience to Holders; provided, however, that any such notice may state that
no representation is made as to the correctness of such numbers either
37
<PAGE>
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 CUSIP or ISIN numbers.
(b) In the event that the Company shall issue and the Trustee shall
authenticate any Add On Notes pursuant to Section 2.2, the Company shall use its
-----------
best efforts to obtain the same CUSIP or ISIN number for such Add On Notes as is
printed on the Notes Outstanding at such time; provided, however, that if any
Add On Notes are determined, pursuant to an Opinion of Counsel, to be a
different class of security than the Notes Outstanding at such time for federal
income tax purposes, the Company may obtain a CUSIP or ISIN number for such
series of Add On Notes that is different from the CUSIP or ISIN number printed
on the Notes then Outstanding and if any Add On Notes are required to carry a
Private Placement Legend and other Notes Outstanding at such time are not or
vice versa, the Company may obtain and use a different CUSIP or ISIN number for
such Add On Notes for such time as such difference applies.
ARTICLE III
COVENANTS
Section 3.1. Payment of Notes. (a) The Company shall pay the
----------------
principal of and interest on the Notes on the dates and in the manner provided
in the Notes and in this Indenture. Principal and interest shall be considered
paid on the date due if on such date the Trustee or the Paying Agent holds in
accordance with this Indenture money sufficient to pay all principal and
interest then due and the Trustee or the Paying Agent, as the case may be, is
not prohibited from paying such money to the Noteholders on that date pursuant
to the terms of this Indenture.
(b) The Company shall pay, to the extent such payments are lawful,
interest (including Post-Petition Interest in any proceeding under any
Bankruptcy Law) on overdue principal at the rate specified therefor in the
Notes, and on Defaulted Interest (without regard to applicable grace periods) at
the rate specified therefor in the Notes.
(c) Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law, deduct
or withhold income or other similar taxes imposed by the United States of
America from principal or interest payments hereunder.
Section 3.2. Maintenance of Office or Agency. (a) The Company shall
-------------------------------
maintain each office or agency required under Section 2.3. The Company will
-----------
give prompt written notice to the Trustee of any change in the location of any
such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the corporate trust office of the Trustee (the "Corporate Trust
Office"), and the Company hereby appoints the Trustee as its agent to receive
all such presentations, surrenders, notices and demands.
38
<PAGE>
(b) The Company may also from time to time designate one or more
other offices or agencies (in or outside of The City of New York) where the
Notes may be presented or surrendered for any or all such purposes and may from
time to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and any change in the location of any such other
office or agency.
Section 3.3. Corporate Existence. Subject to Article IV, Section
------------------- -------
3.11 and Section 10.2, the Company will do or cause to be done all things
- ---- ------------
necessary to preserve and keep in full force and effect its corporate existence
and that of each Restricted Subsidiary and the corporate rights (charter and
statutory) licenses and franchises of the Company and each Restricted
Subsidiary; provided, however, that the Company shall not be required to
preserve any such existence (except the Company's), right, license or franchise
if the Board of Directors of the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
each of its Restricted Subsidiaries, taken as a whole, and that the loss thereof
is not, and will not be, disadvantageous in any material respect to the Holders.
Section 3.4. Payment of Taxes and Other Claims. The Company will pay
---------------------------------
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all material taxes, assessments and governmental charges levied
or imposed upon the Company or any Restricted Subsidiary or upon the income,
profits or property of the Company or any Restricted Subsidiary and (ii) all
lawful claims for labor, materials and supplies, which, if unpaid, might by law
become a material liability or Lien upon the property of the Company or any
Restricted Subsidiary; provided, however, that the Company shall not be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which appropriate reserves, if
necessary (in the good faith judgment of management of the Company), are being
maintained in accordance with GAAP or where the failure to effect such payment
will not be disadvantageous to the Holders.
Section 3.5. Compliance Certificate. The Company shall deliver to
----------------------
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default or Event of Default and whether or not the signers know
of any Default or Event of Default that occurred during such period. If they
do, the certificate shall describe the Default or Event of Default, its status
and what action the Company is taking or proposes to take with respect thereto.
The Company also shall comply with TIA (S) 314(a)(4).
Section 3.6. Maintenance of Properties. The Company and its
-------------------------
Restricted Subsidiaries shall cause all property used or useful in the conduct
of their business or businesses to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and shall
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as, in the judgment of the Company, may be necessary
39
<PAGE>
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided that nothing in this Section 3.6
-----------
shall prevent the Company or any of its Subsidiaries from discontinuing the
operation or maintenance of any of such property if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of its Subsidiaries and not disadvantageous in any material respect to
the Holders.
Section 3.7. Further Instruments and Acts. Upon request of the
----------------------------
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
Section 3.8. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company and each Note Guarantor covenants (to the extent that it
may lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
Company or such Note Guarantor from paying all or any portion of the principal
of or interest on the Notes as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company and each Note Guarantor hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
Section 3.9. Limitation on Incurrence of Additional Indebtedness .
----------------------------------------------------
(a) The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness
(including Acquired Indebtedness) other than Permitted Indebtedness; provided,
however, that the Company and any Note Guarantor may Incur Indebtedness if, at
the time of and immediately after giving pro forma effect to the Incurrence
thereof and the application of the proceeds therefrom, the Consolidated Fixed
Charge Coverage Ratio is greater than 2.0 to 1.0.
(b) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this covenant, the amount of Indebtedness issued at a price
that is less than the principal amount thereof will be equal to the amount of
the liability in respect thereof determined in accordance with GAAP.
Section 3.10. Limitation on Restricted Payments. The Company will
---------------------------------
not, and will not cause or permit any of its Restricted Subsidiaries to,
directly or indirectly, (a) declare or pay any dividend or make any distribution
(other than dividends or distributions payable in Qualified Capital Stock of the
Company or in warrants, rights or options to purchase or acquire shares of
Qualified Capital Stock of the Company or dividends or distributions payable to
the Company or a Restricted Subsidiary and pro rata dividends or distributions
to the Company and/or its Restricted Subsidiaries and to minority holders of
Capital Stock of Restricted
40
<PAGE>
Subsidiaries) on or in respect of shares of Capital Stock of the Company or any
Restricted Subsidiary to holders of such Capital Stock, (b) purchase, redeem or
otherwise acquire or retire for value (other than any such purchase, redemption,
acquisition or retirement that constitutes a Permitted Investment) any Capital
Stock of the Company or any Restricted Subsidiary or any warrants, rights or
options to purchase or acquire shares of any class of such Capital Stock (other
than any such Capital Stock, warrants, rights or options owned by the Company or
any Restricted Subsidiary), (c) make any principal payment on, purchase,
defease, redeem, prepay, decrease or otherwise acquire or retire for value,
prior to any scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, as the case may be, any Subordinated Indebtedness, or (d) make any
Investment (other than Permitted Investments) (each of the foregoing actions set
forth in (but not excluded from) clauses (a), (b), (c) and (d) being referred to
as a "Restricted Payment"), if at the time of such Restricted Payment or
immediately after giving effect thereto, (i) a Default or an Event of Default
shall have occurred and be continuing or (ii) the Company is not able to Incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 3.9 or (iii) the aggregate amount of Restricted Payments
-----------
(including such proposed Restricted Payment) made subsequent to the Issue Date
(the amount expended for such purposes, if other than in cash, being the Fair
Market Value of such property) shall exceed the sum of: (A) 50% of cumulative
Consolidated Net Income (or if cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss) accrued during the period (treated as one
accounting period) beginning on the first day of the fiscal quarter beginning on
January 1, 1999 to the end of the most recent fiscal quarter for which
consolidated financial information of the Company is available; plus (B) 100% of
the aggregate net cash proceeds received by the Company from any Person (other
than a Restricted Subsidiary of the Company) from any capital contribution to
the Company or issuance and sale (other than to a Restricted Subsidiary) of
Qualified Capital Stock of the Company subsequent to the Issue Date or any
warrants, rights or options to purchase or acquire shares of Capital Stock of
the Company or from the issuance and sale (other than to a Restricted
Subsidiary) subsequent to the Issue Date of any Indebtedness of the Company or
any Restricted Subsidiary that has been converted into or exchanged for
Qualified Capital Stock of the Company (excluding any net cash proceeds applied
in accordance with the following paragraph); plus (C) without duplication of any
amounts included in clause (A) above or clause (D) below, in the case of the
disposition or repayment of, or the receipt by the Company or any Restricted
Subsidiary of any dividends or distributions from, any Investment constituting a
Restricted Payment made after the Issue Date, an amount equal to the lesser of
the amount of such Investment and the amount received by the Company or any
Restricted Subsidiary upon such disposition, repayment, dividend or
distribution; plus (D) without duplication of any amounts included in clause (C)
above, in the event the Company or any Restricted Subsidiary makes any
Investment in a Person that, as a result of or in connection with such
Investment, becomes a Restricted Subsidiary, an amount equal to the Company's or
any Restricted Subsidiary's existing Investment in such Person that was
previously treated as a Restricted Payment; plus (E) so long as the Designation
thereof was treated as a Restricted Payment made after the Issue Date, with
respect to any Unrestricted Subsidiary that has been redesignated as a
Restricted Subsidiary after the Issue Date in accordance with Section 3.14, an
------------
amount equal to the Company's Investment in such Unrestricted Subsidiary
(provided that such amount shall not in any case exceed the Designation Amount
with respect to such Restricted Subsidiary upon its Designation); plus (F) $3.0
million; provided, that the amount of Restricted
41
<PAGE>
payments permitted pursuant to this clause (F) shall not be reduced by any
negative amounts occurring pursuant to clause (A) above; minus (G) the
Designation Amount (measured as of the date of Designation) with respect to any
Subsidiary of the Company which has been designated as an Unrestricted
Subsidiary after the Issue Date in accordance with Section 3.14.
------------
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any dividend
within 60 days after the date of declaration of such dividend if the dividend
would have been permitted on the date of declaration; (2) if no Default or Event
of Default shall have occurred and be continuing, the acquisition of any shares
of Capital Stock of the Company or any warrants, rights or options to purchase
or acquire shares of Capital Stock of the Company, (i) in exchange for shares of
Qualified Capital Stock of the Company or any warrants, rights or options to
purchase or acquire shares of Qualified Capital Stock of the Company or (ii)
through the application of the net proceeds of a substantially concurrent sale
for cash (other than to a Restricted Subsidiary of the Company) of shares of
Qualified Capital Stock of the Company or any warrants, rights or options to
purchase or acquire shares of Qualified Capital Stock of the Company; provided,
however, that the value of any such Qualified Capital Stock or warrants, rights
and options issued in exchange for such acquired capital stock, warrants, rights
or options and any such net cash proceeds shall be excluded from clause (iii)(B)
of the preceding paragraph (and were not included therein at any time); (3) if
no Default or Event of Default shall have occurred and be continuing, the
voluntary prepayment, purchase, defeasance, redemption or other acquisition or
retirement for value of any Subordinated Indebtedness (i) solely in exchange for
shares of Capital Stock of the Company or any warrants, rights or options to
purchase or acquire shares of Capital Stock of the Company; provided, however,
that if such Capital Stock is, or such warrants, rights or options to purchase
such Capital Stock are convertible into or exchangeable at the option of the
holder thereof for, Disqualified Capital Stock, then such Disqualified Capital
Stock shall not (A) by its terms, or upon the happening of any event, mature or
be mandatorily redeemable pursuant to a sinking fund obligation or otherwise, or
be redeemable at the option of the holder thereof, in any case, on or prior to
the final maturity of the Indebtedness permitted to be prepaid, purchased,
defeased, redeemed or acquired pursuant to this clause (3) and (B) have a
Weighted Average Life to Maturity less than the Indebtedness permitted to be
prepaid, purchased, defeased, redeemed or acquired pursuant to this clause (3)
or (ii) in exchange for Refinancing Indebtedness or through the application of
net proceeds of a substantially concurrent sale for cash (other than to a
Restricted Subsidiary of the Company) of (A) shares of Qualified Capital Stock
of the Company or any warrants, rights or options to purchase or acquire shares
of Qualified Capital Stock of the Company or (B) Refinancing Indebtedness; and
provided, further, that the value of such Capital Stock or warrants, rights or
options issued in exchange for such Subordinated Indebtedness and any such net
cash proceeds shall be excluded from clause (iii)(B) of the preceding paragraph
(and were not included therein at any time); (4) the making of loans or advances
to officers and directors of the Company or any Restricted Subsidiary entered
into in the ordinary course of business in an amount not to exceed $1.0 million
at any one time outstanding; (5) the repurchase, redemption or other acquisition
or retirement for value of (i) any Capital Stock (or interests under any stock
appreciation rights plan) of the Company held by any member of the Company's
management pursuant to any management equity subscription agreement or stock
option agreement in effect as of the date of this Indenture or entered into
42
<PAGE>
thereafter with members of the management of any Person acquired after the Issue
Date in connection with the acquisition of such Person or (ii) Capital Stock of
the Company held by employees, former employees, directors or former directors
pursuant to the terms of agreements (including employment agreements) approved
by the Board of Directors; provided, however, that the aggregate price paid for
all such repurchased, redeemed, acquired or retired Capital Stock (or interests
under any stock appreciation rights plan) set forth in clauses (i) and (ii)
shall not exceed $750,000 in any twelve-month period and no Default or Event of
Default shall have occurred and be continuing immediately after any such
transaction and (6) the making of book-entry dividends to GHC to make payments
of interest on the Acquisition Loan so long as (A) GHC makes a book-entry
contribution to AGY Holdings to enable AGY Holdings to pay interest on the
Purchase Price Loan, (B) AGY Holdings uses such contribution to pay interest on
the Purchase Price Loan, (C) GHC applies such interest payment to the payment of
interest on the Acquisition Loan and (D) after giving effect to such dividend
and the application of the interest payment on the Acquisition Loan, there is no
change to the retained earnings of the Company or Consolidated Net Income of the
Company solely as a result of the making of such dividend and the payment of
such interest. In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (iii) of the immediately
preceding paragraph, amounts expended pursuant to clauses (1) (without
duplication for the declaration of the relevant dividend), (4) and (5) shall be
included in such calculation and amounts expended pursuant to clauses (2), (3)
and (6) shall not be included in such calculation.
Section 3.11. Limitation on Asset Sales. The Company will not, and
-------------------------
will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale
unless (i) the Company or the applicable 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 sold or otherwise disposed of and (ii) at least
75% of the consideration received for the assets sold by the Company or the
Restricted Subsidiary, as the case may be, in such Asset Sale shall be in the
form of (A) cash or Cash Equivalents or (B) (1) long-term assets (including
intellectual property associated with the use of such long-term assets) to be
used by the Company or any Restricted Subsidiary in a Permitted Business or (2)
Capital Stock of a Restricted Subsidiary or a Person engaged primarily in a
Permitted Business that will become, upon such purchase, a Restricted Subsidiary
(collectively, "Replacement Assets"); provided, that any securities, notes or
other obligations received by the Company or a Restricted Subsidiary from such
transfers that are converted within 90 days of receipt thereof by the Company or
such Restricted Subsidiary into cash or Cash Equivalents (to the extent so
received), shall be deemed to be cash or Cash Equivalents for purposes of this
provision. The amount of any Indebtedness of the Company or such Restricted
Subsidiary (other than Subordinated Indebtedness) that is actually assumed by
the transferee in such Asset Sale and from which the Company or such Restricted
Subsidiary is fully and unconditionally released shall be deemed to be cash for
purposes of determining the percentage of cash consideration received by the
Company or such Restricted Subsidiary. The Company or such Restricted
Subsidiary, as the case may be, may apply the Net Cash Proceeds of any such
Asset Sale within 270 days of such Asset Sale to (x) repay any Senior
Indebtedness and permanently reduce the commitments, if any, with respect
thereto, (y) to purchase from a Person other than the Company and its Restricted
Subsidiaries Replacement Assets or (z) any combination of (x) and (y); provided,
however, that if the Company or a Restricted Subsidiary
43
<PAGE>
makes an investment in Replacement Assets not earlier than 90 days prior to such
Asset Sale (or the execution by the Company or a Restricted Subsidiary of a
binding commitment to consummate such Asset Sale, which commitment is not
subject to any conditions precedent other than obtaining necessary financing and
the closing in respect of the Asset Sale that is the subject of such binding
commitment occurs within 90 days of the date such commitment is executed), then
such investment shall satisfy, to the extent of the amount of such investment,
the requirements of clause (y) above.
To the extent all or a portion of the Net Cash Proceeds of any Asset
Sale are not applied within 270 days of such Asset Sale as described in clause
(x), (y) or (z) of the immediately preceding paragraph (the "Net Proceeds Offer
Trigger Date"), the Company will make an offer to purchase (the "Net Proceeds
Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 20
business days following the date on which such offer is made (or such longer
period as may be required by law) nor more than 60 days following such Net
Proceeds Offer Trigger Date, from all Holders on a pro rata basis (and on a pro
rata basis with the holders of any other Senior Subordinated Indebtedness with
similar provisions requiring the Company to offer to purchase such Senior
Subordinated Indebtedness with the proceeds of Asset Sales), that principal
amount of Notes and such other Indebtedness equal to such unapplied Net Cash
Proceeds at a price, in the case of the Notes, equal to 100% of the principal
amount of the Notes to be purchased, plus accrued and unpaid interest thereon,
to the date of purchase (subject to the right of Holders of record on a record
date to receive interest due on an interest payment date that is on or prior to
such date of purchase). Notwithstanding the foregoing, the Company may defer
the Net Proceeds Offer until there is an aggregate amount of unapplied Net Cash
Proceeds equal to or in excess of $5.0 million resulting from one or more Asset
Sales (at which time, the entire amount of unapplied Net Cash Proceeds, and not
just the amount in excess of $5.0 million, shall be applied as required pursuant
to this paragraph).
Each Net Proceeds Offer will be mailed to the record Holders as shown
on the register of Holders within 30 days following the Net Proceeds Offer
Trigger Date, with a copy to the Trustee, and shall comply with the procedures
set forth herein. Upon receiving notice of the Net Proceeds Offer. Holders may
elect to tender their Notes in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent Holders of Notes and holders of other
Senior Subordinated Indebtedness, if any, which are or is the subject of a Net
Proceeds Offer properly tender Notes or such other Senior Subordinated
Indebtedness in an aggregate amount exceeding the amount of unapplied Net Cash
Proceeds, Notes of tendering Holders and such other Senior Subordinated
Indebtedness of tendering holders will be purchased on a pro rata basis (based
on amounts tendered).
The Company will comply with the requirements of Rule 14e-l under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of
any securities laws or regulations conflict with this Section 3.11, the Company
------------
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Section 3.11 by virtue
------------
thereof.
44
<PAGE>
Upon completion of a Net Proceeds Offer, the amount of Net Cash
Proceeds will be reset at zero. Accordingly, to the extent that the aggregate
amount of Notes and other Senior Subordinated Indebtedness tendered pursuant to
a Net Proceeds Offer is less than the aggregate amount of unapplied Net Cash
Proceeds, the Company may use any remaining Net Cash Proceeds for general
corporate purposes.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Section 4.1, the Surviving
-----------
Entity shall be deemed to have sold the properties and assets of the Company and
its Restricted Subsidiaries not so transferred for purposes of this covenant,
and shall comply with the provisions of this covenant with respect to such
deemed sale as if it were an Asset Sale. In addition, the Fair Market Value of
such properties and assets of the Company or its Restricted Subsidiaries deemed
to be sold shall be deemed to be Net Cash Proceeds for purposes of this
covenant. If at any time any non-cash consideration received by the Company or
any Restricted Subsidiary, as the case may be, in connection with any Asset Sale
is converted into or sold or otherwise disposed of for cash (other than interest
received with respect to any such non-cash consideration), then such conversion
or disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Cash Proceeds thereof shall be applied in accordance with this covenant.
Section 3.12. Limitation on Dividend and Other Payment Restrictions
-----------------------------------------------------
Affecting Restricted Subsidiaries. The Company will not, and will not cause
- ---------------------------------
or permit any of its Restricted Subsidiaries to, directly or indirectly, create
or otherwise cause or permit to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (a) pay dividends or
make any other distributions on or in respect of its Capital Stock to the
Company or any other Restricted Subsidiary or pay any Indebtedness owed to the
Company or any other Restricted Subsidiary; (b) make loans or advances to, or
guarantee any Indebtedness or other obligations of, or make any Investment in,
the Company or any other Restricted Subsidiary; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary, except for
such encumbrances or restrictions existing under or by reason of: (1) applicable
law; (2) this Indenture; (3) the Senior Credit Facility as in effect on the
Issue Date, and any amendments or restatements thereof; provided, however, that
any such amendment or restatement is not materially more restrictive with
respect to such encumbrances or restrictions than those in existence on the
Issue Date; (4) customary non-assignment provisions of any contract and
customary provisions restricting assignment or subletting in any lease governing
a leasehold interest of any Restricted Subsidiary, or any customary restriction
on the ability of a Restricted Subsidiary to dividend, distribute or otherwise
transfer any asset which secures Purchase Money Indebtedness of such Restricted
Subsidiary; (5) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person or the properties or assets of the
Person so acquired; (6) restrictions with respect to a Restricted Subsidiary of
the Company imposed pursuant to a binding agreement which has been entered into
for the sale or disposition of Capital Stock or assets of such Subsidiary;
provided, however, that such restrictions apply solely to the Capital Stock or
assets of such Restricted Subsidiary which are being sold; (7) customary
restrictions imposed on the transfer of copyrighted or patented materials; (8)
secured
45
<PAGE>
Indebtedness otherwise permitted to be incurred pursuant to Section 3.9 and
-----------
Section 3.16, which encumbrance or restriction is not applicable to any
- ------------
property or assets other than the property or assets subject to the Lien
securing such Indebtedness; or (9) an agreement governing Indebtedness Incurred
to Refinance the Indebtedness issued, assumed or Incurred pursuant to an
agreement referred to in clause (3), (5) or (8) above; provided, however, that
such refinancing agreement is not materially more restrictive with respect to
such encumbrances or restrictions than those contained in the agreement referred
to in such clause (3), (5) or (8) as determined by the Board of Directors in
their reasonable good faith judgment.
Section 3.13. Limitation on the Sale or Issuance of Capital Stock of
------------------------------------------------------
Restricted Subsidiaries. The Company will not sell or otherwise dispose of any
- -----------------------
shares of Capital Stock of a Restricted Subsidiary, and will not cause or permit
any Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any shares of its Capital Stock, except (i) to the Company or a
Wholly Owned Restricted Subsidiary; (ii) the sale of 100% of the shares of the
Capital Stock of any Restricted Subsidiary owned by the Company or any
Restricted Subsidiary effected in accordance with Section 3.11 and Section 4.1;
------------ -----------
(iii) in the case of Restricted Subsidiaries other than Wholly Owned Restricted
Subsidiaries, issuance of Capital Stock on a pro rata basis to the Company and
its Restricted Subsidiaries and minority shareholders of such Restricted
Subsidiary (or on less than a pro rata basis to any such minority holder if such
minority holder does not acquire its pro rata amount); (iv) the sale of Capital
Stock of a Restricted Subsidiary or issuance by a Restricted Subsidiary of
Capital Stock if following such sale or issuance, (x) such Restricted Subsidiary
is no longer a Subsidiary, (y) the Company's continuing Investment in such
former Restricted Subsidiary is in compliance with Section 3.10 and (z) any sale
------------
of Capital Stock by the Company or such Restricted Subsidiary is made in
compliance with Section 3.11.
------------
Section 3.14. Designation of Unrestricted Subsidiaries. (a) The
----------------------------------------
Company may designate after the Issue Date any Subsidiary of the Company as an
"Unrestricted Subsidiary" (a "Designation") only if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation:
(ii) at the time of and after giving effect to such Designation, the
Company could Incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 3.9; and
-----------
(iii) the Company would be permitted to make an Investment at the
time of Designation (assuming the effectiveness of such Designation and
treating such Designation as an Investment at such time) pursuant to the
first paragraph of Section 3.10 in an amount (the "Designation Amount")
------------
equal to the amount of the Company's Investment in such Subsidiary on such
date.
Neither the Company nor any Restricted Subsidiary shall at any time
(x) provide credit support for, subject any of its property or assets (other
than the Capital Stock of any Unrestricted Subsidiary) to the satisfaction of,
or guarantee, any Indebtedness of any Unrestricted
46
<PAGE>
Subsidiary (including any undertaking, agreement or instrument evidencing such
Indebtedness) unless such credit support or guarantee constitutes an Investment
permitted pursuant to Section 3.10, (y) be directly or indirectly liable for any
------------
Indebtedness of any Unrestricted Subsidiary or (z) be directly or indirectly
liable for any Indebtedness which provides that the holder thereof may (upon
notice, lapse of time or both) declare a default thereon or cause the payment
thereof to be accelerated or payable prior to its final scheduled maturity upon
the occurrence of a default with respect to any Indebtedness of any Unrestricted
Subsidiary, except for any non-recourse guarantee given solely to support the
pledge by the Company or any Restricted Subsidiary of the Capital Stock of any
Unrestricted Subsidiary. For purposes of the foregoing, the Designation of a
Subsidiary of the Company as an Unrestricted Subsidiary shall be deemed to
include the Designation of all of the Subsidiaries of such Subsidiary.
(b) The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") only if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of this
Indenture.
All Designations and Revocations must be evidenced by resolutions of
the Board of Directors of the Company, delivered to the Trustee certifying
compliance with the foregoing provisions.
Section 3.15. Limitation on Layered Indebtedness. The Company shall
----------------------------------
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
Incur any Indebtedness that is subordinate in right of payment to any other
Indebtedness, unless such Indebtedness is subordinate in right of payment to, or
ranks pari passu with, the Notes or, in the case of Restricted Subsidiaries that
are Note Guarantors, such Indebtedness is subordinate in right of payment to, or
ranks pan passu with, the Note Guarantees of such Note Guarantors.
No Note Guarantor will, directly or indirectly, guarantee any
Indebtedness of the Company that is subordinate in right of payment to any other
Indebtedness of the Company unless such guarantee is subordinate in right of
payment to, or ranks pari passu with, the Note Guarantee of such Note Guarantor.
Section 3.16. Limitation on Liens. The Company will not, and will
-------------------
not cause or permit any of its Restricted Subsidiaries to, directly or
indirectly, Incur any Liens of any kind against or upon any of their respective
properties or assets, whether owned on the Issue Date or acquired after the
Issue Date, or any proceeds therefrom, to secure any Indebtedness unless
contemporaneously therewith effective provision is made, (i) in the case of the
Company to secure the Notes and all other amounts due hereunder and (ii) in the
case of a Note Guarantor, to secure such Note Guarantor's Note Guarantee and all
other amounts due hereunder, in each case, equally and ratably with such
Indebtedness (or, in the event that such Indebtedness is
47
<PAGE>
subordinated in right of payment to the Notes or such Note Guarantee, prior to
such Indebtedness) with a Lien on the same properties and assets securing such
Indebtedness for so long as such Indebtedness is secured by such Lien, except
for (A) Liens securing Senior Indebtedness (including, without limitation,
Indebtedness Incurred under the Senior Credit Facility) and (B) Permitted Liens.
Section 3.17. Limitation on Transactions with Affiliates. (a) The
------------------------------------------
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), unless: (i)
the terms of such Affiliate Transaction are no less favorable than those that
could reasonably be expected to be obtained in a comparable transaction at such
time on an arm's-length basis from a Person that is not an Affiliate of the
Company; (ii) in the event that such Affiliate Transaction involves aggregate
payments, or transfers of property or services with a Fair Market Value in
excess of $2.5 million during any twelve-month period, the terms of such
Affiliate Transaction shall be approved by a majority of the members of the
Board of Directors of the Company (including a majority of the disinterested
members thereof), such approval to be evidenced by a Board Resolution stating
that such Board of Directors has determined that such transaction complies with
the foregoing provisions and (iii) in the event that such Affiliate Transaction
involves aggregate payments, or transfer of property or services with a Fair
Market Value, in excess of $7.0 million during any twelve-month period, the
Company shall, prior to the consummation thereof, obtain a favorable opinion as
to the fairness of such transaction or series of related transactions to the
Company and the relevant Restricted Subsidiary (if any) from a financial point
of view from an Independent Financial Advisor and file the same with the
Trustee.
(b) Notwithstanding the foregoing, the restrictions set forth in
paragraph (a) shall not apply to (i) transactions with or among the Company and
any Restricted Subsidiary or between or among Restricted Subsidiaries; (ii)
reasonable fees and compensation paid to, and any indemnity provided on behalf
of, officers, directors, employees, consultants or agents of the Company or any
Restricted Subsidiary as determined in good faith by the Company's Board of
Directors; (iii) any transactions undertaken pursuant to any contractual
obligations or rights in existence on the Issue Date (as in effect on the Issue
Date); (iv) any Restricted Payments made in compliance with Section 3.10; (v)
------------
loans and advances to officers, directors and employees of the Company or any
Restricted Subsidiary for travel, entertainment, moving and other relocation
expenses, in each case made in the ordinary course of business; and (vi) the
entering into by the Company and any of its consolidated Restricted Subsidiaries
of a tax sharing or similar arrangement.
Section 3.18. Change of Control. (a) Upon the occurrence of a
-----------------
Change of Control, each Holder will have the right to require that the Company
purchase all or a portion (in integral multiples of $1,000) of such Holder's
Notes pursuant to the offer described in this Section 3.18 (the "Change of
------------
Control Offer"), at a purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest thereon to the date of purchase
(subject to the right of Holders of record on a record date to receive interest
due on the related interest payment
48
<PAGE>
date that is on or prior to such date of purchase). Within 30 days following the
date upon which the Change of Control occurred, the Company must send, by first-
class mail, a notice to each Holder, with a copy to the Trustee, which notice
shall govern the terms of the Change of Control Offer. Such notice shall state,
among other things, the purchase date, which must be no earlier than 30 days nor
later than 60 days from the date such notice is mailed, other than as may be
required by law (the "Change of Control Payment Date"). Holders electing to have
a Note purchased pursuant to a Change of Control Offer will be required to
surrender the Note, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Note completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third business day
prior to the Change of Control Payment Date.
(b) The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act of 1934, as amended (the "Exchange Act") and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the purchase of Notes pursuant to
a Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with this Section 3.18, the Company shall comply
------------
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section 3.18 by virtue thereof.
------------
Section 3.19. Conduct of Business. The Company and its Restricted
-------------------
Subsidiaries will not engage in any businesses other than a Permitted Business.
Section 3.20. Reports to Holders. Notwithstanding that the Company
------------------
may not be subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, so long as any Notes remain outstanding, the Company shall (i)
provide the Trustee, the Holders and First Union Capital Markets with such
annual reports and such information, documents and other reports as are
specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S.
corporation subject to such Sections within 15 days after the times specified
for the filing of such information, documents and reports under such Sections
and (ii) beginning on the earlier of (x) the effective date of the Exchange
Offer Registration Statement and (y) 150 days following the Issue Date, file
with the Commission, to the extent permitted, the information, documents and
reports referred to in clause (i) within the periods specified under such
Sections. In addition, at any time when the Company is subject to or is not
current in its reporting obligations under clause (ii) of the preceding
sentence, the Company will make available, upon request, to any holder and any
prospective purchaser of Notes the information required pursuant to Rule
144A(d)(4) under the Securities Act.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
Section 3.21. Payments for Consent. Neither the Company nor any of
--------------------
its Subsidiaries shall, directly or indirectly, pay or cause to be paid any
consideration, whether by
49
<PAGE>
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any terms or provisions of the
Notes, unless such consideration is offered to be paid or agreed to be paid to
all Holders of the Notes that so consent, waive or agree to amend in the time
frame set forth in the solicitation documents relating to such consent, waiver
or agreement.
ARTICLE IV
SUCCESSOR COMPANY
Section 4.1. Merger, Consolidation and Sale of Assets. (a) The
----------------------------------------
Company will not, in a single transaction or series of related transactions,
consolidate or merge with or into any Person (whether or not the Company is the
surviving Person), or sell, assign, transfer, lease, convey or otherwise dispose
of (or cause or permit any Restricted Subsidiary to sell, assign, transfer,
lease, convey or otherwise dispose of) all or substantially all of the Company's
and its Restricted Subsidiaries' properties and assets (determined on a
consolidated basis for the Company and its Restricted Subsidiaries) to any
Person unless:
(i) either (1) the Company shall be the surviving or continuing
entity or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and of the Company's
Restricted Subsidiaries substantially as an entirety (the "Surviving
Entity") (x) shall be a corporation organized and validly existing under
the laws of the United States or any State thereof and (y) shall expressly
assume, by supplemental indenture (in form and substance satisfactory to
the Trustee), executed and delivered to the Trustee, the due and punctual
payment of the principal of, and premium, if any, and interest on all of
the Notes and the performance and observance of every covenant of the Notes
and this Indenture and the Registration Rights Agreement on the part of the
Company to be performed or observed;
(ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect
on a pro forma basis to any Indebtedness, including any Acquired
Indebtedness, Incurred in connection with or in respect of such
transaction), (A) the Company or such Surviving Entity, as the case may be,
shall be able to Incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to Section 3.9 or (B) the
-----------
Consolidated Fixed Charge Coverage Ratio for the Company or such Surviving
Entity, as the case may be, would be greater than the Consolidated Fixed
Charge Coverage Ratio for the Company immediately prior to such
transaction;
(iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect on a pro forma basis to any
Indebtedness, including any Acquired Indebtedness, Incurred and any Lien
granted in connection with or in respect of the transaction), no Default or
Event of Default shall have occurred or be continuing;
50
<PAGE>
(iv) each Note Guarantor (including Persons which become Note
Guarantors as a result of the transaction) shall have confirmed by
Supplemental Indenture that its Note Guarantee shall apply for such
Person's Obligations in respect of this Indenture and the Notes; and
(v) the Company or the Surviving Entity shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with the applicable provisions of this Indenture and that all
conditions precedent in this Indenture relating to such transaction have
been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The provisions of clause (ii) above shall not apply to (x) any
transfer of the properties or assets of a Restricted Subsidiary of the Company
to the Company or to a Wholly Owned Restricted Subsidiary, (y) any merger of a
Restricted Subsidiary into the Company or (z) any merger of the Company into a
Restricted Subsidiary.
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the properties and assets of the Company and its
Restricted Subsidiaries in accordance with the foregoing, in which the Company
is not the continuing corporation, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
lease or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company hereunder and under the Notes
with the same effect as if such surviving entity had been named as such.
(b) Each Note Guarantor (other than any Note Guarantor whose Note
Guarantee is to be released in accordance with Section 11.2 will not, and the
------------
Company will not cause or permit any Note Guarantor to, consolidate with or
merge into any Person that is not a Note Guarantor unless such Person (if such
Person is the surviving entity) assumes by supplemental indenture all of the
obligations of such Note Guarantor in respect of its Note Guarantee.
ARTICLE V
REDEMPTION OF NOTES
Section 5.1. Optional Redemption. The Notes may be redeemed, as a
-------------------
whole or from time to time in part, subject to the conditions and at the
redemption prices specified in the form of Notes set forth in Exhibits A and B
----------------
hereto.
51
<PAGE>
Section 5.2. Applicability of Article. Redemption of Notes at the
------------------------
election of the Company or otherwise, as permitted or required by any provision
of this Indenture, shall be made in accordance with such provision and this
Article.
Section 5.3. Election to Redeem; Notice to Trustee. (a) The
-------------------------------------
election of the Company to redeem any Notes pursuant to Section 5.1 shall be
-----------
evidenced by a Board Resolution. In case of any redemption at the election of
the Company, the Company shall, upon not less than 30 and not more than 60 days
prior to the Redemption Date fixed by the Company, notify the Trustee of the
provision of the Notes pursuant to which the redemption is being made, the
Redemption Date, the principal amount of Notes to be redeemed and shall deliver
to the Trustee such documentation and records as shall enable the Trustee to
select the Notes to be redeemed.
(b) In the event that less than all of the Notes are to be redeemed
at any time, selection of such Notes for redemption will be made by the Trustee
in compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not then
listed on a national securities exchange, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate; provided, however, that
no Notes of a principal amount of $1,000 or less shall be redeemed in part and
Notes of a principal amount in excess of $1,000 may be redeemed in part in
multiples of $1,000 only; and provided, further, that if a partial redemption is
made with the proceeds of a Public Equity Offering, selection of the Notes or
portions thereof for redemption shall, subject to the preceding proviso, be made
by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to the procedures of DTC or a successor depositary), unless
such method is otherwise prohibited. Notice 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. 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 a 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 will cease to
accrue on Notes or portions thereof called for redemption as long as the Company
had deposited with the Paying Agent funds in satisfaction of the applicable
redemption price.
(c) For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Notes shall relate, in the
case of any Note redeemed or to be redeemed only in part, to the portion of the
principal amount of such Note which has been or is to be redeemed.
Section 5.4. Notice of Redemption. (a) Notice of redemption shall
--------------------
be given in the manner provided for in Section 13.2 not less than 30 nor more
------------
than 60 days prior to the Redemption Date, to each Holder of Notes to be
redeemed. At the Company's request, the Trustee shall give notice of redemption
in the Company's name and at the Company's expense; provided, however, that the
Company shall deliver to the Trustee, at least 45 days prior to the Redemption
Date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
following items.
52
<PAGE>
(b) All notices of redemption shall state (in addition to the CUSIP
number, if any):
(1) the Redemption Date,
(2) the redemption price and the amount of accrued interest
to the Redemption Date payable as provided in Section 5.6, if any,
-----------
(3) if less than all Outstanding Notes are to be redeemed,
the identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be redeemed
and the aggregate principal amount of Notes to be Outstanding after such
partial redemption,
(4) in case any Note is to be redeemed in part only, the
notice which relates to such Note shall state that on and after the
Redemption Date, upon surrender of such Note, the Holder will receive,
without charge, a new Note or Notes of authorized denominations for the
principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the redemption price (and
accrued interest, if any, to the Redemption Date payable as provided in
Section 5.6) will become due and payable upon each such Note, or the
-----------
portion thereof, to be redeemed, and, unless the Company defaults in making
the redemption payment, that interest on Notes called for redemption (or
the portion thereof) will cease to accrue on and after said date,
(6) the place or places where such Notes are to be
surrendered for payment of the Redemption Price and accrued interest, if
any,
(7) the name and address of the Paying Agent,
(8) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price,
(9) the CUSIP or ISIN number, and that no representation is
made as to the accuracy or correctness of the CUSIP or ISIN number, if any,
listed in such notice or printed on the Notes, and
(10) the paragraph of the Notes pursuant to which the Notes
are to be redeemed.
Section 5.5. Section Deposit of Redemption Price. On or prior to 11
-----------------------------------
A.M. on the relevant Redemption Date, the Company shall deposit with the Trustee
or with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 2.4) an amount of money
-----------
sufficient to pay the redemption price of, and accrued interest on, all the
Notes which are to be redeemed on that date.
Section 5.6. Notes Payable on Redemption Date. Notice of redemption
--------------------------------
having been given in accordance with this Article V, the Notes so to be redeemed
shall, on the
53
<PAGE>
Redemption Date, become due and payable at the redemption price therein
specified (together with accrued interest, if any, to the Redemption Date), and
from and after such date (unless the Company shall default in the payment of the
redemption price and accrued interest) such Notes shall cease to bear interest.
Upon surrender of any such Note for redemption in accordance with said notice,
such Note shall be paid by the Company at the redemption price, together with
accrued interest, if any, to the Redemption Date (subject to the rights of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date). If any Note called for redemption shall not be
so paid upon surrender thereof for redemption, the principal, and premium, if
any, shall, until paid, bear interest from the Redemption Date at the rate borne
by the Notes.
Section 5.7. Notes Redeemed in Part. Upon surrender of a Note which
----------------------
is to be redeemed in part, the Company shall execute, and the Trustee shall
authenticate and make available for delivery to the Holder of such Note at the
expense of the Company, a new Note or Notes, of any authorized denomination as
requested by such Holder, in an aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Note so surrendered,
provided, that each such new Note will be in a principal amount of $1,000 or
integral multiple thereof.
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1. Events of Default. The following shall be "Events of
-----------------
Default":
(a) the failure to pay the principal of (or premium, if any, on) any
Note when due, at Stated Maturity, upon redemption or otherwise (including
the failure to make a required payment to purchase Notes tendered pursuant
to a Change of Control Offer or a Net Proceeds Offer) and whether or not
prohibited under Articles X and XII");
(b) the failure to pay any interest on any Notes when due, continued
for 30 days or more (whether or not prohibited under Articles X and XII");
(c) the failure to perform or comply with Section 4.1;
-----------
(d) the failure to perform or comply with any other covenant or
agreement contained herein or in the Notes continued for 30 days or more
after written notice to the Company from the Trustee or the Holders of at
least 25% in aggregate principal amount of the Outstanding Notes;
(e) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary, or the
acceleration of the final stated maturity of any such Indebtedness by
reason of a default or event of default in respect of such Indebtedness, in
any case if the aggregate principal amount of such Indebtedness, together
with the principal amount of any other such Indebtedness in default for
failure to
54
<PAGE>
pay principal at final maturity or which has been so accelerated,
aggregates $5.0 million or more at any time;
(f) one or more judgments in an aggregate amount in excess of $5.0
million (to the extent not covered by thirdparty insurance as to which a
financially sound insurer has not disclaimed coverage) shall have been
rendered against the Company or any of its Restricted Subsidiaries and such
judgment or judgments remain undischarged, unpaid or unstayed for a period
of 60 days after such judgment or judgments become final and nonappealable;
(g) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Company or any Significant
Subsidiary of the Company in an involuntary case or proceeding under any
Bankruptcy Law or (ii) a decree or order (A) adjudging the Company or any
Significant Subsidiary of the Company a bankrupt or insolvent, or (B)
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of, or in respect of, the Company or any
Significant Subsidiary of the Company under any Bankruptcy Law, or (C)
appointing a Custodian of the Company or any Significant Subsidiary of the
Company or of any substantial part of the property of the Company or any
Significant Subsidiary of the Company, or (D) ordering the winding-up or
liquidation of the affairs of the Company or any Significant Subsidiary of
the Company, and in each case, the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive calendar days; or
(h) (i) the commencement by the Company or any Significant Subsidiary
of the Company of a voluntary case or proceeding under any Bankruptcy Law
or of any other case or proceeding to be adjudicated a bankrupt or
insolvent; or (ii) the consent by the Company or any Significant Subsidiary
of the Company to the entry of a decree or order for relief in respect of
the Company or any Significant Subsidiary of the Company in an involuntary
case or proceeding under any Bankruptcy Law or to the commencement of any
bankruptcy or insolvency case or proceeding against the Company or any
Significant Subsidiary of the Company; or (iii) the filing by the Company
or any Significant Subsidiary of the Company of a petition or answer or
consent seeking reorganization or relief under any Bankruptcy Law; or (iv)
the consent by the Company or any Significant Subsidiary of the Company to
the filing of such petition or to the appointment of or taking possession
by a Custodian of the Company or any Significant Subsidiary of the Company
or of any substantial part of the property of the Company or any
Significant Subsidiary of the Company, or (v) the making by the Company or
any Significant Subsidiary of the Company of an assignment for the benefit
of creditors; or (vi) the admission by the Company or any Significant
Subsidiary of the Company in writing of its inability to pay its debts
generally as they become due; or (vii) the approval by stockholders of the
Company or any Significant Subsidiary of the Company of any plan or
proposal for the liquidation or dissolution of the Company or any
Significant Subsidiary of the Company; or (viii) the taking of corporate
action by the Company or any Significant Subsidiary of the Company in
furtherance of any such action; or
55
<PAGE>
(i) the Note Guarantee of any Note Guarantor is held or declared to
be unenforceable or invalid in a judicial proceeding or ceases for any
reason to be in full force and effect (other than by reason of a release of
such Note Guarantor from its Note Guarantee in accordance with Section
-------
11.2) or any Note Guarantor or any Person acting on behalf of any Note
----
Guarantor denies or disaffirms such Note Guarantor's obligations under its
Note Guarantee (other than by reason of a release of such Note Guarantor
from its Note Guarantee in accordance with Section 11.2); or
------------
(j) at any time prior to the repayment in full of the Acquisition
Loan, the Acquisition Loan Pledge is held or declared to be unenforceable
or invalid in a judicial proceeding or ceases for any reason to be in full
force and effect.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The Company shall deliver to a Trust Officer of the Trustee, within 30
days after the Company obtains knowledge of the occurrence thereof, written
notice in the form of an Officers' Certificate of any Default or Event of
Default under clauses (c)-(f), (i) and (j) of this Section 6.1, their status and
-----------
what action the Company is taking or proposes to take in respect thereof.
Section 6.2. Acceleration.
------------
If an Event of Default (other than an Event of Default relating to the
Company specified in clauses (g) and (h) of Section 6.1) shall occur and be
-----------
continuing, the Trustee or the Holders of at least 25% in principal amount of
Outstanding Notes may declare the principal of (and premium, if any) and accrued
and unpaid interest on all the Notes to be due and payable by notice in writing
to the Company and the Trustee specifying the respective Event of Default and
that it is a "notice of acceleration" (the "Acceleration Notice"), and the same
shall become immediately due and payable. If an Event of Default specified in
6.1(g) or 6.1(h) relating to the Company occurs and is continuing, then all
unpaid principal of, and premium, if any, and accrued and unpaid interest on all
of the Outstanding Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
At any time after a declaration of acceleration with respect to the
Notes, the Holders of a majority in principal amount of the Outstanding Notes
may rescind and cancel such declaration and its consequences (i) if all existing
Events of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of the acceleration, (ii) to the
extent the payment of such interest is lawful, interest on overdue installments
of interest and overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid and (iii) if the Company has paid the
Trustee its compensation and reimbursed the Trustee for its reasonable expenses,
disbursements and
56
<PAGE>
advances (including counsel fees and expenses). No such rescission shall affect
any subsequent Default or impair any right consequent thereto.
Section 6.3. Other Remedies. If an Event of Default occurs and is
--------------
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of, premium, if any, or 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 Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
Section 6.4. Waiver of Past Defaults. Subject to Section 9.2, the
-----------------------
Holders of not less than a majority in principal amount of the Outstanding Notes
by written notice to the Trustee or by written consent may waive any existing
Default or Event of Default and its consequences, except a Default in the
payment of principal of, premium, if any, and interest and Additional Interest,
if any, on any Note. The Company shall deliver to the Trustee an Officers'
Certificate stating that the requisite percentage of Holders have consented to
such waiver and attaching copies of such consents. When a Default or Event of
Default is waived, it is cured and ceases.
Section 6.5. Control by Majority. The Holders of a majority in
-------------------
principal amount of the Outstanding Notes may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. Subject to Sections 7.1
------------
and 7.2, however, the Trustee may refuse to follow any direction that conflicts
---
with law or this Indenture or, that the Trustee determines is unduly prejudicial
to the rights of other Noteholders; provided, however, that the Trustee may take
any other action deemed proper by the Trustee that is not inconsistent with such
direction.
Section 6.6. Limitation on Suits. No Holder of any Notes will have
-------------------
any right to institute any proceeding hereunder, unless (i) such Holder gives to
a Trust Officer of the Trustee written notice of a continuing Event of Default,
(ii) Holders of at least 25% in principal amount of the Outstanding Notes make a
written request to pursue the remedy, (iii) such Holders of the Notes provide
security and indemnity satisfactory to the Trustee, (iv) the Trustee does not
comply within 60 days and (v) during such 60 day period the Holders of a
majority in principal amount of the Outstanding Notes do not give the Trustee a
written direction which, in the opinion of the Trustee, is inconsistent with the
request. Otherwise, no Holder of any Note will have any right to institute any
proceeding with respect to this Indenture or for any remedy thereunder, except
(i) a Holder of a Note may institute suit for enforcement of payment of the
principal of and premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note or (ii) the institution of any
proceeding hereunder or any remedy hereunder, including, without limitation,
acceleration, by the Holders of a majority in principal amount of the
Outstanding Notes; provided, however, that upon institution of any proceeding or
exercise of any remedy, such Holder or Holders provide the Trustee with prompt
notice thereof.
57
<PAGE>
Section 6.7. Rights of Holders to Receive Payment. Notwithstanding
------------------------------------
any other provision of this Indenture (including, without limitation, Section
-------
6.6), the right of any Holder to receive payment of principal of, premium, if
- ---
any, or interest on the Notes held by such Holder, on or after the respective
due dates expressed in the Notes, 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 6.8. Collection Suit by Trustee. If an Event of Default
--------------------------
specified in clauses (a) or (b) of Section 6.1 occurs and is continuing, the
-----------
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount then due and owing (together with
applicable interest on any overdue principal, and to the extent lawful, interest
on overdue interest) and the amounts provided for in Section 7.7.
-----------
Section 6.9. Trustee May File Proofs of Claim. The Trustee may file
--------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Noteholders allowed
in any judicial proceedings relative to the Company, its Subsidiaries or its or
their respective creditors or properties and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions, and any Note
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.7.
-----------
Section 6.10. Priorities. If the Trustee collects any money or
----------
property pursuant to this Article VI, it shall pay out the money or property in
----------
the following order:
FIRST: to the Trustee for amounts due under Section 7.7;
-----------
SECOND: if the Holders proceed against the Company directly without
the Trustee in accordance with this Indenture, to the Holders for their
collection costs;
THIRD: to the Holders for amounts due and unpaid on the Notes for
principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes
for principal and interest, respectively; and
FOURTH: to the Company or, to the extent the Trustee collects any
amount pursuant to Article XI hereof from any Note Guarantor, to such Note
Guarantor.
The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section. At least 15 days before such record date,
the Company shall mail to each Noteholder and the Trustee a notice that states
the record date, the payment date and amount to be paid.
58
<PAGE>
Section 6.11. Undertaking for Costs. In any suit for the enforcement
---------------------
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by the Company, a suit by a Holder pursuant to Section 6.7 or a
-----------
suit by Holders of more than 10% in principal amount of the Outstanding Notes.
ARTICLE VII
TRUSTEE
Section 7.1. Duties of Trustee. (a) If a Default or an Event of
-----------------
Default has occurred and is continuing, the Trustee shall exercise the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs; provided that if an Event of
Default occurs and is continuing, the Trustee will be under no obligation to
exercise any of the rights or powers under this Indenture at the request or
direction of any of the Holders unless such Holders have offered indemnity or
security satisfactory to the Trustee against loss, liability or expense.
(b) Except during the continuance of a Default or an Event of
Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such certificates or opinions which by any provisions
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine such certificates and opinions to determine whether
or not they conform to the requirements of this Indenture (but need not
confirm or investigate the accuracy of mathematical calculations or other
facts stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
59
<PAGE>
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.2 or Section 6.5.
----------- -----------
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
(i) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(j) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have security or indemnity
satisfactory to the Trustee against the costs, expenses (including reasonable
attorneys' fees and expenses) and liabilities that might be incurred by it in
compliance with such request or direction.
Section 7.2. Rights of Trustee. (a) Subject to Section 7.1, the
----------------- -----------
Trustee may rely on any document reasonably believed by it to be genuine and to
have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(a) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on an
Officers' Certificate or Opinion of Counsel.
(b) 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.
(c) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute
willful misconduct or negligence.
(d) The Trustee may consult with counsel of its selection, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Notes shall be
60
<PAGE>
full and complete authorization and protection from liability in respect to any
action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
Section 7.3. 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 the Company or its Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or
co-Paying Agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
------------- ----
Section 7.4. 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 the Company's use
of the proceeds from the Notes, and it shall not be responsible for any
statement of the Company in this Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Trustee's
certificate of authentication.
Section 7.5. Notice of Defaults. If a Default or Event of Default
------------------
occurs and is continuing and if a Trust Officer has actual knowledge thereof,
the Trustee shall mail to each Noteholder notice of the Default or Event of
Default within five days after it is known to a trust officer or written notice
of it is received by the Trustee. Except in the case of a Default or Event of
Default in payment of principal of, premium, if any, or interest on any Note
(including payments pursuant to the optional redemption or required repurchase
provisions of such Note, if any), the Trustee may withhold the notice if and so
long as a committee of its trust officers in good faith determines that
withholding the notice is not opposed to the interests of the Noteholders.
Section 7.6. Reports by Trustee to Holders. The Trustee shall comply
-----------------------------
with TIA (S) 313. The Company agrees to notify promptly the Trustee whenever
the Notes become listed on any stock exchange and of any delisting thereof.
Section 7.7. Compensation and Indemnity. (a) The Company shall pay
--------------------------
to the Trustee and any predecessor trustee from time to time such compensation
as shall be agreed to in writing by the Company and the Trustee for its
acceptance of this Indenture and services hereunder as the Company 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. The Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection,
costs of preparing and reviewing reports, certificates and other documents,
costs of preparation and mailing of notices to Noteholders and reasonable costs
of counsel retained by the Trustee in connection with the delivery of an Opinion
of Counsel or otherwise, in addition to the compensation for its services. Such
expenses shall include the reasonable compensation and expenses, disbursements
and advances of the Trustee's agents, counsel, accountants and experts.
(b) The Company and the Note Guarantors shall jointly and severally
indemnify the Trustee against any and all loss, liability or expense (including
reasonable attorneys' fees and
61
<PAGE>
expenses) incurred by it without negligence or bad faith on its part in
connection with the administration of this trust and the performance of its
duties hereunder, including the costs and expenses of enforcing this Indenture
(including this Section 7.7) and of defending itself against any claims (whether
-----------
asserted by any Noteholder, the Company or otherwise). The Trustee shall notify
the Company promptly of any claim for which it may seek indemnity. Failure by
the Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee may
have separate counsel and the Company shall pay the fees and expenses of such
counsel provided that the Company shall not be required to pay such fees and
expenses if it assumes the Trustee's defense, and, in the reasonable judgment of
outside counsel to the Trustee, there is no conflict of interest between the
Company and the Trustee in connection with such defense. The Company need not
reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own willful misconduct, negligence
or bad faith.
(c) To secure the Company's 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 other than money or property held in trust to pay
principal of and interest on particular Notes. The Trustee's right to receive
payment of any amounts due under this Section 7.7 shall not be subordinate to
-----------
any other liability or Indebtedness of the Company.
(d) The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in clauses (g) and (h) of Section 6.1 with
-----------
respect to the Company, the expenses are intended to constitute expenses of
administration under any Bankruptcy Law; provided, however, that this shall not
affect the Trustee's rights as set forth in this Section or Section 6.10.
------------
Section 7.8. Replacement of Trustee. (a) The Trustee may resign at
----------------------
any time by so notifying the Company. The Holders of a majority in principal
amount of the Outstanding Notes may remove the Trustee by so notifying the
Trustee and may appoint a successor Trustee. The Company shall remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10;
------------
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
(b) If the Trustee resigns or is removed by the Company or by the
Holders of a majority in principal amount of the Outstanding Notes and such
Holders or the Company do not reasonably promptly appoint a successor Trustee,
or if a vacancy exists in the office of the Trustee for any reason (the Trustee
in such event being referred to herein as the retiring Trustee), the Company
shall promptly appoint a successor Trustee.
62
<PAGE>
(c) A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Noteholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.7.
-----------
(d) If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee or the Holders
of 10% in principal amount of the Outstanding Notes may petition, at the
Company's expense, any court of competent jurisdiction for the appointment of a
successor Trustee.
(e) If the Trustee fails to comply with Section 7.10, any Noteholder
------------
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
(f) Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.7 shall continue for the
-----------
benefit of the retiring Trustee.
Section 7.9. Successor Trustee by Merger. If the Trustee
---------------------------
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture, any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.
Section 7.10. Eligibility; Disqualification. The Trustee shall at
-----------------------------
all times satisfy the requirements of TIA (S) 310(a). The Trustee shall have a
combined capital and surplus of at least $100 million as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
(S) 310(b); provided, however, that there shall be excluded from the operation
of TIA (S) 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA (S)
310(b)(1) are met.
Section 7.11. Preferential Collection of Claims Against Company. The
-------------------------------------------------
Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship
listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be
subject to TIA (S) 311(a) to the extent indicated.
63
<PAGE>
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.1. Termination of the Company's Obligations.
----------------------------------------
(a) This Indenture will be discharged and will cease to be of
further effect (except as to surviving rights, or registration of transfer or
exchange of the Notes, as expressly provided for below) as to all outstanding
Notes when:
(i) either (A) all the 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 the Company and thereafter repaid to the
Company or discharged from such trust) (i) have been delivered to the
Trustee for cancellation or (B) all Notes not theretofore delivered to the
Trustee for cancellation have become due and payable, or will be due and
payable within one year or are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company has irrevocably deposited or caused to be
deposited with the Trustee cash or U.S. Government Obligations 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 earlier of the Stated Maturity or the
Redemption Date together with irrevocable instructions from the Company
directing the Trustee to apply such funds and/or the proceeds of such U.S.
Government Obligations to the payment thereof at maturity or redemption, as
the case may be;
(ii) no Default or Event of Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of such deposit
or shall occur as a result of such deposit and such deposit will not result
in a breach or violation of, or constitute a default under, any other
instrument to which the Company is a party or by which it is bound;
(iii) the Company shall have paid all other sums payable by it
hereunder or under the Notes; and
(iv) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for the termination of the Company's obligations under
the Notes and this Indenture have been complied with. Such Opinion of
Counsel shall also state that such satisfaction and discharge does not
result in a default under any instrument evidencing debt senior to the
Notes or any other agreement or instrument then known to such counsel that
binds or affects the Company or the Company.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.5, 2.8, 2.9, 3.1, 3.2, 3.8, 7.7 and in this Article VIII shall
- ------------ --- --- --- --- --- ---
survive until all Notes are no longer
64
<PAGE>
Outstanding. After all Notes are no longer Outstanding, the Company's
obligations in Sections 7.7, 8.4 and 8.5 shall survive.
----------------- ---
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Notes and this Indenture except for those surviving obligations specified
above.
Section 8.2. Legal Defeasance and Covenant Defeasance.
----------------------------------------
(a) The Company may, at its option, at any time, elect to have either
paragraph (b) or (c) below be applied to all Outstanding Notes upon compliance
with the conditions set forth in Section 8.3.
-----------
(b) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (b), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.3, 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 the Company 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 8.4 hereof and the other Sections of this Indenture
-----------
referred to in (i) and (ii) 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 the Company, shall execute proper instruments
acknowledging the same), except for the following provisions, which shall
survive until otherwise terminated or discharged hereunder: (i) the rights of
Holders of Outstanding Notes to receive solely from the trust fund described in
Section 8.4 hereof, and as more fully set forth in such Section 8.4, payments in
- ----------- -----------
respect of the principal of, premium, if any, and interest on such Notes when
such payments are due, (ii) the Company's obligations with respect to such Notes
under Article II and Section 3.2 hereof, (iii) the rights, powers, trusts,
-----------
duties and immunities of the Trustee hereunder and the Company's obligations in
connection therewith and (iv) this Article VIII. Subject to compliance with
this Article VIII, the Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.3 hereof, be released from
-----------
its obligations under the covenants contained in Sections 3.4-3.6, 3.9-3.21 and
---------------- --------
4.1(a)(ii) hereof with respect to the Outstanding Notes on and after the date
- ----------
the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall 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 Outstanding for all other purposes hereunder (it being understood
that such Notes shall not be deemed outstanding for accounting purposes). For
this purpose, such Covenant Defeasance means that, with respect to the
Outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any
65
<PAGE>
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 or Default
under clauses of Section 6.1(c)-(f), (i) or (j) hereof, but, except as specified
----------------------- ---
above, the remainder of this Indenture and such Notes shall be unaffected
thereby.
Section 8.3. Conditions to Defeasance. The Company may exercise its
------------------------
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits with the Trustee, in trust, for
the benefit of the Holders cash in U.S. dollars, U.S. Government
Obligations, 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 Notes on the stated date for payment thereof or on the applicable
Redemption Date, as the case may be;
(2) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee to the effect that (A) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling
or (B) since the Issue Date, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall state that, the Holders 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, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee to the effect that the Holders 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) the Trustee shall have received an Officers' Certificate stating
that no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit;
(5) the Trustee shall have received an Officers' Certificate stating
that such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a Default under this Indenture or any
other material agreement or instrument to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound (and in that connection, the Trustee shall have
received a certificate from the agent under the Senior Credit Facility to
that effect with respect to the Senior Credit Facility then in effect);
66
<PAGE>
(6) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
any Subsidiary of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or others;
(7) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with;
(8) the Company 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; and
(9) the Company delivers to the Trustee an Opinion of Counsel
(subject to customary assumptions and exclusions) to the effect that the
trust resulting from the deposit does not constitute, or is qualified as, a
regulated investment company under the Investment Company Act of 1940.
Section 8.4. Application of Trust Money. The Trustee shall hold in
--------------------------
trust cash or U.S. Government Obligations deposited with it pursuant to this
Article VIII. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Notes.
Section 8.5. Repayment to Company. (a) The Trustee and the Paying
--------------------
Agent shall promptly turn over to the Company upon request any excess money or
securities held by them upon payment of all the Obligations under this
Indenture.
(b) Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal of or interest on the Notes that remains
unclaimed for two years, and, thereafter, Noteholders entitled to the money must
look to the Company for payment as general creditors.
Section 8.6. Indemnity for U.S. Government Obligations. The Company
-----------------------------------------
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
Section 8.7. Reinstatement. If the Trustee or Paying Agent is unable
-------------
to apply any money or U.S. Government Obligations in accordance with this
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Obligations of the Company under
this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII;
67
<PAGE>
provided, however, that, if the Company has made any payment of interest on or
principal of any Notes because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS
Section 9.1 Without Consent of Holders. The Company, the Note Guarantors
--------------------------
and the Trustee may amend this Indenture or the Notes without notice to or
consent of any Noteholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article IV in respect of the assumption by a
Surviving Entity of an obligation of the Company under this Indenture;
(3) to provide for uncertificated Notes in addition to or in place of
Certificated Notes; provided, however, that the uncertificated Notes are
issued in registered form for purposes of Section 163(f) of the Code or in
a manner such that the uncertificated Notes are described in Section
163(f)(2)(B) of the Code;
(4) to add guarantees with respect to the Notes or to secure the
Notes;
(5) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(6) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA;
(7) to make any change that does not, in the opinion of the Trustee,
adversely affect the rights of any Noteholder in any material respect;
(8) to provide for the issuance of the Exchange Notes pursuant to the
Registration Rights Agreement; or
(9) to provide for the issuance of Add-On Notes, which will have
terms identical to the other Notes except as specified in Section 2.14 or
------------
Section 2.15, and which will be treated, together with any other
------------
Outstanding Notes, as a single issue of Notes.
After an amendment under this Section becomes effective, the Company
shall mail to Noteholders a notice briefly describing such amendment. The
failure to give such notice to all Noteholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
68
<PAGE>
Section 9.2. With Consent of Holders. The Company, the Note
-----------------------
Guarantors and the Trustee may amend this Indenture or the Notes without notice
to any Noteholder but with the written consent of the Holders of at least a
majority in principal amount of the Outstanding Notes (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Notes). It shall not be necessary for the consent of the
Holders under this Section to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent approves the substance
thereof. However, without the consent of each Noteholder affected, an amendment
may not:
(i) reduce the amount of Notes whose Holders must consent to an
amendment or waiver;
(ii) reduce the rate of or change or have the effect of changing the
time for payment of interest, including Defaulted Interest, on any
Notes;
(iii) reduce the principal of or change or have the effect of
changing the Stated Maturity of any Notes, or change the date on which
any Notes may be subject to redemption, or reduce the redemption price
therefor;
(iv) make any Notes payable in money other than that stated in the
Notes;
(v) make any change in provisions of this Indenture entitling each
Holder to receive payment of principal of, premium, if any, and
interest on such Note on or after the due date thereof or to bring
suit to enforce such payment, or permitting Holders of a majority in
principal amount of Notes to waive Defaults or Events of Default;
(vi) amend, change or modify in any material respect the obligation
of the Company to comply with Sections 3.11 or 3.18;
------------- ----
(vii) modify the subordination provisions of this Indenture with
respect to the Company or any Note Guarantor in a manner that
adversely affects the rights of any Holder; or
(viii) eliminate or modify in any manner a Note Guarantor's
obligations with respect to its Note Guarantee which adversely affects
Holders in any material respect.
After an amendment under this Section becomes effective, the Company
shall mail to Noteholders a notice briefly describing such amendment. The
failure to give such notice to all Noteholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
An amendment under this Section 9.2 may not make any change that
-----------
adversely affects the rights under Article X or Article XII of any holder of
Senior Indebtedness then
69
<PAGE>
outstanding unless the holders of such Senior Indebtedness (or any group or
representative thereof authorized to give a consent) consent to such change.
Section 9.3. Compliance with Trust Indenture Act. Every amendment to
-----------------------------------
this Indenture or the Notes shall comply with the TIA as then in effect.
Section 9.4. Revocation and Effect of Consents and Waivers. A
---------------------------------------------
consent to an amendment or a waiver by a Holder of a Note shall bind the Holder
and every subsequent Holder of that Note or portion of the Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
or waiver is not made on the Note. However, any such Holder or subsequent
Holder may revoke the consent or waiver as to such Holder's Note or portion of
the Note if the Trustee receives the notice of revocation before the date the
amendment or waiver becomes effective. After an amendment or waiver becomes
effective, it shall bind every Noteholder. An amendment or waiver shall become
effective upon receipt by the Trustee of the requisite number of written
consents under Section 9.1 or 9.2 as applicable.
----------- ---
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Noteholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Noteholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall become valid or effective more than 90
days after such record date.
Section 9.5. Notation on or Exchange of Notes. If an amendment
--------------------------------
changes the terms of a Note, the Trustee may require the Holder of the Note to
deliver it to the Trustee. The Trustee may place an appropriate notation on the
Note regarding the changed terms and return it to the Holder. Alternatively, if
the Company or the Trustee so determines, the Company in exchange for the Note
shall issue and the Trustee shall authenticate a new Note that reflects the
changed terms. Failure to make the appropriate notation or to issue a new Note
shall not affect the validity of such amendment.
Section 9.6. Trustee to Sign Amendments. The Trustee shall sign any
--------------------------
amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall receive indemnity reasonably satisfactory to it and to receive,
and (subject to Sections 7.1 and 7.2) shall be fully protected in relying upon,
--------------------
such evidence as it deems appropriate, including, without limitation, solely on
an Opinion of Counsel stating that such amendment is authorized or permitted by
this Indenture.
70
<PAGE>
ARTICLE X
SUBORDINATION OF THE NOTES
Section 10.1. Agreement to Subordinate. The Company agrees, and each
------------------------
Noteholder by accepting a Note agrees, that the Indebtedness evidenced by the
Notes is subordinated in right of payment, to the extent and in the manner
provided in this Article X, to the prior payment in full in cash of all
Obligations due in respect of the Senior Indebtedness and that the subordination
is for the benefit of and enforceable by the holders of such Senior
Indebtedness. Only Senior Indebtedness of the Company shall rank senior to the
Notes in accordance with the provisions set forth herein. The Notes shall in
all respects rank pari passu with, or be senior to, all other Indebtedness of
the Company. All provisions of this Article X shall be subject to Section 10.12.
-------------
Section 10.2. Liquidation, Dissolution, Bankruptcy. Upon any payment
------------------------------------
or distribution of the assets of the Company to creditors upon a total or
partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) holders of Senior Indebtedness of the Company shall be entitled
to receive payment in full of such Senior Indebtedness before Noteholders shall
be entitled to receive any payment of principal of, premium, if any, or interest
on the Notes; and
(2) until such Senior Indebtedness is paid in full, any distribution
to which Noteholders would be entitled but for this Article X shall be made to
holders of such Senior Indebtedness as their interests may appear, except that
Noteholders may receive (a) Permitted Junior Securities and (b) payments and
other distributions made from any defeasance trust created pursuant to Section
-------
8.1 hereof.
- ---
Section 10.3. Default on Senior Indebtedness of the Company. The
---------------------------------------------
Company may not pay the principal of, premium, if any, or interest on the Notes
or make any deposit pursuant to Section 8.1 and may not repurchase, redeem or
-----------
otherwise retire any Notes (collectively, "pay the Notes") (other than Permitted
Junior Securities and payments and other distributions made from any defeasance
trust created pursuant to Section 8.1 hereof) if (i) any Designated Senior
-----------
Indebtedness of the Company is not paid when due or (ii) any other default on
such Designated Senior Indebtedness occurs and the maturity of such Designated
Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, (x) the default has been cured or waived and any such acceleration
has been rescinded or (y) such Designated Senior Indebtedness has been paid in
full; provided, however, that the Company may pay the Notes without regard to
the foregoing if the Company and the Trustee receive written notice approving
such payment from the Representative of such Designated Senior Indebtedness with
respect to which either of the events set forth in clause (i) or (ii) has
occurred and is continuing. During the continuance of any default (other than a
default described in clause (i) or (ii) of the immediately preceding sentence)
with respect to any Designated Senior Indebtedness of the Company pursuant to
which the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any
71
<PAGE>
applicable grace periods, the Company may not pay the Notes for a period (a
"Payment Blockage Period") commencing upon the receipt by the Trustee (with a
copy to the Company) of written notice (a "Blockage Notice") of such default
from the Representative of the holders of such Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or Persons who
gave such Blockage Notice, (ii) because a Representative of the holders of such
Designated Senior Indebtedness has notified the Trustee that the default giving
rise to such Blockage Notice is no longer continuing or (iii) because such
Designated Senior Indebtedness has been repaid in full in cash). Notwithstanding
the provisions described in the immediately preceding sentence (but subject to
the provisions contained in the first sentence of this Section 10.3), unless the
------------
holders of such Designated Senior Indebtedness or the Representative of such
holders have accelerated the maturity of such Designated Senior Indebtedness,
the Company may resume payments on the Notes after such Payment Blockage Period.
The Notes shall not be subject to more than one Payment Blockage Period in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Indebtedness during such period. For purposes of this
Section 10.3, no Default or Event of Default which existed or was continuing on
- ------------
the date of the commencement of any Payment Blockage Period with respect to the
Designated Senior Indebtedness initiating such Payment Blockage Period shall be,
or be made, the basis of the commencement of a subsequent Payment Blockage
Period by the Representative of such Designated Senior Indebtedness, whether or
not within a period of 360 consecutive days, unless such Default or Event of
Default shall have been cured or waived for a period of not less than 90
consecutive days.
Section 10.4. Acceleration of Payment of Notes. If payment of the
--------------------------------
Notes is accelerated because of an Event of Default, the Company or the Trustee
shall promptly notify the Representative of the holders of the Designated Senior
Indebtedness of the Company of the acceleration.
Section 10.5. When Distribution Must Be Paid Over. If a distribution
-----------------------------------
is made to Noteholders that because of this Article X should not have been made
to them, the Noteholders who receive the distribution shall hold it in trust for
holders of Senior Indebtedness of the Company and pay it over to them or their
Representative as their interests may appear.
Section 10.6. Subrogation. After all Senior Indebtedness of the
-----------
Company is paid in full and until the Notes are paid in full, Noteholders shall
be subrogated to the rights of holders of such Senior Indebtedness to receive
distributions applicable to such Senior Indebtedness. A distribution made under
this Article X to holders of such Senior Indebtedness which otherwise would have
been made to Noteholders is not, as between the Company and Noteholders, a
payment by the Company on such Senior Indebtedness.
Section 10.7. Relative Rights. This Article X defines the relative
---------------
rights of Noteholders and holders of Senior Indebtedness of the Company. Nothing
in this Indenture shall:
72
<PAGE>
(1) impair, as between the Company and Noteholders, the obligation of
the Company, which is absolute and unconditional, to pay principal of, premium,
if any, and interest on the Notes in accordance with their terms; or
(2) prevent the Trustee or any Noteholder from exercising its
available remedies upon a Default, subject to the rights of holders of Senior
Indebtedness of the Company to receive distributions otherwise payable to
Noteholders.
Section 10.8. Subordination May Not Be Impaired by Company. No right
--------------------------------------------
of any holder of Senior Indebtedness of the Company to enforce the subordination
of the Indebtedness evidenced by the Notes shall be impaired by any act or
failure to act by the Company or by its failure to comply with this Indenture.
Section 10.9. Rights of Trustee and Paying Agent. Notwithstanding
----------------------------------
Section 10.3, the Trustee or Paying Agent may continue to make payments on the
- ------------
Notes and shall not be charged with knowledge of the existence of facts that
would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives written notice satisfactory to it that payments may not be made under
this Article X. The Company, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Indebtedness may give the notice; provided,
however, that, if the holders of an issue of Senior Indebtedness of the Company
have a Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of the Company with the same rights it would have if it were not
Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to all the rights set forth in
this Article X with respect to any Senior Indebtedness of the Company which may
at any time be held by it, to the same extent as any other holder of such Senior
Indebtedness, and nothing in Article VII shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article X shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.7.
-----------
Section 10.10. Distribution or Notice to Representative. Whenever a
----------------------------------------
distribution is to be made or a notice given to holders of Senior Indebtedness
of the Company, the distribution may be made and the notice given to their
Representative (if any).
Section 10.11. Article X Not to Prevent Events of Default or Limit
---------------------------------------------------
Right to Accelerate. The failure to make a payment pursuant to the Notes by
- -------------------
reason of any provision in this Article X shall not be construed as preventing
the occurrence of a Default. Nothing in this Article X shall have any effect on
the right of the Noteholders or the Trustee to accelerate the maturity of the
Notes.
Section 10.12. Trust Moneys Not Subordinated. Notwithstanding
-----------------------------
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article VIII by the Trustee
for the payment of principal of, premium, if any, and interest on the Notes
shall not be subordinated to the prior payment of any
73
<PAGE>
Senior Indebtedness or subject to the restrictions set forth in this Article X,
and none of the Noteholders shall be obligated to pay over any such amount to
the Company or any holder of Senior Indebtedness of the Company or any other
creditor of the Company.
Section 10.13. Trustee Entitled to Rely. Upon any payment or
------------------------
distribution pursuant to this Article X, the Trustee and the Noteholders shall
be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.2
------------
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Noteholders or (iii) upon the Representative for the holders of Senior
Indebtedness of the Company for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of such Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article X. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Indebtedness of the Company to participate
in any payment or distribution pursuant to this Article X, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of such Senior Indebtedness held by such Person, the
extent to which such Person is entitled to participate in such payment or
distribution and other facts pertinent to the rights of such Person under this
Article X, and, if such evidence is not furnished, the Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment. The provisions of Sections 7.1 and 7.2 shall be
------------ ---
applicable to all actions or omissions of actions by the Trustee pursuant to
this Article X.
Section 10.14. Trustee to Effectuate Subordination. Each Noteholder
-----------------------------------
by accepting a Note authorizes and directs the Trustee on such Noteholder's
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Noteholders and the holders of such
Senior Indebtedness of the Company as provided in this Article X and appoints
the Trustee as attorney-in-fact for any and all such purposes.
Section 10.15. Trustee Not Fiduciary for Holders of Senior
-------------------------------------------
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
- ------------
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall mistakenly pay over or distribute to Noteholders or the Company or any
other Person, money or assets to which any holders of Senior Indebtedness of the
Company shall be entitled by virtue of this Article X or otherwise.
Section 10.16. Reliance by Holders of Senior Indebtedness on
---------------------------------------------
Subordination Provisions. Each Noteholder by accepting a Note acknowledges and
- ------------------------
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to each holder of any Senior Indebtedness of
the Company, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Notes, to acquire and continue to hold, or to continue
to hold, such Senior Indebtedness and such holder of such Senior Indebtedness
shall be deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior
Indebtedness.
74
<PAGE>
ARTICLE XI
GUARANTEE
Section 11.1. Guarantee. (a) Each Note Guarantor hereby fully,
---------
unconditionally and irrevocably guarantees, as primary obligor and not merely as
surety, jointly and severally with each other Note Guarantor, to each Holder of
the Notes and the Trustee the full and punctual payment when due, whether at
maturity, by acceleration, by redemption or otherwise, of the Obligations (such
guaranteed Obligations, the "Guaranteed Obligations"). Each Note Guarantor
further agrees (to the extent permitted by law) that the Obligations may be
extended or renewed, in whole or in part, without notice or further assent from
it, and that it will remain bound under this Article X notwithstanding any
extension or renewal of any Obligation. Each of the Note Guarantors will agree
to pay, on a senior subordinated basis and in addition to the amounts stated
above, any and all expenses (including reasonable counsel fees and expenses)
incurred by the Trustee or the Holders in enforcing any rights under such Note
Guarantor's Note Guarantee.
(b) Each Note Guarantor waives presentation to, demand of payment
from and protest to the Company of any of the Obligations and also waives notice
of protest for nonpayment. Each Note Guarantor waives notice of any Default
under the Notes or the Obligations. The obligations of each Note Guarantor
hereunder shall not be affected by (a) the failure of any Holder to assert any
claim or demand or to enforce any right or remedy against the Company or any
other Person under this Indenture, the Notes or any other agreement or
otherwise; (b) any extension or renewal of any thereof; (c) any rescission,
waiver, amendment or modification of any of the terms or provisions of this
Indenture, the Notes or any other agreement; (d) the release of any security
held by any Holder or the Trustee for the Obligations or any of them; (e) the
failure of any Holder to exercise any right or remedy against any other Note
Guarantor; or (f) any change in the ownership of the Company.
(c) Each Note Guarantor further agrees that its Note Guarantee herein
constitutes a guarantee of payment when due (and not a guarantee of collection)
and waives any right to require that any resort be had by any Holder to any
security held for payment of the Guaranteed Obligations.
(d) The Guaranteed Obligations shall not be subject to any reduction,
limitation, impairment or termination for any reason (other than payment of the
Guaranteed Obligations in full), including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to any defense of
setoff, counterclaim, recoupment or termination whatsoever or by reason of the
invalidity, illegality or unenforceability of the Guaranteed Obligations or
otherwise. Without limiting the generality of the foregoing, the Guaranteed
Obligations shall not be discharged or impaired or otherwise affected by the
failure of any Holder to assert any claim or demand or to enforce any remedy
under this Indenture, the Notes or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Guaranteed Obligations, or by any other act
or thing or omission or delay to do any other act or thing which may or might in
any manner or to any extent vary the risk of each
75
<PAGE>
Note Guarantor or would otherwise operate as a discharge of such Note Guarantor
as a matter of law or equity.
(e) Each Note Guarantor further agrees that its Note Guarantee herein
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of principal of or interest on any of the
Obligations is rescinded or must otherwise be restored by any Holder upon the
bankruptcy or reorganization of the Company or otherwise.
(f) In furtherance of the foregoing and not in limitation of any
other right which any Holder has at law or in equity against each Note Guarantor
by virtue hereof, upon the failure of the Company to pay any of the Obligations
when and as the same shall become due, whether at maturity, by acceleration, by
redemption or otherwise, each Note Guarantor hereby promises to and will, upon
receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in
cash, to the Holders an amount equal to the sum of (i) the unpaid amount of such
Obligations then due and owing and (ii) accrued and unpaid interest on such
Obligations then due and owing (but only to the extent not prohibited by law).
(g) Each Note Guarantor further agrees that, as between such Note
Guarantor, on the one hand, and the Holders, on the other hand, (x) the maturity
of the Guaranteed Obligations may be accelerated as provided in this Indenture
for the purposes of its Note Guarantee herein, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Guaranteed Obligations and (y) in the event of any such declaration of
acceleration of such Guaranteed Obligations, such Guaranteed Obligations
(whether or not due and payable) shall forthwith become due and payable by the
Note Guarantor for the purposes of this Note Guarantee.
(h) Each Note Guarantee is, to the extent and in the manner set forth
in Article XII, subordinated and subject in right of payment to the prior
payment in full of all Senior Indebtedness of such Note Guarantor and is made
subject to such provisions of this Indenture.
Section 11.2. Limitation on Liability; Termination, Release and
-------------------------------------------------
Discharge. (a) The Guaranteed Obligation will be limited to the maximum amount
- ---------
as will, after giving effect to all other contingent and fixed liabilities of
such Note Guarantor and after giving effect to any collections from or payments
made by or on behalf of any other Note Guarantor in respect of the Guaranteed
Obligations of such other Note Guarantor or pursuant to its contribution
obligations under this Indenture, result in the Guaranteed Obligations of such
Note Guarantor under its Note Guarantee not constituting a fraudulent conveyance
or fraudulent transfer under federal or state law.
(b) Each Note Guarantor may consolidate with or merge into or sell
its assets to the Company or another Note Guarantor without limitation. Each
Note Guarantor may consolidate with or merge into or sell all or substantially
all its assets to a corporation, partnership or trust other than the Company or
another Note Guarantor (whether or not affiliated with the Note Guarantor),
except that if the surviving corporation of any such merger or consolidation is
a Subsidiary of the Company, such merger, consolidation or sale shall not be
permitted unless (i) the Person formed by or surviving any such consolidation or
merger assumes
76
<PAGE>
all the Guaranteed Obligations of such Note Guarantor pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the Trustee in
respect of the Notes, this Indenture and the Note Guarantee, (ii) immediately
after giving effect to such transaction, no Default or Event of Default exists;
and (iii) the Company delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel addressed to the Trustee with respect to the foregoing
matters. Upon the sale or disposition of a Note Guarantor (by merger,
consolidation, the sale of its Capital Stock or the sale of all or substantially
all of its assets) to a Person (whether or not an Affiliate of the Note
Guarantor) which is not a Subsidiary of the Company, which sale or disposition
is otherwise in compliance with this Indenture (including Section 3.11), such
------------
Note Guarantor will be deemed released from all its Guaranteed Obligations and
such Note Guarantee will terminate; provided, however, that any such termination
will occur only to the extent that all obligations of such Note Guarantor under
the Senior Credit Facility and all of its guarantees of, and under all of its
pledges of assets or other security interests which secure, any other
Indebtedness of the Company will also terminate upon such release, sale or
transfer.
(c) A Note Guarantor will be deemed released and relieved from its
Guaranteed Obligations and its Note Guarantee without any further action
required on the part of the Company or such Note Guarantor if, in accordance
with the provisions of this Indenture:
(i) there is a legal defeasance of the Notes;
(ii) there is a sale or other disposition of all or substantially all
of the assets of such Note Guarantor;
(iii) there is a sale or other disposition of all of the Capital
Stock of such Note Guarantor; or
(iv) such Note Guarantor is designated as an Unrestricted Subsidiary.
Section 11.3. Right of Contribution. Each Note Guarantor that makes
---------------------
a payment or distribution under a Note Guarantee will be entitled to a
contribution from each other Note Guarantor in a pro rata amount, based on the
net assets of each Note Guarantor determined in accordance with GAAP. The
provisions of this Section 11.3 shall in no respect limit the obligations and
------------
liabilities of each Note Guarantor to the Trustee and the Holders and each Note
Guarantor shall remain liable to the Trustee and the Holders for the full amount
guaranteed by such Note Guarantor hereunder.
Section 11.4. No Subrogation. Each Note Guarantor agrees that it
--------------
shall not be entitled to any right of subrogation in respect of any Guaranteed
Obligations until payment in full of all Obligations and all obligations to
which the Obligations are subordinated. If any amount shall be paid to any Note
Guarantor on account of such subrogation rights at any time when all of the
Obligations and all obligations to which the Obligations are subordinated shall
not have been paid in full, such amount shall be held by such Note Guarantor in
trust for the Trustee and the Holders, segregated from other funds of such Note
Guarantor, and shall, forthwith upon receipt by such Note Guarantor, be turned
over to the Trustee in the exact form received by such Note Guarantor (duly
endorsed by such Note Guarantor to the Trustee, if required), to be applied
77
<PAGE>
against the Obligations or obligations to which the Obligations are
subordinated. Each Note Guarantor further agrees that, as between it, on the one
hand, and the Holders and the Trustee, on the other hand, (x) the maturity of
the Guaranteed Obligations may be accelerated as provided in Article VI for the
purposes of such Note Guarantor's Note Guarantee herein, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the Guaranteed Obligations, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article VI, such Obligations
(whether or not due and payable) shall forthwith become due and payable by such
Note Guarantor for the purposes of this Section 11.4.
------------
Section 11.5. Additional Note Guarantees. The Company will cause any
--------------------------
Person that shall become a Note Guarantor (an "Additional Guarantor") to
concurrently Guarantee (an "Additional Guarantee") the Company's Obligations
under this Indenture and the Notes by executing a Supplemental Indenture
substantially in the form of Exhibit G, it being understood that such Additional
---------
Guarantee shall be subordinated in right of payment to Senior Indebtedness of
such Additional Guarantor including Guarantees constituting Senior Indebtedness;
provided, however, that each Additional Guarantor will be automatically and
unconditionally released and discharged from its obligations under such
Additional Guarantee only in accordance with Section 11.2 above.
------------
ARTICLE XII
SUBORDINATION OF THE NOTE GUARANTEES
Section 12.1. Agreement to Subordinate. Each Note Guarantor agrees,
------------------------
and each Noteholder by accepting a Note agrees, that the Guaranteed Obligations
are subordinated in right of payment, to the extent and in the manner provided
in this Article XII, to the prior payment in full in cash of all Senior
Indebtedness of such Note Guarantor and that the subordination is for the
benefit of and enforceable by the holders of such Senior Indebtedness. Only
Senior Indebtedness of such Note Guarantor shall rank senior to the Obligations
of such Note Guarantor in accordance with the provisions set forth herein. The
Obligations of each Note Guarantor shall in all respects rank pari passu with,
or be senior to, all other Indebtedness of such Note Guarantor.
Section 12.2. Liquidation, Dissolution, Bankruptcy. Upon any payment
------------------------------------
or distribution of the assets of any Note Guarantor to creditors upon a total or
partial liquidation or a total or partial dissolution of such Note Guarantor or
in a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to such Note Guarantor or its property:
(1) holders of Senior Indebtedness of such Note Guarantor shall be
entitled to receive payment in full of such Senior Indebtedness before
Noteholders shall be entitled to receive any payment pursuant to the Note
Guarantee of such Note Guarantor; and
(2) until the Senior Indebtedness of such Note Guarantor is paid in
full, any distribution to which Noteholders would be entitled but for this
Article XII shall be made to holders of such Senior Indebtedness as their
interests may appear, except that Noteholders may
78
<PAGE>
receive (a) Permitted Junior Securities and (b) payments and other distributions
made from any defeasance trust created pursuant to Section 8.1 hereof.
-----------
Section 12.3. Default on Senior Indebtedness of Note Guarantors.
-------------------------------------------------
Each Note Guarantor may not pay the principal of, premium, if any, or interest
on the Notes or make any deposit pursuant to Section 8.1 and may not repurchase,
-----------
redeem or otherwise retire any Notes (collectively, "pay its Note Guarantee")
(other than Permitted Junior Securities and payments and other distributions
from any defeasance trust created pursuant to Section 8.1 hereof) if (i) any
-----------
Designated Senior Indebtedness of the relevant Note Guarantor is not paid when
due or (ii) any other default on Designated Senior Indebtedness of such Note
Guarantor occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms unless, in either case, (x) the default
has been cured or waived and any such acceleration has been rescinded or (y)
such Designated Senior Indebtedness has been paid in full; provided, however,
that such Note Guarantor may pay its Note Guarantee without regard to the
foregoing if such Note Guarantor and the Trustee receive written notice
approving such payment from the Representative of the Designated Senior
Indebtedness of such Note Guarantor with respect to which either of the events
set forth in clause (i) or (ii) has occurred and is continuing. During the
continuance of any default (other than a default described in clause (i) or (ii)
of the immediately preceding sentence) with respect to any Designated Senior
Indebtedness of such Note Guarantor pursuant to which the maturity thereof may
be accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, such Note Guarantor may not pay its Note Guarantee for the Payment
Blockage Period commencing upon the receipt by the Trustee (with a copy to such
Note Guarantor) of a Blockage Notice of such default from the Representative of
the holders of such Designated Senior Indebtedness and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and such Note Guarantor from the Person or Persons
who gave such Blockage Notice, (ii) because a Representative of the holders of
such Designated Senior Indebtedness has notified the Trustee that the default
giving rise to such Blockage Notice is no longer continuing or (iii) because
such Designated Senior Indebtedness has been repaid in full in cash).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the provisions contained in the first sentence of this Section
12.3), unless the holders of such Designated Senior Indebtedness of such Note
Guarantor or the Representative of such holders have accelerated the maturity of
such Designated Senior Indebtedness such Note Guarantor may resume payments on
its Note Guarantee after the end of such Payment Blockage Period. Each Note
Guarantee shall not be subject to more than one Payment Blockage Period in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Indebtedness of a Note Guarantor during such period. For
purposes of this Section 12.3, no Default or Event of Default which existed or
------------
was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness initiating such Payment
Blockage Period shall be, or be made, the basis of the commencement of a
subsequent Payment Blockage Period by the Representative of such Designated
Senior Indebtedness, whether or not within a period of 360 consecutive days,
unless such default or event of default shall have been cured or waived for a
period of not less than 90 consecutive days.
79
<PAGE>
Section 12.4. Demand for Payment. If a demand for payment is made on
------------------
any Note Guarantor pursuant to Article XI, the Trustee shall promptly notify the
holders of the Designated Senior Indebtedness (or their Representatives) of such
Note Guarantor of such demand.
Section 12.5. When Distribution Must Be Paid Over. If a distribution
-----------------------------------
is made to Noteholders that because of this Article XII should not have been
made to them, the Noteholders who receive the distribution shall hold it in
trust for holders of the relevant Senior Indebtedness of such Note Guarantor and
pay it over to them or their Representative as their interests may appear.
Section 12.6. Subrogation. After all Senior Indebtedness of each
-----------
Note Guarantor is paid in full and until the Notes are paid in full, Noteholders
shall be subrogated to the rights of holders of such Senior Indebtedness to
receive distributions applicable to such Senior Indebtedness. A distribution
made under this Article XII to holders of such Senior Indebtedness which
otherwise would have been made to Noteholders is not, as between each Note
Guarantor and Noteholders, a payment by such Note Guarantor on such Senior
Indebtedness.
Section 12.7. Relative Rights. This Article XII defines the relative
---------------
rights of Noteholders and holders of Senior Indebtedness of each Note Guarantor.
Nothing in this Indenture shall:
(1) impair, as between each Note Guarantor and the Noteholders, the
obligation of such Note Guarantor, which is absolute and unconditional, to pay
its obligations to the extent set forth in Article XI; or
(2) prevent the Trustee or any Noteholder from exercising its
available remedies upon a default by any Note Guarantor under its obligations,
subject to the rights of holders of Senior Indebtedness of such Note Guarantor
to receive distributions otherwise payable to Noteholders.
Section 12.8. Subordination May Not Be Impaired by Note Guarantors.
----------------------------------------------------
No right of any holder of Senior Indebtedness of any Note Guarantor to enforce
the subordination of the obligations of such Note Guarantor shall be impaired by
any act or failure to act by such Note Guarantor or by its failure to comply
with this Indenture.
Section 12.9. Rights of Trustee and Paying Agent. Notwithstanding
----------------------------------
Section 12.3, the Trustee or Paying Agent may continue to make payments on each
- ------------
Note Guarantee and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives written notice satisfactory to it that payments may not be made under
this Article XII. The Company, each Note Guarantor, the Registrar or co-
registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness
of any Note Guarantor may give the notice; provided, however, that, if the
holders of an issue of Senior Indebtedness of any Note Guarantor has a
Representative, only the Representative may give the notice.
80
<PAGE>
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. The
Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article XII with respect to any Senior Indebtedness of any Note Guarantor which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in Article VII shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article XII shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.7.
-----------
Section 12.10. Distribution or Notice to Representative. Whenever a
----------------------------------------
distribution is to be made or a notice given to holders of Senior Indebtedness
of any Note Guarantor, the distribution may be made and the notice given to
their Representative (if any).
Section 12.11. Article XII Not to Prevent Defaults Under the Note
--------------------------------------------------
Guarantees or Limit Right To Demand Payment. The failure to make a payment
- -------------------------------------------
pursuant to any Note Guarantee by reason of any provision in this Article XII
shall not be construed as preventing the occurrence of a Default under such Note
Guarantee. Nothing in this Article XII shall have any effect on the right of the
Noteholders or the Trustee to make a demand for payment on any Note Guarantor
pursuant to Article XI.
Section 12.12. Trustee Entitled to Rely. Upon any payment or
------------------------
distribution pursuant to this Article XII, the Trustee and the Noteholders shall
be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.2
------------
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Noteholders or (iii) upon the Representative for the holders of Senior
Indebtedness of any Note Guarantor for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of such
Senior Indebtedness and other indebtedness of such Note Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article XII. In the event that
the Trustee determines, in good faith, that evidence is required with respect to
the right of any Person as a holder of Senior Indebtedness of such Note
Guarantor to participate in any payment or distribution pursuant to this Article
XII, the Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness of such
Note Guarantor held by such Person, the extent to which such Person is entitled
to participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article XII, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment. The
provisions of Sections 7.1 and 7.2 shall be applicable to all actions or
------------ ----
omissions of actions by the Trustee pursuant to this Article XII.
Section 12.13. Trustee to Effectuate Subordination. Each Noteholder
-----------------------------------
by accepting a Note authorizes and directs the Trustee on such Noteholder's
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Noteholders and the holders of Senior
Indebtedness of any Note Guarantor as provided in this Article XII and appoints
the Trustee as attorney-in-fact for any and all such purposes.
81
<PAGE>
Section 12.14. Trustee Not Fiduciary for Holders of Senior
-------------------------------------------
Indebtedness of Note Guarantors. The Trustee shall not be deemed to owe any
- -------------------------------
fiduciary duty to the holders of Senior Indebtedness of any Note Guarantor and
shall not be liable to any such holders if it shall mistakenly pay over or
distribute to Noteholders or the Company or any other Person, money or assets to
which any holders of such Senior Indebtedness shall be entitled by virtue of
this Article XII or otherwise.
Section 12.15. Reliance by Holders of Senior Indebtedness on
---------------------------------------------
Subordination Provisions. Each Noteholder by accepting a Note acknowledges and
- ------------------------
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to each holder of any Senior Indebtedness of
any Note Guarantor, whether such Senior Indebtedness was created or acquired
before or after the issuance of the Notes, to acquire and continue to hold, or
to continue to hold, such Senior Indebtedness and such holder of such Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Trust Indenture Act Controls. If any provision of this
----------------------------
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the provision required by
the TIA shall control. Each Note Guarantor in addition to performing its
Guaranteed Obligations shall perform such other obligations as may be imposed
upon it with respect to this Indenture under the TIA.
Section 13.2. Notices. Any notice or communication shall be in
-------
writing and delivered in person or mailed by first-class mail or facsimile
transmission addressed as follows:
if to the Company:
BGF Industries, Inc.
3802 Robert Porcher Way
Greensboro, North Carolina 27410
Facsimile: (336) 545-7715
Attention: Chief Financial Officer
if to the Trustee:
The Bank of New York
101 Barclay Street, 21W
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Administration
82
<PAGE>
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a registered Noteholder shall be
mailed to the Noteholder at the Noteholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 13.3. Communication by Holders with Other Holders.
-------------------------------------------
Noteholders may communicate pursuant to TIA (S) 312(b) with other Noteholders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
Section 13.4. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
Section 13.5. Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
83
<PAGE>
In giving such Opinion of Counsel, counsel may rely as to factual
matters on an Officers' Certificate or on certificates of public officials.
Section 13.6. Rules by Trustee, Paying Agent and Registrar. The
--------------------------------------------
Trustee may make reasonable rules for action by, or a meeting of, Noteholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 13.7. GOVERNING LAW, ETC. (A) THIS INDENTURE (INCLUDING EACH
-------------------
GUARANTEE) AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
(b) Each of the Company and the Note Guarantors hereby (i) agrees
that any suit, action or proceeding against it arising out of or relating to
this Indenture or the Notes, as the case may be, may be instituted in any
Federal or state court sitting in The City of New York, (ii) waives to the
extent permitted by applicable law, any objection which it may now or hereafter
have to the laying of venue of any such suit, action or proceeding, and any
claim that any suit, action or proceeding in such a court has been brought in an
inconvenient forum, (iii) irrevocably submits or will submit, as the case may
be, to the non-exclusive jurisdiction of such courts in any suit, action or
proceeding, (iv) agrees that final judgment in any such suit, action or
proceeding brought in such a court shall be conclusive and binding and may be
enforced in the courts of the jurisdiction of which it is subject by a suit upon
judgment and (v) agrees that service of process by mail to the address specified
herein shall constitute personal service of such process on it in any such suit,
action or proceeding.
Section 13.8. No Recourse Against Others. An incorporator, director,
--------------------------
officer, employee, stockholder or controlling person, as such, of the Company or
any Note Guarantor shall not have any liability for any Obligations of the
Company under the Notes, this Indenture or the Note Guarantees or for any claim
based on, in respect of or by reason of such Obligations or their creation. By
accepting a Note, each Noteholder shall waive and release all such liability.
The waiver and release shall be part of the consideration for the issue of the
Notes.
Section 13.9. Successors. All agreements of the Company and any Note
----------
Guarantor in this Indenture and the Notes shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
Section 13.10. Multiple Originals. The parties may sign any number
------------------
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
Section 13.11. 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.
84
<PAGE>
Section 13.12. Qualification of Indenture. The Company shall qualify
--------------------------
this Indenture under the TIA in accordance with the terms and conditions of the
Registration Rights Agreement and shall pay all reasonable costs and expenses
(including attorneys' fees and expenses for the Company, the Trustee and the
Holders) incurred in connection therewith, including, but not limited to, costs
and expenses of qualification of this Indenture and the Notes and printing this
Indenture and the Notes. The Trustee shall be entitled to receive from the
Company any such Officers' Certificates, Opinions of Counsel or other
documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
Section 13.13. Table of Contents; Headings. The table of contents,
---------------------------
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
85
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
BGF INDUSTRIES, INC.
By:/s/ Richard L. Cromer
---------------------
Name: Richard L. Cromer
Title: President
Attest:
/s/ Philippe Dorier
- -----------------------------
Philippe Dorier
Senior Vice President
THE BANK OF NEW YORK, AS TRUSTEE
By:/s/ Mary Beth Lewicki
---------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
<PAGE>
EXHIBIT A
FORM OF FACE OF INITIAL NOTE
[Include the following legend for Global Notes only:]
THIS IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE REFERRED TO
HEREINAFTER.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[The following legend shall appear on all Certificated Notes prior to the
Resale Restriction Termination Date:]
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER
AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIED WITH THE
FOREGOING RESTRICTIONS AS PROVIDED FOR IN THE INDENTURE.
[The following legend shall appear on all Regulation S Temporary Global
Notes and all other Notes (other than Regulation S Permanent Global Notes)
prior to the Resale Restriction Termination Date:]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY
A-1
<PAGE>
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A ADOPTED UNDER THE
SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S ADOPTED UNDER THE
SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
ADOPTED UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, IN EITHER CASE, IN A MINIMUM
PRINCIPAL AMOUNT OF THE NOTES OF U.S. $250,000, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT, AND THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH REGULATION S ADOPTED UNDER THE SECURITIES ACT, (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 ADOPTED UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL GIVE TO
EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE, IF THE PROPOSED
TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
ADOPTED UNDER THE SECURITIES ACT.
A-2
<PAGE>
[Include the legend below on all Regulation S Temporary Global Notes:]
THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF REGULATION S
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT").
NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO
RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED
CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT TO THE TERMS OF THE INDENTURE.
No. [___]
Principal Amount $[______________]
[If the Note is a Global Note include the
following two lines:]
as revised by the Schedule of Increases
and
Decreases in Global Note attached hereto
CUSIP NO. ____________
[If the Note is a Regulation S Global Note, delete the reference to
CUSIP NO. and replace it with:]
ISIN NO. ____________
A-3
<PAGE>
10 1/4% Senior Subordinated Notes due 2009
BGF Industries, Inc., a Delaware corporation, promises to pay to
[___________], or registered assigns, the principal sum of [__________________]
Dollars, as revised by the Schedule of Increases and Decreases in Global Note
attached hereto, on January 15, 2009.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
Additional provisions of this Note are set forth on the other side of
this Note.
BGF Industries, Inc.
By:__________________________________
Name
Title:
By:__________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
The Bank of New York,
as Trustee, certifies that this is one of the Notes referred to in the
Indenture.
THE BANK OF NEW YORK
By________________
Authorized Signatory Date: _____________, 1999
A-4
<PAGE>
FORM OF REVERSE SIDE OF INITIAL NOTE
10 1/4% Senior Subordinated Notes due 2009
1. Interest
--------
BGF Industries, Inc., a Delaware corporation (such company, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Company"), promises to pay interest on the principal amount of this
Note at the rate per annum shown above.
The Company will pay interest semiannually on January 15 and July 15
of each year commencing July 15, 1999. Interest on the Notes will accrue from
the most recent date to which interest has been paid on the Notes or, if no
interest has been paid, from and including January 21, 1999. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and, to the extent
such payments are lawful, interest on overdue installments of interest (without
regard to any applicable grace periods) at the rate of 2.0% per annum in excess
of the rate shown on this Note.
2. Method of Payment
-----------------
By at least 10:00 a.m. (New York City time) on the date on which any
principal of or interest on any Note is due and payable, the Company shall
irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay
such principal, premium, if any, and/or interest. The Company will pay interest
(except Defaulted Interest) to the Persons who are registered Holders of Notes
at the close of business on the January 1 or July 1 preceding the interest
payment date even if Notes are cancelled, repurchased or redeemed after the
record date and on or before the interest payment date. Holders must surrender
Notes to a Paying Agent to collect principal payments. The Company will pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts. Payments in respect of
Notes represented by a Global Note (including principal, premium, if any, and
interest) will be made by the transfer of immediately available funds to the
accounts specified by the Depository Trust Company. The Company will make all
payments in respect of a Certificated Note (including principal, premium, if
any, and interest) by mailing a check to the registered address of each Holder
thereof; provided, however, that payments on the Notes may also be made by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 15 days immediately preceding the relevant due date for
payment.
3. Paying Agent and Registrar
--------------------------
Initially, The Bank of New York will act as Trustee, Paying Agent and
Registrar. The Company may appoint and change any Paying Agent, Registrar or
co-registrar without notice to any Noteholder. The Company may act as Paying
Agent, Registrar or co-registrar.
A-5
<PAGE>
4. Indenture
---------
The Company issued the Notes under an Indenture dated as of January
21, 1999 (as it may be amended or supplemented from time to time in accordance
with the terms thereof, the "Indenture"), between the Company 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 (15 U.S.C.
------
(S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act").
Capitalized terms used herein and not defined herein have the meanings ascribed
thereto in the Indenture. The Notes are subject to all such terms, and
Noteholders are referred to the Indenture and the Act for a statement of those
terms. Each Noteholder by accepting a Note, agrees to be bound by all of the
terms and provisions of the Indenture, as amended from time to time.
The Notes are general unsecured senior obligations of the Company
unlimited in aggregate principal amount; $100,000,000 in aggregate principal
amount will be initially issued on the Issue Date. This Note is one of the
Initial Notes referred to in the Indenture. The Initial Notes and the Exchange
Notes will be treated as a single class of securities under the Indenture. The
Indenture imposes certain limitations on, among other things: Additional
Indebtedness, Restricted Payments, Asset Sales, dividend and other payment
restrictions affecting Restricted Subsidiaries, the sale or issuance of Capital
Stock of Restricted Subsidiaries, layered Indebtedness, Liens, transactions with
Affiliates, Change of Control and conduct of business transactions with
Affiliates and payments for consent.
The Company may, from time to time, subject to compliance with any
other applicable provisions of this Indenture, without the consent of the
Holders, create and issue pursuant to this Indenture Add On Notes (or the same
except for the payment of interest accruing prior to the issue date of such Add
On Notes or except for the first payment of interest following the issue date of
such Add On Notes), which Add On Notes will be treated, together with any other
Outstanding Notes, as a single issue of securities.
To guarantee the due and punctual payment of the principal, premium,
if any, and interest on the Notes and all other amounts payable by the Company
under the Indenture and the Notes when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Notes and the Indenture, future Restricted Subsidiaries (except Foreign
Subsidiaries) will unconditionally guarantee, jointly and severally, such
obligations on a senior basis pursuant to the terms of the Indenture.
5. Redemption
----------
Optional Redemption. The Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after January
15, 2004, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on January 15 of the year set
forth below, plus, in each case, accrued interest to the date of redemption
(subject to the right of Holders of record on a record date to receive interest
due on the related interest payment date that is on or prior to such date of
redemption):
A-6
<PAGE>
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004.................................................... 105.250%
2005.................................................... 103.500%
2006.................................................... 101.750%
2007 and thereafter..................................... 100.000%
</TABLE>
Optional Redemption upon Public Equity Offerings. In addition, at any
time, or from time to time, on or prior to January 15, 2002, the Company may, at
its option, use the net cash proceeds of one or more Public Equity Offerings (as
defined below) to redeem in the aggregate up to 35% of the aggregate principal
amount of the Notes originally issued at a redemption price equal to 110.5 % of
the principal amount thereof, plus accrued and unpaid interest thereon to the
date of redemption (subject to the right of Holders of record on a record date
to receive interest due on the related interest payment date that is on or prior
to such date of redemption); provided, however, that after giving effect to any
such redemption at least 65% of the aggregate principal amount of the Notes
originally issued remains outstanding. In order to effect the foregoing
redemption with the proceeds of any Public Equity Offering, the Company shall
make such redemption not more than 60 days after the consummation of such Public
Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company pursuant
to a registration statement filed with the Commission in accordance with the
Securities Act of 1933, as amended (the "Securities Act"), or any successor
statute.
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part and Notes of a
principal amount in excess of $1,000 may be redeemed in part in multiples of
$1,000 only; and provided, further, that if a partial redemption is made with
the proceeds of a Public Equity Offering, selection of the Notes or portions
thereof for redemption shall, subject to the preceding proviso, be made by the
Trustee only on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to the procedures of DTC or a successor depositary), unless
such method is otherwise prohibited. Notice 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. 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 a 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 will cease to
accrue on Notes or portions thereof called for redemption as long as the Company
has deposited with the Paying Agent funds in satisfaction of the applicable
redemption price pursuant to the Indenture.
A-7
<PAGE>
6. Repurchase Provisions
---------------------
(1) Upon the occurrence of a Change of Control, each Holder will have
the right to require that the Company purchase all or a portion (in integral
multiples of $1,000) of such Holder's Notes pursuant to the offer described
below (the "Change of Control Offer"), at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest thereon to the date of
purchase (subject to the right of Holders of record on a record date to receive
interest due on the related interest payment date that is on or prior to such
date of purchase). Within 30 days following the date upon which the Change of
Control occurred, the Company must send, by first-class mail, a notice to each
Holder, with a copy to the Trustee, which notice shall govern the terms of the
Change of Control Offer. Such notice shall state, among other things, the
purchase date, which must be no earlier than 30 days nor later than 60 days from
the date such notice is mailed, other than as may be required by law (the
"Change of Control Payment Date"). Holders electing to have a Note purchased
pursuant to a Change of Control Offer will be required to surrender the Note,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third business day prior to the Change of
Control Payment Date.
(2) To the extent all or a portion of the Net Cash Proceeds of any
Asset Sale are not applied within 270 days of such Asset Sale in certain ways
described in the Indenture (the "Net Proceeds Offer Trigger Date"), the Company
will make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net
Proceeds Offer Payment Date") not less than 20 business days following the date
on which such offer is made (or such longer period as may be required by law)
nor more than 60 days following such Net Proceeds Offer Trigger Date, from all
Holders on a pro rata basis (and on a pro rata basis with the holders of any
other Senior Subordinated Indebtedness with similar provisions requiring the
Company to offer to purchase such Senior Subordinated Indebtedness with the
proceeds of Asset Sales), that principal amount of Notes and such other
Indebtedness equal to such unapplied Net Cash Proceeds at a price, in the case
of the Notes, equal to 100% of the principal amount of the Notes to be
purchased, plus accrued and unpaid interest thereon, to the date of purchase
(subject to the right of Holders of record on a record date to receive interest
due on an interest payment date that is on or prior to such date of purchase).
Notwithstanding the foregoing, the Company may defer the Net Proceeds Offer
until there is an aggregate amount of unapplied Net Cash Proceeds equal to or in
excess of $5.0 million resulting from one or more Asset Sales (at which time,
the entire amount of unapplied Net Cash Proceeds, and not just the amount in
excess of $5.0 million, shall be applied as required pursuant to this
paragraph).
7. Denominations; Transfer; Exchange
---------------------------------
The Notes are in registered form without coupons in denominations of
principal amount of $1,000 and whole multiples of $1,000. A Holder may transfer
or exchange Notes in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange
A-8
<PAGE>
(i) any Notes selected for redemption (except, in the case of a Note to be
redeemed in part, the portion of the Note not to be redeemed) for a period
beginning 15 days before the mailing of a notice of Notes to be redeemed and
ending on the date of such mailing or (ii) any Notes for a period beginning 15
days before an interest payment date and ending on such interest payment date.
8. Persons Deemed Owners
---------------------
The registered holder of this Note may be treated as the owner of it
for all purposes.
9. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
10. Discharge Prior to Redemption or Maturity
-----------------------------------------
Subject to certain conditions set forth in the Indenture, the Company
at any time may terminate some or all of its obligations under the Notes and the
Indenture if the Company deposits with the Trustee cash or U.S. Government
Obligations for the payment of principal and interest on the Notes to redemption
or maturity, as the case may be.
11. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the then Outstanding Notes and (ii)
any Default (other than with respect to nonpayment, or in respect of a provision
that cannot be amended without the written consent of each Noteholder affected)
or noncompliance with any provision may be waived with the written consent of
the Holders of a majority in principal amount of the then Outstanding Notes.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Noteholder, the Company and the Trustee may amend the Indenture or the Notes
to, among other things, cure any ambiguity, omission, defect or inconsistency,
or to comply with Article IV of the Indenture, or to provide for uncertificated
Notes in addition to or in place of Certificated Notes, or to add guarantees
with respect to the Notes or to secure the Notes, or to add additional covenants
or surrender rights and powers conferred on the Company, or to comply with any
request of the Commission in connection with qualifying the Indenture under the
Act, or to make any change that does not adversely affect the rights of any
Noteholder, or to provide for the issuance of Exchange Notes.
A-9
<PAGE>
12. Defaults and Remedies
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes may declare all the
Outstanding Notes to be due and payable immediately. Certain events of
bankruptcy or insolvency are Events of Default which will result in the Notes
being due and payable immediately upon the occurrence of such Events of Default.
Noteholders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the
Outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Noteholders notice of any continuing Default or
Event of Default (except a Default or Event of Default in payment of principal
or interest) if it determines that withholding notice is in their interest.
13. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations set forth in the Indenture, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Notes and may otherwise deal with and collect obligations
owed to it by the Company or its Affiliates and may otherwise deal with the
Company or its affiliates with the same rights it would have if it were not
Trustee.
14. No Recourse Against Others
--------------------------
An incorporator, director, officer, employee, stockholder or
controlling person, as such, of the Company or any Note Guarantor shall not have
any liability for any obligations of the Company under the Notes or any Note
Guarantees, the Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation. By accepting a Note, each Noteholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
15. Authentication
--------------
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Note.
16. Abbreviations
-------------
Customary abbreviations may be used in the name of a Noteholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
A-10
<PAGE>
[Include if this is not a Regulation S Note]
17. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Noteholders. 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.
[Include if this is a Regulation S Note]
17. ISIN Numbers
------------
The Company has caused ISIN numbers to be printed on the Notes and has
directed the Trustee to use ISIN numbers in notices of redemption as a
convenience to Noteholders. 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.
18. Governing Law
-------------
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York, but without giving effect to applicable
principles of conflicts of law to the extent that the application of the law of
another jurisdiction would be required thereby.
The Company will furnish to any Noteholder upon written request and
without charge to the Noteholder a copy of the Indenture which has in it the
text of this Note in larger type. Requests may be made to:
BGF Industries, Inc
3802 Robert Porcher Way
Greensboro, North Carolina 27410
A-11
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the books of the
Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date:____________________ Your Signature:___________________
Signature Guarantee:______________________________
(Signature must be guaranteed)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Note.
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
A-12
<PAGE>
[To be attached to Global Notes only:]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been
made:
<TABLE>
<CAPTION>
Signature of
Amount of decrease Amount of increase Principal Amount authorized signatory
in Principal in Principal of this Global of Trustee or
Date of Exchange Amount of this Global Note Amount of this Global Note Note following such decrease or Note Custodian
- ---------------- -------------------------- -------------------------- ------------------------------- --------------------
<S> <C> <C> <C> <C>
</TABLE>
A-13
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 3.11 or Section 3.18 of the Indenture, check either box:
------------ ------------
[_] [_]
Section 3.11 Section 3.18
------------ ------------
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 3.11 or Section 3.18 of the Indenture, state the
------------ ------------
amount in principal amount (must be integral multiple of $1,000): $
Date: __________ Your Signature ____________________________
(Sign exactly as your name appears on the
other side of the Note)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
A-14
<PAGE>
EXHIBIT B
FORM OF FACE OF EXCHANGE NOTE
[Include the following two paragraphs for Global Notes only:]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
No. [___] Principal Amount $[______________],
as revised by the Schedule of
Increases and
Decreases in Global Note attached hereto
CUSIP NO. ____________
B-1
<PAGE>
10 1/4% Senior Subordinated Notes due 2009
BGF Industries, Inc., a Delaware corporation, promises to pay to
[_________], or registered assigns, the principal sum of [____________], as
revised by the Schedule of Increases and Decreases in Global Note attached
hereto, on January 15, 2009.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
Additional provisions of this Note are set forth on the other side of
this Note.
BGF Industries, Inc.
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
The Bank of New York,
as Trustee, certifies that this is one of the Notes referred to in the
Indenture.
THE BANK OF NEW YORK
By_______________________
Authorized Signatory Date: January 21, 1999
FORM OF REVERSE SIDE OF INITIAL NOTE
10 1/4% Senior Subordinated Notes due 2009
1. Interest
--------
BGF Industries, Inc., a Delaware corporation (such company, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Company"), promises to pay interest on the principal amount of this
Note at the rate per annum shown above.
The Company will pay interest semiannually on January 15 and July 15
of each year commencing July 15, 1999. Interest on the Notes will accrue from
the most recent date to
B-2
<PAGE>
which interest has been paid on the Notes or, if no interest has been paid, from
and including January 21, 1999. Interest will be computed on the basis of a 360-
day year of twelve 30-day months.
The Company shall pay interest on overdue principal and, to the extent
such payments are lawful, interest on overdue installments of interest (without
regard to any applicable grace periods) at the rate of 2.0% per annum in excess
of the rate shown on this Note.
2. Method of Payment
-----------------
By at least 10:00 a.m. (New York City time) on the date on which any
principal of or interest on any Note is due and payable, the Company shall
irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay
such principal, premium, if any, and/or interest. The Company will pay interest
(except Defaulted Interest) to the Persons who are registered Holders of Notes
at the close of business on the January 1 or July 1 preceding the interest
payment date even if Notes are cancelled, repurchased or redeemed after the
record date and on or before the interest payment date. Holders must surrender
Notes to a Paying Agent to collect principal payments. The Company will pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts. Payments in respect of
Notes represented by a Global Note (including principal, premium, if any, and
interest) will be made by the transfer of immediately available funds to the
accounts specified by the Depository Trust Company. The Company will make all
payments in respect of a Certificated Note (including principal, premium, if
any, and interest) by mailing a check to the registered address of each Holder
thereof; provided, however, that payments on the Notes may also be made by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 15 days immediately preceding the relevant due date for
payment.
3. Paying Agent and Registrar
--------------------------
Initially, The Bank of New York will act as Trustee, Paying Agent and
Registrar. The Company may appoint and change any Paying Agent, Registrar or
co-registrar without notice to any Noteholder. The Company may act as Paying
Agent, Registrar or co-registrar.
4. Indenture
---------
The Company issued the Notes under an Indenture dated as of January
21, 1999 (as it may be amended or supplemented from time to time in accordance
with the terms thereof, the "Indenture"), between the Company 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 (15 U.S.C.
------
(S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act").
Capitalized terms used herein and not defined herein have the meanings ascribed
thereto in the Indenture. The Notes are subject to all such terms, and
Noteholders are referred to the Indenture and the Act for a statement of those
terms. Each Noteholder by accepting a Note, agrees to be bound by all of the
terms and provisions of the Indenture, as amended from time to time.
B-3
<PAGE>
The Notes are general unsecured senior obligations of the Company
unlimited in aggregate principal amount; $100,000,000 in aggregate principal
amount will be initially issued on the Issue Date. This Note is one of the
Initial Notes referred to in the Indenture. The Initial Notes and the Exchange
Notes will be treated as a single class of securities under the Indenture. The
Indenture imposes certain limitations on, among other things: Additional
Indebtedness, Restricted Payments, Asset Sales, dividend and other payment
restrictions affecting Restricted Subsidiaries, the sale or issuance of Capital
Stock of Restricted Subsidiaries, layered Indebtedness, Liens, transactions with
Affiliates, Change of Control and conduct of business transactions with
Affiliates and payments for consent.
The Company may, from time to time, subject to compliance with any
other applicable provisions of this Indenture, without the consent of the
Holders, create and issue pursuant to this Indenture Add On Notes (or the same
except for the payment of interest accruing prior to the issue date of such Add
On Notes or except for the first payment of interest following the issue date of
such Add On Notes), which Add On Notes will be treated, together with any other
Outstanding Notes, as a single issue of securities.
To guarantee the due and punctual payment of the principal, premium,
if any, and interest on the Notes and all other amounts payable by the Company
under the Indenture and the Notes when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Notes and the Indenture, future Restricted Subsidiaries (except Foreign
Subsidiaries) will unconditionally guarantee, jointly and severally, such
obligations on a senior basis pursuant to the terms of the Indenture.
5. Redemption
----------
Optional Redemption. The Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after January
15, 2004, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on January 15 of the year set
forth below, plus, in each case, accrued interest to the date of redemption
(subject to the right of Holders of record on a record date to receive interest
due on the related interest payment date that is on or prior to such date of
redemption):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2004.................................................... 105.250%
2005.................................................... 103.500%
2006.................................................... 101.750%
2007 and thereafter..................................... 100.000%
</TABLE>
Optional Redemption upon Public Equity Offerings. In addition, at any
time, or from time to time, on or prior to January 15, 2002, the Company may, at
its option, use the net cash proceeds of one or more Public Equity Offerings (as
defined below) to redeem in the aggregate up to 35% of the aggregate principal
amount of the Notes originally issued at a redemption price equal to 110.5 % of
the principal amount thereof, plus accrued and unpaid
B-4
<PAGE>
interest thereon to the date of redemption (subject to the right of Holders of
record on a record date to receive interest due on the related interest payment
date that is on or prior to such date of redemption); provided, however, that
after giving effect to any such redemption at least 65% of the aggregate
principal amount of the Notes originally issued remains outstanding. In order to
effect the foregoing redemption with the proceeds of any Public Equity Offering,
the Company shall make such redemption not more than 60 days after the
consummation of such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company pursuant
to a registration statement filed with the Commission in accordance with the
Securities Act of 1933, as amended (the "Securities Act"), or any successor
statute.
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part and Notes of a
principal amount in excess of $1,000 may be redeemed in part in multiples of
$1,000 only; and provided, further, that if a partial redemption is made with
the proceeds of a Public Equity Offering, selection of the Notes or portions
thereof for redemption shall, subject to the preceding proviso, be made by the
Trustee only on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to the procedures of DTC or a successor depositary), unless
such method is otherwise prohibited. Notice 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. 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 a 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 will cease to
accrue on Notes or portions thereof called for redemption as long as the Company
has deposited with the Paying Agent funds in satisfaction of the applicable
redemption price pursuant to the Indenture.
6. Repurchase Provisions
---------------------
(1) Upon the occurrence of a Change of Control, each Holder will have
the right to require that the Company purchase all or a portion (in integral
multiples of $1,000) of such Holder's Notes pursuant to the offer described
below (the "Change of Control Offer"), at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest thereon to the date of
purchase (subject to the right of Holders of record on a record date to receive
interest due on the related interest payment date that is on or prior to such
date of purchase). Within 30 days following the date upon which the Change of
Control occurred, the Company must send, by first-class mail, a notice to each
Holder, with a copy to the Trustee, which notice shall govern the terms of the
Change of Control Offer. Such notice shall state,
B-5
<PAGE>
among other things, the purchase date, which must be no earlier than 30 days nor
later than 60 days from the date such notice is mailed, other than as may be
required by law (the "Change of Control Payment Date"). Holders electing to have
a Note purchased pursuant to a Change of Control Offer will be required to
surrender the Note, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Note completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third business day
prior to the Change of Control Payment Date.
(2) To the extent all or a portion of the Net Cash Proceeds of any
Asset Sale are not applied within 270 days of such Asset Sale in certain ways
described in the Indenture (the "Net Proceeds Offer Trigger Date"), the Company
will make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net
Proceeds Offer Payment Date") not less than 20 business days following the date
on which such offer is made (or such longer period as may be required by law)
nor more than 60 days following such Net Proceeds Offer Trigger Date, from all
Holders on a pro rata basis (and on a pro rata basis with the holders of any
other Senior Subordinated Indebtedness with similar provisions requiring the
Company to offer to purchase such Senior Subordinated Indebtedness with the
proceeds of Asset Sales), that principal amount of Notes and such other
Indebtedness equal to such unapplied Net Cash Proceeds at a price, in the case
of the Notes, equal to 100% of the principal amount of the Notes to be
purchased, plus accrued and unpaid interest thereon, to the date of purchase
(subject to the right of Holders of record on a record date to receive interest
due on an interest payment date that is on or prior to such date of purchase).
Notwithstanding the foregoing, the Company may defer the Net Proceeds Offer
until there is an aggregate amount of unapplied Net Cash Proceeds equal to or in
excess of $5.0 million resulting from one or more Asset Sales (at which time,
the entire amount of unapplied Net Cash Proceeds, and not just the amount in
excess of $5.0 million, shall be applied as required pursuant to this
paragraph).
7. Denominations; Transfer; Exchange
---------------------------------
The Notes are in registered form without coupons in denominations of
principal amount of $1,000 and whole multiples of $1,000. A Holder may transfer
or exchange Notes in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange (i) any
Notes selected for redemption (except, in the case of a Note to be redeemed in
part, the portion of the Note not to be redeemed) for a period beginning 15 days
before the mailing of a notice of Notes to be redeemed and ending on the date of
such mailing or (ii) any Notes for a period beginning 15 days before an interest
payment date and ending on such interest payment date.
8. Persons Deemed Owners
---------------------
The registered holder of this Note may be treated as the owner of it
for all purposes.
B-6
<PAGE>
9. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
10. Discharge Prior to Redemption or Maturity
-----------------------------------------
Subject to certain conditions set forth in the Indenture, the Company
at any time may terminate some or all of its obligations under the Notes and the
Indenture if the Company deposits with the Trustee cash or U.S. Government
Obligations for the payment of principal and interest on the Notes to redemption
or maturity, as the case may be.
11. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the then Outstanding Notes and (ii)
any Default (other than with respect to nonpayment, or in respect of a provision
that cannot be amended without the written consent of each Noteholder affected)
or noncompliance with any provision may be waived with the written consent of
the Holders of a majority in principal amount of the then Outstanding Notes.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Noteholder, the Company and the Trustee may amend the Indenture or the Notes
to, among other things, cure any ambiguity, omission, defect or inconsistency,
or to comply with Article IV of the Indenture, or to provide for uncertificated
Notes in addition to or in place of Certificated Notes, or to add guarantees
with respect to the Notes or to secure the Notes, or to add additional covenants
or surrender rights and powers conferred on the Company, or to comply with any
request of the Commission in connection with qualifying the Indenture under the
Act, or to make any change that does not adversely affect the rights of any
Noteholder, or to provide for the issuance of Exchange Notes.
12. Defaults and Remedies
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes may declare all the
Outstanding Notes to be due and payable immediately. Certain events of
bankruptcy or insolvency are Events of Default which will result in the Notes
being due and payable immediately upon the occurrence of such Events of Default.
Noteholders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the
Outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Noteholders notice of any continuing Default or
Event
B-7
<PAGE>
of Default (except a Default or Event of Default in payment of principal or
interest) if it determines that withholding notice is in their interest.
13. Trustee Dealings with the Company
---------------------------------
Subject to certain limitations set forth in the Indenture, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Notes and may otherwise deal with and collect obligations
owed to it by the Company or its Affiliates and may otherwise deal with the
Company or its affiliates with the same rights it would have if it were not
Trustee.
14. No Recourse Against Others
--------------------------
An incorporator, director, officer, employee, stockholder or
controlling person, as such, of the Company or any Note Guarantor shall not have
any liability for any obligations of the Company under the Notes or any Note
Guarantees, the Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation. By accepting a Note, each Noteholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
15. Authentication
--------------
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Note.
16. Abbreviations
-------------
Customary abbreviations may be used in the name of a Noteholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
17. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Noteholders. 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.
18. Governing Law
-------------
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York, but without giving effect to applicable
principles of conflicts of law to the extent that the application of the law of
another jurisdiction would be required thereby.
B-8
<PAGE>
The Company will furnish to any Noteholder upon written request and
without charge to the Noteholder a copy of the Indenture which has in it the
text of this Note in larger type. Requests may be made to:
BGF Industries, Inc.
3802 Robert Porcher Way
Greensboro, North Carolina 27410
B-9
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the books
of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date: _______________ Your Signature ____________________
Signature Guarantee: ____________________________________
(Signature must be guaranteed)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Note.
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
B-10
<PAGE>
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been
made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase of this Global Signature of authorized
in Principal in Principal Note following such signatory of Trustee or
Date of Exchange Amount of this Global Note Amount of this Global Note decrease or increase Note Custodian
- ---------------- -------------------------- -------------------------- -------------------- -----------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 3.11 or Section 3.18 of the Indenture, check either box:
------------ ------------
[_] [_]
Section 3.11 Section 3.18
------------ ------------
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 3.11 or Section 3.18 of the Indenture, state the
------------ ------------
amount in principal amount (must be integral multiple of $1,000): $
Date: _______________ Your Signature: _________________________
(Sign exactly as your name appears on the other side
of the Note)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
B-12
<PAGE>
EXHIBIT 4.3
EXECUTION COPY
BGF INDUSTRIES, INC.
10 1/4% SENIOR SUBORDINATED NOTES DUE 2009
REGISTRATION RIGHTS AGREEMENT
New York, New York
January 21, 1999
First Union Capital Markets
As Initial Purchaser under the Purchase Agreement
301 South College Street, TW-10
Charlotte, NC 28288-0606
Ladies and Gentlemen:
This Registration Rights Agreement (the "Agreement") is dated as of
January 21, 1999, by and between BGF Industries, Inc., a Delaware corporation
(the "Issuer"), and First Union Capital Markets, a division of Wheat First
Securities, Inc. (the "Initial Purchaser").
This Agreement is being entered into in connection with a certain note
purchase agreement, dated January 15, 1999, between the Issuer and the Initial
Purchaser (the "Purchase Agreement"), which provides for the issuance and sale
by the Issuer to the Initial Purchaser of $150,000,000 aggregate principal
amount of the Issuer's 10 1/4% Senior Subordinated Notes Due 2009 (the "Notes").
In order to induce the Initial Purchaser to enter into the Purchase Agreement,
the Issuer has agreed to provide the registration rights set forth in this
Agreement for the benefit of the Initial Purchaser and its direct and indirect
transferees. The execution and delivery of this Agreement is a condition to the
obligation of the Initial Purchaser to purchase the Notes under the Purchase
Agreement. The parties hereby agree as follows:
1. Definitions. Capitalized terms used herein without definition
-----------
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:
"Act" means the Securities Act of 1933, as amended, and the rules and
---
regulations of the Commission promulgated thereunder.
"Affiliate" means, with respect to any specified person, any other
---------
person that, directly or indirectly, is in control of, is controlled by, or is
under common control with, such specified person. For purposes of this
definition, control of a person means the power, direct or indirect, to direct
or cause the direction of the management and policies of such person whether by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agreement" has the meaning set forth in the preamble hereto.
---------
<PAGE>
"Business Day" means any day excluding Saturday, Sunday or any other
------------
day which is a legal holiday under the laws of Charlotte, North Carolina or New
York, New York or is a day on which banking institutions therein located are
authorized or required by law or other governmental action to close.
"Commission" means the Securities and Exchange Commission.
----------
"Consummate" means, with respect to a Registered Exchange Offer, the
----------
occurrence of (a) the filing and effectiveness under the Act of the Exchange
Offer Registration Statement relating to the Exchange Notes to be issued in the
Registered Exchange Offer, (b) the maintenance of such Registration Statement
continuously effective and the keeping of the Registered Exchange Offer open for
a period not less than the minimum period required pursuant to Section 2(c)(ii)
hereof, (c) the Issuer's acceptance for exchange of all Transfer Restricted
Notes duly tendered and not validly withdrawn pursuant to the Registered
Exchange Offer and (d) the delivery of Exchange Notes by the Issuer to the
registrar under the Indenture in the same aggregate principal amount as the
aggregate principal amount of Transfer Restricted Notes duly tendered and not
validly withdrawn by Holders thereof pursuant to the Registered Exchange Offer
and the delivery of such Exchange Notes to such Holders and the delivery of such
Exchange Notes to such Holders. The term "Consummation" has a meaning
correlative to the foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations of the Commission promulgated thereunder.
"Exchange Notes" means debt securities of the Issuer substantially
--------------
identical in all material respects to the Notes (except that the Liquidated
Damages provisions and the transfer restrictions pertaining to the Notes will be
modified or eliminated, as appropriate), to be issued under the Indenture.
"Exchange Offer Registration Period" means the 180-Business Day period
----------------------------------
(or longer, if required by applicable law) following the Consummation of the
Registered Exchange Offer, exclusive of any period during which any stop order
shall be in effect suspending the effectiveness of the Exchange Offer
Registration Statement.
"Exchange Offer Registration Statement" means a registration statement
-------------------------------------
of the Issuer on an appropriate form under the Act with respect to the
Registered Exchange Offer, all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Filing Date" has the meaning set forth in Section 2 hereto.
-----------
"Holder" means any holder from time to time of Transfer Restricted
------
Notes or Exchange Notes (including the Initial Purchaser).
2
<PAGE>
"Indenture" means the indenture relating to the Notes and the Exchange
---------
Notes, to be dated as of the Closing Date, between the Issuer and The Bank of
New York, as trustee, as the same may be amended, supplemented, waived or
otherwise modified from time to time in accordance with the terms thereof.
"Initial Purchaser" has the meaning set forth in the preamble hereto.
-----------------
"Issue Date" means January 21, 1999.
----------
"Issuer" has the meaning set forth in the preamble hereto.
------
"Liquidated Damages" has the meaning set forth in Section 4 hereto.
------------------
"Losses" has the meaning set forth in Section 8(d) hereto.
------
"Majority Holders" means the Holders of a majority of the aggregate
----------------
principal amount of Transfer Restricted Notes registered under a Registration
Statement.
"Managing Underwriters" means the investment banker or investment
---------------------
bankers and manager or managers that shall administer an underwritten offering
under a Shelf Registration Statement.
"Notes" has the meaning set forth in the preamble hereto.
-----
"Participating Broker-Dealer" means any Holder (which may include the
---------------------------
Initial Purchaser) that is a broker-dealer, electing to exchange Notes acquired
for its own account as a result of market-making activities or other trading
activities for Exchange Notes.
"Prospectus" means the prospectus included in any Registration
----------
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Transfer Restricted Notes covered by such
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"Purchase Agreement" has the meaning set forth in the preamble hereto.
------------------
"Registered Exchange Offer" means the proposed offer to the Holders to
-------------------------
issue and deliver to such Holders, in exchange for the Notes, a like principal
amount of Exchange Notes.
"Registration Statement" means any Exchange Offer Registration
----------------------
Statement or Shelf Registration Statement that covers any of the Transfer
Restricted Notes (including any guarantees of each thereof) pursuant to the
provisions of this Agreement, amendments and supplements to such registration
statement, including post-effective amendments, in each case
3
<PAGE>
including the Prospectus contained therein, all exhibits thereto, and all
material incorporated by reference therein.
"Shelf Registration" means a registration effected pursuant to Section
------------------
3 hereof.
"Shelf Registration Period" has the meaning set forth in Section 3(c)
-------------------------
hereof.
"Shelf Registration Statement" means a "shelf" registration statement
----------------------------
of the Issuer pursuant to the provisions of Section 3 hereof, which covers some
or all of the Transfer Restricted Notes, as applicable, on an appropriate form
under Rule 415 under the Act, or any similar rule that may be adopted by the
Commission, all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Transfer Restricted Notes" means each Note upon original issuance
-------------------------
thereof and at all times subsequent thereto, each Exchange Note as to which
Section 3(a)(iii) and Section 3(a)(iv) apply upon original issuance and at all
times subsequent thereto, until in the case of any such Note or Exchange Note,
as the case may be, the earliest to occur of (i) the date on which such Note has
been exchanged by a person other than a Participating Broker-Dealer for an
Exchange Note (other than with respect to an Exchange Note as to which Section
3(a)(iii) and Section 3(a)(iv) apply), (ii) with respect to Exchange Notes
received by Participating Broker-Dealers in the Registered Exchange Offer, the
date on which such Exchange Note has been sold by such Participating Broker-
Dealer by means of the Prospectus contained in the Exchange Offer Registration
Statement, (iii) a Shelf Registration Statement covering such Note or Exchange
Note, as the case may be, has been declared effective by the Commission and such
Note or Exchange Note, as the case may be, has been disposed of in accordance
with such effective Shelf Registration Statement, (iv) the date on which such
Note or Exchange Note, as the case may be, is disposed of pursuant to Rule 144
under the Act or (v) such Note or Exchange Note, as the case may be, ceases to
be outstanding for purposes of the Indenture.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
-------------------
amended.
"Trustee" means the trustee with respect to the Notes or Exchange
-------
Notes, as applicable, under the Indenture.
2. Registered Exchange Offer; Resales of Exchange Notes by
-------------------------------------------------------
Participating Broker-Dealers; Private Exchange. (a) The Issuer shall prepare
- ----------------------------------------------
and, not later than 60 days from the Issue Date (or, if such 60th day is not a
Business Day, by the first Business Day thereafter), shall file with the
Commission the Exchange Offer Registration Statement with respect to the
Registered Exchange Offer (the date of such filing hereinafter referred to as
the "Filing Date"). The Issuer shall use its best efforts (i) to cause the
Exchange Offer Registration Statement to be declared effective under the Act
within 150 days from the Issue Date (or, if such 150th day is not a Business
Day, by the first Business Day thereafter), and (ii) to Consummate the
Registered Exchange Offer within 30 Business Days from the date the Exchange
Offer Registration
4
<PAGE>
Statement becomes effective (or, if such 30th day is not a Business Day, by the
first Business Day thereafter).
(b) The objective of such Registered Exchange Offer is to enable each
Holder electing to exchange Transfer Restricted Notes for Exchange Notes
(assuming that such Holder (x) is not an "affiliate" of the Issuer within the
meaning of the Act, (y) is not a broker-dealer that acquired the Transfer
Restricted Notes in a transaction other than as a part of its market-making or
other trading activities and (z) if such Holder is not a broker-dealer, acquires
the Exchange Notes in the ordinary course of such Holder's business, is not
participating in the distribution of the Exchange Notes and has no arrangements
or understandings with any person to participate in the distribution of the
Exchange Notes) to resell such Exchange Notes from and after their receipt
without any limitations or restrictions under the Act and without material
restrictions under the securities laws of a substantial proportion of the
several states of the United States.
(c) In connection with the Registered Exchange Offer, the Issuer
shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for acceptance for not
less than 20 Business Days after the date notice thereof is mailed to
Holders;
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of New
York; and
(iv) comply in all material respects with all applicable laws
relating to the Registered Exchange Offer.
(d) The Issuer may suspend the use of the Prospectus for a period not
to exceed 30 days in any six month period or an aggregate of 45 days in any
twelve-month period for valid business reasons, to be determined by the Issuer
in its sole reasonable judgment (not including avoidance of its obligations
hereunder), including, without limitation, the acquisition or divestiture of
assets, public filings with the Commission, pending corporate developments and
similar events; provided that the Issuer promptly thereafter complies with the
--------
requirements of Section 5(k) hereof, if applicable.
(e) As soon as practicable after the Consummation of the Registered
Exchange Offer, the Issuer shall cause the Trustee promptly to authenticate and
deliver to each Holder Exchange Notes equal in principal amount to the Transfer
Restricted Notes of such Holder so accepted for exchange.
(f) The Initial Purchaser and the Issuer acknowledge that, pursuant
to interpretations by the staff of the Commission of Section 5 of the Act, and
in the absence of an applicable exemption therefrom, each Participating Broker-
Dealer is required to deliver a Prospectus in connection with a sale of any
Exchange Notes received by such Participating
5
<PAGE>
Broker-Dealer pursuant to the Registered Exchange Offer in exchange for Transfer
Restricted Notes acquired for its own account as a result of market-making
activities or other trading activities. Accordingly, the Issuer will allow
Participating Broker-Dealers and other persons, if any, with similar prospectus
delivery requirements to use the Prospectus contained in the Exchange Offer
Registration Statement in connection with the resale of Exchange Notes and
shall:
(i) include the information set forth in Annex A hereto on the cover
of the Prospectus forming a part of the Exchange Offer Registration
Statement, in Annex B hereto in the forepart of the Exchange Offer
Registration Statement in a section setting forth details of the Registered
Exchange Offer, in Annex C hereto in the underwriting or plan of
distribution section of the Prospectus forming a part of the Exchange Offer
Registration Statement, and in Annex D hereto in the letter of transmittal
delivered pursuant to the Registered Exchange Offer; and
(ii) use all commercially reasonable best efforts to keep the Exchange
Offer Registration Statement continuously effective (subject to Section
2(d)) under the Act during the Exchange Offer Registration Period for
delivery of the Prospectus included therein by Participating Broker-Dealers
in connection with sales of Exchange Notes received pursuant to the
Registered Exchange Offer, as contemplated by Section 5(h) below.
(g) In the event that the Initial Purchaser determines that it is not
eligible to participate in the Registered Exchange Offer with respect to the
exchange of Transfer Restricted Notes constituting any portion of an unsold
allotment, upon the effectiveness of the Shelf Registration Statement as
contemplated by Section 3 hereof and at the request of the Initial Purchaser,
the Issuer shall issue and deliver to the Initial Purchaser, or to the party
purchasing Transfer Restricted Notes registered under the Shelf Registration
Statement from the Initial Purchaser, in exchange for such Transfer Restricted
Notes, a like principal amount of Exchange Notes to the extent permitted by
applicable law. The Issuer shall use its reasonable best efforts to cause the
CUSIP Service Bureau to issue the same CUSIP number for such Exchange Notes as
for Exchange Notes issued pursuant to the Registered Exchange Offer.
3. Shelf Registration. (a) If (i) the Issuer is not permitted to file
------------------
the Exchange Offer Registration Statement or to Consummate the Registered
Exchange Offer because the Registered Exchange Offer is not permitted by
applicable law or Commission policy, (ii) for any other reason the Registered
Exchange Offer is not Consummated within 30 Business Days of the date the
Exchange Offer Registration Statement has become effective, (iii) the Initial
Purchaser so requests with respect to Notes acquired by it directly from the
Issuer on or prior to the 20th Business Day following the Consummation of the
Registered Exchange Offer, (iv) any Holder notifies the Issuer on or prior to
the 20th Business Day following the Consummation of the Registered Exchange
Offer that such Holder is not eligible to participate in the Registered Exchange
Offer or the Exchange Notes such Holder would receive would not be freely
tradable, or (v) in the case where the Initial Purchaser participates in the
Registered Exchange Offer or acquires Exchange Notes pursuant to Section 2(g)
hereof, the Initial Purchaser does not receive
6
<PAGE>
freely tradable Exchange Notes in exchange for Notes constituting any portion of
an unsold allotment and the Initial Purchaser notifies the Issuer on or prior to
the 20th Business Day following the Consummation of the Registered Exchange
Offer (it being understood that, for purposes of this Section 3, (x) the
requirement that the Initial Purchaser deliver a Prospectus containing the
information required by Items 507 and/or 508 of Regulation S-K under the Act in
connection with sales of Exchange Notes acquired in exchange for such Transfer
Restricted Notes shall result in such Exchange Notes being not "freely tradable"
and (y) the requirement that a Participating Broker-Dealer deliver a Prospectus
in connection with sales of Exchange Notes acquired in the Registered Exchange
Offer in exchange for Transfer Restricted Notes acquired as a result of market-
making activities or other trading activities shall not result in such Exchange
Notes being not "freely tradable"), the following provisions shall apply:
(b) The Issuer shall use its reasonable best efforts to file with the
Commission a Shelf Registration Statement prior to the 75th day following the
earliest to occur of (i) the date on which the Issuer determines that it is not
permitted to file the Exchange Offer Registration Statement or to Consummate the
Exchange Offer; (ii) 30 Business Days after the Exchange Offer Registration
Statement has been declared effective if the Registered Exchange Offer has not
been Consummated by such date and (iii) the date notice is given pursuant to
Section (a)(iii), (iv) or (v) above (or if such 75th day is not a Business Day,
by the first Business Day thereafter) and shall use its reasonable efforts to
cause the Shelf Registration Statement to be declared effective by the
Commission within 135 days thereafter. With respect to Exchange Notes received
by the Initial Purchaser in exchange for Notes constituting any portion of an
unsold allotment, the Issuer may, if permitted by current interpretations by the
Commission's staff, file a post-effective amendment to the Exchange Offer
Registration Statement containing the information required by Regulation S-K
Items 507 and/or 508, as applicable, in satisfaction of its obligations under
this paragraph (b) with respect thereto, and any such Exchange Offer
Registration Statement, as so amended, shall be referred to herein as, and
governed by the provisions herein applicable to, a Shelf Registration Statement.
(c) The Issuer shall use its best efforts to keep such Shelf
Registration Statement continuously effective (subject to Section 3(d)) in order
to permit the Prospectus forming a part thereof to be usable by Holders until
the earliest of (i) such time as the Notes or Exchange Notes covered by the
Shelf Registration Statement can be sold without any limitations under clauses
(c), (e), (f) and (h) of Rule 144, (ii) two years from the date on which the
Shelf Registration Statement was filed and (iii) such date as of which all the
Transfer Restricted Notes have been sold pursuant to the Shelf Registration
Statement (in any such case, such period being called the "Shelf Registration
Period"). The Issuer shall be deemed not to have used its best efforts to keep
the Shelf Registration Statement effective during the requisite period if it
voluntarily takes any action that would result in Holders of Transfer Restricted
Notes covered thereby not being able to offer and sell such notes during that
period, unless such action is (x) required by applicable law or (y) pursuant to
Section 3(d) hereof, and, in either case, so long as the Issuer promptly
thereafter complies with the requirements of Section 5(k) hereof, if applicable.
(d) The Issuer may suspend the use of the Prospectus for a period not
to exceed 30 days in any six month period or an aggregate of 45 days in any
twelve-month period for valid
7
<PAGE>
business reasons, to be determined by the Issuer in its sole reasonable judgment
(not including avoidance of its obligations hereunder), including, without
limitation, the acquisition or divestiture of assets, public filings with the
Commission, pending corporate developments and similar events; provided that the
--------
Issuer promptly thereafter complies with the requirements of Section 5(k)
hereof, if applicable.
(e) No Holder of Transfer Restricted Notes may include any of its
Transfer Restricted Notes in any Shelf Registration Statement pursuant to this
Agreement unless and until such Holder furnishes to the Issuer in writing,
within 20 Business Days after receipt of a request therefor, such information as
the Issuer may reasonably request for use in connection with any Shelf
Registration Statement or Prospectus or preliminary Prospectus included therein.
No Holder of Transfer Restricted Notes shall be entitled to Liquidated Damages
pursuant to Section 4 hereof unless and until such Holder shall have used its
best efforts to provide all such reasonably requested information. Each Holder
of Transfer Restricted Notes as to which any Shelf Registration Statement is
being effected agrees to furnish promptly to the Issuer all information required
to be disclosed in order to make the information previously furnished to the
Issuer by such Holder not misleading.
4. Liquidated Damages.
------------------
(a) The parties hereto agree that Holders will suffer damages if the
Issuer fails to perform its obligations under Section 2 or Section 3 hereof and
that it would not be feasible to ascertain the extent of such damages.
Accordingly, in the event that (i) the applicable Registration Statement is not
filed with the Commission on or prior to the date specified herein for such
filing, (ii) the applicable Registration Statement has not been declared
effective by the Commission on or prior to the date specified herein for such
effectiveness after such obligation arises, (iii) if the Registered Exchange
Offer is required to be Consummated hereunder, the Registered Exchange Offer has
not been Consummated by the Issuer within the time period set forth in Section
2(a), or (iv) prior to the end of the Exchange Offer Registration Period or the
Shelf Registration Period, the Commission shall have issued a stop order
suspending the effectiveness of the Exchange Offer Registration Statement or the
Shelf Registration Statement, as the case may be, or proceedings have been
initiated with respect to the Registration Statement under Section 8(d) or 8(e)
of the Act, (v) the aggregate number of days in any one such suspension period
exceeds the period permitted pursuant to Section 2(d) or 3(d) hereof, as each
may be applicable, or (vi) the number of suspension periods exceeds the number
permitted pursuant to Section 2(d) or 3(d) hereof, as each may be applicable
(each such event referred to in clauses (i) through (vi), a "Registration
Default"), then damages ("Liquidated Damages") will accrue with respect to the
first 90-day period immediately following the occurrence of such Registration
Default in an amount equal to $0.05 per week per $1,000 principal amount of such
Transfer Restricted Notes and will increase by an additional $0.05 per week per
$1,000 principal amount of such Transfer Restricted Notes for each subsequent
90-day period until such Registration Default has been cured, up to an aggregate
maximum amount of Liquidated Damages of $0.30 per week per $1,000 principal
amount of Notes for all Registration Defaults. Following the cure of a
Registration Default, the accrual of Liquidated Damages with respect to
8
<PAGE>
such Registration Default will cease and upon the cure of all Registration
Defaults the accrual of all Liquidated Damages will cease.
(b) The Issuer shall notify the Trustee and paying agent under the
Indenture (or the trustee and paying agent under such other indenture under
which any Transfer Restricted Notes are issued) immediately upon the happening
of each and every Registration Default. The Issuer shall pay the Liquidated
Damages due on the Transfer Restricted Notes by depositing with the paying agent
(which shall not be the Issuer for these purposes) for the Transfer Restricted
Notes, in trust, for the benefit of the Holders thereof, prior to 11:00 A.M. on
the next interest payment date specified in the Indenture (or such other
indenture), sums sufficient to pay the Liquidated Damages then due. The
Liquidated Damages due shall be payable on each interest payment date specified
by the Indenture (or such other indenture) to the record holders entitled to
receive the interest payment to be made on such date. Each obligation to pay
Liquidated Damages shall be deemed to accrue from and including the date of the
applicable Registration Default.
(c) The parties hereto agree that the Liquidated Damages provided for
in this Section 4 constitutes a reasonable estimate of the damages that will be
suffered by holders of Transfer Restricted Notes by reason of the happening of
any Registration Default.
(d) All of the Issuer's obligations set forth in this Section 4 which
are outstanding with respect to any Transfer Restricted Note at the time such
Note ceases to be covered by an effective Registration Statement shall survive
until such time as all such obligations with respect to such security have been
satisfied in full (notwithstanding termination of the Agreement).
5. Registration Procedures. In connection with any Shelf
-----------------------
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Issuer shall furnish to the Initial Purchaser, prior to the
filing thereof with the Commission, a copy of any Registration Statement, and
each amendment thereof and each amendment or supplement, if any, to the
Prospectus included therein and shall use its best efforts to reflect in each
such document, when so filed with the Commission, such comments as the Initial
Purchaser reasonably may propose.
(b) The Issuer shall ensure that:
(i) any Registration Statement and any amendment thereto and any
Prospectus contained therein and any amendment or supplement thereto
complies in all material respects with the Act;
(ii) any Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and
9
<PAGE>
(iii) any Prospectus forming part of any Registration Statement,
including any amendment or supplement to such Prospectus, does not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
provided that no representation or agreement is made hereby with respect to
- --------
information with respect to the Initial Purchaser, any Underwriter or any Holder
required to be included in any Registration Statement or Prospectus pursuant to
the Act or provided by the Initial Purchaser, any Holder or any Underwriter
specifically for inclusion in any Registration Statement or Prospectus.
(c) (1) The Issuer shall advise the Initial Purchaser and, in the
case of a Shelf Registration Statement, the Holders of Transfer Restricted Notes
covered thereby, and, if requested by the Initial Purchaser or any such Holder,
confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto has been
filed with the Commission and when the Registration Statement or any post-
effective amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or supplements to
the Registration Statement or the Prospectus included therein or for
additional information.
(2) The Issuer shall advise the Initial Purchaser and, in the case of
a Shelf Registration Statement, the Holders of Transfer Restricted Notes covered
thereby, and, in the case of an Exchange Offer Registration Statement, any
Participating Broker-Dealer that has provided in writing to the Issuer a
telephone or facsimile number and address for notices, and, if requested by the
Initial Purchaser or any such Holder or Participating Broker-Dealer, confirm
such advice in writing:
(i) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(ii) of the receipt by the Issuer of any notification with respect
to the suspension of the qualification of the Transfer Restricted Notes
included in any Registration Statement for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
(iii) of the happening of any event that requires the making of any
changes in the Registration Statement or the Prospectus so that, as of such
date, the statements therein are not misleading and do not omit to state a
material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading (which advice
shall be accompanied by an instruction to suspend the use of the Prospectus
until the requisite changes have been made).
10
<PAGE>
(d) The Issuer shall use its best efforts to obtain the withdrawal of
any order suspending the effectiveness of any Registration Statement at the
earliest possible time.
(e) The Issuer shall furnish to each Holder of Transfer Restricted
Notes included within the coverage of any Shelf Registration Statement, without
charge, at least one copy of such Shelf Registration Statement and any post-
effective amendment thereto, including financial statements and schedules, and,
if the Holder so requests in writing, all exhibits thereto (including those
incorporated by reference).
(f) The Issuer shall, during the Shelf Registration Period, deliver
to each Holder of Transfer Restricted Notes included within the coverage of any
Shelf Registration Statement, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) included in such Shelf Registration
Statement and any amendment or supplement thereto as such Holder may reasonably
request; and the Issuer consents to the use of the Prospectus or any amendment
or supplement thereto by each of the selling Holders of Transfer Restricted
Notes in connection with the offering and sale of the Transfer Restricted Notes
covered by the Prospectus or any amendment or supplement thereto.
(g) The Issuer shall furnish to each Participating Broker-Dealer that
so requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, any documents incorporated by reference
therein and, if the Participating Broker-Dealer so requests in writing, all
exhibits thereto (including those incorporated by reference).
(h) The Issuer shall, during the Exchange Offer Registration Period,
deliver to each Participating Broker-Dealer, without charge, as many copies of
the Prospectus (including each preliminary Prospectus) included in such Exchange
Offer Registration Statement and any amendment or supplement thereto as such
Participating Broker-Dealer may reasonably request; and the Issuer consents to
the use of the Prospectus or any amendment or supplement thereto by any such
Participating Broker-Dealer in connection with the offering and sale of the
Exchange Notes, as provided in Section 2(f) above.
(i) Prior to the Registered Exchange Offer or any other offering of
Transfer Restricted Notes pursuant to any Registration Statement, the Issuer
shall register, qualify or cooperate with the Holders of Transfer Restricted
Notes included therein and their respective counsel in connection with the
registration or qualification of such Transfer Restricted Notes for offer and
sale under the securities or blue sky laws of such states as any such Holders
reasonably request in writing and do any and all other acts or things necessary
or advisable to enable the offer and sale in such jurisdictions of the Transfer
Restricted Notes covered by such Registration Statement; provided, however, that
-------- -------
the Issuer will not be required to qualify generally to do business in any
jurisdiction in which it is not then so qualified, to file any general consent
to service of process or to take any action which would subject it to general
service of process or to taxation in any such jurisdiction where it is not then
so subject.
11
<PAGE>
(j) The Issuer shall cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Transfer Restricted
Notes to be sold pursuant to any Registration Statement free of any restrictive
legends and in denominations and registered in such names as Holders may request
prior to sales of Transfer Restricted Notes pursuant to such Registration
Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) of this Section 5, the Issuer shall promptly prepare and file a
post-effective amendment to any Registration Statement or an amendment or
supplement to the related Prospectus or any other required document so that, as
thereafter delivered to purchasers of the Transfer Restricted Notes included
therein, the Prospectus will not include an untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(l) The Issuer shall use its reasonable best efforts to cause The
Depository Trust Company ("DTC") on the first Business Day following the
effective date of any Registration Statement hereunder or as soon as possible
thereafter to remove (i) from any existing CUSIP number assigned to the Transfer
Restricted Notes or Exchange Notes, as the case may be, any designation
indicating that such notes are "restricted securities," which efforts shall
include delivery to DTC of a letter executed by the Issuer substantially in the
form of Annex E hereto and (ii) any other stop or restriction on DTC's system
with respect to the Transfer Restricted Notes or Exchange Notes, as the case may
be. In the event the Issuer is unable to cause DTC to take actions described in
the immediately preceding sentence, the Issuer shall take such actions as the
Initial Purchaser may reasonably request to provide, as soon as practicable, a
CUSIP number for the Transfer Restricted Notes or Exchange Notes registered
under such Registration Statement and to cause such CUSIP number to be assigned
to the Transfer Restricted Notes or Exchange Notes (or to the maximum aggregate
principal amount of the securities to which such number may be assigned).
(m) The Issuer shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make generally
available to its security holders as soon as practicable after the effective
date of the applicable Registration Statement an earnings statement satisfying
the provisions of Section 11(a) of the Act and Rule 158 promulgated thereunder.
(n) The Issuer shall cause the Indenture to be qualified under the
Trust Indenture Act in a timely manner.
(o) The Issuer may require each Holder of Transfer Restricted Notes
to be sold pursuant to any Shelf Registration Statement to furnish to the Issuer
such information regarding the Holder and the distribution of such Transfer
Restricted Notes as may, from time to time, be reasonably required by the Act
and the rules and regulations promulgated thereunder, and the obligations of the
Issuer to any Holder hereunder shall be expressly conditioned on the compliance
of such Holder with such request.
12
<PAGE>
(p) The Issuer shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement (i) such information as the Majority Holders provide or, if the
Transfer Restricted Notes are being sold in an underwritten offering, as the
Managing Underwriters and the Majority Holders reasonably agree should be
included therein and provided to the Issuer in writing for inclusion in the
Shelf Registration Statement or Prospectus, and (ii) such information as a
Holder may provide from time to time to the Issuer in writing for inclusion in a
Prospectus or any Shelf Registration Statement concerning such Holder and the
distribution of such Holder's Transfer Restricted Notes and, in either case,
shall make all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after being notified in writing of the matters
to be incorporated in such Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Issuer shall
enter into such agreements (including underwriting agreements) and take all
other customary and appropriate actions as may be reasonably requested in order
to expedite or facilitate the registration or the disposition of any Transfer
Restricted Notes, and in connection therewith, if an underwriting agreement is
entered into, cause the same to contain indemnification provisions and
procedures no less favorable than those set forth in Section 8 (or such other
provisions and procedures acceptable to the Majority Holders and the Managing
Underwriters, if any, with respect to all parties to be indemnified pursuant to
Section 8).
(r) In the case of any Shelf Registration Statement, the Issuer
shall:
(i) make reasonably available for inspection by the Holders of
Transfer Restricted Notes to be registered thereunder, any Underwriter
participating in any disposition pursuant to such Shelf Registration
Statement, and any attorney, accountant or other agent retained by the
Holders or any such Underwriter, all relevant financial and other records,
pertinent corporate documents and properties of the Issuer and any of its
subsidiaries;
(ii) make reasonably available its officers, directors and employees
to supply all relevant information reasonably requested by the Holders or
any such Underwriter, attorney, accountant or agent in connection with any
such Registration Statement as is customary for similar due diligence
examinations; provided, however, that any information so provided will be
-------- -------
deemed confidential at the time of delivery of such information and shall
be kept confidential by the Holders or any such Underwriter, attorney,
accountant or agent, unless (x) disclosure thereof is made in connection
with a court proceeding or required by law; provided that each Holder and
--------
any such Managing Underwriter, attorney, accountant or agent will, upon
learning that disclosure of such information is sought in a court
proceeding or required by law, give reasonable notice to the Issuer with
enough time to allow the Issuer to undertake appropriate action to prevent
disclosure at the Issuer's sole expense, or (y) such information has
previously been made or becomes available to the public generally through
the Issuer or through a third party without an accompanying obligation of
confidentiality;
13
<PAGE>
(iii) make such representations and warranties to the Holders of
Transfer Restricted Notes registered thereunder and the Managing
Underwriters, if any, in form, substance and scope as are customarily made
by issuers to Managing Underwriters and covering matters including, but not
limited to, those set forth in the Purchase Agreement;
(iv) obtain opinions of counsel to the Issuer and updates thereof
(which counsel and opinions, in form, scope and substance, shall be
reasonably satisfactory to the Managing Underwriters, if any) addressed to
each selling Holder and the Managing Underwriters, if any, covering such
matters as are customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
Holders and Managing Underwriters;
(v) obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Issuer (and, if necessary,
any other independent certified public accountants of any subsidiary of the
Issuer or of any business acquired by the Issuer for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to each selling Holder of the Transfer
Restricted Notes covered by such Shelf Registration Statement (provided
such Holder furnishes the accountants with such representations as the
accountants customarily require in similar situations) and the Managing
Underwriters, if any, in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with primary
underwritten offerings;
(vi) deliver such documents and certificates as may be reasonably
requested by the Majority Holders and the Managing Underwriters, if any,
including those to evidence compliance with Section 5(i) and with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Issuer; and
(vii) The foregoing actions set forth in this Section 5(r) shall be
performed at (A) the effectiveness of such Shelf Registration Statement and
each post-effective amendment thereto and (B) each closing under any
underwriting or similar agreement as and to the extent required thereunder.
(s) The Issuer shall, if and to the extent required under the Act
and/or the Trust Indenture Act and the rules and regulations thereunder in order
to register the Transfer Restricted Notes (including any guarantees thereof)
under the Act and qualify the Indenture under the Trust Indenture Act, cause
each guarantor, if any, to sign any Registration Statement and take all other
action necessary to register any such guarantees under the applicable
Registration Statement.
6. Registration Expenses. The Issuer shall bear all fees and
---------------------
expenses (including the fees and expenses, if any, of Cleary, Gottlieb, Steen &
Hamilton, counsel for the Initial Purchaser, incurred in connection with the
Registered Exchange Offer) incurred in connection with the performance of its
obligations under Sections 2, 3, 4 and 5 hereof (other than brokers', dealers'
and underwriters' discounts and commissions and brokers', dealers' and
underwriters' counsel fees) and shall reimburse the Holders for the reasonable
fees and disbursements of one
14
<PAGE>
firm or counsel designated by the Majority Holders to act as counsel for the
Holders in connection therewith.
7. Rules 144 and 144A. The Issuer shall use its best efforts to file
------------------
the reports required to be filed by it under the Act and the Exchange Act in a
timely manner and, if at any time the Issuer is not required to file such
reports, it will, upon the request of any Holder of Transfer Restricted Notes,
make publicly available other information so long as necessary to permit sales
of their securities pursuant to Rules 144 and 144A. The Issuer covenants that
it will take such further action as any Holder of Transfer Restricted Notes may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Transfer Restricted Notes without registration under the
Securities Act within the limitation of the exemptions provided by Rules 144 and
144A (including the requirements of Rule 144A(d)(4)). The Issuer will provide a
copy of this Agreement to prospective purchasers of Transfer Restricted Notes
identified to the Issuer by the Initial Purchaser upon request. Upon the
request of any Holder of Transfer Restricted Notes, the Issuer shall deliver to
such Holder a written statement as to whether it has complied with such
requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be
deemed to require the Issuer to register any of its securities pursuant to the
Exchange Act.
8. Indemnification and Contribution.
--------------------------------
(a) (i) In connection with any Registration Statement, the Issuer
agrees to indemnify and hold harmless each Holder of Transfer Restricted
Notes covered thereby, the directors, officers, employees and agents of
each such Holder and each person who controls any such Holder within the
meaning of either the Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of
them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement as
originally filed or in any amendment thereof, in any preliminary Prospectus
or Prospectus or in any amendment thereof or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and agree to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the
-------- -------
Issuer will not be liable in any case to the extent that any such loss,
claim, damage or liability arises out of or is based upon (A) any such
untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information relating to the Holder furnished to the Issuer by or on behalf
of any such Holder specifically for inclusion therein, (B) use of a
Registration Statement or the related Prospectus during a period when a
stop order has been issued in respect of such Registration Statement or any
proceedings for that purpose have been initiated or use of a Prospectus
when use of such Prospectus has been suspended pursuant to Section 5(c);
provided, further, in each case, that Holders received prior notice of such
-------- -------
15
<PAGE>
stop order, initiation of proceedings or suspension or (C) if the Holder is
required to but does not deliver a Prospectus or the then current
Prospectus. This indemnity agreement will be in addition to any liability
which the Issuer may otherwise have.
(ii) The Issuer also agrees to indemnify or contribute to Losses, as
provided in Section 8(d), of any Managing Underwriters of Transfer
Restricted Notes registered under a Registration Statement, their officers
and directors and each person who controls such Managing Underwriters on
substantially the same basis as that of the indemnification of the selling
Holders provided in this Section 8(a) and shall, if requested by any
Holder, enter into an underwriting agreement reflecting such agreement, as
provided in Section 5(q) hereof.
(b) Each Holder of Transfer Restricted Notes covered by a
Registration Statement severally agrees to indemnify and hold harmless the
Issuer, its directors, officers, employees and agents and each person who
controls the Issuer within the meaning of either the Act or the Exchange Act to
the same extent as the foregoing indemnity from the Issuer to each such Holder,
but only with reference to written information relating to such Holder furnished
to the Issuer by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
-------- -------
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel (and local counsel) if (i) the use of
counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of
16
<PAGE>
the institution of such action or (iv) the indemnifying party shall have
authorized the indemnified party to employ separate counsel at the expense of
the indemnifying party; provided further, that the indemnifying party shall not
-------- -------
be responsible for the fees and expenses of more than one separate counsel
(together with appropriate local counsel) representing all the indemnified
parties under paragraph (a) or paragraph (b) above. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Registration Statement which
resulted in such Losses; provided, however, that in no case shall any
-------- -------
Underwriter be responsible for any amount in excess of the underwriting discount
or commission applicable to the Transfer Restricted Notes purchased by such
Underwriter under the Registration Statement which resulted in such Losses. If
the allocation provided by the immediately preceding sentence is unavailable for
any reason, the indemnifying party and the indemnified party shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Issuer shall be deemed to be equal to
the sum of (x) the aggregate principal amount of the Notes and (y) the total
amount of Liquidated Damages which the Issuer was not required to pay as a
result of registering the Transfer Restricted Notes covered by the Registration
Statement which resulted in such Losses. Benefits received by any Holder shall
be deemed to be equal to the value of receiving Transfer Restricted Notes
registered under the Act. Benefits received by any Underwriter shall be deemed
to be equal to the total underwriting discounts and commissions, as set forth on
the cover page of the Prospectus forming a part of the Registration Statement
which resulted in such Losses. Relative fault shall be determined by reference
to, among other things, whether any alleged untrue statement or omission relates
to information provided by the indemnifying party, on the one hand, or by the
indemnified party, on the other hand. The parties agree that it would not be
just and equitable if contribution were determined by pro rata allocation or any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For
17
<PAGE>
purposes of this Section 8, each person who controls a Holder within the meaning
of either the Act or the Exchange Act and each director, officer, employee and
agent of such Holder shall have the same rights to contribution as such Holder,
and each person who controls the Issuer within the meaning of either the Act or
the Exchange Act and each director, officer , employee and agent of the Issuer
shall have the same rights to contribution as the Issuer, subject in each case
to the applicable terms and conditions of this paragraph (d).
(e) The provisions of this Section 8 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder, the
Issuer or any of the officers, directors or controlling persons referred to in
Section 8 hereof, and will survive the sale by a Holder of Transfer Restricted
Notes covered by a Registration Statement.
9. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Issuer has not, as of the date
--------------------------
hereof, entered into nor shall it, on or after the date hereof, enter into any
agreement that is inconsistent with the rights granted to the Holders herein or
otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Issuer has obtained the written
consent of the Majority Holders. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose Transfer Restricted Notes are
being sold pursuant to a Shelf Registration Statement or whose Notes are being
exchanged pursuant to an Exchange Offer Registration Statement, as the case may
be, and which does not directly or indirectly affect the rights of other Holders
may be given by such Holders, determined on the basis of Notes being sold rather
than registered. Notwithstanding any of the foregoing, no amendment,
modification, supplement, waiver or consents to any departure from the
provisions of Section 8 hereof shall be effective as against any Holder of
Transfer Restricted Notes unless consented to in writing by such Holder.
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to the Initial Purchaser, as follows:
First Union Capital Markets
301 South College Street, TW-10
Charlotte, NC 28288-0606
Attention: Corporate Finance Department
(ii) if to any other Holder, at the most current address given by such
Holder to the Issuer in accordance with the provisions of this Section
9(c), which address initially
18
<PAGE>
is, with respect to each Holder, the address of such Holder maintained by
the registrar under the Indenture, with a copy in like manner to the
Initial Purchaser; and
(iii) if to the Issuer, as follows:
BGF Industries, Inc.
3802 Robert Porcher Way
Greensboro, NC 27410
Attention: Philippe R. Dorier
All such notices and communications shall be deemed to have been duly
given when received, if delivered by hand or air courier, and when sent, if sent
by first-class mail, telex or telecopier.
The Issuer by notice to the others may designate additional or
different addresses for subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties,
including, without the need for an express assignment or any consent by the
Issuer thereto, subsequent Holders. The Issuer hereby agrees to extend the
benefits of this Agreement to any Holder and any such Holder may specifically
enforce the provisions of this Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York applicable to agreements
made and to be performed in said State, without regard to the conflicts of law
rules thereof.
(h) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
(i) Notes Held by the Issuer, etc. Whenever the consent or approval
------------------------------
of Holders of a specified percentage of principal amount of Transfer Restricted
Notes or Exchange Notes is required hereunder, Transfer Restricted Notes or
Exchange Notes held by the Issuer or its
19
<PAGE>
Affiliates (other than subsequent Holders of Transfer Restricted Notes or
Exchange Notes if such subsequent Holders are deemed to be Affiliates solely by
reason of their holdings of such notes) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
20
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Issuer and the Initial Purchaser.
Very truly yours,
BGF INDUSTRIES, INC.
By: /s/ Philippe Dorier
------------------------------------
Name: Philippe Dorier
Title: Senior Vice President, Chief
Financial Officer, Secretary,
Treasurer
The foregoing Agreement is hereby
accepted as of the date first written above.
FIRST UNION CAPITAL MARKETS,
A DIVISION OF WHEAT FIRST SECURITIES, INC.
By: /s/ Richard E. Fogg
--------------------------
Name: Richard E. Fogg
Title: Director
21
<PAGE>
EXHIBIT 10.1
DEFERRED COMPENSATION AGREEMENT
-------------------------------
AGREEMENT made this 13 day of Nov., 1995, by and between BGF Industries,
Inc., a Delaware corporation, having its principal place of business in
Greensboro, North Carolina (hereinafter referred to as the "Corporation"), and
GRAHAM A. POPE, an employee of BGF INDUSTRIES, INC. (hereinafter referred to as
the "Executive").
WHEREAS, the Executive has been employed by the Corporation in a highly
compensated management position with the Corporation;
WHEREAS, the Corporation is desirous of having the Executive continue in
the employment of the Corporation; and
WHEREAS, the Executive is willing to continue in the employment of the
Corporation provided that the Corporation will pay compensation for his services
during the period prior to termination of employment and also after termination
of employment in accordance with the terms of this agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
it is agreed between the parties hereto as follows:
1. Pre-Retirement Survivor Benefit.
-------------------------------
(a) Survivor Benefit. Subject to the limitations of (b) below, in the
----------------
event of the death of a participating employee prior to age 65,
the beneficiary designated by such employee, or, if none, the
employee's estate, will receive 120 monthly payments (10 years)
each in an amount equal to 50% of the monthly base salary of the
employee in effect on the January 1 occurring with or immediately
preceding the death of the employee or 50% of the average monthly
base salary on January 1 for the previous five years (including
the date of death, should death occur on January 1), whichever is
greater. Such payments will commence with the month immediately
following death.
(b) Limitations for Participants Over Age 60. If death occurs after
----------------------------------------
attaining age 60 but before attaining age 65, the following
percentages will be applicable to the greater of the two salary
bases described above to determine the amount of the payment.
-1-
<PAGE>
Attained Age % of Salary Base
at Death To Be Payable
------------ -----------------
60 45%
61 40%
62 35%
63 30%
64 25%
Such payments will commence with the month immediately following
death.
(c) Death of Disabled Employee. In the event a participating
--------------------------
employee becomes permanently disabled, as determined in the
manner specified below, before age 65 and dies before age 65, the
benefits provided for in paragraph 1(a) or 1(b) above shall be
paid in like manner as provided in paragraph 1(a) or 1(b) above.
Permanent disability for purposes hereof shall be deemed to have
occurred when the employee shall become physically or mentally
incapable of fully performing services to the Company or its
subsidiaries as required by the Company and such incapacity is,
or may reasonably be expected to exist, for more than two months,
as shall be determined by a physician mutually agreed upon by the
Company and the employee or in the absence of mutual agreement as
selected by the Company, and the determination of such physician,
whether selected by mutual agreement or by the Company shall be
final and conclusive.
(d) Effects of Termination of Employment. All rights to the Pre-
------------------------------------
Retirement Survivor Benefit provided for in paragraph 1(a) or
1(b) above shall cease if and when a participating employee's
employment by the Company or one of its subsidiaries terminates
prior to age 65 for any reason other than death or disability as
set forth above.
2. Post-Retirement Benefit.
-----------------------
(a) Supplemental Compensation Benefit. Upon retirement at age sixty-
---------------------------------
five (65) or upon early retirement with the written approval of
the Corporation, the Executive will receive the equivalent of
three times the Executive's final annual base salary as of the
January 1 occurring concurrently with or immediately preceding
retirement or an average of the last five years (computed on base
salary as of
-2-
<PAGE>
each January 1 of said 5-year period), whichever is greater, paid
as follows:
(i) Equal monthly payments for ten years equal in total to two
and one-quarter times the final annual base salary (22.5%
each year). If death of the Executive occurs before all
payments have been made, the remaining installments will be
paid to the Executive's designated beneficiary or, in the
absence of such designation, to the Executive's estate.
(ii) A death benefit equal to three-fourths of the Executive's
annual base salary as of the January 1 occurring
concurrently with or immediately preceding the Executive's
retirement.
(b) Early Retirement. If the Executive elects early retirement at
----------------
age 50 or thereafter with the written approval of the Corporation
(which approval shall not be required if vested according to
paragraph (e) below) such Executive will be entitled to the
payments provided in (a) above reduced according to the following
schedule:
at age 50 - 35% of benefit due at age 65
(5% reduction per year)
at age 55 - 60% of benefit due if retirement
occurred at age 65
(5% reduction per year)
at age 60 - 85% of benefit due if retirement
occurred at age 65
(3% reduction per year)
at age 65 - 100%
(c) Permanent Disability. An Executive who becomes permanently
--------------------
disabled, as defined in 1(c) above, and retires because of
disability shall not be entitled to benefits under this plan
unless said Executive survives until age 65, at which time such
Executive shall be deemed to have retired at age 65 and will then
receive the benefits provided for in (a) above.
(d) Discharged or Terminated Executive. If the Executive or the
----------------------------------
Corporation chooses to terminate their relationship, said
Executive will cease to have any rights to any retirement
benefits under this plan, except as provided in (e).
-3-
<PAGE>
(e) Vested Right at Age 50 and 10 Years of Service. The Executive
----------------------------------------------
who has attained age 50 and has completed 10 years of service
with the Corporation (or with its predecessor Obligor, Burlington
Industries, Inc.) shall have a vested, non-forfeitable right to
receive benefits accrued under the post-retirement benefit
portions of the plan as set forth in this section 2, the amount
of which benefit will be determined as of the date of retirement
under the benefit schedule set forth above.
3. Activities Barring Benefits. The payment of or the continuation of
---------------------------
the payment of any of the benefits herein provided for is upon the
express condition that (i) without prior, written consent of the
Corporation, the Executive, either during or after the Executive's
employment with the Corporation, will not directly or indirectly
render advisory services to or become employed by or participate or
engage in any business materially competitive with and of the
businesses of the Corporation and its affiliated companies, and (ii)
such Executive shall not have willfully engaged in any conduct
constituting fraud or materially damaging to the Corporation's
interest.
4. Financing of Benefits. All retirement benefits under this Agreement
---------------------
shall be provided out of the general assets of the Corporation at the
time such benefits are to be paid. The parties agree that the
Corporation is under no obligation to set aside funds in advance of
the time for payment hereunder, or to otherwise provide security for
its obligations under this Agreement.
5. Claims Procedure.
----------------
(a) Any person entitled to benefits under the Agreement (the
"Claimant") must file a claim request with the person authorized
by the Board to fulfill the responsibilities of the Corporation
as Plan Administrator, on a form provided by the Plan
Administrator.
(b) A claim for benefits will be denied if the Corporation determines
that the Claimant is not entitled to receive benefits under the
Agreement. The Plan Administrator shall provide adequate notice
in writing to any Claimant whose claim for benefits under the
Agreement has been denied, and the notice to the Claimant shall
set forth:
(i) The specific reason for denial of the claim;
(ii) Specific references to pertinent provisions of the Agreement
on which the denial is based;
-4-
<PAGE>
(iii) A description of any additional material and information
needed for the Claimant to perfect his claim and an
explanation of why the material or information is needed;
and
(iv) A statement that the Claimant may;
- Request a review of his claim upon written application
to the Corporation, which is the Named Fiduciary under the
Agreement;
- Review pertinent documents affecting his claim; and
- Submit issues and comments in writing.
(c) Any appeal the Claimant wishes to make of the adverse
determination must be made by the Claimant in writing to the Plan
Administrator within sixty (60) days after receipt of the written
notice of denial of the claim. The failure of the Claimant to
appeal the denial to the Plan Administrator in writing within the
sixty (60) day period will render the Plan Administrator's
determination final, binding, and conclusive.
(d) If the Claimant should appeal to the Plan Administrator, he, or
his duly authorized representative, may submit, in writing,
whatever issues and comments he, or his duly authorized
representative, feels are pertinent. The Plan Administrator shall
re-examine all facts related to the appeal and make a final
determination as to whether the denial of benefits is Justified
under the circumstances. The Plan Administrator shall advise the
Claimant of its decision within sixty (60) days of the Claimant's
written request for review, unless special circumstances (such as
a hearing) would make a rendering of a decision within the sixty
(60) day period infeasible, but in no event shall the Plan
Administrator render a decision with respect to a denial for a
claim for benefits later than one hundred twenty (120) days after
receipt of a request for review. A written statement stating the
decision on review, the specific reasons for the decision, and
the specific provisions of the Agreement on which the decision is
based shall be mailed or delivered to the Claimant within such
sixty (60) (or one hundred twenty (120)) day period.
6. Board to Administer. Subject to the provisions of this Agreement, the
-------------------
Board shall have exclusive authority to interpret this Agreement, to
establish and revise rules and regulations relating to this Agreement,
and to make any other determinations that it believes necessary or
advisable for the administration of this Agreement. Decisions and
determinations by the Board shall be final and binding upon all
persons for all purposes and no member of the Board shall be liable to
any person for any action taken or omitted in connection with the
-5-
<PAGE>
interpretation and administration of this Agreement unless
attributable to his own willful misconduct or lack of good faith.
7. Assignment and Alienation. The Executive's rights and interests under
-------------------------
this Agreement shall not be subject in any manner to alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment,
execution, or levy of any kind, whether voluntary or involuntary,
prior to actually being received by the person entitled to the benefit
under the terms of this Agreement, and in the event of any attempted
assignment or transfer, whether voluntary or involuntary, this
Agreement shall terminate and the Corporation shall have no further
liability hereunder.
8. Designation of Beneficiary. The Executive may designate the person or
--------------------------
persons to receive his interest under this Agreement in the event of
his death by completing a written, dated designation of beneficiary,
signed by the Executive and filed with the Corporation on a Nomination
of Beneficiary form provided by the Corporation. Beneficiaries may be
changed at any time, and such change may be made without the consent
of any prior beneficiary. If the Executive fails to designate a
beneficiary in accordance with the provisions of this Paragraph 9, or
in the event the Executive's designated beneficiary predeceases him,
the Corporation shall pay any sums remaining to be paid under this
Agreement to the Executive's estate.
9. Incapacity of Recipient. If the Board shall find that any person to
-----------------------
whom any distribution is to be made under this Agreement is unable to
care for his affairs because of accident or illness, or is a minor,
any payment due (unless a prior claim therefor shall have been made by
a duly appointed guardian, committee or other legal representative)
may be paid to the spouse, child, parent, or brother or sister of such
person, or to any person deemed by the Board to have incurred expense
for such person otherwise entitled to payment, in such manner and
proportions as the Board may determine. Any such payment shall be a
complete discharge of the liabilities of the Corporation under this
Agreement.
10. Merge. The Corporation agrees that it will not merge or consolidate
-----
with another corporation or organization, or permit its business
activities to be taken over by any other corporation or organization
unless and until the succeeding or continuing corporation or other
organization shall expressly assume the rights and obligations of the
Corporation herein set forth. The Corporation further agrees that it
will not cease its business activities or terminate its existence,
other than as heretofore set forth in this Paragraph 11, without
having made adequate provision for the fulfilling of its obligations
hereunder.
11. No Right to Employment. Nothing contained in this Agreement, or any
----------------------
modification or amendment to this Agreement, shall give the Executive
or his designated beneficiary any right to be retained in the employ
of the Corporation,
-6-
<PAGE>
nor shall it give the Executive or his designated beneficiary any
legal or equitable right against the Corporation or any officer,
director, or employee of the Corporation or its agents, except as
expressly provided by this Agreement.
12. No Right to Specific Assets. Title to and beneficial ownership of any
---------------------------
assets, whether cash or investments, which the Corporation may ear-
mark to pay the benefits hereunder shall at all times remain in the
Corporation, and the Executive, his estate and his designated
beneficiary shall not have any property interest whatsoever in any
specific assets of the Corporation. Any assets so earmarked shall
continue for all purposes to be a part of the general funds of the
Corporation and no person other than the Corporation shall by virtue
of the provisions of this Agreement have any interest in such funds.
To the extent that any person, including the Executive, acquires a
right to receive payments from the Corporation under this Agreement,
such right shall be no greater than the right of any unsecured general
creditor of the Corporation.
13. No Trust Created. Nothing contained in this Agreement and no action
----------------
taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship
between the Corporation and the Executive, his designated beneficiary
or any other person.
14. Taxes. The Corporation shall have the right to deduct from any
-----
distribution or payment in cash under this Agreement, any state,
federal or local taxes required by law to be withheld with respect to
such distribution or payment.
15. Amendment and Termination. This Agreement may be modified, extended,
-------------------------
or terminated only by consent of both parties specifying in writing
the terms of the modification, extension or termination.
16. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of North Carolina and applicable federal law.
17. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other
provisions hereof.
18. Headings. The titles and headings of Paragraphs are included for
--------
convenience of reference only and are not to be considered in
construction of the provisions of this Agreement.
19. Counterparts. This Agreement shall be executed in duplicate, each
------------
copy of which when so executed and delivered shall be an original, but
both copies shall, together, constitute one and the same instrument.
-7-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed
by its duly authorized officers and the Executive has hereunto set his hand and
seat as of the date first above written.
BGF INDUSTRIES, INC.
By: _______________________
/s/ R. Porcher 11/13/95
ATTEST:
/s/ Philippe R. Dorier
- --------------------------
/s/ Graham A. Pope (SEAL)
---------------------------------
-8-
<PAGE>
BGF INDUSTRIES, INC.
INTEROFFICE MEMORANDUM
To:. Robert Porcher Date: February 24, 1998
From: Graham Pope/sb cc:
Subject: Retirement
Even though retirement is a year away, I would appreciate it if you would
consider the following proposal in the near future so that I can do the
necessary planning and legal work to take advantage of the proposals when I
retire:
1. BGF has an insurance policy on my life that has a value of approximately
$100,000. I would like to ask that you please consider giving me this policy.
If you consider this being too generous, then I propose that BGF sell me the
policy, and that I be allowed to pay for the policy by working for you 66 days
(in the two years following retirement) without additional compensation. I
arrived at this by dividing $100,000 by $1,500 per day.
2. Will you agree to pay the death benefit that is part of the deferred
compensation plan on a monthly basis over 10 years, rather than at my death? If
the money is paid at death, the estate taxes plus income taxes would amount to
72%, however if it is paid over 10 years, the taxes will be 43%.
By getting a decision on these two items now, I will be able to get advice on
the most tax-effective way to handle this.
Thanks,
Graham
2/26/1998
o.k. with pleasure
/s/ R. Porcher
-9-
<PAGE>
EXHIBIT 10.2
DEFERRED COMPENSATION AGREEMENT
-------------------------------
AGREEMENT made this 1 day of April, 1998, by and between BGF Industries,
Inc., a Delaware corporation, having its principal place of business in
Greensboro, North Carolina (hereinafter referred to as the "Corporation"), and
Richard L. Cromer, an employee of BGF Industries, Inc. (hereinafter referred to
as the "Executive").
WHEREAS, the Executive has been employed by the Corporation in a highly-
compensated management position with the Corporation;
WHEREAS, the Corporation is desirous of having the Executive continue in
the employment of the Corporation; and
WHEREAS, the Executive is willing to continue in the employment of the
Corporation provided that the Corporation will pay compensation for his services
during the period prior to termination of employment and also after termination
of employment in accordance with the terms of this agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
it is agreed between the parties hereto as follows:
1. Pre-Retirement Survivor Benefit.
-------------------------------
(a) Survivor Benefit. Subject to the limitations of (b) below, in
----------------
the event of the death of a participating employee prior to age
65, the beneficiary designated by such employee, or, if none, the
employee's estate, will receive 120 monthly payments (10 years)
each in an amount equal to 50% of the monthly base salary of the
employee in effect on the January 1 occurring with or immediately
preceding the death of the employee or 50% of the average monthly
base salary on January 1 for the previous five years (including
the date of death, should death occur on January 1), whichever is
greater. Such payments will commence with the month immediately
following death.
(b) Limitations for Participants Over Age 60. If death occurs after
----------------------------------------
attaining age 60 but before attaining age 65, the following
percentages will be applicable to the greater of the two salary
bases described above to determine the amount of the payment.
<PAGE>
Attained Age % of Salary Base
at Death To Be Payable
------------ ----------------
60 45%
61 40%
62 35%
63 30%
64 25%
Such payments will commence with the month immediately following
death.
(c) Death of Disabled Employee. In the event a participating
--------------------------
employee becomes permanently disabled, as determined in the
manner specified below, before age 65 and dies before age 65, the
benefits provided for in paragraph 1(a) or 1(b) above shall be
paid in like manner as provided in paragraph 1(a) or 1(b) above.
Permanent disability for purposes hereof shall be deemed to have
occurred when the employee shall become physically or mentally
incapable of fully performing services to the Company or its
subsidiaries as required by the Company and such incapacity is,
or may reasonably be expected to exist, for more than two months,
as shall be determined by a physician mutually agreed upon by the
Company and the employee or in the absence of mutual agreement as
selected by the Company, and the determination of such physician,
whether selected by mutual agreement or by the Company shall be
final and conclusive.
(d) Effects of Termination of Employment. All rights to the Pre-
------------------------------------
Retirement Survivor Benefit provided for in paragraph 1(a) or
1(b) above shall cease if and when a participating employee's
employment by the Company or one of its subsidiaries terminates
prior to age 65 for any reason other than death or disability as
set forth above.
2. Post-Retirement Benefit.
-----------------------
(a) Supplemental Compensation Benefit. Upon retirement at age sixty-
---------------------------------
five (65) or upon early retirement with the written approval of
the Corporation, the Executive will receive the equivalent of two
and one-fourth times the Executive's final annual base salary as
of the January 1 occurring concurrently with or immediately
preceding retirement or an average of the last five years
(computed on base salary as of each January 1 of said 5-year
period) whichever is greater, paid as follows:
-2-
<PAGE>
(i) Equal monthly payments for ten years equal in total to one
and one-half times the final annual base salary (15% each
year). If death of the Executive occurs before all payments
have been made, the remaining installments will be paid to
the Executive's designated beneficiary or, in the absence of
such designation, to the Executive's estate.
(ii) A death benefit equal to three-fourths of the Executive's
annual base salary as of the January 1 occurring
concurrently with or immediately preceding the Executive's
retirement.
(b) Early Retirement. If the Executive elects early retirement at
----------------
age 50 or thereafter with the written approval of the Corporation
(which approval shall not be required if vested according to
paragraph (e) below) such Executive will be entitled to the
payments provided in (a) above reduced according to the following
schedule:
at age 50 - 35% of benefit due at age 65
(5% reduction per year)
at age 55 - 60% of benefit due if retirement
occurred at age 65
(5% reduction per year)
at age 60 - 85% of benefit due if retirement
occurred at age 65
(3% reduction per year)
at age 65 - 100%
(c) Permanent Disability. An Executive who becomes permanently
--------------------
disabled, as defined in 1(c) above, and retires because of
disability shall not be entitled to benefits under this plan
unless said Executive survives until age 65, at which time such
Executive shall be deemed to have retired at age 65 and will then
receive the benefits provided for in (a) above.
(d) Discharged or Terminated Executive. If the Executive or the
----------------------------------
Corporation chooses to terminate their relationship, said
Executive will cease to have any rights to any. retirement
benefits under this plan, except as provided in (e).
(e) Vested Right at Age 50 and 10 Years of Service. The Executive
----------------------------------------------
who has attained age 50 and has completed 10 years of service
with the Corporation (or with its predecessor Obligor, Burlington
Industries, Inc.) shall have a vested, non-forfeitable right to
receive benefits accrued under the
-3-
<PAGE>
post-retirement benefit portions of the plan as set forth in this
section 2, the amount of which benefit will be determined as of
the date of retirement under the benefit schedule set forth
above.
3. Activities Barring Benefits. The payment of or the continuation of
---------------------------
the payment of any of the benefits herein provided for is upon the
express condition that (i) without prior, written consent of the
Corporation, the Executive, either during or after the Executive's
employment with the Corporation, will not directly or indirectly
render advisory services to or become employed by or participate or
engage in any business materially competitive with and of the
businesses of the Corporation and its affiliated companies, and (ii)
such Executive shall not have willfully engaged in any conduct
constituting fraud or materially damaging to the Corporation's
interest.
4. Financing of Benefits. All retirement benefits under this Agreement
---------------------
shall be provided out of the general assets of the Corporation at the
time such benefits are to be paid. The parties agree that the
Corporation is under no obligation to set aside funds in advance of
the time for payment hereunder, or to otherwise provide security for
its obligations under this Agreement.
5. Claims Procedure.
----------------
(a) Any person entitled to benefits under the Agreement (the
"Claimant") must file a claim request with the person authorized
by the Board to fulfill the responsibilities of the Corporation
as Plan Administrator, on a form provided by the Plan
Administrator.
(b) A claim for benefits will be denied if the Corporation determines
that the Claimant is not entitled to receive benefits under the
Agreement. The Plan Administrator shall provide adequate notice
in writing to any Claimant whose claim for benefits under the
Agreement has been denied, and the notice to the claimant shall
set forth:
(i) The specific reason for denial of the claim;
(ii) Specific references to pertinent provisions of the
Agreement on which the denial is based;
(iii) A description of any additional material and information
needed for the Claimant to perfect his claim and an
explanation of why the material or information is needed;
and
(iv) A statement that the claimant may;
-4-
<PAGE>
- Request a review of his claim upon written application
to the Corporation, which is the Named Fiduciary under
the Agreement;
- Review pertinent documents affecting his claim; and
- Submit issues and comments in writing.
(c) Any appeal the Claimant wishes to make of the adverse
determination must be made by the Claimant in writing to the Plan
Administrator within sixty (60) days after receipt of the written
notice of denial of the claim. The failure of the Claimant to
appeal the denial to the Plan Administrator in writing within the
sixty (60) day period will render the Plan Administrator's
determination final, binding, and conclusive.
(d) If the Claimant should appeal to the Plan Administrator, he, or
his duly authorized representative, may submit, in writing,
whatever issues and comments he, or his duly authorized
representative, feels are pertinent. The Plan Administrator
shall re-examine all facts related to the appeal and make a final
determination as to whether the denial of benefits is justified
under the circumstances. The Plan Administrator shall advise the
Claimant of its decision within sixty (60) days of the Claimant's
written request for review, unless special circumstances (such as
a hearing) would make a rendering of a decision within the sixty
(60) day period infeasible, but in no event shall the Plan
Administrator render a decision with respect to a denial for a
claim for benefits later than one hundred twenty (120) days after
receipt of a request for review. A written statement stating the
decision on review, the specific reasons for the decision, and
the specific provisions of the Agreement on which the decision is
based shall be mailed or delivered to the Claimant within such
sixty (60) (or one hundred twenty (120)) day period.
6. Board to Administer. Subject to the provisions of this Agreement, the
-------------------
Board shall have exclusive authority to interpret this Agreement, to
establish and revise rules and regulations relating to this Agreement,
and to make any other determinations that it believes necessary or
advisable for the administration of this Agreement. Decisions and
determinations by the Board shall be final and binding upon all
persons for all purposes and no member of the Board shall be liable to
any person for any action taken or omitted in connection with the
interpretation and administration of this Agreement unless
attributable to his own willful misconduct or lack of good faith.
7. Assignment and Alienation. The Executive's rights and interests under
-------------------------
this Agreement shall not be subject in any manner to alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment,
execution, or levy of any
-5-
<PAGE>
kind, whether voluntary or involuntary, prior to actually being
received by the person entitled to the benefit under the terms of this
Agreement, and in the event of any attempted assignment or transfer,
whether voluntary or involuntary, this Agreement shall terminate and
the Corporation shall have no further liability hereunder.
8. Designation of Beneficiary. The Executive may designate the person or
--------------------------
persons to receive his interest under this Agreement in the event of
his death by completing a written, dated designation of beneficiary,
signed by the Executive and filed with the Corporation on a Nomination
of Beneficiary form provided by the Corporation. Beneficiaries may be
changed at any time, and such change may be made without the consent
of any prior beneficiary. If the Executive fails to designate a
beneficiary in accordance with the provisions of this Paragraph 9, or
in the event the Executive's designated beneficiary predeceases him,
the Corporation shall pay any sums remaining to be paid under this
Agreement to the Executive's estate.
9. Incapacity of Recipient. If the Board shall find that any person to
-----------------------
whom any distribution is to be made under this Agreement is unable to
care for his affairs because of accident or illness, or is a minor,
any payment due (unless a prior claim therefor shall have been made by
a duly appointed guardian, committee or other legal representative)
may be paid to the spouse, child, parent, or brother or sister of such
person, or to any person deemed by the Board to have incurred expense
for such person otherwise entitled to payment, in such manner and
proportions as the Board may determine. Any such payment shall be a
complete discharge of the liabilities of the Corporation under this
Agreement.
10. Merger. The Corporation agrees that it will not merge or consolidate
------
with another corporation or organization, or permit its business
activities to be taken over by any other corporation or organization
unless and until the succeeding or continuing corporation or other
organization shall expressly assume the rights and obligations of the
Corporation herein set forth. The Corporation further agrees that it
will not cease its business activities or terminate its existence,
other than as heretofore set forth in this Paragraph 11, without
having made adequate provision for the fulfilling of its obligations
hereunder.
11. No Right to Employment. Nothing contained in this Agreement, or any
----------------------
modification or amendment to this Agreement, shall give the Executive
or his designated beneficiary any right to be retained in the employ
of the Corporation, nor shall it give the Executive or his designated
beneficiary any legal or equitable right against the Corporation or
any officer, director, or employee of the Corporation or its agents,
except as expressly provided by this Agreement.
12. No Right to Specific Assets. Title to and beneficial ownership of any
---------------------------
assets, whether cash or investments, which the Corporation may earmark
to pay the
-6-
<PAGE>
benefits hereunder shall at all times remain in the Corporation, and
the Executive, his estate and his designated beneficiary shall not
have any property interest whatsoever in any specific assets of the
Corporation. Any assets so earmarked shall continue for all purposes
to be a part of the general funds of the Corporation and no person
other than the Corporation shall by virtue of the provisions of this
Agreement have any interest in such funds. To the extent that any
person, including the Executive., acquires a right to receive payments
from the Corporation under this Agreement, such right shall be no
greater than the right of any unsecured general creditor of the
Corporation.
13. No Trust Created. Nothing contained in this Agreement and no action
----------------
taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship
between the Corporation and the Executive, his designated beneficiary
or any other person.
14. Taxes. The Corporation shall have the right, to deduct from any
-----
distribution or payment in cash under this Agreement, any state,
federal or local taxes required by law to be withheld with respect to
such distribution or payment.
15. Amendment and Termination. This Agreement may be modified, extended,
-------------------------
or terminated only by consent of both parties specifying in writing
the terms of the modification, extension or termination.
16. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of North Carolina and applicable federal law.
17. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other
provisions hereof.
18. Headings. The titles and headings of Paragraphs are included for
--------
convenience of reference only and are not to be considered in
construction of the provisions of this Agreement.
19. Counterparts. This Agreement shall be executed in duplicate, each
------------
copy of which when so executed and delivered shall be an original, but
both copies shall, together, constitute one and the same instrument.
-7-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers and the Executive has hereunto set his
hand and seal as of the date first above written.
BGF INDUSTRIES, INC.
By: /s/ Graham A. Pope
----------------------
ATTEST
- --------------------------
Secretary
/s/ Richard L. Cromer (SEAL)
----------------------------------------
-8-
<PAGE>
EXHIBIT 10.3
DEFERRED COMPENSATION AGREEMENT
-------------------------------
AGREEMENT made this 16 day of April, 1990, by and between BGF Industries,
Inc., a Delaware corporation, having its principal place of business in
Greensboro, North Carolina (hereinafter referred to as the "Corporation"), and
James R. Henderson of Greensboro, NC, an employee of BGF Industries,
Incorporated (hereinafter referred to as the "Executive").
WHEREAS, the Executive has been employed by the Corporation in a highly-
compensated management position with the Corporation;
WHEREAS, the Corporation is desirous of having the Executive continue in
the employment of the Corporation; and
WHEREAS, the Executive is willing to continue in the employment of the
Corporation provided that the Corporation will pay compensation for his services
during the period prior to termination of employment and also after termination
of employment in accordance with the terms of this agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
it is agreed between the parties hereto as follows:
1. Pre-Retirement Survivor Benefit.
-------------------------------
(a) Survivor Benefit. Subject to the limitations of (b) below, in
----------------
the event of the death of a participating employee prior to age
65, the beneficiary designated by such employee, or, if none, the
employee's estate, will receive 120 monthly payments (10 years)
each in an amount equal to 50% of the monthly base salary of the
employee in effect on the January 1 occurring with or immediately
preceding the death of the employee or 50% of the average monthly
base salary on January 1 for the previous five years (including
the date of death, should death occur on January 1), whichever is
greater. Such payments will commence with the month immediately
following death.
(b) Limitations for Participants Over Age 60. If death occurs after
----------------------------------------
attaining age 60 but before attaining age 65, the following
percentages will be applicable to the greater of the two salary
bases described above to determine the amount of the payment.
<PAGE>
Attained Age % of Salary Base
at Death To Be Payable
------------ ----------------
60 45%
61 40%
62 35%
63 30%
64 25%
Such payments will commence with the month immediately following
death.
(c) Death of Disabled Employee. In the event a participating
--------------------------
employee becomes permanently disabled, as determined in the
manner specified below, before age 65 and dies before age 65, the
benefits provided for in paragraph 1(a) or 1(b) above shall be
paid in like manner as provided in paragraph 1(a) or 1(b) above.
Permanent disability for purposes hereof shall be deemed to have
occurred when the employee shall become physically or mentally
incapable of fully performing services to the Company or its
subsidiaries as required by the Company and such incapacity is,
or may reasonably be expected to exist, for more than two months,
as shall be determined by a physician mutually agreed upon by the
Company and the employee or in the absence of mutual agreement as
selected by the Company, and the determination of such physician,
whether selected by mutual agreement or by the Company shall be
final and conclusive.
(d) Effects of Termination of Employment. All rights to the Pre-
------------------------------------
Retirement Survivor Benefit provided for in paragraph 1(a) or
1(b) above shall cease if and when a participating employee's
employment by the Company or one of its subsidiaries terminates
prior to age 65 for any reason other than death or disability as
set forth above.
2. Post-Retirement Benefit.
-----------------------
(a) Supplemental Compensation Benefit. Upon retirement at age sixty-
---------------------------------
five (65) or upon early retirement with the written approval of
the Corporation, the Executive will receive the equivalent of two
and one-fourth times the Executive's final annual base salary as
of the January 1 occurring concurrently with or immediately
preceding retirement or an average of the last five years
(computed on base salary as of each January 1 of said 5-year
period) whichever is greater, paid as follows:
-2-
<PAGE>
(i) Equal monthly payments for ten years equal in total to one
and one-half times the final annual base salary (15% each
year). If death of the Executive occurs before all payments
have been made, the remaining installments will be paid to
the Executive's designated beneficiary or, in the absence of
such designation, to the Executive's estate.
(ii) A death benefit equal to three-fourths of the Executive's
annual base salary as of the January 1 occurring
concurrently with or immediately preceding the Executive's
retirement.
(b) Early Retirement. If the Executive elects early retirement at
----------------
age 50 or thereafter with the written approval of the Corporation
(which approval shall not be required if vested according to
paragraph (e) below) such Executive will be entitled to the
payments provided in (a) above reduced according to the following
schedule:
at age 50 - 35% of benefit due at age 65
(5% reduction per year)
at age 55 - 60% of benefit due if retirement
occurred at age 65
(5% reduction per year)
at age 60 - 85% of benefit due if retirement
occurred at age 65
(3% reduction per year)
at age 65 - 100%
(c) Permanent Disability. An Executive who becomes permanently
--------------------
disabled, as defined in 1(c) above, and retires because of
disability shall not be entitled to benefits under this plan
unless said Executive survives until age 65, at which time such
Executive shall be deemed to have retired at age 65 and will then
receive the benefits provided for in (a) above.
(d) Discharged or Terminated Executive. If the Executive or the
----------------------------------
Corporation chooses to terminate their relationship, said
Executive will cease to have any rights to any retirement
benefits under this plan, except as provided in (e).
(e) Vested Right at Age 50 and 10 Years of Service. The Executive
----------------------------------------------
who has attained age 50 and has completed 10 years of service
with the Corporation (or with its predecessor Obligor, Burlington
Industries, Inc.) shall have a vested, non-forfeitable right to
receive benefits accrued under the
-3-
<PAGE>
post-retirement benefit portions of the plan as set forth in this
section 2, the amount of which benefit will be determined as of
the date of retirement under the benefit schedule set forth
above.
3. Activities Barring Benefits. The payment of or the continuation of
---------------------------
the payment of any of the benefits herein provided for is upon the
express condition that (i) without prior, written consent of the
Corporation, the Executive, either during or after the Executive's
employment with the Corporation, will not directly or indirectly
render advisory services to or become employed by or participate or
engage in any business materially competitive with and of the
businesses of the Corporation and its affiliated companies, and (ii)
such Executive shall not have willfully engaged in any conduct
constituting fraud or materially damaging to the Corporation's
interest.
4. Financing of Benefits. All retirement benefits under this Agreement
---------------------
shall be provided out of the general assets of the Corporation at the
time such benefits are to be paid. The parties agree that the
Corporation is under no obligation to set aside funds in advance of
the time for payment hereunder, or to otherwise provide security for
its obligations under this Agreement.
5. Claims Procedure.
----------------
(a) Any person entitled to benefits under the Agreement (the
"Claimant") must file a claim request with the person authorized
by the Board to fulfill the responsibilities of the Corporation
as Plan Administrator, on a form provided by the Plan
Administrator.
(b) A claim for benefits will be denied if the Corporation determines
that the Claimant is not entitled to receive benefits under the
Agreement. The Plan Administrator shall provide adequate notice
in writing to any Claimant whose claim for benefits under the
Agreement has been denied, and the notice to the claimant shall
set forth:
(i) The specific reason for denial of the claim;
(ii) Specific references to pertinent provisions of the
Agreement on which the denial is based;
(iii) A description of any additional material and information
needed for the Claimant to perfect his claim and an
explanation of why the material or information is needed;
and
(iv) A statement that the claimant may;
-4-
<PAGE>
- Request a review of his claim upon written application
to the Corporation, which is the Named Fiduciary under
the Agreement;
- Review pertinent documents affecting his claim; and
- Submit issues and comments in writing.
(c) Any appeal the Claimant wishes to make of the adverse
determination must be made by the Claimant in writing to the Plan
Administrator within sixty (60) days after receipt of the written
notice of denial of the claim. The failure of the Claimant to
appeal the denial to the Plan Administrator in writing within the
sixty (60) day period will render the Plan Administrator's
determination final, binding, and conclusive.
(d) If the Claimant should appeal to the Plan Administrator, he, or
his duly authorized representative, may submit, in writing,
whatever issues and comments he, or his duly authorized
representative, feels are pertinent. The Plan Administrator
shall re-examine all facts related to the appeal and make a final
determination as to whether the denial of benefits is justified
under the circumstances. The Plan Administrator shall advise the
Claimant of its decision within sixty (60) days of the Claimant's
written request for review, unless special circumstances (such as
a hearing) would make a rendering of a decision within the sixty-
(60) day period infeasible, but in no event shall the Plan
Administrator render a decision with respect to a denial for a
claim for benefits later than one hundred twenty (120) days after
receipt of a request for review. A written statement stating the
decision on review, the specific reasons for the decision, and
the specific provisions of the Agreement on which the decision is
based shall be mailed or delivered to the claimant within such
sixty- (60) (or one hundred twenty- (120)) day period.
6. Board to Administer. Subject to the provisions of this Agreement, the
-------------------
Board shall have exclusive authority to interpret this Agreement, to
establish and revise rules and regulations relating to this Agreement,
and to make any other determinations that it believes necessary or
advisable for the administration of this Agreement. Decisions and
determinations by the Board shall be final and binding upon all
persons for all purposes and no member of the Board shall be liable to
any person for any action taken or omitted in connection with the
interpretation and administration of this Agreement unless
attributable to his own willful misconduct or lack of good faith.
7. Assignment and Alienation. The Executive's rights and interests under
-------------------------
this Agreement shall not be subject in any manner to alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment,
execution, or levy of any
-5-
<PAGE>
kind, whether voluntary or involuntary, prior to actually being
received by the person entitled to the benefit under the terms of this
Agreement, and in the event of any attempted assignment or transfer,
whether voluntary or involuntary, this Agreement shall terminate and
the Corporation shall have no further liability hereunder.
8. Designation of Beneficiary. The Executive may designate the person or
--------------------------
persons to receive his interest under this Agreement in the event of
his death by completing a written, dated designation of beneficiary,
signed by the Executive and filed with the Corporation on a Nomination
of Beneficiary form provided by the Corporation. Beneficiaries may be
changed at any time, and such change may be made without the consent
of any prior beneficiary. If the Executive fails to designate a
beneficiary in accordance with the provisions of this Paragraph 9, or
in the event the Executive's designated beneficiary predeceases him,
the Corporation shall pay any sums remaining to be paid under this
Agreement to the Executive's estate.
9. Incapacity of Recipient. If the Board shall find that any person to
-----------------------
whom any distribution is to be made under this Agreement is unable to
care for his affairs because of accident or illness, or is a minor,
any payment due (unless a prior claim therefor shall have been made by
a duly appointed guardian, committee or other legal representative)
may be paid to the spouse, child, parent, or brother or sister of such
person, or to any person deemed by the Board to have incurred expense
for such person otherwise entitled to payment, in such manner and
proportions as the Board may determine. Any such payment shall be a
complete discharge of the liabilities of the Corporation under this
Agreement.
10. Merger. The Corporation agrees that it will not merge or consolidate
------
with another corporation or organization, or permit its business
activities to be taken over by any other corporation or organization
unless and until the succeeding or continuing corporation or other
organization shall expressly assume the rights and obligations of the
Corporation herein set forth. The Corporation further agrees that it
will not cease its business activities or terminate its existence,
other than as heretofore set forth in this Paragraph 11, without
having made adequate provision for the fulfilling of its obligations
hereunder.
11. No Right to Employment. Nothing contained in this Agreement, or any
----------------------
modification or amendment to this Agreement, shall give the Executive
or his designated beneficiary any right to be retained in the employ
of the corporation, nor shall it give the Executive or his designated
beneficiary any legal or equitable right against the Corporation or
any officer, director, or employee of the Corporation or its agents,
except as expressly provided by this Agreement.
12. No Right to Specific Assets. Title to and beneficial ownership of any
---------------------------
assets, whether cash or investments, which the Corporation may earmark
to pay the
-6-
<PAGE>
benefits hereunder shall at all times remain in the Corporation, and
the Executive, his estate and his designated beneficiary shall not
have any property interest whatsoever in any specific assets of the
Corporation. Any assets so earmarked shall continue for all purposes
to be a part of the general funds of the Corporation and no person
other than the Corporation shall by virtue of the provisions of this
Agreement have any interest in such funds. To the extent that any
person, including the Executive., acquires a right to receive payments
from the Corporation under this Agreement, such right shall be no
greater than the right of any unsecured general creditor of the
Corporation.
13. No Trust Created. Nothing contained in this Agreement and no action
----------------
taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship
between the Corporation and the Executive, his designated beneficiary
or any other person.
14. Taxes. The Corporation shall have the right to deduct from any
-----
distribution or payment in cash under this Agreement, any state,
federal or local taxes required by law to be withheld with respect to
such distribution or payment.
15. Amendment and Termination. This Agreement may be modified, extended,
-------------------------
or terminated only by consent of both parties specifying in writing
the terms of the modification, extension or termination.
16. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of North Carolina and applicable federal law.
17. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other
provisions hereof.
18. Headings. The titles and headings of Paragraphs are included for
--------
convenience of reference only and are not to be considered in
construction of the provisions of this Agreement.
19. Counterparts. This Agreement shall be executed in duplicate, each
------------
copy of which when so executed and delivered shall be an original, but
both copies shall, together, constitute one and the same instrument.
-7-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers and the Executive has hereunto set his
hand and seal as of the date first above written.
BGF INDUSTRIES, INC.
By: /s/ R. Porcher
------------------
ATTEST
/s/ Philippe R. Dorier
- -------------------------------
Secretary
/s/ James R. Henderson (SEAL)
------------------------------
-8-
<PAGE>
EXHIBIT 10.4
DEFERRED COMPENSATION AGREEMENT
-------------------------------
AGREEMENT made this 28th day of January 1993, by and between BGF Services,
Inc., a Delaware corporation, having its principal place of business in
Greensboro, North Carolina (hereinafter referred to as the "Corporation"), and
Philippe Dorier, an employee of BGF Services, Inc. (hereinafter referred to as
the "Executive").
WHEREAS, the Executive has been employed by the Corporation in a highly-
compensated management position with the Corporation;
WHEREAS, the Corporation is desirous of having the Executive continue in
the employment of the Corporation; and
WHEREAS, the Executive is willing to continue in the employment of the
Corporation provided that the Corporation will pay compensation for his services
during the period prior to termination of employment and also after termination
of employment in accordance with the terms of this agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
it is agreed between the parties hereto as follows:
1. Pre-Retirement Survivor Benefit.
-------------------------------
(a) Survivor Benefit. Subject to the limitations of (b) below, in
----------------
the event of the death of a participating employee prior to age
65, the beneficiary designated by such employee, or, if none, the
employee's estate, will receive 120 monthly payments (10 years)
each in an amount equal to 50% of the monthly base salary of the
employee in effect on the January 1 occurring with or immediately
preceding the death of the employee or 50% of the average monthly
base salary on January 1 for the previous five years (including
the date of death, should death occur on January 1), whichever is
greater. Such payments will commence with the month immediately
following death.
(b) Limitations for Participants Over Age 60. If death occurs after
----------------------------------------
attaining age 60 but before attaining age 65, the following
percentages will be applicable to the greater of the two salary
bases described above to determine the amount of the payment.
<PAGE>
Attained Age % of Salary Base
at Death To Be Payable
------------- ----------------
60 45%
61 40%
62 35%
63 30%
64 25%
Such payments will commence with the month immediately following
death.
(c) Death of Disabled Employee. In the event a participating
--------------------------
employee becomes permanently disabled, as determined in the
manner specified below, before age 65 and dies before age 65, the
benefits provided for in paragraph 1(a) or 1(b) above shall be
paid in like manner as provided in paragraph 1(a) or 1(b) above.
Permanent disability for purposes hereof shall be deemed to have
occurred when the employee shall become physically or mentally
incapable of fully performing services to the Company or its
subsidiaries as required by the Company and such incapacity is,
or may reasonably be expected to exist, for more than two months,
as shall be determined by a physician mutually agreed upon by the
Company and the employee or in the absence of mutual agreement as
selected by the Company, and the determination of such physician,
whether selected by mutual agreement or by the Company shall be
final and conclusive.
(d) Effects of Termination of Employment. All rights to the Pre-
------------------------------------
Retirement Survivor Benefit provided for in paragraph 1(a) or
1(b) above shall cease if and when a participating employee's
employment by the Company or one of its subsidiaries terminates
prior to age 65 for any reason other than death or disability as
set forth above.
2. Post-Retirement Benefit.
-----------------------
(a) Supplemental Compensation Benefit. Upon retirement at age sixty-
---------------------------------
five (65) or upon early retirement with the written approval of
the Corporation, the Executive will receive the equivalent of two
and one-fourth times the Executive's final annual base salary as
of the January 1 occurring concurrently with or immediately
preceding retirement or an average of the last five years
(computed on base salary as of each January 1 of said 5-year
period) whichever is greater, paid as follows:
-2-
<PAGE>
(i) Equal monthly payments for ten years equal in total to one
and one-half times the final annual base salary (15% each
year). If death of the Executive occurs before all
payments have been made, the remaining installments will
be paid to the Executive's designated beneficiary or, in
the absence of such designation, to the Executive's
estate.
(ii) A death benefit equal to three-fourths of the Executive's
annual base salary as of the January 1 occurring
concurrently with or immediately preceding the Executive's
retirement.
(b) Early Retirement. If the Executive elects early retirement at
----------------
age 50 or thereafter with the written approval of the Corporation
(which approval shall not be required if vested according to
paragraph (e) below) such Executive will be entitled to the
payments provided in (a) above reduced according to the following
schedule:
at age 50 - 35% of benefit due at age 65
(5% reduction per year)
at age 55 - 60% of benefit due if retirement
occurred at age 65
(5% reduction per year)
at age 60 - 85% of benefit due if retirement
occurred at age 65
(3% reduction per year)
at age 65 - 100%
(c) Permanent Disability. An Executive who becomes permanently
--------------------
disabled, as defined in 1(c) above, and retires because of
disability shall not be entitled to benefits under this plan
unless said Executive survives until age 65, at which time such
Executive shall be deemed to have retired at age 65 and will then
receive the benefits provided for in (a) above.
(d) Discharged or Terminated Executive. If the Executive or the
----------------------------------
Corporation chooses to terminate their relationship, said
Executive will cease to have any rights to any retirement
benefits under this plan, except as provided in (e).
(e) Vested Right at Age 50 and 10 Years of Service. The Executive
----------------------------------------------
who has attained age 50 and has completed 10 years of service
with the Corporation (or with its predecessor Obligor, Burlington
Industries, Inc.) shall have a vested, non-forfeitable right to
receive benefits accrued under the
-3-
<PAGE>
post-retirement benefit portions of the plan as set forth in this
section 2, the amount of which benefit will be determined as of
the date of retirement under the benefit schedule set forth
above.
3. Activities Barring Benefits. The payment of or the continuation of
---------------------------
the payment of any of the benefits herein provided for is upon the
express condition that (i) without prior, written consent of the
Corporation, the Executive, either during or after the Executive's
employment with the Corporation, will not directly or indirectly
render advisory services to or become employed by or participate or
engage in any business materially competitive with and of the
businesses of the Corporation and its affiliated companies, and (ii)
such Executive shall not have willfully engaged in any conduct
constituting fraud or materially damaging to the Corporation's
interest.
4. Financing of Benefits. All retirement benefits under this Agreement
---------------------
shall be provided out of the general assets of the Corporation at the
time such benefits are to be paid. The parties agree that the
Corporation is under no obligation to set aside funds in advance of
the time for payment hereunder, or to otherwise provide security for
its obligations under this Agreement.
5. Claims Procedure.
----------------
(a) Any person entitled to benefits under the Agreement (the
"Claimant") must file a claim request with the person authorized
by the Board to fulfill the responsibilities of the Corporation
as Plan Administrator, on a form provided by the Plan
Administrator.
(b) A claim for benefits will be denied if the Corporation determines
that the Claimant is not entitled to receive benefits under the
Agreement. The Plan Administrator shall provide adequate notice
in writing to any Claimant whose claim for benefits under the
Agreement has been denied, and the notice to the claimant shall
set forth:
(i) The specific reason for denial of the claim;
(ii) Specific references to pertinent provisions of the
Agreement on which the denial is based;
(iii) A description of any additional material and information
needed for the Claimant to perfect his claim and an
explanation of why the material or information is needed;
and
(iv) A statement that the claimant may;
-4-
<PAGE>
- Request a review of his claim upon written application
to the Corporation, which is the Named Fiduciary under
the Agreement;
- Review pertinent documents affecting his claim; and
- Submit issues and comments in writing.
(c) Any appeal the Claimant wishes to make of the adverse
determination must be made by the Claimant in writing to the Plan
Administrator within sixty (60) days after receipt of the written
notice of denial of the claim. The failure of the Claimant to
appeal the denial to the Plan Administrator in writing within the
sixty (60) day period will render the Plan Administrator's
determination final, binding, and conclusive.
(d) If the Claimant should appeal to the Plan Administrator, he, or
his duly authorized representative, may submit, in writing,
whatever issues and comments he, or his duly authorized
representative, feels are pertinent. The Plan Administrator
shall re-examine all facts related to the appeal and make a final
determination as to whether the denial of benefits is justified
under the circumstances. The Plan Administrator shall advise the
Claimant of its decision within sixty (60) days of the Claimant's
written request for review, unless special circumstances (such as
a hearing) would make a rendering of a decision within the sixty-
(60) day period infeasible, but in no event shall the Plan
Administrator render a decision with respect to a denial for a
claim for benefits later than one hundred twenty (120) days after
receipt of a request for review. A written statement stating the
decision on review, the specific reasons for the decision, and
the specific provisions of the Agreement on which the decision is
based shall be mailed or delivered to the claimant within such
sixty- (60) (or one hundred twenty- (120)) day period.
6. Board to Administer. Subject to the provisions of this Agreement, the
-------------------
Board shall have exclusive authority to interpret this Agreement, to
establish and revise rules and regulations relating to this Agreement,
and to make any other determinations that it believes necessary or
advisable for the administration of this Agreement. Decisions and
determinations by the Board shall be final and binding upon all
persons for all purposes and no member of the Board shall be liable to
any person for any action taken or omitted in connection with the
interpretation and administration of this Agreement unless
attributable to his own willful misconduct or lack of good faith.
7. Assignment and Alienation. The Executive's rights and interests under
-------------------------
this Agreement shall not be subject in any manner to alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment,
execution, or levy of any
-5-
<PAGE>
kind, whether voluntary or involuntary, prior to actually being
received by the person entitled to the benefit under the terms of this
Agreement, and in the event of any attempted assignment or transfer,
whether voluntary or involuntary, this Agreement shall terminate and
the Corporation shall have no further liability hereunder.
8. Designation of Beneficiary. The Executive may designate the person or
--------------------------
persons to receive his interest under this Agreement in the event of
his death by completing a written, dated designation of beneficiary,
signed by the Executive and filed with the Corporation on a Nomination
of Beneficiary form provided by the Corporation. Beneficiaries may be
changed at any time, and such change may be made without the consent
of any prior beneficiary. If the Executive fails to designate a
beneficiary in accordance with the provisions of this Paragraph 9, or
in the event the Executive's designated beneficiary predeceases him,
the Corporation shall pay any sums remaining to be paid under this
Agreement to the Executive's estate.
9. Incapacity of Recipient. If the Board shall find that any person to
-----------------------
whom any distribution is to be made under this Agreement is unable to
care for his affairs because of accident or illness, or is a minor,
any payment due (unless a prior claim therefor shall have been made by
a duly appointed guardian, committee or other legal representative)
may be paid to the spouse, child, parent, or brother or sister of such
person, or to any person deemed by the Board to have incurred expense
for such person otherwise entitled to payment, in such manner and
proportions as the Board may determine. Any such payment shall be a
complete discharge of the liabilities of the Corporation under this
Agreement.
10. Merger. The Corporation agrees that it will not merge or consolidate
------
with another corporation or organization, or permit its business
activities to be taken over by any other corporation or organization
unless and until the succeeding or continuing corporation or other
organization shall expressly assume the rights and obligations of the
Corporation herein set forth. The Corporation further agrees that it
will not cease its business activities or terminate its existence,
other than as heretofore set forth in this Paragraph 11, without
having made adequate provision for the fulfilling of its obligations
hereunder.
11. No Right to Employment. Nothing contained in this Agreement, or any
----------------------
modification or amendment to this Agreement, shall give the Executive
or his designated beneficiary any right to be retained in the employ
of the Corporation, nor shall it give the Executive or his designated
beneficiary any legal or equitable right against the Corporation or
any officer, director, or employee of the Corporation or its agents,
except as expressly provided by this Agreement.
12. No Right to Specific Assets. Title to and beneficial ownership of any
---------------------------
assets, whether cash or investments, which the Corporation may earmark
to pay the
-6-
<PAGE>
benefits hereunder shall at all times remain in the Corporation, and
the Executive, his estate and his designated beneficiary shall not
have any property interest whatsoever in any specific assets of the
Corporation. Any assets so earmarked shall continue for all purposes
to be a part of the general funds of the Corporation and no person
other than the Corporation shall by virtue of the provisions of this
Agreement have any interest in such funds. To the extent that any
person, including the Executive., acquires a right to receive payments
from the Corporation under this Agreement, such right shall be no
greater than the right of any unsecured general creditor of the
Corporation.
13. No Trust Created. Nothing contained in this Agreement and no action
----------------
taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary relationship
between the Corporation and the Executive, his designated beneficiary
or any other person.
14. Taxes. The Corporation shall have the right to deduct from any
-----
distribution or payment in cash under this Agreement, any state,
federal or local taxes required by law to be withheld with respect to
such distribution or payment.
15. Amendment and Termination. This Agreement may be modified, extended,
-------------------------
or terminated only by consent of both parties specifying in writing
the terms of the modification, extension or termination.
16. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of North Carolina and applicable federal law.
17. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other
provisions hereof.
18. Headings. The titles and headings of Paragraphs are included for
--------
convenience of reference only and are not to be considered in
construction of the provisions of this Agreement.
19. Counterparts. This Agreement shall be executed in duplicate, each
------------
copy of which when so executed and delivered shall be an original, but
both copies shall, together, constitute one and the same instrument.
-7-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers and the Executive has hereunto set his
hand and seal as of the date first above written.
BGF SERVICES, INC.
By: /s/ Robert Porcher
--------------------------------
ATTEST
/s/ Philippe R. Dorier
- -------------------------------------
Secretary
/s/ Philippe R. Dorier (SEAL)
--------------------------
-8-
<PAGE>
GUARANTY
The undersigned, BGF INDUSTRIES, INC. hereby absolutely guarantees the full
and prompt payment of any and every obligation of BGF SERVICES, INC. under the
Deferred Compensation Agreement dated the 28th day of January, 1993 between
Philippe Dorier and BGF SERVICES, INC. This guaranty is given in recognition of
the services performed by Philippe Dorier as an officer of BGF INDUSTRIES, INC.
BGF INDUSTRIES, INC.
By: /s/ Graham A. Pope
-------------------------------------
/s/ R.R. Sipe, Jr.
- ----------------------------
Assistant Secretary
<PAGE>
EXHIBIT 10.5
LEASE
STATE OF VIRGINIA
COUNTY OF CAMPBELL
TOWN OF ALTAVISTA
THIS LEASE, made this 20th day of March, 1996, between E. R. ENGLISH, SR.
(Lessor), and BGF INDUSTRIES, INC. (Lessee);
WITNESSETH:
That for and in consideration of the agreements and covenants hereinafter
mentioned, the Lessor does hereby demise and lease unto the Lessee a certain
building lying and being in Campbell County, Virginia and more particularly
described as follows:
A steel building of approximately 101,000 square feet located at 1523 East
Main Street, Altavista, Virginia 24517.
TO HAVE AND TO HOLD the same with all privileges and appurtenances
thereunto belonging unto the Lessee, for the term hereinafter specified upon the
following terms and conditions:
1. The term of this lease shall begin on March 20, 1996 and shall continue
for three (3) years terminating on the 19th day of March, 1999.
Following the expiration of this three (3) year lease term, Lessee shall
have the option to renew this lease for an additional three (3) years (either
one (1) three (3) year term or three (3) one (1) year terms) at rates to be
negotiated.
Except for the rental, the renewals shall be upon the same terms and
conditions as are set forth herein. The Lessee is to notify the Lessor in
writing twelve (12) months prior to the renewal date if the lease is to be
extended or terminated.
2. The Lessor reserves and the Lessee agrees to pay for and during the
term of this lease as follows:
1st year $12,500.00/month
2nd year $13,300.00/month
3rd year $14,200.00/month
<PAGE>
3. The Lessor at his own cost and expense shall maintain the building on
the premises herein leased in proper condition and repair, but the Lessee shall
at its own cost and expense attend to any minor and incidental internal repairs
which are usually and customarily paid for by the Lessee. The Lessee will be
responsible for repairs to the building resulting from damage by Lessee's
employees or equipment except for that which occurs through normal wear and
tear.
4. During the term of this lease the Lessor shall pay all property taxes
and assessments imposed on the demised premises by any lawful authority. The
Lessee shall pay for all electric current, lights, gas and water used by Lessee
while in possession of said premises.
5. It is understood and agreed that the responsibility and cost of
insuring the building and the premises hereby demised against fire or other
casualty shall be borne by the Lessor. In case of damages to the premises
occasioned during this term by fire or other unavoidable casualty, and such
damage does not render the same unfit for use, the Lessor shall promptly repair
the same. In case said premises, during said term, shall be destroyed or
damaged by fire or other unavoidable casualty so that the same shall be unfit
for use or substantially destroyed, then said rent or a proportionate part
thereof shall be abated until said premise shall have been put in proper repair
by the Lessor, or this lease shall, upon the happening of such event, be
terminated at the election of either of the parties hereto. This clause shall
cover with like provisions the condemnation and/or destruction of the property
ordered by the properly constituted authorities of the State, County, City or
National government.
Lessor is not responsible for water damages to Lessee's goods resulting
from sprinkler leaking or malfunction.
6. The Lessor warrants and agrees that the Lessee shall enjoy said
premises during the said term free from the adverse claim of any person. The
Lessee agrees to make no unlawful or offensive use of the premises and to
deliver up the same at the end of the term hereby demised or upon the earlier
termination of this lease, as herein provided, in substantially as good order
and condition as same are now in, ordinary wear and tear, fire, and other
unavoidable casualties expected, and subject to the responsibility herein fixed
for the making of repairs.
7. The Lessee shall have the right to assign the lease or sublet the
premises herein demised, but such assignment or subletting shall in no way
relieve the Lessee from the obligation to pay the rental herein provided and to
do and perform all other things agreed to be done by Lessee unless the Lessor
herein shall in writing release the Lessee from such obligations.
8. Lessee shall have the right to make alterations to the demised premises
as are necessitated by its business needs, provided, however, that the Lessor
shall have the
-2-
<PAGE>
right to require the Lessee to restore the premises to their original
conditions, less reasonable wear and tear, upon the termination of this lease.
9. The Lessee shall have the right, upon the termination of the lease term
or any renewal thereof, to remove all trade fixtures, machinery and equipment
and installations which the Lessee may have upon the demised premises, except
that the Lessee shall repair any damage to the demised premises which may be
caused by such removal.
10. All communications to the Lessor may be addressed to
E. R. English, Jr., P.O.A.
1522 Main Street
Altavista, Virginia 24517
11. All communications to the Lessee may be addressed to:
BGF Industries, Inc.
401 Amherst Avenue
Altavista, Virginia 24517
Attention: Quintus Wade
IN WITNESS WHEREOF, the parties have caused this lease to be executed in
their corporate names by their corporate. officers thereunto duly authorized
this the day and year first above written.
By: /s/ E.R. English Sr. P.O.A.
by E.R. English Sr. P.O.A.
--------------------------
ATTEST:
/s/ Dolly J. Peak 3/20/96
- -----------------
BGF INDUSTRIES, INC.
BY: /s/ Herman Rogers
-----------------
ATTEST:
/s/ Quintus Wade
- ----------------
cc: N. Ross 3/25/96
J. Woodford 5/7/96
-3-
<PAGE>
BGF INDUSTRIES, INC.
February 24, 1998
Mr. E. R. English, Jr.
1522 Main Street
Altavista, VA 24517
Dear Ralph:
Under the terms of the lease on the English Warehouse, located at 1523 East Main
Street, we are notifying you in writing twelve (12) months prior to the renewal
date of March 20, 1999, of our intentions to extend the lease.
Best regards,
/s/ Quintus Wade
Quintus Wade
Administrative Manager
ss
cc: Herman Rogers-BGF
[logo]
An ISO 9002 Manufacturer
401 Amherst Avenue Altavista, VA 24517-1513 (803) 369-4751 Fax (804) 369-
7032
<PAGE>
EXHIBIT 10.6
BGF INDUSTRIES, INC.
<TABLE>
<CAPTION>
---------------------------------------
PURCHASE THIS ORDER NUMBER MUST
----
ORDER APPEAR ON ALL PACKAGES
BILLS OF LADING, INVOICES
AND ALL CORRESPONDENCE
<S> <C>
VENDOR: 0005058
K&C BROKERAGE
P.O. BOX 2171
LYNCHBURG NO 01025512
VA 24501
----------------------------------------------------------
DATE ORDER TO BE RECEIVED BY
SHIP TO: 11/26/96
----------------------------------------------------------
BGF INDUSTRIES, INC. *SEND ACKNOWLEDGEMENT TO "SHIP TO"
401 AMHERST AVENUE LOCATION.
ALTAVISTA, VA. 24517-1513
*SEND INVOICE TO SAME AS "SHIP TO"
ADDRESS UNLESS SHOWN OTHERWISE BELOW.
---------------------------------------
ROUTING (As shown unless UPS or PP is applicable Alta Vista Warehouse Lease
No written lease - month to month
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
BIN NO. PROJECT NO.
QUANTITY U/M PART NO. DESCRIPTION TAX UNIT PRICE TERMS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MO RENTAL OF 24000 SQ. N 1,000.00 NET 30,D 99999 57-0300
FT. OF WAREHOUSE
SPACE
***** END OF ORDER *****
N= NO TAX APPLICABLE
T = TAXABLE
$6000/month
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------------------
<S> <C>
All materials received must be manufactured in accordance with the AUTHORIZED SIGNATURE
requirements of paragraph 3.5 of MIL-I-24244 latest revision and has not
come in contact with mercury or any of its compounds during the /s/ S.E. Saunders
manufacturing process.
- ---------------------------------------------------------------------------------------------------
</TABLE>
Seller, by the acceptance, execution or performance of this order, expressly
certifies that it has read, is familiar with, and agrees to the terms and
conditions set forth above and that it understands that these terms and
conditions may not be waived or modified without the express written consent of
the Buyer.
<PAGE>
EXHIBIT 10.7
BGF INDUSTRIES, INC.
Philippe Dorier
Senior Vice President
Chief Financial Officer
December 14, 1998
Mr. Van Johns
Vando, Inc. Graphite Master
3815 Medford Street
Los Angeles, CA 90063
Dear Van,
Please accept this letter as my agreement to continue the Los Angeles
warehouse/office lease agreement at $5,500/month for another three years. This
agreement retroactively goes into effect December 1, 1998 and will expire on
December 1, 2001.
Please execute one original and send back to my attention at BGF Industries,
Inc.
We appreciate your time and consideration in this matter.
AGREED UPON:
/s/ Philippe Dorier /s/ H. V. Johns
- ------------------------- --------------------
Philippe Dorier H. V. Johns
12/14/98 12-21-98
- ------------------------- --------------------
Date Date
3802 Robert Porcher Way . Greensboro, NC 27410 . 336-545-0011 . Fax 336-545-0233
<PAGE>
VANDO, INC. GRAPHITE MASTER
Technology in Textiles
Distributors of Graphite, Kevlar, Synthetic & Fiberglass Fabrics
3815 Medford St., Los Angeles, CA 90063 . (213) 261-1107
January 27, 1995
Mr. Philippe Dorier
BGF Industries, Inc.
301 North Elm Street
Greensboro, NC 27401
Dear Philippe:
A copy of the warehouse/office lease, commencing December 1, 1991 and ending
December 1, 1994, is enclosed.
It is agreed upon that this lease be extended for a term of 3 years with another
one year option. The base rent will remain the same, at $5500.00 per month,
commencing December 1, 1994 and ending December 1, 1998.
Thank you for signing and dating this Agreement and furnishing me with a copy
upon completion.
Yours truly,
/s/ H. V. Johns
H. V. Johns
Ab/
AGREED UPON DATE:
/s/ H. V. Johns 1-27-95
- --------------------------- -------------------
H. V. Johns
/s/ Philippe Dorier 1-31-95
- --------------------------- --------------------
Philippe Dorier
<PAGE>
STANDARD INDUSTRIAL/COMMERCIAL SINGLE TENANT LEASE - NET
1. Basic Provisions ("Basic Provisions")
1.1 Parties: This Lease ("Lease"), dated for reference purposes only,
November 1, 1991 is made by and between BGF Industries, Inc. ("Lessor"), and H.
V. Johns, Jr. ("Lessee"), (collectively the "Parties," or individually a
"Party").
1.2 Premises: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known by the street address of 3815 Medford Street, Los Angeles, located in the
County of Los Angeles, State of California and generally described as (describe
briefly the nature of the property) Office/Warehouse (20,259 sq. ft.)
("Premises"). (See Paragraph 2 for further provisions.)
1.3 Term: 2 years and one year option ("Original Term") commencing
December 1, 1991 ("Commencement Date") and ending December 1, 1994 ("Expiration
Date"). (See Paragraph 3 for further provisions.)
1.4 Early Possession: n/a ("Early Possession Date"). (See Paragraphs 3.2
and 3.3 for further provisions.)
1.5 Base Rent: $5500.00 per month ("Base Rent"), payable on the 1st day
of each month commencing December 1, 1991. (See Paragraph 4 for further
provisions.)
[_] If this box is checked, there are provisions in this Lease for the Base
Rent to be adjusted.
1.6 Base Rent Paid Upon Execution: $5500.00/mo for three years as Base
Rent for the period __________.
1.7 Security Deposit: $ none ("Security Deposit"). (See Paragraph 5 for
further provisions.)
1.8 Permitted Use: Office and Warehouse. (See Paragraph 6 for further
provisions.)
1.9 Insuring Party: Lessor is the "Insuring Party" unless otherwise
stated herein. (See Paragraph 8 for further provisions.)
1.10 Real Estate Brokers: The following real estate brokers (collectively,
the "Brokers") and brokerage relationships exist in this transaction and are
consented to by the Parties (check applicable boxes): n/a.
<PAGE>
1.11 Guarantor: The obligations of the Lessee under this Lease are to be
guaranteed by H. V. Johns, Jr. ("Guarantor"). (See Paragraph 37 for further
provisions.)
1.12 Addenda: Attached hereto is an Addendum or Addenda consisting of
Paragraphs ____ through ____ and Exhibits _____________ all of which constitute
a part of this Lease.
2. Premises.
2.1 Letting. Lessor hereby leases, and Lessee hereby leases to Lessee
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental, is an approximation which Lessor
and Lessee agree is reasonable and the rental based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, fire sprinkler system, lighting, air conditioning, heating and loading
doors, if any, in the Premises, other than those constructed by Lessee, shall be
in good working condition on the Commencement Date. If a non-compliance with
said warranty exists as of the Commencement Date, Lessor shall, except a
otherwise provided in this Lease, promptly after receipt of written notice from
Lessee setting forth with specificity the nature and extent of such non-
compliance, rectify same at Lessor's expense. If Lessee does not give Lessor
written notice of a non-compliance with this warranty within thirty (30) days
after the Commencement Date, correction of that non-compliance shall be the
obligation of Lessee at Lessee's sole cost and expense.
2.3 Compliance with Covenants, Restrictions and Building Code. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record and applicable building codes,
regulations and ordinances in effect on the Commencement Date. Said warranty
does not apply to the use to which Lessee will put the Premises or to any
Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to
be made by Lessee. If the Premises do not comply with said warranty, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within thirty
(30) days after the Commencement Date, correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.
2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that it has
been advised by the Brokers to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, compliance with Applicable Law, as
defined in Paragraph 6.3) and the present and future suitability of the Premises
for Lessee's intended use, (b) that
-4-
<PAGE>
Lessee has made such investigation as it deems necessary with reference to such
matters and assumes all responsibility therefor as the same relate to Lessee's
occupancy of the Premises and/or the term of this Lease, and (c) that neither
Lessor, nor any of Lessor's agents, has made any oral or written representations
or warranties with respect to the said matters other than as set forth in this
Lease.
2.5 Lessee Prior Owner/Occupant. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in Paragraph 1.1. Lessee was the owner or occupant of the Premises in
such event, Lessee shall, at Lessee's sole cost and expense, correct any non-
compliance of the Premises with said warranties.
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this
Lease, however, (including but not limited to the obligations to pay Real
Property Taxes and insurance premiums and to maintain the Premises) shall be in
effect during such period. Any such early possession shall not affect nor
advance the Expiration Date of the Original Term.
3.3 Delay in Possession. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early Possession
Date if one is specified in Paragraph 1.4 or, if no Early Possession Date is
specified by the Commencement Date, Lessor shall not be subject to any liability
therefor, nor shall such failure affect the validity of this Lease, or the
obligations of Lessee hereunder, or extend the term hereof, but in such case,
Lessee shall not except as otherwise provided herein, be obligated to pay rent
or perform any other obligation of Lessee under the terms of this Lease until
Lessor delivers possession of the Premises to Lessee. If possession of the
Premises is not delivered to Lessee within sixty (60) days after the
Commencement Date, Lessee may, at its option, by notice in writing to Lessor
within ten (10) days thereafter, cancel this Lease, in which event the Parties
shall be discharged from all obligations hereunder; provided, however, that if
such written notice by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease shall terminate and be of no further
force or effect. Except as may be otherwise provided, and regardless of when
the term actually commences, if possession is not tendered to Lessee when
required by this Lease and Lessee does not terminate this Lease, as aforesaid,
the period free of the obligation to pay Base Rent, if any, that Lessee would
otherwise have enjoyed shall run from the date of delivery of possession and
continue for a period equal to what Lessee would otherwise have enjoyed under
the terms hereof, but minus any days of delay caused by the acts, changes or
omissions of Lessee.
-5-
<PAGE>
4. Rent.
4.1 Base Rent. Lessee shall cause payment of Base Rent and other rent or
charges, as the same may be adjusted from time to time, to be received by Lessor
in lawful money of the United States, without offset or deduction, on or before
the day on which it is due under the terms of the Lease. Base Rent and all
other rent and charges for any period during the term hereof which is for less
than one (1) full calendar month shall be prorated based upon the actual number
of days of the calendar month involved. Payment of Base Rent and other charges
shall be made to Lessor at its address stated herein or to such other persons or
at such other addresses as Lessor may from time to time designate in writing to
Lessee.
5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefor
deposit moneys with Lessor sufficient to restore said Security Deposit to the
full amount required by this lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional monies with Lessor sufficient to maintain the same ratio between the
Security Deposit and the Base Rent as those amounts are specified in the Basic
Provisions. Lessor shall not be required to keep all or any part of the
Security Deposit separate from its general accounts. Lessor shall, at the
expiration or earlier termination of the term hereof and after Lessee has
vacated the Premises, return to Lessee (or, at Lessor's option, to the last
assignee, if any, of Lessee's interest herein), that portion of the Security
Deposit not used or applied by Lessor. Unless otherwise expressly agreed in
writing by Lessor, no part of the Security Deposit shall be considered to be
held in trust, to bear interest or other increment for its use, or to be
prepayment for any moneys to be paid by Lessee under this Lease.
6. Use.
6.1 Use. Lessee shall use and occupy the Premises only for the purposes
set forth in Paragraph 1.8 or any other use which is comparable thereto, and for
no other purpose. Lessee shall not use or permit the use of the Premises in a
manner that creates waste or a nuisance, or that disturbs owners and/or
occupants of, or causes damage to, neighboring premises or properties.
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, chemical, material or
-6-
<PAGE>
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for liability of Lessor to any governmental agency
or third party under any applicable statute or common law theory. Hazardous
Substance shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, crude oil or any products, by-products or transactions thereof. Lessee
shall not engage in any activity in, on or about the Premises which constitutes
a Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Law (as defined in Paragraph
6.3). "Reportable Use" shall mean (i) the installation or use of any above or
below ground storage tank, (ii) the generation, possession, storage, use,
transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority. Reportable Use shall
also include Lessee's being responsible for the presence in, on or about the
Premises of a Hazardous Substance with respect to which any Applicable Law
requires that a notice be given to persons entering or occupying the Premises or
neighboring properties. Notwithstanding the foregoing, Lessee may, without
Lessor's prior consent, but in compliance with all Applicable Law, use any
ordinary and customary materials reasonably required to be used by Lessee in the
normal course of Lessee's business permitted on the Premises, so long as such
use is not a Reportable Use and does not expose the Premises or neighboring
properties to any meaningful risk of contamination or damage or expose Lessor to
any liability therefor. In addition, Lessor may (but without any obligation to
do so) condition its consent to the use or presence of any Hazardous Substance,
activity or storage tank by Lessee upon Lessee's giving Lessor such additional
assurances as Lessor, in its reasonable discretion, deems necessary to protect
itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefrom or therefor, including, but
not limited to, the installation (and removal on or before Lease expiration or
earlier terminations of reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of an additional
Security Deposit under Paragraph 5 hereof.
(b) Duty to Inform Lessor. If Lessee knows or has reasonable cause to
believe that a Hazardous Substance, or a condition involving or resulting from
same, has come to be located in, on, under or about the Premises, other than as
previously consented to by Lessor, Lessee shall immediately give written notice
of such fact to Lessor. Lessee shall also immediately give Lessor a copy of any
statement, report, notice, registration, application, permit, business plan,
license, claim, action or proceeding given to, or received from, any
governmental authority or private party, or persons entering or occupying the
Premises, concerning the presence, spill, release, discharge of, or exposure to,
any Hazardous Substance or contamination in, on or about the Premises, including
but not limited to all such documents as may be involved in any Reportable Uses
involving the Premises.
-7-
<PAGE>
(c) Indemnification. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground Lessor, if any, and the
Premises, harmless from and against any and all loss of rents and/or damages,
liabilities, judgments, costs, claims, liens, expenses, penalties, permits and
attorney's and consultant's fees arising out of or involving any Hazardous
Substance or storage tank brought onto the Premises by or for Lessee or under
Lessee's control. Lessee's obligations under this Paragraph 6 shall include, but
not be limited to, the effects of any contamination or injury to person,
property or the environment created or suffered by Lessee, and the cost of
investigation (including consultant's and attorney's fees and testing), removal,
remediation, restoration and/or abatement thereof, or of any contamination
therein involved, and shall survive the expiration or earlier termination of
this Lease. No termination, cancellation or release agreement entered into by
Lessor and Lessee shall release Lessee from its obligations under this Lease
with respect to Hazardous Substances or storage tanks, unless specifically so
agreed by Lessor in writing at the time of such agreement.
6.3. Lessee's Compliance with Law. Except as otherwise provided in this
Lease, Lessee, shall, at Lessee's sole cost and expense fully, diligently and in
a timely manner, comply with all "Applicable Law," which term is used in this
Lease to include all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the Premises (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil and groundwater conditions, and (iii) the use
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill or release of any Hazardous Substance or storage
tank), now in effect or which may hereafter come into effect, and whether or not
reflecting a change in policy from any previously existing policy. Lessee
shall, within five (5) days after receipt of Lessor's written request, provide
Lessor with copies of all documents and information, including, but not limited
to, permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Law specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or the
Premises to comply with any Applicable Law.
6.4 Inspection; Compliance. Lessor and Lessor's Lender(s) (as defined in
Paragraph 8.3(a) shall have the right to enter the Premises at any time. In the
case of an emergency, and otherwise at reasonable times, for the purpose of
inspecting the condition of the Premises and for verifying compliance by Lessee
with this Lease and all Applicable Laws (as defined in Paragraph 6.3), and to
employ experts and/or consultants in connection therewith and/or to advise
Lessor with respect to Lessee's activities, including but not limited to the
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance or storage tank on or from the Premises. The costs and
expenses of any such inspections shall be paid by the party requesting same,
unless a Default or Breach of this Lease, violation of Applicable Law, or a
contamination, caused or materially contributed to by Lessee is found to exist
or be imminent, or unless the
-8-
<PAGE>
inspection is requested or ordered by a governmental authority as the result of
any such existing or imminent violation or contamination. In any such case,
Lessee shall upon request reimburse Lessor or Lessor's Lender, as the case may
be, for the costs and expenses of such inspections.
7. Maintenance; Repairs; Utility Installations; Trade Fixtures and
Alternations.
7.1 Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 2.2 (Lessor's warranty as
to condition), 2.3 (Lessor's warranty as to compliance with covenants, etc), 7.2
(Lessor's obligations to repair), 9 (damage and destruction), and 14
(condemnation), Lessee shall, at Lessee's sole cost and expense and at all times
keep the Premises and every part thereof in good order, condition and repair,
structural and non-structural (whether or not such portion of the Premises
requiring repair, or the means of repairing the same, are reasonably or readily
accessible to Lessee, and whether or not the need for such repairs occurs as a
result of Lessee's [illegible] use, the elements or the age of such portion of
the Premises, including, [illegible] of the foregoing, all equipment or facility
[illegible] the Premises, such as plumbing, heating, air conditioning,
[illegible] facilities, oilers, fired or unfired, pressure vessels, fire
[illegible] and/or standpipe and hose or other automatic fire extinguishing
system including fire alarm and/or smoke detection systems and equipment, fire
hydrants, fixtures, walls (interior and exterior), foundations, ceilings, roofs,
floors, windows, doors, plate glass, skylights, landscaping, driveways, parking
lots, fences, retaining walls, signs, sidewalks and parkways located in, on
about or adjacent to the Premise, Lessee shall not cause or permit any Hazardous
Substance to be spilled or released in, on, under or about the Premises
including through the plumbing or sanitary sewer systems and shall promptly, at
Lessee's expense, take all investigatory and/or remedies action reasonably
recommended, whether or not formally ordered or required, for the cleanup of any
contamination of, and for the maintenance, security and/or monitoring of, the
Premises, the elements surrounding same, or neighboring properties, that was
caused or materially contributed to by Lessee, or pertaining to or involving any
Hazardous Substance and/or storage tank brought onto the Premises by or for
Lessee or under its control. Lessee, in keeping the Premises in good order,
condition and repair, shall exercise and perform good maintenance practices.
Lessee's obligations shall include restorations, replacements or renewals when
necessary to keep the Premises and all improvements thereon or a part thereof in
good order, condition and state of repair. If Lessee occupies the Premises for
seven (7) years or more, Lessor may require Lessee to repaint the exterior of
the buildings on the Premises as reasonably required, but not more frequently
than once every seven (7) years.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain contracts, with copies to Lessor, in customary form and substance for
and with contractor's specializing and experienced in, the inspection,
maintenance and service of the following equipment and improvements, if any,
located on the Premises: (i) heating, air conditioning and ventilation
equipment, (ii) boiler, fired or unfired pressure vessels, (iii) fire sprinkler
and/or standpipe and hose or other automatic fire extinguishing
-9-
<PAGE>
systems, including fire alarm and/or smoke detection, (iv) landscaping and
irrigation systems, (vi) roof covering and drain maintenance and (vi) asphalt
and parking lot maintenance.
7.2 Lessor's Obligations. Except for the warranties and agreements of
Lessor contained in paragraphs 2.2 (relating to condition of the Premises), 2.3
(relating to compliance with covenants, restrictions and building code), 9
(relating to destruction of the Premises) and 14 (relating to condemnation of
the Premises), it is intended by the Parties hereto that Lessor have no
obligation, in any manner whatsoever, to repair and maintain the Premises, the
improvements located thereon, or the equipment therein, whether structural or
non structural, all of which obligations are intended to be that of the Lessee
under Paragraph 7.1 hereof. It is the intention of the Parties that the terms
of this Lease govern the respective obligations of the Parties as to maintenance
and repair of the Premises. Lessee and Lessor expressly waive the benefit of
any statute now or hereafter in effect to the extent it is inconsistent with the
terms of this Lease with respect to, or which affords Lessee the right to make
repairs at the expense of Lessor or to terminate this Lease by reason of any
needed repairs.
7.3 Utility Installation; Trade Fixtures; Alterations.
(a) Definitions: Consent Required. The term "Utility Installations"
is used in this Lease to refer to all carpeting, window coverings, air lines,
power panels, electrical distribution, security fire protection systems,
communication systems, lighting fixtures, heating, ventilating, and air
conditioning equipment, plumbing, and fencing in, on or about the Premises. The
term "Trade Fixtures" shall mean Lessee's machinery and equipment that can be
removed without doing material damage to the Premises. The term "Alternations"
shall mean any modification of the improvements on the Premises from that which
are provided by Lessor under the terms of this Lease, other than Utility
installations or Trade Fixtures, whether by addition or deletion. "Lessee Owned
Alterations and/or Utility Installations" are defined as Alterations and/or
Utility Installations made by Lessee that are not yet owned by Lessor as defined
in Paragraph 7.4(a). Lessee shall not make any Alterations or Utility
Installations in, on or under or about the Premises without Lessor's prior
written consent. Lessee may, however, make non-structural Utility Installations
to the interior of the Premises (excluding the roof), as long as they are not
visible from the outside, do not involve puncturing, relocating or removing the
roof or any existing walls, and the cumulative coat thereof during the term of
this Lease as extended does not exceed $25,000.
(b) Consent. Any Alternations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with proposed detailed plans. All consents
given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent, shall be deemed conditioned upon (i) Lessee's acquiring all applicable
permits required by governmental authorities, (ii) the furnishing of copies of
such permits together with a copy of the plans and specifications for the
Alternation or Utility Installation to Lessor prior to commencement of the work
thereon, and (iii) the compliance by Lessee with all conditions of said permits
-10-
<PAGE>
in a prompt and expeditious manner. Any Alterations or Utility Installations by
Lessee during the term of this Lease shall be done in a good and workmanlike
manner, with good and sufficient materials, and in compliance with all
Applicable Law. Lessee shall promptly upon completion thereof furnish Lessor
with as-built plans and specifications therefor. Lessor may (but without
obligation to do so) condition its consent to any requested Alteration or
Utility Installation that costs $10,000 or more upon Lessee's providing Lessor
with a lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alterations or Utility Installation and/or upon Lessee's
posting an additional Security Deposit with Lessor under Paragraph 36 hereof.
(c) Indemnification. Lessee shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days notice prior to the commencement of any
work in, on or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense defend and protect itself, Lessor
and the Premises against the same and shall pay and satisfy any such adverse
judgment that may be rendered thereon before the enforcement thereof against the
Lessor or the Premises. If Lessor shall require, Lessee shall furnish to Lessor
a surety bond satisfactory to Lessor in an amount equal to one and one-half
times the amount of such contested lien claim or demand, indemnifying Lessor
against liability for the same, as required by law for the holding of the
Premises free from the effect of such lien or claim. In addition, Lessor may
require Lessee to pay Lessor's attorney's fees and costs in participating in
such action if Lessor shall decide it is to its best interest to do so.
7.4 Ownership; Removal; Surrender; and Restoration.
(a) Ownership. Subject to Lessor's right to require their removal or
become the owner thereof as hereinafter provided in this Paragraph 7.4, all
Alterations and Utility Additions made to the Premises by Lessee shall be the
property of and owned by Lessee, but considered a part of the Premises. Lessor
may, at any time and at its option, elect in writing to Lessee to be the owner
of all or any specified part of the Lessee Owned Alterations and Utility
Installation. Unless otherwise instructed per subparagraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
earlier termination of this Lease, become the property of Lessor and remain upon
and be surrendered by Lessee with the Premises.
(b) Removal. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee Owned Alterations or Utility Installations be removed by
the expiration or earlier termination of this Lease, notwithstanding their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Lessee Owned Alterations or
Utility Installations made without the required consent of Lessor.
-11-
<PAGE>
(c) Surrender/Restoration. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, with all
of the improvements, parts and surfaces thereof clean and free of debris and in
good operating order, condition and state of repair, ordinary wear and tear
excepted. "Ordinary wear and tear" shall not include any damage or deterioration
that would have been prevented by good maintenance practice or by Lessee
performing all of its obligations under this Lease. Except as otherwise agreed
or specified in writing by Lessor, the Premises, as surrendered, shall include
the Utility Installations. The obligation of Lessee shall include the repair of
any damage occasioned by the installation, maintenance or removal of Lessee's
Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by Applicable
Law and/or good practice. Lessee's Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee subject to its obligation to repair and
restore the Premises per this Lease.
8. Insurance; Indemnity.
8.1 Payment For Insurance. Regardless of whether the Lessor or Lessee is
the Insuring Party, Lessee shall pay for all insurance required under this
Paragraph 8 except to the extent of the cost attributable to liability insurance
carried by Lessor in excess of $1,000,000 per occurrence. Premiums for policy
periods commencing prior to or extending beyond the Lease term shall be prorated
to correspond to the Lease term. Payment shall be made by Lessee to Lessor
within ten (10) days following receipt of an invoice for any amount due.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee and Lessor (as an additional insured) against claims for
bodily injury, personal injury and property damage based upon, involving or
arising out of the ownership, use occupancy or maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be on an occurrence basis
providing single limit coverage in an amount not less than $1,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises"
Endorsement and contain the "Amendment of the Pollution Exclusion" for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not contain
any intra-insured exclusions as between insured persons or organizations, but
shall include coverage for liability assumed under this Lease as an "insured
contract" for the performance of Lessee's indemnity obligations under this
Lease. The limits of said insurance required by this Lease or as carried by
Lessee shall not, however, limit the liability of Lessee nor retrieve Lessee of
any obligation hereunder. All insurance to be carried by Lessee shall be primary
to and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.
-12-
<PAGE>
(b) Carried By Lessor. In the event Lessor is the Insuring Party,
Lessor shall also maintain liability insurance described in Paragraph 8.2(a),
above, in addition to, and not in lieu of, the insurance required to be
maintained by Lessee. Lessee shall not be named as an additional insured
therein.
8.3 Property Insurance--Building, Improvements and Rental Value.
(a) Building and Improvements. The Insuring Party shall obtain and
keep in force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and to the holders of any mortgages, deeds
of trust or ground leases on the Premises ("Lender(s)"), insuring loss or damage
to the Premises. The amount of such insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by Lenders, but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of the unique
nature or age of the improvements involved, such latter amount is less than full
replacement cost. If Lessor is the Insuring Party, however, Lessee Owned
Alterations and Utility Installations shall be insured by Lessee under Paragraph
8.4 rather than by Lessor if the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquake unless
required by a Lender), including coverage for any additional costs resulting
from debris removal and reasonable amounts of coverage for the enforcement of
any ordinance or law regulating the reconstruction or replacement of any
undamaged sections of the Premises required to be demolished or removed by
reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered cause of loss. Said policy or policies shall also
contain an agreed valuation provision in lieu of any coinsurance clause, waiver
of subrogation, and initiation guard protection causing an increase in the
annual property insurance coverage amount by a factor of not less than the
adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers
for the city nearest to where the Premises are located. If such insurance
coverage has a deductible clause, the deductible amount shall not exceed $1,000
per occurrence, and Lessee shall be liable for such deductible amount in the
event of an Insured Loss, defined in Paragraph 9.1(c).
(b) Rental Value. The Insuring Party shall, in addition, obtain and
keep in force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and Lender(s), insuring the loss of the full
rental and other charges payable by Lessee to Lessor under this Lease for one
(1) year (including all real estate taxes, insurance costs, and any scheduled
rental increases). Said insurance shall provide that in the event the Lease is
terminated by reason of an insured loss, the period of indemnity for such
coverage shall be extended beyond the date of the completion of repairs or
replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the protected rental income,
property lease, insurance premium costs and other expenses, if any, otherwise
payable by Lessee, for the next twelve (12) month period. Lessee shall be liable
for any deductible amount in the event of such loss.
-13-
<PAGE>
(c) Adjacent Premises. If the Premises are part of a larger building,
or if the Premises are part of a group of buildings owned by Lessor which are
adjacent to the Premises, the Lessee shall pay for any increase in the premiums
for the property insurance of such building or buildings if said increase is
caused by Lessee's acts, omissions, use or occupancy of the Premises.
(d) Tenant's Improvements. If the Lessor is the Insuring Party, the
Lessor shall not be required to insure Lessee Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease. If Lessee is the Insuring Party, the policy
carried by Lessee under this Paragraph 8.3 shall insure Lessee Owned Alterations
and Utility Installations.
8.4 Lessee's Property Insurance. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property. Lessee Owned Alterations and Utility
Installations in, on, or about the Premises similar in coverage to that carried
by the Insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for
the replacement of personal property or the restoration of Lessee Owned
Alterations and Utility Installations. Lessee shall be the Insuring Party with
respect to the insurance required by this Paragraph 8.4 and shall provide Lessor
with written evidence that such insurance is in force.
8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be required by a Lender having a
lien on the Premises, as set forth in the most current issue of "Best's
Insurance Guide." Lessee shall not do or permit to be done anything which shall
invalidate the insurance policies referred to in this Paragraph 8. If Lessee is
the Insuring Party, Lessee shall cause to be delivered to Lessor certified
copies of policies of such insurance or certificates evidencing the existence
and amounts of such insurance with the insureds and loss payable clauses as
required by this Lease. No such policy shall be cancellable or subject to
modification except after thirty (30) days prior written notice to Lessor.
Lessee shall at least thirty (30) days prior to the expiration of such policies,
furnish Lessor with evidence of renewals or "insurance binders" evidencing
renewal thereof, or Lessor may order such insurance and charge the cost thereof
to Lessee, which amount shall be payable by Lessee to Lessor upon demand. If
the Insuring Party shall fail to procure and maintain the insurance required to
be carried by the Insuring Party under the Paragraph 8, the other Party may, but
shall not be required to, procure and maintain the same, but at Lessee's
expense.
8.6 Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor ("Waiving Party") each hereby release and relieve
the other, and waive their entire right to recover damages (whether in contract
or in tort) against the other, for
-14-
<PAGE>
loss of or damage to the Waiving Party's property arising out of or incident to
the perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto.
8.7 Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground Lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, permits, attorney's and consultant's fees,
expenses and/or liabilities arising out of, involving, or in dealing with the
occupancy of the Premises by Lessee, the conduct of Lessee's business, any act,
omission or neglect of Lessee, its agents, contractors, employees or invitees,
and out of any Default or Breach by Lessee in the performance in a timely manner
of any obligation on Lessee's part to be performed under this Lease. The
foregoing shall include, but not be limited to, the defense or pursuit of any
claim or any action or proceeding involved thereon, and whether or not (in the
case of claims made against Lessor) litigated and/or reduced to judgment, and
whether well founded or not, in case any action or proceeding be brought against
Lessor by reason of any of the foregoing matters. Lessee upon notice from
Lessor shall defend the same at Lessee's expense by counsel reasonably
satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense.
Lessor need not have first paid any such claim in order to be so indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers or any other person
in or about the Premises, whether such damage or injury is caused by or results
from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said injury or damage results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible or not,
Lessor shall not be liable for any damages arising from any act or neglect of
any other tenant of Lessor. Notwithstanding, Lessor's negligence or breach of
this Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, the repair cost of which damage or destruction is less than 50%
of the then Replacement Cost of the Premises immediately prior to such damage or
destruction,
-15-
<PAGE>
excluding from such calculation the value of the land and Lessee Owned
Alterations and Utility Installations.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility installations the
repair cost of which damage or destruction is 50% or more of the then
Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.
(c) "Insured Loss" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility Installations,
which was caused by an event required to be covered by the insurance described
in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits
involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in paragraph 6.2(a) in, on, or under the
Premises.
9.2 Partial Damage--Insured Loss. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make the insurance
proceeds available to Lessee on a reasonable basis for that purpose.
Notwithstanding the foregoing, if the required insurance was not in force or the
insurance proceeds are not sufficient to effect such repair, the Insuring Party
shall promptly contribute the shortage in proceeds (except as to the deductible
which is Lessee's responsibility) as and when required to complete said repairs.
In the event, however, the shortage in proceeds was due to the fact that, by
reason of the unique nature of the improvements, full replacement cost insurance
coverage was not commercially reasonable and available, Lessor shall have no
obligation to pay for the shortage in insurance proceeds or to fully restore the
unique aspects of the Premises unless Lessee provides Lessor with the funds to
cover same, or adequate assurance thereof, within ten (10) days following
receipt of written notice of such shortage and request therefor. If Lessor
receives said funds or adequate assurance thereof within said ten (10) day
period, the party responsible for making the repairs shall complete them as soon
as reasonably possible and this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee written ten (10) days thereafter
to make such restoration and repair as is
-16-
<PAGE>
commercially reasonable with Lessor paying any shortage in proceeds, in which
case this Lease shall remain in full force and effect. If in such case Lessor
does not so elect, then this lease shall terminate sixty (60) days following the
occurrence of the damage or destruction. Unless otherwise agreed, Lessee shall
in no event have any right to reimbursement from Lessor for any funds
contributed by Lessee to repair any such damage or destruction. Premises Partial
Damage due to flood or earthquake shall be subjected to Paragraph 9.3 rather
than Paragraph 9.2, notwithstanding that there may be some insurance coverage,
but the net proceeds of any such insurance shall be made available for the
repairs it made by either Party.
9.3 Partial Damage Uninsured Loss. If a Premises Partial Damage that is
not an Insured Loss occurs [illegible] caused by a negligent or willful act of
Lessee in which event Lessee shall make the repairs at Lessee's expense and this
Lease shall continue in full force and effect , but subject to Lessor's rights
under Paragraph [illegible]. Lessor may at Lessor's option either (i) repair
such damage as soon as reasonably [illegible] at Lessor's expense, in which
event the Lease shall continue in full force and effect, or (ii) give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of
the occurrence of such damage of Lessor's desire to terminate this Lease as of
the date sixty (60) days following the giving of such notice. In the event
Lessor elects to give such notice of Lessor's intention to terminate this Lease,
Lessee shall have the right within ten (10) days after the receipt of such
notice to give written notice to Lessor of Lessee's commitment to pay for the
repair of such damage totally at Lessee's expense and without reimbursement from
Lessor. Lessee shall provide Lessor with the required funds or satisfactory
assurance thereof within thirty (30) days following Lessee's said commitment.
In such event this lease shall continue in full force and effect, and Lessor
shall proceed to make such repairs as soon as reasonably possible and the
required funds are available. If Lessee does not give such notice and provide
the funds or assurance thereof within the times specified above, this Lease
shall terminate as of the date specified in Lessor's notice of termination.
9.4 Total Destruction. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in paragraph 8.6.
9.5 Damage Near End of Term. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one (1) month's Base Rent, whether or not an Insured Loss, Lessor may,
at Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by, within twenty (20) days following the occurrence of
-17-
<PAGE>
the damage or before the expiration of the time provided in such option for its
exercise, whichever is earlier ("Exercise Period"), (i) exercising such option
and (ii) providing Lessor with any shortage in insurance proceeds for adequate
assurance thereof) needed to make the repairs. If Lessee duly exercises such
option during said Exercise Period and provides Lessor with funds for adequate
assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at
Lessor's expense repair such damage as soon as reasonably possible and this
Lease shall continue in full force and effect. If Lessee fails to exercise such
option and provide such funds or assurance during said Exercise Period, then
Lessor may at Lessor's option terminate this Lease as of the expiration of said
sixty (60) day period following the occurrence of such damage by giving written
notice to Lessee of Lessor's election to do so within ten (10) days after the
expiration of the Exercise Period, notwithstanding any term or provision in the
grant of option to the contrary.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in Paragraph 9.2 (Partial
Damage--Insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, payable by Lessee hereunder for the period during which such
damage, its repair or the restoration continues (not to exceed the period for
which rental value insurance is required under Paragraph 8.3(b)), shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired. Except for abatement of Base Rent, Real Property Taxes, insurance
premiums, and other charges, if any, as aforesaid, all other obligations of
Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim
against Lessor for any damage suffered by reason of any such repair or
restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a lender commences the repair or restoration of the
Premises within thirty (30) days after receipt of such notice, this Lease shall
continue in full force and effect. "Commence" as used in this Paragraph shall
mean either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the Premises, whichever first
occurs.
9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable Law
and this Lease shall continue in full force and effect, but subject to Lessor's
rights under paragraph 13).
-18-
<PAGE>
Lessor may at Lessor's option either (i) investigate and remediate such
Hazardous Substance Condition, if required, as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) if the estimated cost to investigate and remediate such
condition exceeds twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater, give written notice to Lessee within thirty (30) days
after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition of Lessor's desire to terminate this Lease as of the date
sixty (60) days following the giving of such notice. In the event Lessor elects
to give such notice of Lessor's intention to terminate this Lease, Lessee shall
have the right within ten (10) days after the receipt of such notice to give
written notice to Lessor of Lessee's commitment to pay for the investigation and
remediation of such Hazardous Substance Condition totally at Lessee's expense
and without reimbursement from Lessor except to the extent of an amount equal to
twelve (12) times the then monthly Base Rent or $100,000, whichever is greater.
Lessee shall provide Lessor with the funds required of Lessee or satisfactory
assurance thereof within thirty (30) days following Lessee's said commitment. In
such event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such investigation and remediation as soon as reasonably
possible and the required funds are available. If Lessee does not give such
notice and provide the required funds or assurance thereof within the times
specified above, this Lease shall terminate as of the date specified in Lessor's
notice of termination. If a Hazardous Substance Condition occurs for which
Lessee is not legally responsible, there shall be abatement of Lessee's
obligations under this Lease to the same extent as provided in Paragraph 9.6(a)
for a period of not to exceed twelve months.
9.8 Termination--Advance Payments. Upon termination of this Lease
pursuant to this paragraph 9, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit
as has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9 Waive Statutes. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.
10. Real Property Taxes.
10.1 (a) Payment of Taxes. Lessee shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Premises during the term of this
Lease. Subject to Paragraph 10.1(b), all such payments shall be made at least
ten (10) days prior to the delinquency date of the applicable installment.
Lessee shall promptly furnish Lessor with satisfactory evidence that such taxes
have been paid. If any such taxes to be paid by Lessee shall cover any period
of time prior to or after the expiration or earlier termination of the term
hereof, Lessee's share of such taxes shall be equitably prorated to cover only
the period of time within the tax fiscal year this Lease is in effect, and
Lessor shall reimburse Lessee for any overpayment after such proration. If
Lessee shall fail to
-19-
<PAGE>
pay any Real Property Taxes required by this Lease to be paid by Lessee, Lessor
shall have the right to pay the same, and Lessee shall reimburse Lessor therefor
upon demand.
(b) Advance Payment. In order to insure payment when due and before
delinquency of any or all Real Property Taxes, Lessor reserves the right, at
Lessor's option, to estimate the current Real Property Taxes applicable to the
Premises, and to require such current year's Real Property Taxes to be paid in
advance to Lessor by Lessee, either: (i) in a lump sum amount equal to the
installment due, at least twenty (20) days prior to the applicable delinquency
date, or (ii) monthly in advance with the payment of the Base Rent. If Lessor
elects to require payment monthly in advance, the monthly payment shall be that
equal monthly amount which over the number of months remaining before the month
in which the applicable tax installment would become delinquent (and without
interest thereon), would provide a fund large enough to fully discharge before
delinquency the estimated installment of taxes to be paid. When the actual
amount of the applicable tax bill is known, the amount of such equal monthly
advance payment shall be adjusted as required to provide the fund needed to pay
the applicable taxes before delinquency. If the amounts paid to Lessor by
Lessee under the provisions of this Paragraph are insufficient to discharge the
obligations of Lessee to pay such Real Property Taxes as the same become due.
Lessee shall pay to Lessor, upon Lessor's demand, such additional sums as are
necessary to pay such obligations. All moneys paid to Lessor under this
Paragraph may be intermingled with other moneys of Lessor and shall not bear
interest. In the event of a Breach by Lessee in the performance of the
obligations of Lessee under this Lease, then any balance of funds paid to Lessor
under the provisions of this Paragraph may, subject to proration as provided in
Paragraph 10.1(a), at the opinion of Lessor, be treated as an additional
Security Deposit under Paragraph 5.
10.2 Definition of "Real Property Taxes." As used herein, the term "Real
Property Taxes" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Premises by any authority
having the direct or indirect power to tax, including any city, state or federal
government or any school, agricultural, sanitary, fire street, drainage or other
improvement district thereof, levied against any legal or equitable interest of
Lessor in the Premises or in the real property of which the Premises are a part,
Lessor's right to rent or other income therefrom, and/or Lessor's business of
leasing the Premises. The term "Real Property Taxes" shall also include any
tax, fee, levy, assessment or charge, or any increase therein, imposed by reason
of events occurring, or changes in applicable law taking effect, during the term
of this Lease, including but not limited to a change in the ownership of the
Premises or in the improvements thereon, the execution of this Lease, or any
modification, amendment or transfer thereof, and whether or not contemplated by
the Parties.
10.3 Joint Assessment. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined
-20-
<PAGE>
by Lessor from the respective valuations assigned in the assessor's work sheets
or such other information as may be reasonable available. Lessor's reasonable
determination thereof, in good faith, shall be conclusive.
10.4 Personal Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alternations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere when possible. Lessee shall
cause its Trade Fixtures, furnishing, equipment and all other personal property
to be assessed and billed separately from the real property of Lessor. If any of
Lessee's said personal property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee within ten (10) days
after receipt of a written statement setting forth the taxes applicable to
Lessee's property or, at Lessor's option, as provided in Paragraph 10.1(b).
11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other premises.
12. Assignment and Subletting.
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively,
"assignment") or sublet all or any part of Lessee's interest in this Lease or in
the Premises without Lessor's prior written consent given under and subject to
the terms of Paragraph 36.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of twenty-five
percent (25%) or more of the voting control of Lessee shall constitute a change
in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transaction (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a normal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such
Net Worth of Lessee as it was represented to Lessor at the time of the execution
by Lessor of the Lease or at the time of the most recent assignment to which
Lessor has consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, at whichever time said Net Worth of
Lessee was or is greater, shall be considered an assignment of this Lease by
Lessee to which Lessor may reasonably withhold its consent. "Net Worth of
Lessee" for purposes of this Lease
-21-
<PAGE>
shall be the net worth of Lessee (excluding any guarantors) established under
generally accepted accounting principles consistently applied.
(d) An assignment or subletting of Lessee's interest in this Lease without
Lessor's specific prior written consent shall, at Lessor's option, be a Default
curable after notice per Paragraph 13.1(c), or a noncurable Breach without the
necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment or subletting as a noncurable Breach, Lessor shall
have the right to either (i) terminate this Lease, or (ii) upon thirty (30)
days' written notice ("Lessor's Notice"), increase the monthly Base Rent to fair
market rental value or one hundred ten percent (110%) of the Base Rent then in
effect, whichever is greater. Pending determination of the new fair market
rental value, if disputed by Lessee, Lessee shall pay the amount set forth in
Lessor's Notice, with any overpayment credited against the next installment(s)
of Base Rent coming due, and any underpayment for the period retroactively to
the effective date of the adjustment being due and payable immediately upon the
determination thereof. Further, in the event of such Breach and market value
adjustment, (i) the purchase price of any option to purchase the Premises held
by Lessee shall be subject to similar adjustment to the then fair market value
(without the Lease being considered an encumbrance or any deduction for
depreciation or obsolescence, and considering the Premises at its highest and
best use and in good condition), or one hundred ten percent (110%) of the price
previously in effect, whichever is greater, (ii) any index-oriented rental or
price adjustment formulas contained in this Lease shall be adjusted to require
that the base index be determined with reference to the index applicable to the
time of such adjustment, and (iii) any fixed rental adjustments scheduled during
the remainder of the Lease term shall be increased in the same ratio as the new
market rental bears to the Base Rent in effect immediately prior to the market
value adjustment.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by such
assignee or subLessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent or performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the subLessee.
However, Lessor
-22-
<PAGE>
may consent to subsequent sublettings and assignments of the sublease or any
amendments or modifications thereto without notifying Lessee or anyone else
liable on the Lease or sublease and without obtaining their consent, and such
action shall not relieve such persons from liability under this Lease or
sublease.
(d) In the event of any Default or Breach of Lessee's obligations
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
any one else responsible for the performance of the Lessee's obligations under
this Lease, including the subLessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor or Lessee.
(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or subLessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000 or ten percent (10%) of the currently monthly Base Rent,
whichever is greater, as reasonable consideration for Lessor's considering and
processing the request for consent. Lessee agrees to provide Lessor with such
other or additional information and/or documentation as may be reasonably
requested by Lessor.
(f) Any assignee of, or subLessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph 12.1(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased to an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
amount required to establish such Security Deposit a condition to Lessor's
consent to such transaction.
(h) Lessor, as a condition to giving its consent to any assignment
or subletting, may require that the amount and adjustment structure of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment structure for property similar to the Premises as then constituted.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
-23-
<PAGE>
(a) Lessee hereby assigns and transfer to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of this or any
other assignment of such sublease to Lessor, nor by reason of the collection of
the rents from a subLessee, be deemed liable to the subLessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such subLessee
under such sublease. Lessee hereby irrevocably authorizes and directs any such
subLessee, upon receipt of a written notice from Lessor stating that a Breach
exists in the performance of Lessee's obligations under this Lease, to pay to
Lessor the rents and other charges due and to become due under the sublease.
SubLessee shall rely upon any such statement and request from Lessor and shall
pay such rents and other charges to Lessor without any obligation or right to
inquire as to whether such Breach exists and notwithstanding any notice form or
claim from Lessee to the contrary, Lessee shall have no right or claim against
said subLessee, or, until the Breach has been cured, against Lessor, for any
such rents and other charges so paid by said subLessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any subLessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the subLessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such subLessee to such subLessor or for any other prior Defaults
or breaches of such subLessor under such sublease.
(c) Any matter or thing requiring the consent of the subLessor under
a sublease shall also require the consent of Lessor herein.
(d) No subLessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach
by Lessee to the subLessee, who shall have the right to cure the Default of
Lessee within the grace period, if any, specified in such notice. The subLessee
shall have a right of reimbursement and offset from and against Lessee for any
such Defaults cured by the subLessee.
13. Default; Breach; Remedies.
13.1 Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of
-24-
<PAGE>
such services and costs in said notice as rent due and payable to cure said
Default. A "Default" is defined as a failure by the Lessee to observe, comply
with or perform any of the terms, covenants, conditions or rules applicable to
Lessee under this Lease. A "Breach" is defined as the occurrence of any one or
more of the following Defaults, and, where a grace period for cure after notice
is specified herein, the failure by Lessee to cure such Default prior to the
expiration of the applicable grace period, and shall entitle Lessor to pursue
the remedies set forth in Paragraphs 13.2 and/or 13.3.
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as [illegible] otherwise [illegible] in the Lease, the
[illegible] by Lessee to make any payment of [illegible] or any other monetary
payment required to be made by [illegible], whether to Lessor or to a third
party as and when due, the failure [illegible] to provide Lessor with reasonable
evidence of insurance [illegible] bond required under this Lease, or the failure
of Lessee to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) days following written notice thereof by or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure by Lessee
to provide Lessor with reasonable written evidence (in duly executed original
form, if applicable) of (i) compliance with applicable law per Paragraph 6.3,
(ii) the inspection, maintenance and service contracts required under Paragraph
7.1(b), (iii) the rescission of an unauthorized assignment or subletting per
Paragraph 12.1(B), (iv) a Tenancy Statement per Paragraphs 16 or 37, (v) the
subordination or non-subordination of this Lease per Paragraph 30, (vi) the
guaranty of the performance of Lessee's obligations under this Lease if required
under Paragraphs 1.11 and 37, (vii) the execution of any document requested
under Paragraph 42 (easements), or (viii) any other documentation or information
which Lessor may reasonably require of Lessee under the terms of this Lease,
where any such failure continues for a period of ten (10) days following written
notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
that are to be observed, complied with or performed by Lessee, other than those
described in subparagraphs (a), (b) or (c), above, where such Default continues
for a period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee's Default is
such that more than thirty (30) days are reasonably required for its cure, then
it shall not be deemed to be a Breach of this Lease by Lessee if Lessee
commences such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) The making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 USC (S)101 or any successor
statute thereto (unless,
-25-
<PAGE>
in the case of a petition filed against Lessee, the same is dismissed within
sixty (60) days); (iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where possession is not restored to Lessee
within thirty (30) days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within
thirty (30) days; provided, however, in the event that any provision of this
subparagraph (e) is contrary to any applicable law, such provision shall be of
no force or effect, and not affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee or any Guarantor of Lessee's obligations hereunder was
materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed (i) the death of a guarantor, (ii) the termination of a guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a guarantor's refusal to honor the guaranty, or (v) a
guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurance or security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the guarantors that existed at the time of execution of this Lease.
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon notice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its option,
may require all future payments to be made under this Lease by Lessee to be made
only by cashier's check. In the event of a Breach of this Lease by Lessee, as
defined in Paragraph 13.1, with or without further notice or demand and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee
-26-
<PAGE>
proves could have been reasonably avoided; (iii) the worth at the time of award
of the amount by which the unpaid rent for the balance of the term after the
time of award exceeds the amount of such rental loss that the Lessee proves
could be reasonably avoided; and (iv) any other amount necessary to compensate
Lessor for all the detriment proximately caused by the Lessee's failure to
perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, including but not limited to the
cost of recovering possession of the Premises, expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorneys' fees,
and that portion of the leasing commission paid by Lessor applicable to the
unexpired term of this Lease. The worth at the time of award of the amount
referred to in provision (iii) of the prior sentence shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent. Efforts by Lessor to mitigate
damages caused by Lessee's Default or Breach of this Lease shall not waive
Lessor's right to recover damages under this Paragraph. If termination of this
Lease is obtained through the provisional remedy of unlawful detainer, Lessor
shall have the right to recover in such proceeding the unpaid rent and damages
as are recoverable therein, or Lessor may reserve therein the right to recover
all or any part thereof in a separate suit for such rent and/or damages. If a
notice and grace period required under subparagraphs 13.1(b), (c) or (d) was not
previously given, a notice to pay rent or quit, or to perform or quit, as the
case may be given to Lessee under any statute authorizing the forfeiture of
leases for unlawful detainer shall also constitute the applicable notice for
grace period purposes required by subparagraphs 13.1(b), (c) or (d). In such
case, the applicable grace period under subparagraphs 13.1(b), (c) or (c) and
under the unlawful detainer statute shall run concurrently after the one such
statutory notice, and the failure of Lessee to cure the Default within the
greater of the two such grace periods shall constitute both an unlawful detainer
and a Breach of this Lease entitling Lessor to the remedies provided for in this
Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
abandonment and recover the rent as it becomes due, provided Lessee has the
right to sublet or assign, subject only to reasonable limitations. See
Paragraphs 12 and 36 for the limitations on assignment and subletting which
limitations Lessee and Lessor agree are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a receiver to
protect the Lessor's interest under the Lease, shall not constitute a
termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
-27-
<PAGE>
13.3 Inducement Recapture in Event of Breach. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions," shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach of this Lease by Lessee, as defined in Paragraph 13.1, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph shall not be deemed a waiver by Lessor of the provisions of this
Paragraph unless specifically so stated in writing by Lessor at the time of such
acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within five (5) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in non event be less than thirty (30) days after receipt by Lessor,
and by the holders of any ground lease, mortgage or deed of trust covering the
Premises whose name and address shall have been furnished Lessee in writing for
such purpose, of written notice specifying wherein such obligation of Lessor has
not been performed; provided, however, that if the nature of Lessor's obligation
is such that more than thirty (30) days after such notice are reasonably
required for its performance, then Lessor shall not be in breach of this Lease
if
-28-
<PAGE>
performance is commenced within such thirty (30) day period and thereafter
diligently pursued to completion.
14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the land area
not occupied by any building, is taken by condemnation, Lessee may, at Lessee's
option, to be exercised in writing within ten (10) days after Lessor shall have
given Lessee written notice of such taking (or in the absence of such notice,
within ten (10) days after the condemning authority shall have taken possession)
terminate this Lease as of the date the condemning authority takes such
possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in the same
proportion as the rentable floor area of the Premises taken bears to the total
rentable floor area of the building located on the Premises. No reduction of
Base Rent shall occur if the only portion of the Premises taken is land on which
there is no building. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor, whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided, however, that Lessee
shall be entitled to any compensation, separately awarded to Lessee for Lessee's
relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that
this Lease is not terminated by reason of such condemnation, Lessor shall to the
extent of its net severance damages received, over and above the legal and other
expenses incurred by Lessor in the condemnation matter, repair any damage to the
Premises caused by such condemnation, except to the extent that Lessee has been
reimbursed therefor by the condemning authority, Lessee shall be responsible for
the payment of any amount in excess of such net severance damages required to
complete such repair.
15. Broker's Fee.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of this
Lease.
15.2 Upon execution of this Lease by both Parties, Lessor shall pay to
said Brokers jointly, or in such separate shares as they may mutually designated
in writing, a fee as set forth in a separate written agreement between Lessor
and said Brokers (or in the event there is no separate written agreement between
Lessor and said Brokers, the sum of $______________) for brokerage services
rendered by said Brokers to Lessor in this transaction.
15.3 Unless Lessor and Brokers have otherwise agreed in writing, Lessor
further agrees that, (a) if Lessee exercises any Option (as defined in Paragraph
39.1) or
-29-
<PAGE>
any Option subsequently granted which is substantially similar to an Option
granted to Lessee in this Lease, or (b) if Lessee acquires any rights to the
Premises or other premises described in this Lease which are substantially
similar to what Lessee would have acquired had an Option herein granted to
Lessee been exercised, or (c) if Lessee remains in possession of the Premises,
with the consent of Lessor, after the expiration of the term of this Lease after
having failed to exercise an Option, or (d) if said Brokers are the procuring
cause of any other lease or sale entered into between the Parties pertaining to
the Premises and/or any adjacent property in which Lessor has an interest, or
(e) if Base Rent is increased, whether by agreement or operation of an
escalation clause herein, then as to any of said transactions, Lessor shall pay
said Brokers a fee in accordance with the schedule of said Brokers in effect at
the time of the execution of this Lease.
15.4 Any buyer or transferee of Lessor's interest in this Lease, whether
such transfer is by agreement or by operation of law, shall be deemed to have
assumed Lessor's obligation under this Paragraph 15. Each Broker shall be a
third party beneficiary of the provisions of this Paragraph 15 to the extent of
its interest in any commission arising from this Lease and may enforce that
right directly against Lessor and its successors.
15.5 Lessee and Lessor each represent and warrant to the other that it has
had no dealings with any person, firm, broker or finder (other than the Brokers,
if any, named in Paragraph 1.10) in connection with the negotiation of this
Lease and/or the consummation of the transaction contemplated hereby, and that
no broker or other person, firm or entity other than said named Brokers is
entitled to any commission or finder's fee in connection with said transaction.
Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold
the other harmless from and against liability for compensation or charges which
may be claimed by any such unnamed broker, lender or other similar party by
reason of any dealings or actions of the indemnifying Party, including any
costs, expenses, attorneys' fees reasonably incurred with respect thereto.
15.6 Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. Tenancy Statement
16.1 Each Party (as "Responding Party") shall within ten (10) days after
written notice form the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "Tenancy Statement" form published by the
American Industrial Real Estate Association, plus each additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
16.2 If Lessor desires to finance, refinance, or sell the Premises, any
part thereof, or the building of which the Premises are a part Lessee and all
Guarantors of Lessee's performance hereunder shall deliver to any potential
lender or purchaser designated by Lessor such financial statements of Lessee and
such Guarantors as may be
-30-
<PAGE>
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises, or, if this
is a sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or in this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor at the time of such transfer or assignment.
Except as provided in Paragraph 15, upon such transfer or assignment and
delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined.
18. Severability. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. Interest on Past-Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within thirty (30)
days following the date on which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but not
exceeding the maximum rate allowed by law, in addition to the late charge
provided for in Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party.
23. Notices.
23.1 All notices required or permitted by this Lease shall be in writing
and may be delivered in person (by hand or messenger or courier service) or may
be sent by
-31-
<PAGE>
regular, certified or registered mail or U.S. Postal Service Express Mail, with
postage prepaid, or by facsimile transmission, and shall be deemed sufficiently
given if served in a manner specified in this Paragraph 23. The addresses noted
adjacent to a Party's signature on this Lease shall be that Party's address for
delivery or mailing of notice purposes. Either Party may by written notice to
the other specify a different address for notice purposes, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for the purpose of mailing or delivering notices to Lessee. A
copy of all notices required or permitted to be given to Lessor hereunder shall
be concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark thereon. If sent by regular
mail the notice shall be deemed given forty-eight (48) hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantees next day
delivery shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postal Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone confirmation of receipt of the transmission thereof,
provided a copy is also delivered via delivery or mail. If notice is received
on a Sunday or legal holiday, it shall be deemed received on the next business
day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any subsequent or similar
acts by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any preceding Default or
Breach by Lessee of any provision hereof, other than the failure of Lessee to
pay the particular rent so accepted. Any payment given Lessor or Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
acknowledge and deliver to the other a short form memorandum of this Lease for
recording purposes. The Party requesting recordation shall be responsible for
payment of any fees or taxes applicable thereto.
26. No Right to Holdover. Lessee has no right to retain possession of the
Premises or any party thereof beyond the expiration or earlier termination of
this Lease.
-32-
<PAGE>
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed or
performed by Lessee are [illegible] and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default and
allow such Lender thirty (30) days following receipt of such notice for the cure
of said default before invoking any remedies Lessee may have by reason thereof.
If any Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
Security Device, notwithstanding the relative dates of the documentation or
recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a security Device, and
that in the event of such foreclosure, such new owner shall not (i) be liable
for any act or omission of any prior Lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior Lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurances (a "non-disturbance agreement") from
the Lender that Lessee's possession and this Lease, including any options to
extend the term hereof, will not be disturbed so long as Lessee is not in Breach
hereof and attorns to the record owner of the Premises.
-33-
<PAGE>
30.4 Self-Executing. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of the Premises, Lessee and Lessor shall execute such
further writings as may be reasonable required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. Attorney's Fees. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) or Broker in any such proceeding, action, or appeal thereon,
shall be entitled to reasonable attorney's fees. Such fees may be awarded in
the same suit or recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgment. The term "Prevailing Party"
shall include, without limitation, a Party or Broker who substantially obtains
or defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party or Broker of its
claim or defense. The attorney's fee award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorney's fees reasonably incurred. Lessor shall be entitled to attorney's
fees, costs and expenses incurred in the preparation and service of notices of
Default and consultations in connection therewith, whether or not a legal action
is subsequently commenced in connection with such Default or resulting Breach.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lender, or Lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the building of which
they are a part, as Lessor may reasonably deem necessary. Lessor may at any
time place on or about the Premises or building any ordinary "For Sale" signs
and Lessor may at any time during the last one hundred twenty (120) days of the
term hereof place on or about the Premises any ordinary "For Lease" signs. All
such activities of Lessor shall be without abatement of rent or liability to
Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the Premises, except that
Lessee may, with Lessor's prior written consent, install (but not on the roof)
such signs as are reasonably required to advertise Lessee's own business. The
installation of any sign on the Premises by or for Lessee shall be subject to
the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,
Trade Fixtures and Alterations). Unless otherwise expressly agreed herein,
Lessor reserves all rights to the use of the roof and the
-34-
<PAGE>
right to install, and all revenues from the installation of, such advertising
signs on the Premises, including the roof, as to not unreasonably interfere with
the conduct of Lessee's business.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' or other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consent to an assignment, a subletting or the presence or use of a
Hazardous Substance, practice or storage tank, shall be paid by Lessee to Lessor
upon receipt of an invoice and supporting documentation therefor. Subject to
Paragraph 12.2(e) (applicable to assignment or subletting), Lessor may, as a
condition to considering any such request by Lessee, require that Lessee deposit
with Lessor an amount of money (in addition to the Security Deposit held under
Paragraph 5) reasonably calculated by Lessor to represent the cost Lessor will
incur in considering and responding to Lessee's request. Except as otherwise
provided, any unused portion of said deposit shall be refunded to Lessee without
interest. Lessor's consent to any act, assignment of this Lease or subletting of
the Premises by Lessee shall not constitute an acknowledgment that no Default or
Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver
of any then existing Default or Breach, except as may be otherwise specifically
stated in writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the imposition by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. Guarantor.
37.1 If there are to be any Guarantors of this Lease per Paragraph 1.11,
the form of the guaranty to be executed by each such Guarantor shall be in the
form most
-35-
<PAGE>
recently published by the American Industrial Real Estate Association, and each
said Guarantor shall have the same obligations as Lessee under this Lease,
including but not limited to the obligation to provide the Tenancy Statement and
information called for by Paragraph 16.
37.2 It shall constitute a Default of the Lessee under this Lease if any
such Guarantor fails or refuses, upon reasonable request by Lessor to give: (a)
evidence of the due execution of the guaranty called for by this Lease,
including the authority of the Guarantor (and of the party signing on
Guarantor's behalf) to obligate such Guarantor on said guaranty, and including
in the case of a corporate Guarantor, a certified copy of a resolution of its
board of directors authorizing the making of such guaranty, together with a
certificate of incumbency showing the signatures of the persons authorized to
sign on its behalf, (b) current financial statements of Guarantor as may from
time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
38. Quiet Possession. Upon payment by Lessee of the rent for the Premises and
the observance and performance of all of the covenants, conditions and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. Options.
39.1 Definition. As use din this Paragraph 39 the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase other property of Lessor, or the right of
first refusal to purchase other property of Lessor, or the right of first offer
to purchase other property of Lessor.
39.2 Options Personal to Original Lessee. Each Option granted to Lessee
in this Lease is personal to the original Lessee named in Paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.
-36-
<PAGE>
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i) during
the period commencing with the giving of any notice of Default under Paragraph
13.1 and continuing until the notice of Default is cured, or (ii) during the
period of time any monetary obligation due Lessor from Lessee is unpaid (without
regard to whether notice thereof is given Lessee) or (iii) during the time
Lessee is in breach of this Lease, or (iv) in the event that Lessor has given to
Lessee three (3) or more notices of Default under Paragraph 13.1, whether or not
the Defaults are cured, during the twelve (12) month period immediately
preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee, or (ii) Lessor gives to
Lessee three or more notices of Default under Paragraph 13.1 during any twelve
month period, whether or not the Defaults are cured, or (iii) if Lessee commits
a Breach of this Lease.
40. Multiple Buildings. If the Premises are part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of such other buildings and their
invitees and that Lessee will pay its low share of common expenses incurred in
connection therewith.
41. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. Reservations. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign all documents necessary required by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
-37-
<PAGE>
43. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. Authority. If such Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. Other. Preparation of this Lease by Lessor or Lessor's agents and
submission of same to Lessee shall not be deemed an offer to lease to Lessee.
This Lease is not intended to be binding until executed by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations thereunder, Lessee agrees to make such
reasonable non-monetary modifications to the Lease as may be reasonably required
by an institutional, insurance company, or pension plan Lender in connection
with the obtaining of normal financing or refinancing of the property of which
the Premises are a part.
48. Multiple Parties. Except as otherwise expressly provided therein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY
-38-
<PAGE>
CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS
EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE
INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION
TO YOUR ATTORNEY FOR HIS APPROVAL. FURTHER, EXPERTS SHOULD BE
CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY AS TO THE
POSSIBLE PRESENCE OF ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES.
NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER(S) OR
THEIR AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT,
OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES, THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN
COUNSEL, AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE
SUBJECT PROPERTY KS LOCATED IN A STATE OTHER THAN CALIFORNIA, AN
ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE
CONSULTED.
The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
Executed at Los Angeles, CA Executed at ________________________
-----------------------
on Nov 11, 1991 on Nov 11, 1991
-------------------------------- ----------------------------------
by LESSOR: / Owner by LESSEE:
H.V. Johns, Jr. BGF Industries, Inc.
- ---------------------------------- ------------------------------------
/s/ H.V. Johns, Jr. ____________________________________
- ----------------------------------
by _______________________________ by /s/ R.R Sipe, Jr
----------------------------------
Name Printed: ____________________ Name Printed: R.R. Sipe, Jr.
-----------------------
Title: ___________________________ Title: VP Administration and Finance
by _______________________________ by _________________________________
Name Printed:_____________________ Name Printed: ______________________
Title: ___________________________ Title: _____________________________
Address: ___________________________ Address: ___________________________
___________________________________ ____________________________________
Tel. No. (213)261-1107Fax No. (213)261-4813 Tel. No. (__) _____Fax No. (__) ____
4813
- ----
-39-
<PAGE>
EXHIBIT 10.8
BGF INDUSTRIES, INC.
AGREEMENT BETWEEN CONTRACTOR AND OWNER
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Plant South Hill No. 0121 February 1, 1998 Contract No. 02-98-0121
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Location South Hill, Va 23970 Acct. No. 01-57-0300-0121 Contract Value $2,200.00/per month
- -------------------------------------------------------------------------------------------------------------------
Boyd Warehouse/Emmett Williams Contractor Boyd Warehouse
5000 Danville Street Emmett Williams
South Hill, Va. 23970
-------------------------------------------------
Contract Date February 1, 1998
-------------------------------------------------
</TABLE>
hereinafter called the "Contractor," and BGF INDUSTRIES, INC., hereinafter
called the "Owner".
1. BASIS OF CONTRACT:
-----------------
A. THE CONTRACT DOCUMENT:
---------------------
The Specifications and the Drawings together with the Terms and
Conditions from the basis of the Contract, and they are as fully a
part of the Contract as if recited herein. The Contractor agrees to
perform all work and provide all materials as required by the below
referenced Documents and Scope of Work.
B. SCOPE OF WORK:
-------------
BGF Industries, Inc. agrees to rent from Boyd Warehouse/Emmett
Williams 18,038 square feet of warehouse space for 1 (one) year
beginning February 1, 1998
C. SPECIAL INSTRUCTIONS:
--------------------
Forty-five (45) days notice must be given by either party in order to
cancel contract.
D. REFERENCED DOCUMENTS:
--------------------
Price is per verbal quote to Mike McCullar.
2. CONTRACT SUM: $2,200.00 per month beginning February 1, 1998.
------------
3. INVOICES: Submitted in duplicate to: REMIT TO ADDRESS
--------
BGF INDUSTRIES, INC. BOYD WAREHOUSE
SOUTH HILL PLANT EMMETT WILLIAMS
800 GOODES FERRY BLVD P.O. BOX 549
SOUTH HILL, VIRGINIA 23970 SOUTH HILL, VIRGINIA 23970
BY: /s/ Richard Walker /s/ Emmett Williams
------------------ -------------------
PLANT MANAGER CONTRACTOR
TITLE: Owner/Partner
-----------------
DATE: 1/28/98
-----------------
<PAGE>
EXHIBIT 10.9
EXECUTION COPY
BGF INDUSTRIES, INC.
$100,000,000
10 1/4% SENIOR SUBORDINATED NOTES DUE 2009
NOTE PURCHASE AGREEMENT
January 15, 1999
First Union Capital Markets
301 South College Street, TW-10
Charlotte, NC 28288-0606
Ladies and Gentlemen:
BGF Industries, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell (the "Initial Placement") to First Union Capital Markets, a
division of Wheat First Securities, Inc., (the "Initial Purchaser"),
$100,000,000 principal amount of its 10 1/4% Senior Subordinated Notes Due 2009
(the "Notes"). The Notes are to be issued under an indenture (the "Indenture")
to be dated as of the Closing Date (as defined below) between the Company and
The Bank of New York, as trustee (the "Trustee"). This Agreement, the
registration rights agreement, to be dated the Closing Date, between the Initial
Purchaser and the Company (the "Registration Rights Agreement"), the Notes and
the Indenture are hereinafter collectively referred to as the "Transaction
Documents" and the transactions contemplated herein and therein are hereinafter
referred to as the "Transactions."
The sale of the Notes to the Initial Purchaser will be made without
registration of the Notes under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon certain exemptions from the registration
requirements of the Securities Act. You have advised the Company that you will
offer and sell the Notes purchased by you hereunder in accordance with Section 4
hereof as soon as you deem advisable.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum, dated December 23, 1998 (the "Preliminary
Memorandum"), and a final offering memorandum, dated January 15, 1999 (the
"Final Memorandum"). Each of the Preliminary Memorandum and the Final
Memorandum sets forth certain information concerning the Company, the
Transaction Documents and the Transactions. The Company hereby confirms that it
has authorized the use of the Preliminary Memorandum and the Final Memorandum,
and
<PAGE>
any amendment or supplement thereto, in connection with the offer and sale of
the Notes by the Initial Purchaser. Unless stated to the contrary, all
references herein to the Final Memorandum are to the Final Memorandum at the
Execution Time (as defined below) and are not meant to include any amendment or
supplement, or any information incorporated by reference therein, subsequent to
the Execution Time.
As used herein, "Material Adverse Effect" means (i) a material adverse
effect upon the business, operations, properties, assets, condition (financial
or otherwise) or prospects of the Company and the Subsidiary (as defined below),
taken as a whole, whether before or after the issue and sale of the Notes and
the consummation of the other transactions contemplated herein or (ii) a
material impairment of the ability of the Company to execute, deliver or perform
any of its obligations under, or the material impairment of the ability of the
Trustee and the holders of the Notes (the "Holders") to enforce any obligations
under, any of the Transaction Documents. Capitalized terms used but not defined
herein have the meaning ascribed to them in the Final Memorandum.
1. The Company's Representations and Warranties. The Company
--------------------------------------------
represents and warrants to the Initial Purchaser the following:
(a) The Preliminary Memorandum, at the date thereof, did not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Final Memorandum, at the
date hereof, does not and at the Closing Date will not (and any amendment
or supplement thereto, at the date thereof and at the Closing Date, will
not), contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
--------
however, that the Company makes no representation or warranty as to any
-------
statements made in or omissions from the Preliminary Memorandum or the
Final Memorandum (or any amendment or supplement thereto) in reliance upon
and in conformity with information relating to the Initial Purchaser
furnished to the Company in writing by the Initial Purchaser, expressly for
use therein.
(b) No holder of securities of the Company (other than holders of the
Notes) will be entitled to have such securities registered under any
registration statement required to be filed by the Company pursuant to the
Registration Rights Agreement.
(c) None of the Company or any of its Affiliates (as defined in Rule
501(b) of Regulation D under the Securities Act ("Regulation D")), nor any
person acting on its or their behalf (other than the Initial Purchaser or
any of its Affiliates, as to whom the Company makes no representation or
warranty) has, directly or indirectly:
(i) made offers or sales of any security, or solicited offers to
buy any security, which is or will be integrated with the sale of the
Notes in a manner that would require the registration of the Notes
under the Securities Act;
2
<PAGE>
(ii) engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with
any offer or sale of the Notes;
(iii) taken any action designed to cause or result in, or that
has constituted or that might reasonably be expected to constitute,
stabilization or manipulation of the price of the Notes;
(iv) paid or agreed to pay to any person any compensation for
soliciting another to purchase any of the Notes;
(v) engaged in any directed selling efforts (as that term is
defined in Regulation S under the Securities Act ("Regulation S"))
with respect to the Notes, and each of the Company and its Affiliates
and any person acting on its or their behalf (other than the Initial
Purchaser or any of its Affiliates, as to whom the Company makes no
representation) has complied with the offering restrictions
requirement of Rule 903 under Regulation S.
(d) The Notes satisfy the eligibility requirements of Rule 144A(d)(3)
under the Securities Act.
(e) Each of the Company and BGF Overseas, Inc., a company organized
under the laws of the United States Virgin Islands (the "Subsidiary"), is a
corporation duly organized and existing and in good standing under the laws
of its jurisdiction of incorporation. Each of the Company and the
Subsidiary has the corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as proposed to
be conducted and is duly qualified as a foreign corporation and in good
standing under the laws of all jurisdictions in which it is doing business,
except where the failure to be so qualified or in good standing,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect.
(f) The Subsidiary is the only subsidiary of the Company in existence
on the date of this Agreement and is not a "significant subsidiary" of the
Company within the meaning of Rule 1-02 of Regulation S-X under the
Securities Act. The capital stock of the Subsidiary is duly authorized,
validly issued, fully paid and nonassessable. All of the outstanding
shares of capital stock of the Subsidiary are beneficially owned directly
by the Company, free and clear of any perfected security interest or any
other security interests, claims, liens or encumbrances other than liens
granted pursuant to the Senior Secured Credit Agreement, dated as of
September 30, 1998, among the Company, the lenders named therein and First
Union National Bank, as agent (the "Bank Facility").
(g) All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable.
(h) The Company has the corporate power and requisite authority to
execute, deliver and perform its obligations under the Transaction
Documents.
3
<PAGE>
(i) Each of the Transaction Documents and each other document or
instrument to be delivered in connection therewith has been, duly
authorized by all necessary corporate action of the Company; each of the
Transaction Documents and each other document or instrument to be delivered
in connection herewith or therewith to be executed and delivered on or
prior to the date hereof is, and each of the Transaction Documents and each
other document or instrument to be delivered in connection herewith or
therewith to be executed and delivered after the Closing Date, will be,
upon such execution and delivery, the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, except to the extent that the enforceability thereof may
be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the enforcement of creditors' rights
generally ("Bankruptcy Law") or by general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or
at law) ("Equity").
(j) The execution, delivery and performance of the Transaction
Documents and each other document and instrument to be executed, delivered
or performed by the Company in connection therewith, the consummation of
the transactions herein and therein contemplated, the compliance with each
of the terms hereof or thereof, and the issuance, delivery and performance
of the Notes do not and on the Closing Date will not (i) violate any
statute, law, rule, regulation, order, judgment or decree (singly "Law" and
collectively "Laws") applicable to the Company or the Subsidiary of any
court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or the
Subsidiary or any of its or their properties (ii) conflict with, result in
a breach or violation of or constitute a default under the certificate of
incorporation or bylaws of the Company or the Subsidiary or any indenture,
mortgage, deed of trust, contract, undertaking, loan agreement, lease or
other agreement or instrument to which the Company or the Subsidiary is a
party or by which the Company or the Subsidiary or any of their respective
properties are bound ("Contracts"), (iii) result in or require the creation
or imposition of any mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the
foregoing ("Lien"), upon any of the properties or assets of the Company or
the Subsidiary.
(k) No consent, approval, authorization or order of any Tribunal or
other person is required in connection with the execution, delivery and
performance by the Company of the Transaction Documents or any other
document or instrument to be delivered, executed or performed by the
Company or the Subsidiary in connection therewith or the consummation of
the transactions contemplated hereby or thereby, other than any such
consent, approval, authorization or order which has been obtained and
remains in full force and effect or which has been waived in writing by the
Initial Purchaser or such as may be required under applicable state
securities or Blue Sky laws.
4
<PAGE>
(l) The audited financial statements (including the notes thereto) of
the Company included in the Final Memorandum comply as to form in all
material respects with the requirements applicable to registration
statements on Form S-1 under the Securities Act and fairly present in all
material respects the financial position of the Company and the results of
operations and cash flow of the Company as of the dates and for the periods
therein specified. Such financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the periods involved. Since the date of
the most recent financial statements included in the Final Memorandum,
except as described therein and in the notes thereto or in the Final
Memorandum, (i) neither the Company nor the Subsidiary has incurred any
liabilities or obligations, direct or contingent, or entered into or agreed
to enter into any transactions or Contracts (written or oral) which
liabilities, obligations, transactions or Contracts would, individually or
in the aggregate, have a Material Adverse Effect, (ii) the Company has not
purchased any of its outstanding capital stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on its capital
stock, (iii) there has not been any material change in the long-term
indebtedness of the Company or the Subsidiary and (iv) none of the material
assets of either the Company or the Subsidiary have materially diminished
in value ordinary wear and tear excepted.
(m) Each of the Company and the Subsidiary maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for inventory assets is compared with the
existing inventory assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(n) Upon giving effect to the issue and sale of the Notes as
contemplated herein and the application of the net proceeds thereof as
contemplated in the Final Memorandum:
(i) The fair saleable value of the assets of the Company and
the Subsidiary, on a stand-alone basis, exceeds the amount that will
be required to be paid on or in respect of the existing debts and
other liabilities (including contingent liabilities) of the Company
and the Subsidiary as they mature.
(ii) The assets of each of the Company and the Subsidiary, on a
stand-alone basis, do not constitute unreasonably small capital to
carry out its business as now conducted and as proposed to be
conducted, including its capital needs, taking into account the
particular capital requirements of the business conducted by each of
the Company and the Subsidiary.
(iii) The Company does not intend to, and will not permit the
Subsidiary to, incur debts beyond its ability to pay such debts as
they mature (taking into
5
<PAGE>
account the timing and amounts of cash to be payable on or in respect
of debt of each of the Company and the Subsidiary).
(o) Each of the Company and the Subsidiary owns, leases or has
sufficient rights to use, and after consummation of the issue and sale of
the Notes as contemplated herein, will own, lease or have sufficient rights
to use, such properties and assets as are necessary to the conduct of its
operations as presently conducted and as contemplated to be conducted
immediately following consummation of the issue and sale of the Notes as
contemplated herein, and neither the Company nor the Subsidiary and, to the
knowledge of the Company, any other party thereto, is in default under any
lease, except in each case for such defects or defaults that, individually
or in the aggregate, would not reasonably be expected to have a Material
Adverse Effect. None of the material assets of either the Company or the
Subsidiary is subject to any restriction which would prevent continuation
of the use currently made, or contemplated to be made, thereof or which
would materially adversely affect the value thereof.
(p) Neither the Company nor the Subsidiary is (i) in violation of its
charter, bylaws or other organizational documents, (ii) in breach or
violation of any Laws or (iii) in breach of or default under (nor has any
event occurred which, with notice or the lapse of time or both, would
constitute a default under) or in violation of any of the terms or
provisions of any Contract, except for any such breach, default, violation
or event in each case of (i), (ii) or (iii) which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect.
(q) There is no action, suit, proceeding, claim, lawsuit and/or
investigation conducted by or before any Tribunal ("Litigation") pending
or, to the best knowledge of the Company after due investigation,
threatened, by, against, or which may relate to or affect (a) any benefit
plan or any fiduciary or administrator thereof, (b) the Transactions or (c)
either of the Company or the Subsidiary which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
There are no outstanding injunctions or restraining orders prohibiting
consummation of the Transactions or any other transactions contemplated in
connection therewith. Neither the Company nor the Subsidiary is in default
with respect to any judgment, order, writ, injunction or decree of any
Tribunal, and there are no unsatisfied judgments against either the Company
or the Subsidiary or their respective businesses or properties which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect. Neither the Company nor the Subsidiary has been
advised that there is a reasonable likelihood of an adverse determination
of any Litigation which adverse determination, should it occur, could
reasonably be expected to have a Material Adverse Effect.
(r) The proceeds from the issuance and sale of the Notes will be used
solely for the purposes specified in the Final Memorandum. None of the
issuance or sale of the Notes, the application of the proceeds therefrom,
or the consummation of Transactions or
6
<PAGE>
any of the other transactions contemplated thereby will violate Regulations
T, U, or X of the Board of Governors of the Federal Reserve System.
(s) All material Tax Returns, foreign and domestic, required to be
filed by or on behalf of the Company and the Subsidiary in any jurisdiction
have been filed, and all material Taxes (whether or not actually shown on
such Tax Returns) for which they are directly, or indirectly as a member of
a consolidated group, liable have been paid other than any Tax (i) the
validity or amount of which is being contested in good faith, (ii) for
which adequate reserve, or other appropriate provision, if any, as required
in conformity with GAAP shall have been made, and (iii) with respect to
which any right to execute upon or sell any assets of the Company or of the
Subsidiary has not matured or has been and continues to be effectively
enjoined, superseded or stayed ("Contested Claims"); all such Tax Returns
are true, correct and complete in all material respects. To the knowledge
of the Company, there is no material proposed tax assessment with respect
to Taxes due by, or on behalf of, the Company or the Subsidiary except for
Contested Claims.
As used herein, the following terms shall have the respective meaning
ascribed to each below:
"Tax Return" means a report, return or other information (including
any amendments) required to be supplied to a Tribunal with respect to Taxes
including, where permitted or required, combined or consolidated returns
for any group of entities that includes the Company or the Subsidiary.
"Taxes" shall mean any taxes, assessments, fees, levies, imposts,
duties, deductions, liabilities, withholdings or other charges of any
nature whatsoever, including any interest, penalties and additions thereto
from time to time or at any time imposed by any Law or any Tribunal.
(t) (A) No ERISA Events have occurred or are reasonably expected to
occur which individually or in the aggregate resulted in or might
reasonably be expected to result in a liability of the Company or the
Subsidiary or any of their respective ERISA Affiliates which would
reasonably be expected to have a Material Adverse Effect.
(B) In accordance with the most recent actuarial valuations, the
Amount of Unfunded Benefit Liabilities individually or in the aggregate for
all Pension Plans (excluding for purposes of such computation any Pension
Plans which have a negative Amount of Unfunded Benefit Liabilities), is not
an amount which could reasonably be expected to have a Material Adverse
Effect.
(C) Neither the Company nor the Subsidiary has incurred or is
reasonably expected to incur any liability with respect to any Foreign Plan
or Foreign Plans which, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect.
7
<PAGE>
As used herein, the following terms shall have the respective meaning
ascribed to each below:
"Amount of Unfunded Benefit Liability" means, with respect to any
Pension Plan, (i) if set forth on the most recent actuarial valuation
report with respect to such Pension Plan, the amount of unfunded benefit
liabilities (as defined in Section 4001(a)(18) of ERISA) and (ii)
otherwise, the excess of (a) the greater of the current liability (as
defined in Section 412(1)(7) of the Internal Revenue Code) or the actuarial
present value of the accrued benefits with respect to such Pension Plan
over (b) the market value of the assets of such Pension Plan.
"Employee Pension Benefit Plan" means any "employee pension benefit
plan" as defined in Section 3(2) of ERISA (i) which is, or, at any time
within the five calendar years immediately preceding the date hereof, was
at any time, sponsored, maintained or contributed to by the Company or the
Subsidiary or any of their ERISA Affiliates or (ii) with respect to which
the Company or the Subsidiary retains any liability, including any
potential joint and several liability as a result of an affiliation with an
ERISA Affiliate or a party that would be an ERISA Affiliate except for the
fact the affiliation ceased more than five calendar years prior to the date
hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder and any successor statute, regulations and rulings.
"ERISA Affiliate," as applied to any person, means (i) any corporation
which is, or was at any time within the five calendar years immediately
preceding the date hereof, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which
that person is, or was at any time within the five calendar years
immediately preceding the date hereof, a member; (ii) any trade or business
(whether or not incorporated) which is, or was at any time within the five
calendar years immediately preceding the date hereof, a member of a group
of trades or businesses under common control within the meaning of Section
414(c) of the Internal Revenue Code of which that person is, or was at any
time within the five calendar years immediately preceding the date hereof,
a member; and (iii) any member of an affiliated service group within the
meaning of Section 414(m) or (o) of the Internal Revenue Code of which that
person, any corporation described in clause (i) above or any trade or
business described in clause (ii) above is, or was at any time within the
five calendar years immediately preceding the date hereof, a member.
"ERISA Event" means (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to
any Pension Plan (excluding those for which the provision for 30-day notice
to the PBGC has been waived by regulation); (ii) the failure to meet the
minimum funding standard of Section 412 of the Internal Revenue Code with
respect to any Pension Plan (whether or not waived) or the failure to make
any required contribution within 30 days of its due date
8
<PAGE>
with respect to any Multiemployer Plan; (iii) the provision by the
administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA
of a notice of intent to terminate such plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the withdrawal by the Company
or the Subsidiary or any of their respective ERISA Affiliates from any
Multiple Employer Plan or the termination of any such Multiple Employer
Plan resulting in liability pursuant to Sections 4063 or 4064 of ERISA; (v)
the institution by the PBGC of proceedings to terminate any Pension Plan,
or the occurrence of any event or condition which might reasonably be
expected to constitute grounds under ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; (vi) the
imposition of liability on the Company or the Subsidiary or any of their
respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or
by reason of the application of Section 4212(c) of ERISA; (vii) the
withdrawal by the Company or the Subsidiary or any of their respective
ERISA Affiliates in a complete or partial withdrawal (within the meaning of
Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is
any potential liability therefor, or the receipt by the Company or the
Subsidiary or any of their respective ERISA Affiliates of notice from any
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA, or that it intends to terminate or has
terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of
an act or omission which could reasonably be expected to give rise to the
imposition on the Company or the Subsidiary or any of their respective
ERISA Affiliates of fines, penalties, taxes or related charges under
Chapter 43 of the Internal Revenue Code or under Sections 406, 409 or
502(i) or (1) of ERISA in respect of any Employee Benefit Pension Plan;
(ix) receipt from the Internal Revenue Service of notice of the failure of
any Pension Plan (or any other Employee Pension Benefit Plan intended to be
qualified under Section 401(a) of the Internal Revenue Code) to qualify
under Section 401(a) of the Internal Revenue Code, or the failure of any
trust forming part of any Pension Plan or Employee Pension Benefit Plan to
qualify for exemption from taxation under Section 501(a) of the Internal
Revenue Code; or (x) the imposition of a Lien pursuant to Section
401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with
respect to any Pension Plan.
"Foreign Plan" means any employee benefit plan maintained outside the
U.S. by the Company, the Subsidiary or any of their respective ERISA
Affiliates for employees substantially all of whom are non-resident aliens
of the U.S. and for which the Company or the Subsidiary may be directly or
indirectly liable.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor code or statute.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which any of the Company, the Subsidiary or
any of their respective ERISA Affiliates is making or accruing an
obligation to make contributions, or has within any of the preceding five
years made or accrued an obligation to make contributions.
9
<PAGE>
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the
Company, the Subsidiary or any of their respective ERISA Affiliates and at
least one person other than the Company, the Subsidiary and the respective
ERISA Affiliates or (ii) was so maintained and in respect of which such
Company, Subsidiary or ERISA Affiliates could have liability under Section
4064 or Section 4069 of ERISA in the event such plan has been or were to be
terminated.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or any of the Pension Benefit Guaranty Corporation's
functions under ERISA.
"Pension Plan" means a Single Employer Plan or Multiple Employer Plan.
"Single Employer Plan" means a "single-employer plan," as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the
Company, the Subsidiary or any of their respective ERISA Affiliates and no
person other than the Company, the Subsidiary or any of their respective
ERISA Affiliates or (ii) was so maintained and in respect of which such
Company, Subsidiary or any of their respective ERISA Affiliates could have
liability under Section 4069 of ERISA in the event such plan has been or
were to be terminated.
(u) Neither the Company nor the Subsidiary is subject to regulation
under the Public Utility Holding Company Act of 1935, the Investment
Company Act of 1940 (as any of the preceding acts have been amended) or
other Law which regulates the incurrence by the Company or the Subsidiary
of indebtedness, including, but not limited to, Laws relating to common
contract carriers or the sale of electricity, gas, steam, water or other
public utility services.
(v) (A) Each of the Company and the Subsidiary owns or is licensed to
use all patents, trademarks, tradenames, copyrights, technology, know-
how and processes necessary for the conduct of the business of the
Company or the Subsidiary as currently conducted ("Intellectual
Property"), except where the failure to own or license such
Intellectual Property, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(B) To the Company's knowledge, no material claim has been
asserted by any person with respect to the use of any such
Intellectual Property, or challenging or questioning the validity or
effectiveness of any such Intellectual Property; to the Company's
knowledge, the use of such Intellectual Property by the Company or the
Subsidiary does not infringe on the rights of any person, subject to
such claims and infringements as would not, individually or in the
aggregate, have a Material Adverse Effect; the consummation of the
issue and sale of the Notes as contemplated herein will not impair the
ownership of (or the license to use, as the case may be) such
Intellectual Property by the Company or the Subsidiary.
10
<PAGE>
(w) (A) the operations of each of the Company and the Subsidiary
(including, without limitation, as the term is used throughout this
Section 1(w), all operations and conditions at or in the Facilities)
comply in all material respects with all Environmental Laws except for
any such noncompliance which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect;
(B) each of the Company and the Subsidiary has obtained all
Permits under Environmental Laws necessary to its operations under
currently applicable Laws, and all such Permits are being maintained
in good standing and each of the Company and the Subsidiary is in
compliance with all material terms and conditions of such Permits
except for any such failure to obtain, maintain or comply which,
individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect;
(C) neither the Company nor the Subsidiary has received (a) any
notice or claim to the effect that it is or may be liable to any
person under any Environmental Law, including without limitation, any
notice or claim relating to any Hazardous Materials except as would
not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect or (b) any letter or request for information
under Section 104 of the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. (S) 9604) or comparable
foreign or state laws regarding any matter which, individually or in
the aggregate, would reasonably be expected to result in a Material
Adverse Effect, and, to the best of the Company's knowledge, neither
the Company nor the Subsidiary is or will be involved in any
investigation, response or corrective action relating to or in
connection with any Hazardous Materials at any Facility or at any
other location except for such of the foregoing which, individually or
in the aggregate, would not reasonably be expected to have a Material
Adverse Effect;
(D) neither the Company nor the Subsidiary is subject to any
judicial or administrative proceeding alleging the violation of or
liability under any Environmental Laws which if adversely determined,
individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect;
(E) neither the Company, the Subsidiary nor any of their
respective Facilities or operations is subject to any outstanding
written order or agreement with any governmental authority or private
party relating to (a) any actual or potential violation of or
liability under Environmental Laws or (b) any Environmental Claims
except for such of the foregoing which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect;
(F) neither the Company nor the Subsidiary has any contingent
liability in connection with any Release or threatened Release of any
Hazardous Materials by
11
<PAGE>
either the Company or the Subsidiary except for such of the foregoing
which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect;
(G) neither the Company nor the Subsidiary or any predecessor of
either the Company or the Subsidiary has filed any notice required
under any Environmental Law indicating past or present treatment,
storage or disposal of hazardous waste, as defined under 40 C.F.R.
Parts 260-270 or any state equivalent which would reasonably be
expected to have a Material Adverse Effect;
(H) no Hazardous Materials exist on, under or about any Facility
in a manner that, individually or in the aggregate, would reasonably
be expected to give rise to an Environmental Claim having a Material
Adverse Effect; neither the Company nor the Subsidiary has filed any
notice or report of a Release of any Hazardous Materials that,
individually or in the aggregate, would reasonably be expected to give
rise to an Environmental Claim having a Material Adverse Effect;
(I) neither the Company, the Subsidiary nor, to the best of the
Company's knowledge, any of their respective predecessors, has
disposed of any Hazardous Materials in a manner that, individually or
in the aggregate, would reasonably be expected to give rise to an
Environmental Claim having a Material Adverse Effect;
(J) no unregistered or noncompliant underground storage tanks
and no unmonitored or otherwise noncompliant surface impoundments are
on or at any Facility; and
(K) no Lien in favor of any person relating to or in connection
with any Environmental Claim has been filed or has been attached to
any Facility or other assets of either the Company or the Subsidiary
except for any such Lien which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.
Notwithstanding anything in this Section 1(x) to the contrary, no
event or condition has occurred which may interfere with present compliance
by the Company or the Subsidiary with any Environmental Law or which may
give rise to any liability under any Environmental Law, which, individually
or in the aggregate, could reasonably be expected to have a Material
Adverse Effect.
As used herein, the following terms shall have the respective meaning
ascribed to each below:
"Environmental Claim" means any allegation, notice of violation,
claim, demand, abatement order or other order or direction (conditional or
otherwise) by any governmental authority or any person for any response or
corrective action, any damage,
12
<PAGE>
including, without limitation, personal injury (including sickness, disease
or death), property damage, contribution, indemnity, indirect or
consequential damages, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the environment, or for fines,
penalties or restrictions, in each case arising under or relating to any
Environmental Law, including without limitation, relating to, resulting
from or in connection with Hazardous Materials and relating to the Company,
the Subsidiary or any of their respective Facilities or predecessors in
interest.
"Environmental Laws" means the common law and all statutes,
ordinances, orders, rules, regulations, requirements, judgments, plans,
policies or decrees and the like relating to (i) environmental matters,
including, without limitation, those relating to fines, injunctions,
penalties, damages, contribution, cost recovery compensation, losses or
injuries resulting from the Release or threatened Release of Hazardous
Materials, (ii) the generation, use, storage, transportation or disposal of
Hazardous Materials including, without limitation, investigation, study,
assessment, testing, monitoring, containment, removal, remediation, or
clean-up of any such Release, or (iii) occupational safety and health,
industrial hygiene or the protection of the environment, natural resources,
human, plant or animal health or welfare, including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act
(42 U.S.C. (S) 9601 et. seq.), the Hazardous Materials Transportation Act
-- ---
(49 U.S.C. (S) 1801 et seq.), the Resource Conservation and Recovery Act
-- ---
(42 U.S.C. (S) 6901 et seq.), the Federal Water Pollution Control Act (33
-- ---
U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C. (S) 7401 et seq.),
-- --- -- ---
the Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq.), the Federal
-- ---
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. (S) 136 et seq.), the
-- ---
Occupational Safety and Health Act (29 U.S.C. (S) 651 et seq.) and the
-- ---
Emergency Planning and Community Right-to-Know Act (42 U.S.C. (S) 11001 et
--
seq.), each as amended or supplemented, and any analogous future or present
---
statutes, orders, rules, regulations, requirements, judgments or decrees
promulgated pursuant thereto, each as in effect as of the date of
determination.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon)
now, hereafter or heretofore owned, leased, operated or used by the
Company, the Subsidiary or any of their respective predecessors in
interest.
"Hazardous Materials" means (i) any chemical, material or substance at
any time defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous substance," "restricted hazardous waste," "infectious waste,"
"toxic substances" or any other formulations intended to define, list or
classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity,
reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of similar
import under any applicable Environmental Laws or publications issued
pursuant thereto; (ii) any oil, petroleum, petroleum fraction or petroleum
derived substance; (iii) any drilling fluids, produced waters and other
wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources, (iv) any flammable substances or
explosives; (v) any radioactive
13
<PAGE>
materials or gases; (vi) asbestos in any form; (vii) urea formaldehyde foam
insulation; (viii) electrical equipment which contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess
of fifty parts per million; (ix) pesticides; (x) lead-based paint; and (xi)
any other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority or which may or could
pose a hazard to human health or safety or the environment.
"Permits" has the meaning ascribed to it in Section 1(x) below.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the indoor or
outdoor environment (including, without limitation, the abandonment or
disposal of any barrels, containers or other closed receptacles containing
any Hazardous Materials), or onto or out of any Facility, including the
movement of any Hazardous Material through the air, soil, surface water,
groundwater or property.
(x) Each of the Company and the Subsidiary has such certificates,
permits, licenses, franchises, consents, approvals, authorizations and
clearances ("Permits"), and is in compliance in all material respects with all
Laws as are necessary to own, lease or operate its properties and to conduct its
businesses in the manner as presently conducted and to be conducted immediately
after the consummation of the issue and sale of the Notes as contemplated
herein, except where the failure to have such Permits or to comply with such
Laws would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect, and all such Permits are valid and in full force and
effect. Each of the Company and the Subsidiary is in compliance in all material
respects with its obligations under such Permits and no event has occurred or
will occur as a result of the consummation of the issue and sale of the Notes
and the other transactions contemplated herein that allows, or after notice or
lapse of time or both would allow, revocation or termination of such Permits
except for any such revocation or termination as could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(y) Each of the Company and the Subsidiary carries insurance or is
entitled to the benefits of insurance in such amounts and covering such risks as
is generally maintained by companies of established repute engaged in the same
or similar businesses, and all such insurance is in full force and effect.
(z) No labor disturbance by the employees of the Company or the
Subsidiary exists or, to the best knowledge of the Company, is threatened and
the Company is not aware of any existing or imminent labor disturbance which
would reasonably be expected to have a Material Adverse Effect.
(aa) Any reprogramming and related testing required to permit the
proper functioning of each of the Company's and the Subsidiary's computer
systems in and following the year 2000 will be completed in all material
respects prior to December 31, 1999 (that is, each of the Company and the
Subsidiary will be "Year 2000 Compliant"), and the cost to each of the
14
<PAGE>
Company and the Subsidiary of such reprogramming and testing will not result in
a default under any Contract nor would reasonably be expected to have a Material
Adverse Effect. Except for such reprogramming referred to in the preceding
sentence as may be necessary, the computer and management information systems of
each of the Company and the Subsidiary are adequate for the conduct of its
business.
(bb) Except for the fees and expenses payable to the Initial
Purchaser, the Company did not employ any investment banker, broker, finder,
consultant, intermediary or other person in connection with the transactions
contemplated by this Agreement which would be entitled to any investment
banking, brokerage, finder's or other fee or commission in connection with this
Agreement or the transactions contemplated hereby.
Any certificate signed by any officer of the Company and delivered to
the Initial Purchaser or its counsel shall be deemed to be a representation and
warranty made as of the date of such certificate by the Company to the Initial
Purchaser as to the matters covered thereby.
2. Purchase and Sale. Subject to the terms and conditions and in
-----------------
reliance upon the representations and warranties herein set forth, the Company
agrees to issue and sell to the Initial Purchaser, and the Initial Purchaser
agrees to purchase from the Company at a purchase price equal to 95.25% of the
principal amount thereof, $100,000,000 in principal amount of Notes.
3. Delivery and Payment. Delivery of and payment for the Notes shall
--------------------
be made at 10:00 AM, New York City time, on January 21, 1999, which date and
time may be postponed by agreement between the Initial Purchaser and the Company
(such date and time of delivery and payment for the Notes being herein called
the "Closing Date"). Delivery of the Notes shall be made to the Initial
Purchaser against payment by the Initial Purchaser of the purchase price thereof
to or upon the order of the Company by wire transfer payable in same day funds
or such other manner of payment as may be agreed by the Company and the Initial
Purchaser. Delivery of the Notes and payment for the Notes shall be made at the
offices of Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, NY
10006. Certificates for the Notes shall be registered in such names and in such
denominations as the Initial Purchaser may request in writing not less than two
full Business Days in advance of the Closing Date.
The Company agrees to have the Notes available for inspection,
checking and packaging by the Initial Purchaser in New York, New York, not later
than 1:00 PM on the Business Day prior to the Closing Date.
4. Offering of Notes and the Initial Purchaser' Representations and
----------------------------------------------------------------
Warranties. The Initial Purchaser represents and warrants to and agrees with
- ----------
the Company that:
(a) It has not offered or sold, and it will not offer or sell, any
Notes except (i) to those it reasonably believes to be qualified
institutional buyers (as defined in Rule 144A under the Securities Act)
("QIBs") in transactions meeting the requirements of Rule 144A, (ii) to
other institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) who provide to it and to the
Company a letter in the
15
<PAGE>
form of Exhibit A hereto or (iii) in compliance with Regulation S under the
Securities Act and in accordance with the restrictions set forth in Exhibit
B hereto. In connection with each sale pursuant to clause (i) above, the
Initial Purchaser has taken or will take reasonable steps to ensure that
the purchaser of such Notes is aware that such sale is being made in
reliance upon Rule 144A.
(b) It is an "accredited investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act).
(c) Neither it nor any person acting on its behalf has made or will
make offers or sales of the Notes by means of any form of general
solicitation or general advertising (within the meaning of Regulation D
under the Securities Act).
5. Agreements. The Company agrees with the Initial Purchaser that:
----------
(a) The Company will furnish to the Initial Purchaser and to Cleary,
Gottlieb, Steen & Hamilton ("Counsel for the Initial Purchaser") as soon as
reasonably possible, without charge, during the period referred to in
paragraph (c) below, as many copies of the Final Memorandum and any
amendments and supplements thereto as they may reasonably request. The
Company will pay the expenses of printing or other production of all
documents relating to the offering of the Notes and will reimburse the
Initial Purchaser for payment of the required PORTAL filing fee.
(b) The Company will not amend or supplement the Final Memorandum
prior to the completion of the distribution of the Notes by the Initial
Purchaser, without the prior written consent of the Initial Purchaser,
which will not be unreasonably withheld.
(c) If at any time prior to the completion of the distribution of the
Notes acquired by the Initial Purchaser pursuant to this Agreement, during
which time you are required to deliver a Final Memorandum in connection
with sales of the Notes by you (as reasonably determined by the Initial
Purchaser, upon the advice of counsel), any event occurs as a result of
which the Final Memorandum, as then amended or supplemented, would include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or if it should be necessary to
amend or supplement the Final Memorandum to comply with applicable law, the
Company will promptly notify the Initial Purchaser of the same and, subject
to the requirements of paragraph (b) of this Section 5, will prepare and
provide to the Initial Purchaser pursuant to paragraph (a) of this Section
5, an amendment or supplement that will correct such statement or omission
or effect such compliance.
(d) The Company will arrange for the qualification of the Notes for
sale by the Initial Purchaser under the laws of such jurisdictions as the
Initial Purchaser may reasonably designate and will maintain such
qualifications in effect so long as required for the sale of the Notes by
the Initial Purchaser; provided, however, that the Company will not be
-------- -------
required to qualify generally to do business in any jurisdiction in which
it is
16
<PAGE>
not then so qualified, to file any general consent to service of process or
to take any other action which would subject it to general service of
process or to taxation in any such jurisdiction where it is not then so
subject. The Company will promptly advise the Initial Purchaser of the
receipt by the Company of any notification with respect to the suspension
of the qualification of the Notes for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
(e) The Company, whenever it publishes or makes available to the
public (by filing with any regulatory authority or securities exchange or
by publishing a press release or otherwise) any information that would
reasonably be expected to be material in the context of the issue of the
Notes under this Agreement, shall promptly notify the Initial Purchaser as
to the nature of such information or event. The Company will likewise
notify the Initial Purchaser of (i) any decrease in the rating of the Notes
or any other debt securities of the Company by any nationally recognized
statistical rating organization (as defined in Rule 436(g)(2) under the
Securities Act) or (ii) any notice given of any intended or potential
decrease in any such rating or of a possible change in any such rating that
does not indicate the direction of the possible change, as soon as the
Company becomes aware of any such decrease or notice. The Company will
also deliver to the Initial Purchaser, as soon as available and without
request, copies of its latest yearly and quarterly financial statements and
any report of its auditors thereon.
(f) The Company will not, and will not permit any of its Affiliates
to, resell any of the Notes that have been acquired by any of them, other
than pursuant to an effective registration statement under the Securities
Act.
(g) Except as contemplated in the Registration Rights Agreement, none
of the Company or any of its Affiliates, nor any person acting on its or
their behalf (other than the Initial Purchaser or any of its Affiliates, as
to whom the Company expresses no opinion) will, directly or indirectly,
make offers or sales of any security, or solicit offers to buy any
security, under circumstances that would require the registration of the
Notes under the Securities Act.
(h) None of the Company or any of its Affiliates, nor any person
acting on its or their behalf (other than the Initial Purchaser or any of
its Affiliates, as to whom the Company expresses no opinion) will engage in
any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with any offer or sale of the Notes.
(i) So long as any of the Notes are "restricted securities" within
the meaning of Rule 144(a)(3) under the Securities Act, the Company will
provide at its expense to each holder of the Notes and to each prospective
purchaser (as designated by such holder) of the Notes, upon the request of
such holder or prospective purchaser, any information required to be
provided by Rule 144A(d)(4) under the Securities Act, unless the Company is
then subject to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended
17
<PAGE>
(the "Exchange Act"). This covenant is intended to be for the benefit of
the holders, and the prospective purchasers designated by such holders from
time to time, of the Notes.
(j) The Company will cooperate with the Initial Purchaser and use its
best efforts to (i) permit the Notes to be designated PORTAL securities in
accordance with the Rules and regulations of the NASD relating to trading
in the Private Offerings, Resale and Trading through Automated Linkages
market ("PORTAL") and (ii) permit the Notes to be eligible for clearance
and settlement as described under "Book-Entry; Delivery and Form" in the
Final Memorandum.
(k) The Company will apply the net proceeds from the sale of the
Notes as set forth under "Use of Proceeds" in the Final Memorandum.
(l) The Company will conduct its operations in a manner that will not
subject the Company to registration as an investment company under the
Investment Company Act of 1940, as amended.
(m) Each Note will bear a legend substantially to the following
effect until such legend shall no longer be necessary or advisable because
the Notes are no longer subject to the restrictions on transfer described
therein:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A ADOPTED UNDER THE
SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S ADOPTED UNDER THE
SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
ADOPTED UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, IN EITHER CASE, IN A MINIMUM
PRINCIPAL AMOUNT OF THE NOTES OF U.S. $250,000, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT, AND THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-
18
<PAGE>
DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH REGULATION S ADOPTED UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
ADOPTED UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES
THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER
OF THIS NOTE WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE, IF
THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR
TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT.
6. Conditions to the Obligations of the Initial Purchaser. The
------------------------------------------------------
obligation of the Initial Purchaser to purchase the Notes shall be subject to
the accuracy of the representations and warranties on the part of the Company
contained herein at the date and time that this Agreement is executed and
delivered by the parties hereto (the "Execution Time") and the Closing Date, to
the accuracy of the statements of the Company made in any certificates pursuant
to the provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:
(a) The Company shall have furnished to the Initial Purchaser the
opinion of Alston & Bird LLP ("Counsel for the Company"), dated the Closing
Date, in form and substance satisfactory to the Initial Purchaser, to the
effect set forth in Exhibit C hereto.
(b) The Initial Purchaser shall have received from Counsel for the
Initial Purchaser such opinion or opinions, dated the Closing Date, with
respect to the issuance and sale of the Notes and other related matters as
the Initial Purchaser may reasonably require, and the Company shall have
furnished to such counsel such documents as it reasonably requests for the
purpose of enabling it to pass upon such matters.
(c) The Company shall have furnished to the Initial Purchaser a
certificate dated the Closing Date, signed on behalf of the Company by any
two of its Chairman of the Board and Chief Executive Officer, President,
Chief Financial or Accounting Officers and any Vice President to the effect
that the signer of such certificate has carefully
19
<PAGE>
examined the Final Memorandum, any amendment or supplement to the Final
Memorandum and this Agreement and that:
(i) the representations and warranties of the Company contained
in this Agreement are, without giving effect to any qualification
regarding a Material Adverse Effect that may be contained in any of
them, true, correct and complete in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date,
and the Company has performed and complied with all the covenants and
agreements and satisfied all the conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date; and
(ii) since the date of the most recent financial statements
included in the Final Memorandum, there has been no change or
development or event involving a prospective change which,
individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect, except as set forth in or contemplated by
the Final Memorandum (exclusive of any amendment or supplement
thereto);
(d) At the Execution Time and at the Closing Date,
PricewaterhouseCoopers LLP shall have furnished to the Initial Purchaser a
letter or letters, dated respectively as of the Execution Time and as of
the Closing Date, in form and substance satisfactory to the Initial
Purchaser, confirming that they are independent public accountants within
the meaning of Rule 101 of the Code of Professional Conduct of the American
Institute of Certified Public Accountants (the "AICPA") and stating in
effect that:
(i) (a) on the basis of a reading of the unaudited financial
statements of the Company for the nine month period ended September
30, 1998 made available by the Company; their limited review in
accordance with the standards established by the AICPA under Statement
on Auditing Standards No. 71 of the unaudited interim financial
statements; carrying out certain specified procedures (but not an
audit in accordance with generally accepted auditing standards) that
would not necessarily reveal matters of significance with respect to
the comments set forth in such letter and a reading of the minutes of
the meetings of the board of directors of the Company and
(b) on the basis of a reading of the unaudited consolidated
financial statements of the Company for October and November of both
1998 and 1997 furnished by the Company and inquiries of certain
officials of the Company who have responsibility for financial and
accounting matters of the Company as to whether the unaudited
consolidated financial statements referred to in this clause (b) are
stated on a basis substantially consistent with that of the audited
consolidated financial statements of the Company included in the Final
Memorandum and a reading of the minutes of the meetings of the board
of directors of the Company, nothing came to their attention that
caused them to believe that
20
<PAGE>
(A) any material modifications should be made to the
unaudited financial statements of the Company described in
clause (i)(a) above included in the Final Memorandum, for them
to be in conformity with generally accepted accounting
principles, or
(B) at November 30, 1998, there was any change in capital
stock, increases in long-term debt, decrease in consolidated net
current assets or in stockholders' equity, as compared with
amounts shown in the September 30, 1998 unaudited consolidated
balance sheet of the Company included in the Final Memorandum,
or for the period from October 1, 1998 to November 30, 1998,
there were any decreases, as compared with the corresponding
period in the preceding year, in net sales or net income, except
in all instances for changes or decreases set forth in such
letter, in which case the letter shall be accompanied by an
explanation by the Company as to the significance thereof unless
said explanation is not deemed necessary by the Initial
Purchaser.
(ii) on the basis of inquiries of certain officials of the
Company who have responsibility for financial and accounting matters
of the Company as to whether (a) at January 13, 1999, there was any
change in the common stock, increase in long-term debt or decrease in
consolidated net current assets or in stockholders' equity, as
compared with amounts shown in the September 30, 1998 unaudited
consolidated balance sheet of the Company included in the Final
Memorandum or (b) for the period from December 1, 1998 to January 13,
1999, there were any decreases, as compared with the corresponding
period in the preceding year, in net sales or net income, nothing came
to attention that caused them to believe that there were any such
change, increase or decrease, except for such changes, increases or
decreases that the Final Memorandum discloses have occurred or may
occur.
(iii) they have performed certain other specified procedures as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company) set forth in the Final
Memorandum, including without limitation the information set forth
under the captions "Offering Memorandum Summary," "Summary Unaudited
as Adjusted Financial Information," "Summary Historical Financial
Information," "Risk Factors," "Use of Proceeds," "Capitalization,"
"Selected Financial and Operating Information," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and "Certain Relationships and Related Party
Transactions," in the Final Memorandum agrees with the accounting
records of the Company, excluding any questions of legal
interpretation.
21
<PAGE>
All references in this Section 6(d) to the Final Memorandum shall be
deemed to include any amendment or supplement thereto at the date of the
letter or letters.
(e) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Memorandum and prior to the Closing
Date, there shall not have been (i) any change or decrease specified in the
letter or letters referred to in paragraph (d) of this Section 6, or (ii)
any change, or any development involving a prospective change, in or
affecting the business or properties of the Company and the Subsidiary, the
effect of which, in any case referred to in clause (i) or (ii) above, is,
in the judgment of the Initial Purchaser, so material and adverse as to
make it impractical or inadvisable to market the Notes as contemplated by
the Final Memorandum.
(f) Subsequent to the respective dates as of which information is
given in the Final Memorandum, after giving effect to the issue and sale of
the Notes as contemplated herein and on or prior to the Closing Date, (i)
neither the Company nor the Subsidiary shall have incurred any material
liability or obligation, direct or contingent, or entered into any material
transaction not in the ordinary course of business; (ii) the Company shall
not have purchased any of its outstanding capital stock, nor declared, paid
or otherwise made any dividend or distribution of any kind on its capital
stock; (iii) there shall not have been any material change in the capital
stock of the Company and the Subsidiary or in the short-term debt or long-
term debt of the Company or the Subsidiary; and (iv) none of the material
assets of the Company and the Subsidiary shall have materially diminished
in value (ordinary wear and tear excepted), except in each case as
described in or contemplated by the Final Memorandum.
(g) On the Closing Date, the Notes shall have a rating from Standard
& Poor's Corporation at least as favorable as B2 and from Moody's Investors
Service, Inc. at least as favorable as B.
(h) On or prior to the Closing Date, each of the Transaction
Documents (including any amendments thereto) shall have been duly
authorized, executed and delivered by each of the parties thereto, and the
Initial Purchaser shall have received copies of each such Transaction
Document (including any amendments thereto) as so executed and delivered in
the form provided to the Initial Purchaser on or before the date hereof,
except for changes approved by the Initial Purchaser.
(i) Concurrently with the consummation of the Transactions, all
amounts due and payable under the Senior Subordinated Credit Agreement
dated as of September 30, 1998 among the Company as borrower, certain
subsidiaries from time to time party thereto as guarantors, First Union
Investors, Inc. as agent and the lenders named therein, (the "Senior
Subordinated Credit Agreement") shall be paid on the Closing Date from the
proceeds of the sale of the Notes to the Initial Purchasers and any liens
securing amounts due and payable under the Senior Subordinated Credit
Agreement shall have been released effective upon receipt of such payments.
22
<PAGE>
(j) The Company shall have been advised by the National Association
of Securities Dealers, Inc. (the "NASD") that the Notes have been
designated PORTAL-eligible securities in accordance with the Rules and
regulations of the NASD relating to trading in the Private Offerings,
Resales and Trading through Automated Linkages Market (the "PORTAL
Market").
(k) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto
after the date hereof), the business or operations of the Company or the
Subsidiary shall not have been interfered with by fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from
any strike, labor dispute, slow down or work stoppage or from any legal or
governmental proceeding, order or decree, and the Company and the
Subsidiary and their properties shall not have sustained any loss or
damage, whether or not covered by insurance, as a result of any such
occurrence, except for any such interference, loss or damage which has not
had, and would not reasonably be expected to have, a Material Adverse
Effect.
(l) Prior to the Closing Date, the Company and the Subsidiary shall
have furnished to the Initial Purchaser or Counsel for the Initial
Purchaser such further information, certificates and documents as the
Initial Purchaser or Counsel for the Initial Purchaser may reasonably
request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as provided in this Agreement, or if any of the opinions
and certificates mentioned above or elsewhere in this Agreement shall not be
satisfactory in form and substance to the Initial Purchaser and Counsel for the
Initial Purchaser, this Agreement and all obligations of the Initial Purchaser
hereunder may be canceled at the Closing Date by the Initial Purchaser. Notice
of such cancellation shall be given to the Company in writing or by telephone or
by telegraph confirmed in writing.
The documents required to be delivered by this Section 6 will be
delivered at the office of Cleary, Gottlieb, Steen & Hamilton on the Closing
Date.
7. Reimbursement of Expenses; Fees. (a) The Company will, whether or
-------------------------------
not the sale of the Notes provided for herein is consummated, pay all expenses
incident to the performance of its obligations under this Agreement and the
offering documents, including the fees and disbursements of its accountants and
counsel, the costs of printing or other production and delivery of the
Preliminary Memorandum, the Final Memorandum, all amendments thereof and
supplements thereto, each Transaction Document and all other documents relating
to the offering of the Notes, the costs of preparing, printing, packaging and
delivering the Notes, the fees and disbursements, including fees of counsel,
incurred in compliance with Section 5(d), the fees and disbursements of the
Trustee and the fees of any agency that rates the Notes, and the fees and
expenses, if any, incurred in connection with the admission of the Notes for
trading in the PORTAL Market.
23
<PAGE>
(b) If the sale of the Notes provided for herein is not consummated
because any condition to the obligation of the Initial Purchaser set forth in
Section 6 hereof is not satisfied or because of any refusal, inability or
failure on the part of the Company to perform any agreement herein or comply
with any provision hereof other than by reason of a default by the Initial
Purchaser, the Company shall reimburse the Initial Purchaser for all reasonable
out-of-pocket expenses (including legal fees and expenses) incurred by the
Initial Purchaser in connection with the proposed purchase and resale of the
Notes.
8. Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless the Initial Purchaser, the directors, officers,
employees and agents of the Initial Purchaser and each person who controls the
Initial Purchaser within the meaning of either the Securities Act or the
Exchange Act, against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Memorandum, the Final Memorandum or any information provided by the
Company to any Holder or prospective purchaser of Notes pursuant to Section
5(i), or in any amendment thereof or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
-------- -------
Company will not be liable in any case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made in the Preliminary
Memorandum or the Final Memorandum, or in any amendment thereof or supplement
thereto, in reliance upon and in conformity with written information relating to
the Initial Purchaser furnished to the Company by or on behalf of the Initial
Purchaser specifically for inclusion therein; and, provided, further, that with
-------- -------
respect to any untrue statement or omission of a material fact made in the
Preliminary Memorandum, the indemnity agreement contained in this Section 8(a)
shall not inure to the benefit of the Initial Purchaser to the extent that any
such losses, claims, damages or liabilities asserted against the Initial
Purchaser occurs under circumstances where it shall have been determined by a
court of competent jurisdiction by final and nonappealable judgment that (x) the
Company had previously furnished copies of the Final Memorandum to the Initial
Purchaser as required by this Agreement, (y) the untrue statement or omission of
a material fact contained in the Preliminary Memorandum was corrected in the
Final Memorandum and (z) there was not sent or given to such person asserting
any such losses, claims, damages or liabilities, at or prior to the written
confirmation of the sale of Notes to such person, a copy of the Final
Memorandum. This indemnity agreement will be in addition to any liability which
the Company may otherwise have.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Company, its directors, officers, employees and agents and each person who
controls the Company within the meaning of either the Securities Act or the
Exchange Act to the same extent as the foregoing
24
<PAGE>
indemnity from the Company to the Initial Purchaser, but only with reference to
written information relating to the Initial Purchaser furnished to the Company
by or on behalf of the Initial Purchaser specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which the Initial Purchaser may otherwise have.
The Company acknowledges that the statements set forth in the last paragraph of
the cover page and under the heading "Plan of Distribution" in the Preliminary
Memorandum and the Final Memorandum constitute the only information furnished in
writing by or on behalf of the Initial Purchaser for inclusion in the
Preliminary Memorandum or Final Memorandum (or in any amendment or supplement
thereto).
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
-------- -------
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel (and local counsel) if (i) the use of
counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall have authorized the indemnified
party to employ separate counsel at the expense of the indemnifying party;
provided further, that the indemnifying party shall not be responsible for the
- -------- -------
fees and expenses of more than one separate counsel (together with appropriate
local counsel) representing all the indemnified parties under paragraph (a) or
paragraph (b) above. An indemnifying party will not, without the prior written
consent of the indemnified party, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not an indemnified party is an actual or potential party
to such claim or action) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding.
25
<PAGE>
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable or insufficient to hold harmless an indemnified
party for any reason, the Company, on the one hand, and the Initial Purchaser,
on the other, agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which the
Company, on the one hand, and the Initial Purchaser, on the other, may be
subject in such proportion as is appropriate to reflect the relative benefits
received by the Company, on the one hand, and by the Initial Purchaser, on the
other, from the offering of the Notes; provided, however, that in no case shall
-------- -------
the Initial Purchaser be responsible for any amount in excess of the purchase
discount or commission applicable to the Notes purchased by the Initial
Purchaser hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Company, on the one hand, and the
Initial Purchaser, on the other, shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company, on the one hand, and of the Initial Purchaser, on the
other, in connection with the statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the total net proceeds
from the offering (before deducting expenses), and benefits received by the
Initial Purchaser shall be deemed to be equal to the total purchase discounts
and commissions received by the Initial Purchaser from the Company in connection
with the purchase of the Notes hereunder. Relative fault shall be determined by
reference to, among other things, whether any alleged untrue statement or
omission relates to information provided by the Company or the Initial Purchaser
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Initial Purchaser agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation that does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section
8, each person who controls the Initial Purchaser within the meaning of either
the Securities Act or the Exchange Act and each director, officer, employee and
agent of the Initial Purchaser shall have the same rights to contribution as the
Initial Purchaser, and each person who controls the Company within the meaning
of either the Securities Act or the Exchange Act and each officer, director,
employee and agent of the Company shall have the same rights to contribution as
the Company, subject in each case to the applicable terms and conditions of this
paragraph (d).
9. Termination. This Agreement shall be subject to termination by
-----------
notice given by the Initial Purchaser to the Company prior to delivery of and
payment for the Notes if, after the date hereof and prior to such delivery and
payment, there shall have occurred a material adverse change in the condition of
the financial, banking or capital markets in the United States the effect of
which, in the judgment of the Initial Purchaser, makes it impractical to market
the Notes or to enforce sale contracts with respect to the Notes.
10. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and
26
<PAGE>
of the Initial Purchaser set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of the Initial Purchaser or the Company or any of its officers, directors
or controlling persons referred to in Section 8 hereof, and will survive
delivery of and payment for the Notes. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancellation of this Agreement.
11. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to the Initial Purchaser, will be
mailed, delivered or telecopied and confirmed to it at 301 South College Street,
TW-10, Charlotte, NC 28288-0606, Telecopy No.: (704) 383-9527, Attention: Rick
Fogg; or, if sent to the Company, will be mailed, delivered or telecopied and
confirmed to them at 3802 Robert Porcher Way, Greensboro, N.C. 27410, Telecopy
No.: (336) 545-7715, Attention: Chief Financial Officer.
12. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and assigns and
the officers and directors and controlling persons referred to in Section 8
hereof, and, except as expressly set forth in Section 5(i) hereof, nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person, firm, corporation or other entity any legal or equitable
right, remedy or claim under or in respect to this Agreement or any provisions
herein contained. No purchaser of Notes from the Initial Purchaser shall be
deemed to be a successor merely by reason of such purchase.
13. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
--------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
14. Business Day. For purposes of this Agreement, "Business Day"
------------
means any day excluding Saturday, Sunday and any day which is a legal holiday
under the laws of Charlotte, North Carolina or of New York, New York, or is a
day on which banking institutions therein located are authorized or required by
law or other governmental action to close.
15. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
27
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this Agreement and your acceptance shall represent a binding agreement among the
Company and the Initial Purchaser.
Very truly yours,
BGF INDUSTRIES, INC.
By: /s/ Philippe R. Dorier
----------------------
Name: Philippe R. Dorier
Title: Senior Vice-President
Chief Financial Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first written above
FIRST UNION CAPITAL MARKETS,
A DIVISION OF WHEAT FIRST SECURITIES, INC.
By: /s/ Rick Fogg
-------------------
Name: Rick Fogg
Title: Director
<PAGE>
EXHIBIT 10.10
EXECUTION COPY
________________________________________________________________________________
$125,000,000
CREDIT AGREEMENT
among
BGF INDUSTRIES, INC.,
as Borrower,
ITS DOMESTIC SUBSIDIARIES
FROM TIME TO TIME PARTIES HERETO
as Guarantors,
THE LENDERS PARTIES HERETO
and
FIRST UNION NATIONAL BANK,
as Agent
Dated as of September 30, 1998
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS......................................................................................... 1
Section 1.1 Defined Terms............................................................................. 1
-------------
Section 1.2 Other Definitional Provisions............................................................. 25
-----------------------------
Section 1.3 Accounting Terms.......................................................................... 25
----------------
ARTICLE II THE LOANS; AMOUNT AND TERMS........................................................................ 26
Section 2.1 Revolving Loans........................................................................... 26
---------------
Section 2.2 Term Loan................................................................................. 28
---------
Section 2.3 Swingline Loan Subfacility................................................................ 29
--------------------------
Section 2.4 Letter of Credit Subfacility.............................................................. 31
----------------------------
Section 2.5 Fees...................................................................................... 34
----
Section 2.6 Commitment Reductions..................................................................... 35
---------------------
Section 2.7 Prepayments............................................................................... 36
-----------
Section 2.8 Minimum Principal Amount of Tranches...................................................... 38
------------------------------------
Section 2.9 Default Rate and Payment Dates............................................................ 38
------------------------------
Section 2.10 Conversion Options....................................................................... 39
------------------
Section 2.11 Computation of Interest and Fees......................................................... 39
--------------------------------
Section 2.12 Pro Rata Treatment and Payments.......................................................... 40
-------------------------------
Section 2.13 Non-Receipt of Funds by the Agent........................................................ 40
---------------------------------
Section 2.14 Inability to Determine Interest Rate..................................................... 41
------------------------------------
Section 2.15 Illegality............................................................................... 42
----------
Section 2.16 Requirements of Law...................................................................... 42
-------------------
Section 2.17 Indemnity................................................................................ 44
---------
Section 2.18 Taxes.................................................................................... 44
-----
Section 2.19 Indemnification; Nature of Issuing Lender's Duties....................................... 46
--------------------------------------------------
Section 2.20 Defaulting Lenders....................................................................... 47
------------------
ARTICLE III REPRESENTATIONS AND WARRANTIES.................................................................... 49
Section 3.1 Financial Condition....................................................................... 49
-------------------
Section 3.2 No Change................................................................................. 49
---------
Section 3.3 Corporate Existence; Compliance with Law.................................................. 49
----------------------------------------
Section 3.4 Corporate Power; Authorization; Enforceable Obligations................................... 49
-------------------------------------------------------
Section 3.5 No Legal Bar; No Default.................................................................. 50
------------------------
Section 3.6 No Material Litigation.................................................................... 50
----------------------
Section 3.7 Investment Company Act.................................................................... 50
----------------------
Section 3.8 Margin Regulations........................................................................ 51
------------------
Section 3.9 ERISA..................................................................................... 51
-----
Section 3.10 Environmental Matters.................................................................... 51
---------------------
Section 3.11 Purpose of Loans......................................................................... 52
----------------
Section 3.12 Subsidiaries............................................................................. 52
------------
Section 3.13 Ownership................................................................................ 53
---------
Section 3.14 Indebtedness............................................................................. 53
------------
Section 3.15 Taxes.................................................................................... 53
-----
Section 3.16 Intellectual Property.................................................................... 53
---------------------
Section 3.17 Solvency................................................................................. 54
--------
Section 3.18 Investments.............................................................................. 54
-----------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 3.19 Location of Collateral................................................................... 54
----------------------
Section 3.20 No Burdensome Restrictions............................................................... 54
--------------------------
Section 3.21 Brokers' Fees............................................................................ 54
-------------
Section 3.22 Labor Matters............................................................................ 54
-------------
Section 3.23 Accuracy and Completeness of Information................................................. 55
----------------------------------------
Section 3.24 Year 2000 Issue.......................................................................... 55
---------------
ARTICLE IV CONDITIONS PRECEDENT............................................................................... 55
Section 4.1 Conditions to Closing Date and Initial Revolving Loans and Term Loans..................... 55
---------------------------------------------------------------------
Section 4.2 Conditions to All Extensions of Credit.................................................... 62
--------------------------------------
ARTICLE V AFFIRMATIVE COVENANTS............................................................................... 63
Section 5.1 Financial Statements...................................................................... 63
--------------------
Section 5.2 Certificates; Other Information........................................................... 64
-------------------------------
Section 5.3 Payment of Obligations.................................................................... 65
----------------------
Section 5.4 Conduct of Business and Maintenance of Existence.......................................... 65
------------------------------------------------
Section 5.5 Maintenance of Property; Insurance........................................................ 65
----------------------------------
Section 5.6 Inspection of Property; Books and Records; Discussions.................................... 66
------------------------------------------------------
Section 5.7 Notices................................................................................... 66
-------
Section 5.8 Environmental Laws........................................................................ 67
------------------
Section 5.9 Financial Covenants....................................................................... 68
-------------------
Section 5.10 Additional Guarantors.................................................................... 69
---------------------
Section 5.11 Compliance with Law...................................................................... 69
-------------------
Section 5.12 Pledged Assets........................................................................... 70
--------------
Section 5.13 Interest Rate Protection Agreements...................................................... 70
-----------------------------------
Section 5.14 Year 2000 Compliance..................................................................... 70
--------------------
ARTICLE VI NEGATIVE COVENANTS................................................................................. 71
Section 6.1 Indebtedness.............................................................................. 71
------------
Section 6.2 Liens..................................................................................... 72
-----
Section 6.3 Guaranty Obligations...................................................................... 72
--------------------
Section 6.4 Nature of Business........................................................................ 73
------------------
Section 6.5 Consolidation, Merger, Sale or Purchase of Assets, etc.................................... 73
------------------------------------------------------
Section 6.6 Advances, Investments and Loans........................................................... 74
-------------------------------
Section 6.7 Transactions with Affiliates.............................................................. 74
----------------------------
Section 6.8 Ownership of Subsidiaries; Restrictions................................................... 74
---------------------------------------
Section 6.9 Fiscal Year; Organizational Documents; Material Contracts................................. 74
---------------------------------------------------------
Section 6.10 Limitation on Restricted Actions......................................................... 75
--------------------------------
Section 6.11 Restricted Payments...................................................................... 75
-------------------
Section 6.12 Prepayments of Indebtedness, etc......................................................... 75
--------------------------------
Section 6.13 Sale Leasebacks.......................................................................... 76
---------------
Section 6.14 No Further Negative Pledges.............................................................. 76
---------------------------
ARTICLE VII EVENTS OF DEFAULT................................................................................. 77
Section 7.1 Events of Default......................................................................... 77
-----------------
Section 7.2 Acceleration; Remedies.................................................................... 79
----------------------
ARTICLE VIII THE AGENT........................................................................................ 80
Section 8.1 Appointment............................................................................... 80
-----------
Section 8.2 Delegation of Duties...................................................................... 80
--------------------
Section 8.3 Exculpatory Provisions.................................................................... 80
----------------------
Section 8.4 Reliance by Agent......................................................................... 81
-----------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 8.5 Notice of Default......................................................................... 81
-----------------
Section 8.6 Non-Reliance on Agent and Other Lenders................................................... 82
---------------------------------------
Section 8.7 Indemnification........................................................................... 82
---------------
Section 8.8 Agent in Its Individual Capacity.......................................................... 82
--------------------------------
Section 8.9 Successor Agent........................................................................... 83
---------------
ARTICLE IX MISCELLANEOUS...................................................................................... 83
Section 9.1 Amendments, Waivers and Release of Collateral............................................. 83
---------------------------------------------
Section 9.2 Notices................................................................................... 85
-------
Section 9.3 No Waiver; Cumulative Remedies............................................................ 86
------------------------------
Section 9.4 Survival of Representations and Warranties................................................ 86
------------------------------------------
Section 9.5 Payment of Expenses and Taxes............................................................. 86
-----------------------------
Section 9.6 Successors and Assigns; Participations; Purchasing Lenders................................ 87
----------------------------------------------------------
Section 9.7 Adjustments; Set-off...................................................................... 90
--------------------
Section 9.8 Table of Contents and Section Headings.................................................... 91
--------------------------------------
Section 9.9 Counterparts.............................................................................. 91
------------
Section 9.10 Effectiveness............................................................................ 91
-------------
Section 9.11 Severability............................................................................. 91
------------
Section 9.12 Integration.............................................................................. 91
-----------
Section 9.13 Governing Law............................................................................ 91
-------------
Section 9.14 Consent to Jurisdiction and Service of Process........................................... 92
----------------------------------------------
Section 9.15 Arbitration.............................................................................. 92
-----------
Section 9.16 Confidentiality.......................................................................... 93
---------------
Section 9.17 Acknowledgments.......................................................................... 94
---------------
Section 9.18 Waivers of Jury Trial.................................................................... 94
---------------------
ARTICLE X GUARANTY............................................................................................ 94
Section 10.1 The Guaranty............................................................................. 94
------------
Section 10.2 Bankruptcy............................................................................... 95
----------
Section 10.3 Nature of Liability...................................................................... 96
-------------------
Section 10.4 Independent Obligation................................................................... 96
----------------------
Section 10.5 Authorization............................................................................ 96
-------------
Section 10.6 Reliance................................................................................. 96
--------
Section 10.7 Waiver................................................................................... 97
------
Section 10.8 Limitation on Enforcement................................................................ 98
-------------------------
Section 10.9 Confirmation of Payment.................................................................. 98
-----------------------
</TABLE>
iii
<PAGE>
Schedules
- ---------
Schedule 1.1(a) Account Designation Letter
Schedule 1.1(b) Existing Letters of Credit
Schedule 1.1(c) Liens
Schedule 2.1(a) Schedule of Lenders and Commitments
Schedule 2.1(b)(i) Form of Notice of Borrowing
Schedule 2.1(e) Form of Revolving Note
Schedule 2.2(d) Form of Term Note
Schedule 2.3(d) Form of Swingline Note
Schedule 2.10 Form of Notice of Conversion/Extension
Schedule 2.18 Section 2.18 Certificate
Schedule 3.6 Litigation
Schedule 3.9 ERISA
Schedule 3.10 Environmental Matters
Schedule 3.12 Subsidiaries
Schedule 3.16 Intellectual Property
Schedule 3.19(a) Location of Real Property
Schedule 3.19(b) Location of Collateral
Schedule 3.19(c) Chief Executive Offices
Schedule 3.22 Labor Matters
Schedule 4.1(b) Form of Secretary's Certificate
Schedule 4.1(i-A) Form of Solvency Certificate
Schedule 5.5(b) Insurance
Schedule 5.10 Form of Joinder Agreement
Schedule 6.1(b) Indebtedness
Schedule 6.7 Transactions with Affiliates
Schedule 9.2 Schedule of Lenders' Lending Offices
Schedule 9.6(c) Form of Commitment Transfer Supplement
iv
<PAGE>
CREDIT AGREEMENT, dated as of September 30, 1998, among BGF INDUSTRIES,
INC., a Delaware corporation (the "Borrower"), those Domestic Subsidiaries of
--------
the Borrower as may from time to time become a party hereto (collectively, the
"Guarantors"), the several banks and other financial institutions as may from
----------
time to time become parties to this Agreement (collectively, the "Lenders"; and
-------
individually, a "Lender"), and FIRST UNION NATIONAL BANK, a national banking
------
association, as agent for the Lenders hereunder (in such capacity, the "Agent").
-----
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower has requested that the Lenders make loans and other
financial accommodations to the Borrower in the amount of up to $125,000,000, as
more particularly described herein;
WHEREAS, the Lenders have agreed to make such loans and other financial
accommodations to the Borrower on the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINED TERMS.
-------------
As used in this Agreement, terms defined in the preamble to this Agreement
have the meanings therein indicated, and the following terms have the following
meanings:
"Account Designation Letter" shall mean the Notice of Account Designation
--------------------------
Letter dated the Closing Date from the Borrower to the Agent substantially in
the form attached hereto as Schedule 1.1(a).
---------------
"Acquired Business" shall mean the glass yarn and specialty materials
------------------
business of Owens Corning and all assets and liabilities related thereto to be
contributed to Advanced Glassfiber Yarns pursuant to the Acquisition Documents.
"Acquisition" shall mean the purchases, contributions and other
-----------
acquisitions of assets contemplated by the Acquisition Documents.
<PAGE>
"Acquisition Documents" shall mean all agreements, documents and instruments
---------------------
executed and delivered pursuant to or in connection with the acquisition of the
Acquired Business.
"Additional Credit Party" shall mean each Person that becomes a Guarantor by
-----------------------
execution of a Joinder Agreement in accordance with Section 5.10.
"Advanced Glassfiber Yarns" shall mean Advanced Glassfiber Yarns LLC, a
-------------------------
Delaware limited liability company.
"Advanced Glassfiber Yarns Credit Agreement" shall mean that credit agreement
------------------------------------------
dated as of the date hereof among Advanced Glassfiber Yarns, as borrower, the
guarantors party thereto, the lenders party thereto and First Union, as agent
for such lenders.
"Affiliate" shall mean as to any Person, any other Person (excluding any
---------
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
a Person shall be deemed to be "controlled by" a Person if such Person
possesses, directly or indirectly, power either (a) to vote 10% or more of the
securities having ordinary voting power for the election of directors of such
Person or (b) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
"Agent" shall have the meaning set forth in the first paragraph of this
----
Agreement and any successors in such capacity.
"Agreement" shall mean this Credit Agreement, as amended, modified or
---------
supplemented from time to time in accordance with its terms.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to the
-------------------
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof:
"Prime Rate" shall mean, at any time, the rate of interest per annum publicly
- -----------
announced from time to time by First Union at its principal office in Charlotte,
North Carolina as its prime rate. Each change in the Prime Rate shall be
effective as of the opening of business on the day such change in the Prime Rate
occurs. The parties hereto acknowledge that the rate announced publicly by
First Union as its Prime Rate is an index or base rate and shall not necessarily
be its lowest or best rate charged to its customers or other banks; and "Federal
-------
Funds Effective Rate" shall mean, for any day, 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 on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not so
published on the next succeeding Business Day, the average of the quotations for
the day of such transactions received by the Agent from three federal funds
brokers of recognized standing selected by it. If for any reason the Agent
shall have determined (which determination shall be conclusive in the absence of
manifest error) that it is unable to ascertain the Federal Funds Effective Rate,
for any reason, including the inability or failure of the Agent to obtain
sufficient quotations in accordance with the terms thereof, the Alternate Base
Rate shall be determined without regard to clause (b) of the first sentence of
this
2
<PAGE>
definition, as appropriate, until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a change
in the Prime Rate or the Federal Funds Effective Rate shall be effective on the
opening of business on the date of such change.
"Alternate Base Rate Loans" shall mean Loans that bear interest at an interest
-------------------------
rate based on the Alternate Base Rate.
"Applicable Percentage" shall mean, for any day, the rate per annum set forth
---------------------
below opposite the applicable Level then in effect, it being understood that the
Applicable Percentage for (i) Loans which are Alternate Base Rate Loans shall be
the percentage set forth under the column "Alternate Base Rate Margin", (ii)
Loans which are LIBOR Rate Loans shall be the percentage set forth under the
column "LIBOR Rate Margin and Letter of Credit Fee", (iii) the Commitment Fee
shall be the percentage set forth under the column "Commitment Fee" and (iv) the
Letter of Credit Fee shall be the percentage set forth under the column "LIBOR
Rate Margin and Letter of Credit Fee":
<TABLE>
<CAPTION>
LIBOR Rate
Alternate Margin
Leverage Base Rate and Letter of Commitment
Level Ratio Margin Credit Fee Fee
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I greater than or equal to 4.5 to 1.0 1.50% 2.75% 0.50%
II 4.0 to 1.0 but 1.25% 2.50% 0.50%
less than 4.5 to 1.0
III greater than or equal to 3.5 to 1.0 but 1.00% 2.25% 0.50%
less than 4.0 to 1.0
IV less than 3.5 to 1.0 0.75% 2.00% 0.375%
</TABLE>
The Applicable Percentage shall, in each case, be determined and adjusted
quarterly on the date five (5) Business Days after the date on which the Agent
has received from the Borrower the quarterly financial information and
certifications required to be delivered to the Agent and the Lenders in
accordance with the provisions of Sections 5.1(b) and 5.2(b) (each an "Interest
--------
Determination Date"). Such Applicable Percentage shall be effective from such
- ------------------
Interest Determination Date until the next such Interest Determination Date.
The initial Applicable Percentages on the Closing Date shall be based on Level
I. Subsequent to the Closing Date, the Applicable Percentages shall not be less
than the interest rates for Level I until the first Interest Determination Date
occurring after March 31, 1999. After the Closing Date, if the Borrower shall
fail to provide the quarterly financial information and certifications in
accordance with the provisions of Sections 5.1(b) and 5.2(b), the Applicable
Percentages for such Interest Determination Date shall, on the date five (5)
Business Days after the date by which the Borrower was so required to provide
such financial information and certifications to the Agent and the Lenders, be
based on Level I until such time as such information and certifications are
provided, whereupon the Level shall be determined by the then current Leverage
Ratio.
*> greater than
> less than
3
<PAGE>
"Asset Disposition" shall mean the disposition of any or all of the assets
-----------------
(including, without limitation, the Capital Stock of a Subsidiary or any
ownership interest in a joint venture) of the Borrower or any Subsidiary whether
by sale, lease, transfer or otherwise. The term "Asset Disposition" (i) shall
include any "Asset Sale" under the Subordinated Debt Documentation and (ii)
shall not in any event include (a) Specified Sales, (b) the sale, lease or
transfer of assets permitted by Section 6.5(a)(iii) or (iv) hereof, or (c) any
Debt Issuance or Equity Issuance.
"Bankruptcy Code" shall mean the Bankruptcy Code in Title 11 of the United
---------------
States Code, as amended, modified, succeeded or replaced from time to time.
"Belmont" shall mean Belmont of America, Inc., a Delaware corporation.
-------
"Belmont Letter of Credit" shall mean the direct pay letter of credit in the
------------------------
original undrawn amount of $5,246,576 issued by the Issuing Lender, as such
letter of credit may be amended, modified, extended, renewed or replaced from
time to time.
"Bond Trustee" shall mean First Union National Bank in its capacity as trustee
------------
under the Indenture, and its successors and assigns.
"Bonds" shall mean the Issuer's Economic Development Revenue Bonds in the
-----
original aggregate principal amount of $5,000,000 issued and sold by the Issuer
pursuant to the Indenture.
"Borrower" shall have the meaning set forth in the first paragraph of this
--------
Agreement.
"Borrowing Date" shall mean, in respect of any Loan, the date such Loan is
--------------
made.
"Business" shall have the meaning set forth in Section 3.10.
--------
"Business Day" shall mean a day other than a Saturday, Sunday or other day on
------------
which commercial banks in Charlotte, North Carolina or New York, New York are
authorized or required by law to close; provided, however, that when used in
-------- -------
connection with a rate determination, borrowing or payment in respect of a LIBOR
Rate Loan, the term "Business Day" shall also exclude any day on which banks in
London, England are not open for dealings in Dollar deposits in the London
interbank market.
"Capital Expenditures" shall mean all expenditures which in accordance with
--------------------
GAAP would be classified as capital expenditures, including without limitation,
Capital Lease Obligations.
"Capital Lease" shall mean any lease of property, real or personal, the
-------------
obligations with respect to which are required to be capitalized on a balance
sheet of the lessee in accordance with GAAP.
"Capital Lease Obligations" shall mean the capitalized lease obligations
-------------------------
relating to a Capital Lease determined in accordance with GAAP.
4
<PAGE>
"Capital Stock" shall mean (i) in the case of a corporation, capital stock,
-------------
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
capital stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited liability company,
membership interests and (v) 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" shall mean (i) securities issued or directly and fully
----------------
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition ("Government Obligations"), (ii)
----------------------
U.S. dollar denominated (or foreign currency fully hedged) time deposits,
certificates of deposit, Eurodollar time deposits and Eurodollar certificates of
deposit of (y) any domestic commercial bank of recognized standing having
capital and surplus in excess of $250,000,000 or (z) any bank whose short-term
commercial paper rating from S&P is at least A-1 or the equivalent thereof or
from Moody's is at least P-1 or the equivalent thereof (any such bank being an
"Approved Bank"), in each case with maturities of not more than 364 days from
-------------
the date of acquisition, (iii) commercial paper and variable or fixed rate notes
issued by any Approved Bank (or by the parent company thereof) or any variable
rate notes issued by, or guaranteed by any domestic corporation rated A-1 (or
the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or
better by Moody's and maturing within six months of the date of acquisition,
(iv) repurchase agreements with a bank or trust company (including a Lender) or
a recognized securities dealer having capital and surplus in excess of
$500,000,000 for direct obligations issued by or fully guaranteed by the United
States of America, (v) obligations of any state of the United States or any
political subdivision thereof for the payment of the principal and redemption
price of and interest on which there shall have been irrevocably deposited
Government Obligations maturing as to principal and interest at times and in
amounts sufficient to provide such payment, and (vi) auction preferred stock
rated in the highest short-term credit rating category by S&P or Moody's.
"Closing Date" shall mean the date of this Agreement.
------------
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
----
time.
"Collateral" shall mean a collective reference to the collateral which is
-----------
identified in, and at any time will be covered by, the Security Documents.
"Commitment" shall mean the Revolving Commitment, the LOC Commitment, the
----------
Swingline Commitment and the Term Loan Commitment, individually or collectively,
as appropriate.
"Commitment Fee" shall have the meaning set forth in Section 2.5(a).
--------------
5
<PAGE>
"Commitment Percentage" shall mean the Revolving Commitment Percentage, the
---------------------
LOC Commitment Percentage and/or the Term Loan Commitment Percentage, as
appropriate.
"Commitment Period" shall mean the period from and including the Closing Date
-----------------
to but not including the Revolving Commitment Termination Date.
"Commitment Transfer Supplement" shall mean a Commitment Transfer Supplement,
------------------------------
substantially in the form of Schedule 9.6(c).
---------------
"Commonly Controlled Entity" shall mean an entity, whether or not
--------------------------
incorporated, which is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414 of the Code.
"Consolidated Cash Taxes" shall mean, for any period, the aggregate of all
------------------------
taxes for such period of the Borrower and its Subsidiaries on a consolidated
basis determined in accordance with GAAP applied on a consistent basis, to the
extent the same are paid in cash during such period. The applicable period
shall be for the four consecutive quarters ending as of the date of computation.
"Consolidated EBITDA" shall mean, for any period, Consolidated Net Income plus
------------------- ----
the sum of (i) Consolidated Interest Expense plus interest expense not payable
----
in cash and amortization of debt discount and premium, for such period, plus, to
----
the extent the following items are deducted in calculating Consolidated Net
Income, (ii) all provisions for any Federal, state , local and foreign income,
value added, ad valorem and similar taxes for such period, plus (iii)
----
depreciation, amortization and non-recurring non-cash charges for such period,
plus (iv) losses (or minus gains) on the sale or disposition of assets outside
- ---- -----
the ordinary course of business for such period, of the Borrower and its
Subsidiaries on a consolidated basis as determined in accordance with GAAP
applied on a consistent basis. The applicable period shall be for the four
consecutive quarters ending as of the date of determination.
"Consolidated Fixed Charges" shall mean, for any period, the sum of (i)
--------------------------
Consolidated Interest Expense for such period plus (ii) Consolidated Scheduled
----
Funded Debt Payments for the next four fiscal quarters following the end of such
period plus (iii) consolidated Capital Expenditures in excess of $7,500,000 for
----
the four fiscal quarters most recently ending (without duplication of items in
clause (ii)) plus (iv) Consolidated Cash Taxes for such period of the Borrower
and its Subsidiaries on a consolidated basis determined in accordance with GAAP
applied on a consistent basis. The applicable period shall be for the four
consecutive quarters ending as of the date of computation.
"Consolidated Funded Debt" shall mean, on any date of calculation, Funded Debt
------------------------
of the Borrower and its Subsidiaries on a consolidated basis.
"Consolidated Interest Expense" shall mean, for any period, all interest
-----------------------------
expense (excluding interest expense not payable in cash and amortization of debt
discount and premium), including
6
<PAGE>
the interest component under Capital Leases for such period of the Borrower and
its Subsidiaries on a consolidated basis determined in accordance with GAAP
applied on a consistent basis. The applicable period shall be for the four
consecutive quarters ending as of the date of computation; provided, however,
-------- -------
for purposes of determining the Interest Coverage Ratio and Consolidated Fixed
Charge Coverage Ratio for the first three fiscal quarters subsequent to the
Closing Date, the calculation of Consolidated Interest Expense as the
denominator in the Interest Coverage Ratio and as a component of Consolidated
Fixed Charges shall be made by annualizing actual interest expense for the
applicable period subsequent to the Closing Date.
"Consolidated Net Income" shall mean, for any period, the net income
-----------------------
(excluding extraordinary items) of the Borrower and its Subsidiaries on a
consolidated basis determined in accordance with GAAP applied on a consistent
basis for such period. Except as otherwise specified, the applicable period
shall be for the four consecutive quarters ending as of the date of computation.
"Consolidated Net Worth" shall mean total stockholders' equity for the
----------------------
Borrower and its Subsidiaries on a consolidated basis as determined at a
particular date in accordance with GAAP applied on a consistent basis.
"Consolidated Scheduled Funded Debt Payments" shall mean, on any date of
-------------------------------------------
determination, with respect to the Borrower and its Subsidiaries on a
consolidated basis, the sum of all scheduled payments of principal on
Consolidated Funded Debt to be made (including the principal component of
payments due on Capital Leases); it being understood that scheduled payments on
Consolidated Funded Debt shall not include optional prepayments or the mandatory
prepayments required pursuant to Section 2.7.
"Contractual Obligation" shall mean, as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.
"Credit Documents" shall mean this Agreement, each of the Notes, any Joinder
----------------
Agreement, the Letters of Credit, LOC Documents, the Environmental Indemnity
Agreement and the Security Documents.
"Credit Facility Trustee" shall mean Branch Banking and Trust Company, in its
-----------------------
capacity as the Credit Facility Trustee under the Indenture, and its successors
and assigns.
"Credit Party" shall mean any of the Borrower or the Guarantors.
------------
"Credit Party Obligations" shall mean, without duplication, (i) all of the
------------------------
obligations of the Credit Parties to the Lenders (including the Issuing Lender)
and the Agent, whenever arising, under this Agreement, the Notes or any of the
other Credit Documents (including, but not limited to, any interest accruing
after the occurrence of a filing of a petition of bankruptcy under the
Bankruptcy Code with respect to any Credit Party, regardless of whether such
interest is an allowed claim under the Bankruptcy Code) and (ii) all liabilities
and obligations, whenever arising,
7
<PAGE>
owing from the Borrower or any of its Subsidiaries to any Lender, or any
Affiliate of a Lender, arising under any Hedging Agreement (if and only if the
Lender and the Borrower expressly provide in the documents evidencing any such
Hedge Agreement that such liabilities and obligations shall be classified as
"Credit Party Obligations" hereunder).
"Debt Issuance" shall mean the issuance of any Indebtedness for borrowed money
-------------
by the Borrower or any of its Subsidiaries (excluding any Equity Issuance or any
Indebtedness of the Borrower and its Subsidiaries permitted to be incurred
pursuant to Section 6.1 hereof).
"Default" shall mean any of the events specified in Section 7.1, whether or
-------
not any requirement for the giving of notice or the lapse of time, or both, or
any other condition, has been satisfied.
"Default Rate" shall have the meaning set forth in Section 2.9(b).
------------
"Defaulting Lender" shall mean, at any time, any Lender that, at such time (a)
-----------------
has failed to make a Loan required pursuant to the term of this Credit
Agreement, including the funding of a Participation Interest in accordance with
the terms hereof, (b) has failed to pay to the Agent or any Lender an amount
owed by such Lender pursuant to the terms of this Credit Agreement, (c) has been
deemed insolvent or has become subject to a bankruptcy or insolvency proceeding
or to a receiver, trustee or similar official or (d) has failed to perform any
of its obligations under this Agreement or any other Credit Document within the
time specified herein or therein or, if no time is so specified, within 5
Business Days of notice by the Agent of such failure to perform.
"Dollars" and "$" shall mean dollars in lawful currency of the United States
------- -
of America.
"Domestic Lending Office" shall mean, initially, the office of each Lender
-----------------------
designated as such Lender's Domestic Lending Office shown on Schedule 9.2; and
------------
thereafter, such other office of such Lender as such Lender may from time to
time specify to the Agent and the Borrower as the office of such Lender at which
Alternate Base Rate Loans of such Lender are to be made.
"Domestic Subsidiary" shall mean any Subsidiary that is organized and existing
-------------------
under the laws of the United States or any state or commonwealth thereof or
under the laws of the District of Columbia; provided, however, BGF Overseas,
-------- -------
Inc. shall be deemed to be a Foreign Subsidiary for purposes of this Agreement
and the other Credit Documents.
"Eligible Assignee" shall mean (i) a Lender; (ii) any Affiliate of a Lender or
-----------------
any fund that invests in bank loans and is managed by an investment advisor to a
Lender; and (iii) any bank, financial institution, finance company, investment
fund, insurance company, or other lending entity having capital and surplus in
excess of $100,000,000.
"Environmental Indemnity Agreement" shall mean that certain Environmental
---------------------------------
Undertaking and Indemnity Agreement dated as of September 30, 1998 among the
Borrower, Porcher Industries S.A. and the Agent.
8
<PAGE>
"Environmental Laws" shall mean any and all applicable foreign, Federal,
------------------
state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority or other
Requirement of Law (including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of human health or the
environment, as are now or may at any time be in effect during the term of this
Agreement.
"Equity Issuance" shall mean any issuance by the Borrower or any Subsidiary to
---------------
any Person which is not a Credit Party of (a) shares of its Capital Stock, (b)
any shares of its Capital Stock pursuant to the exercise of options or warrants
or (c) any shares of its Capital Stock pursuant to the conversion of any debt
securities to equity. The term "Equity Issuance" shall not include any Asset
Disposition, any Debt Issuance or the issuance of common stock of the Borrower's
Subsidiaries to its officers, directors or employees in connection with stock
offering plans and other benefit plans of such Subsidiaries.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Eurodollar Reserve Percentage" shall mean for any day, the percentage
-----------------------------
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of Eurocurrency liabilities, as defined in Regulation D of such Board as
in effect from time to time, or any similar category of liabilities for a member
bank of the Federal Reserve System in New York City.
"Event of Default" shall mean any of the events specified in Section 7.1;
----------------
provided, however, that any requirement for the giving of notice or the lapse of
- -------- -------
time, or both, or any other condition, has been satisfied.
"Excess Cash Flow" shall mean, with respect to any fiscal year period of the
----------------
Borrower and its Subsidiaries on a consolidated basis, an amount equal to (a)
Consolidated EBITDA for such period minus (b) consolidated Capital Expenditures
-----
for such period minus (c) Consolidated Interest Expense for such period minus
----- -----
(d) Consolidated Cash Taxes paid during such period minus (e) Consolidated
-----
Scheduled Funded Debt Payments made during such period plus (f) Net Cash
----
Proceeds of Asset Dispositions outside the ordinary course of business except to
the extent such Net Cash Proceeds are used to prepay the Loans pursuant to
Section 2.7(b)(iii).
"Extension of Credit" shall mean, as to any Lender, the making of a Loan by
-------------------
such Lender or the issuance of, or participation in, a Letter of Credit by such
Lender.
"Existing Letter of Credit" means any one of the letters of credit described
-------------------------
by date of issuance, letter of credit number, undrawn amount, name of
beneficiary and date of expiry on Schedule 1.1(b).
---------------
9
<PAGE>
"Federal Funds Effective Rate" shall have the meaning set forth in the
----------------------------
definition of "Alternate Base Rate".
"Fee Letter" shall mean the letter agreement dated July 28, 1998 addressed to
----------
the Borrower from the Agent, as amended, modified or otherwise supplemented.
"First Union" shall mean First Union National Bank, a national banking
-----------
association.
"Fixed Charge Coverage Ratio" shall mean the ratio of (i) Consolidated EBITDA
---------------------------
to (ii) Consolidated Fixed Charges.
"Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic
------------------
Subsidiary.
"Funded Debt" shall mean, with respect to any Person, without duplication, (a)
-----------
all Indebtedness of such Person other than Indebtedness of the types referred to
in clause (e), (f), (g), (i) and (m) of the definition of "Indebtedness" set
forth in this Section 1.1, (b) all Funded Debt of others of the type referred to
in clause (a) above secured by (or for which the holder of such Funded Debt has
an existing right, contingent or otherwise, to be secured by) any Lien on, or
payable out of the proceeds of production from, Property owned or acquired by
such Person, whether or not the obligations secured thereby have been assumed,
the amount of such Funded Debt being deemed to be the lesser of the fair market
value of such Property or the amount of Funded Debt so secured, (c) all Guaranty
Obligations of such Person with respect to Funded Debt of the type referred to
in clause (a) above of another Person and (d) Funded Debt of the type referred
to in clause (a) above of any partnership or unincorporated joint venture in
which such Person is legally obligated, but only to the extent such Person is
obligated therefor.
"GAAP" shall mean generally accepted accounting principles in effect in the
----
United States of America applied on a consistent basis, subject, however, in the
------- -------
case of determination of compliance with the financial covenants set out in
Section 5.9 to the provisions of Section 1.3.
"GHC Pledge Agreements" shall mean (i) the Pledge Agreement dated as of the
---------------------
Closing Date given by Glass Holdings to the Borrower (and assigned to the
Agent), pledging all of the capital stock of Belmont and GHC Sub and (ii) the
Pledge Agreement dated as of the Closing Date given by Glass Holdings to the
Agent, pledging all of the capital stock of the Borrower, as each may from time
to time be amended, supplemented or otherwise modified in accordance with the
terms hereof and thereof.
"GHC Sub" shall mean AGY Holdings, Inc. a Delaware corporation, and wholly
-------
owned Subsidiary of Glass Holdings.
"GHC Sub Note" shall mean the promissory note dated the date hereof issued by
------------
GHC Sub in favor of Glass Holdings in the principal amount of $132,600,000.
"Glass Holdings" shall mean Glass Holdings Corp., a Delaware corporation.
--------------
10
<PAGE>
"Glass Holdings Note" shall have the meaning set forth in clause (viii) of the
-------------------
definition of "Permitted Investments".
"Government Acts" shall have the meaning set forth in Section 2.19.
---------------
"Governmental Authority" shall mean any nation or government, any state or
----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guaranty Obligation" shall mean, as to any Person (the "guaranteeing
------------------- ------------
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations (the
"primary obligations") of any other third Person (the "primary obligor") in any
- -------------------- ---------------
manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the purchase
or payment of any such primary obligation or (2) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; provided, however, that the
-------- -------
term Guaranty Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Guaranty Obligation of any guaranteeing person shall be deemed to be the lower
of (a) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guaranty Obligation is made and (b) the
maximum amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guaranty Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such Guaranty
Obligation shall be such guaranteeing person's maximum reasonably anticipated
liability in respect thereof as determined by the Borrower in good faith.
"Guarantor" shall mean any of the Domestic Subsidiaries identified as a
---------
"Guarantor" on the signature pages hereto and the Additional Credit Parties
which execute a Joinder Agreement, together with their successors and permitted
assigns.
"Guaranty" shall mean the guaranty of the Guarantors set forth in Article X.
--------
"Hedging Agreements" shall mean, with respect to any Person, any agreement
------------------
entered into to protect such Person against fluctuations in interest rates, or
currency or raw materials values, including, without limitation, any interest
rate swap, cap or collar agreement or similar arrangement between such Person
and one or more counterparties, any foreign currency exchange
11
<PAGE>
agreement, currency protection agreements, commodity purchase or option
agreements or other interest or exchange rate or commodity price hedging
agreements.
"Indebtedness" shall mean, with respect to any Person, without duplication,
------------
(a) all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes or similar instruments, or
upon which interest payments are customarily made, (c) all obligations of such
Person under conditional sale or other title retention agreements relating to
Property purchased by such Person (other than customary reservations or
retentions of title under agreements with suppliers entered into in the ordinary
course of business), (d) all obligations of such Person issued or assumed as the
deferred purchase price of Property or services purchased by such Person (other
than trade debt incurred in the ordinary course of business and due within six
months of the incurrence thereof) which would appear as liabilities on a balance
sheet of such Person, (e) all obligations of such Person under take-or-pay or
similar arrangements or under commodities agreements, (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on, or payable out of
the proceeds of production from, Property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed, the amount of
such Indebtedness being deemed to be the lesser of the fair market value of such
Property or the amount of Indebtedness so secured, (g) all Guaranty Obligations
of such Person with respect to Indebtedness of another Person, (h) the principal
portion of all obligations of such Person under Capital Leases, (i) all
obligations of such Person under Hedging Agreements, (j) the maximum amount of
all standby letters of credit issued or bankers' acceptances facilities created
for the account of such Person and, without duplication, all drafts drawn
thereunder (to the extent unreimbursed), (k) all preferred Capital Stock issued
by such Person and which by the terms thereof could be (at the request of the
holders thereof or otherwise) subject to mandatory sinking fund payments,
redemption or other acceleration prior to the Maturity Date, (l) the principal
balance outstanding under any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product, and (m)
the Indebtedness of any partnership or unincorporated joint venture in which
such Person is a general partner or a joint venturer to the extent such Person
is legally obligated therefor.
"Indenture" shall mean the Trust Indenture entered into among the Issuer, the
---------
Bond Trustee and the Credit Facility Trustee, pursuant to which the Issuer shall
issue and sell the Bonds, as the same may be amended, modified, supplemented or
restated from time to time in accordance with its terms.
"Insolvency" shall mean, with respect to any Multiemployer Plan, the condition
----------
that such Plan is insolvent within the meaning of such term as used in Section
4245 of ERISA.
"Insolvent" shall mean being in a condition of Insolvency.
---------
"Interest Coverage Ratio" shall mean the ratio of (i) Consolidated EBITDA to
-----------------------
(ii) Consolidated Interest Expense.
"Interest Payment Date" shall mean (a) as to any Alternate Base Rate Loan or
---------------------
Swingline Loan, the last day of each March, June, September and December and on
the applicable Maturity
12
<PAGE>
Date, (b) as to any LIBOR Rate Loan having an Interest Period of three months or
less, the last day of such Interest Period, and (c) as to any LIBOR Rate Loan
having an Interest Period longer than three months, each day which is three
months after the first day of such Interest Period and the last day of such
Interest Period.
"Interest Period" shall mean, with respect to any LIBOR Rate Loan,
---------------
(i) initially, the period commencing on the Borrowing Date or
conversion date, as the case may be, with respect to such LIBOR Rate Loan
and ending one, two, three or six months thereafter, as selected by the
Borrower in the notice of borrowing or notice of conversion given with
respect thereto; and
(ii) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such LIBOR Rate Loan
and ending one, two, three or six months thereafter, as selected by the
Borrower by irrevocable notice to the Agent not less than three Business
Days prior to the last day of the then current Interest Period with respect
thereto;
provided that the foregoing provisions are subject to the following:
--------
(A) if any Interest Period pertaining to a LIBOR Rate Loan would
otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest Period
into another calendar month in which event such Interest Period shall
end on the immediately preceding Business Day;
(B) any Interest Period pertaining to a LIBOR Rate Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day
of the relevant calendar month;
(C) if the Borrower shall fail to give notice as provided above,
the Borrower shall be deemed to have selected an Alternate Base Rate
Loan to replace the affected LIBOR Rate Loan;
(D) any Interest Period in respect of any Loan that would
otherwise extend beyond the applicable Maturity Date and, further with
regard to the Term Loans, no Interest Period shall extend beyond any
principal amortization payment date unless the portion of such Term
Loan consisting of Alternate Base Rate Loans together with the portion
of such Term Loan consisting of LIBOR Rate Loans with Interest Periods
expiring prior to or concurrently with the date such principal
amortization payment date is due, is at least equal to the amount of
such principal amortization payment due on such date; and
13
<PAGE>
(E) no more than seven (7) LIBOR Rate Loans may be in effect at
any time. For purposes hereof, LIBOR Rate Loans with different
Interest Periods shall be considered as separate LIBOR Rate Loans,
even if they shall begin on the same date and have the same duration,
although borrowings, extensions and conversions may, in accordance
with the provisions hereof, be combined at the end of existing
Interest Periods to constitute a new LIBOR Rate Loan with a single
Interest Period.
"Issuer" shall mean the South Carolina Jobs-Economic Development Authority, a
------
body politic and corporate and an agency of the State of South Carolina.
"Issuing Lender" shall mean First Union.
--------------
"Issuing Lender Fees" shall have the meaning set forth in Section 2.5(c).
-------------------
"Joinder Agreement" shall mean a Joinder Agreement substantially in the form
-----------------
of Schedule 5.10, executed and delivered by an Additional Credit Party in
-------------
accordance with the provisions of Section 5.10.
"Lender" shall have the meaning set forth in the first paragraph of this
------
Agreement.
"Letters of Credit" shall mean (i) any letter of credit issued by the Issuing
-----------------
Lender for the account of the Borrower pursuant to the terms hereof, as such
Letters of Credit may be amended, modified, extended, renewed or replaced from
time to time and (ii) each Existing Letter of Credit.
"Letter of Credit Fee" shall have the meaning set forth in Section 2.5(b).
--------------------
"Leverage Ratio" shall mean the ratio of (i) Consolidated Funded Debt to (ii)
--------------
Consolidated EBITDA.
"LIBOR" shall mean, for any LIBOR Rate Loan for any Interest Period therefor,
-----
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 A.M. (London Time)
two Business Days prior to the first day of such interest period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "LIBOR" shall mean, for any LIBOR Rate Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 A.M.
(London Time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period; provided, however, if more than
-------- -------
one rate is specified on Reuters Screen Libo Page, the applicable rate shall be
the arithmetic mean of all such rates (rounded upwards, if necessary, to the
nearest 1/100 of 1%). If, for any reason, neither of such rates is available,
then "LIBOR" shall mean the rate per annum at which, as determined by the Agent,
Dollars in an amount comparable to the Loans then requested are being offered to
leading banks at approximately 11:00 A.M. London Time, two (2) Business Days
prior to the commencement of the applicable Interest Period
14
<PAGE>
for settlement in immediately available funds by leading banks in the London
interbank market for a period equal to the Interest Period selected.
"LIBOR Lending Office" shall mean, initially, the office of each Lender
--------------------
designated as such Lender's Libor Lending Office shown on Schedule 9.2; and
------------
thereafter, such other office of such Lender as such Lender may from time to
time specify to the Agent and the Borrower as the office of such Lender at which
the Libor Rate Loans of such Lender are to be made.
"LIBOR Rate" shall mean a rate per annum (rounded upwards, if necessary, to
----------
the next higher 1/100th of 1%) determined by the Agent pursuant to the following
formula:
LIBOR Rate = LIBOR
------------------------------------
1.00 - EURODOLLAR RESERVE PERCENTAGE
"LIBOR Rate Loan" shall mean loans the rate of interest applicable to which is
---------------
based on the LIBOR Rate.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Capital Lease having
substantially the same economic effect as any of the foregoing).
"Loan" shall mean a Revolving Loan, a Swingline Loan and/or the Term Loans, as
----
appropriate.
"LOC Commitment" shall mean the commitment of the Issuing Lender to issue
--------------
Letters of Credit and with respect to each Lender, the commitment of such Lender
to purchase participation interests in the Letters of Credit up to such Lender's
LOC Committed Amount as specified in Schedule 2.1(a), as amount may be reduced
---------------
from time to time in accordance with the provisions hereof.
"LOC Commitment Percentage" shall mean, for each Lender, the percentage
-------------------------
identified as its LOC Commitment Percentage on Schedule 2.1(a), as such
---------------
percentage may be modified in connection with any assignment made in accordance
with the provisions of Section 9.6(c).
"LOC Committed Amount" shall mean, collectively, the aggregate amount of all
--------------------
of the LOC Commitments of the Lenders to issue and participate in Letters of
Credit as referenced in Section 2.4 and, individually, the amount of each
Lender's LOC Commitment as specified in Schedule 2.1(a).
---------------
"LOC Documents" shall mean, with respect to any Letter of Credit, such Letter
-------------
of Credit, any amendments thereto, any documents delivered in connection
therewith, any application therefor, and any agreements, instruments, guarantees
or other documents (whether general in
15
<PAGE>
application or applicable only to such Letter of Credit) governing or providing
for (i) the rights and obligations of the parties concerned or (ii) any
collateral security for such obligations.
"LOC Obligations" shall mean, at any time, the sum of (i) the maximum amount
---------------
which is, or at any time thereafter may become, available to be drawn under
Letters of Credit then outstanding, assuming compliance with all requirements
for drawings referred to in such Letters of Credit plus (ii) the aggregate
----
amount of all drawings under Letters of Credit honored by the Issuing Lender but
not theretofore reimbursed.
"Mandatory Borrowing" shall have the meaning set forth in Section 2.3(b)(ii)
-------------------
or Section 2.4(e), as the context may require.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
-----------------------
business, operations, property or condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole, (b) the ability of the Credit
Parties to perform their obligations, when such obligations are required to be
performed, under this Agreement, any of the Notes or any other Credit Document
or (c) the validity or enforceability of this Agreement, any of the Notes or any
of the other Credit Documents or the rights or remedies of the Agent or the
Lenders hereunder or thereunder.
"Material Contract" shall mean any written contract or other written
-----------------
arrangement, to which the Borrower or any of its Subsidiaries is a party as to
which the breach, nonperformance, cancellation or failure to renew by any party
thereto could reasonably be expected to have a Material Adverse Effect.
"Materials of Environmental Concern" shall mean any gasoline or petroleum
----------------------------------
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
"Maturity Date" shall mean (i) with respect to the Term Loan, the last
-------------
scheduled quarterly payment date for the Term Loan set forth in Section 2.2(b)
and (ii) with respect to the Revolving Loans or any Swingline Loan, the
Revolving Commitment Termination Date.
"Moody's" shall mean Moody's Investors Service, Inc. and its successors and
-------
assigns.
"Mortgage Instruments" shall have the meaning set forth in Section 4.1(e).
--------------------
"Mortgage Policies" shall have the meaning set forth in Section 4.1(e).
-----------------
"Mortgaged Properties" shall have the meaning set forth in Section 4.1(e).
--------------------
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan as defined
------------------
in Section 4001(a)(3) of ERISA.
16
<PAGE>
"Net Cash Proceeds" shall mean the aggregate cash proceeds received by the
-----------------
Borrower or any Subsidiary in respect of any Asset Disposition, Equity Issuance
or Debt Issuance, net of (a) direct costs (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) (b) repayment of
Indebtedness that would be required in connection with any Asset Disposition
contemplated as part of the purchase price or otherwise related to such disposed
assets, (c) appropriate amounts to be provided by the Borrower or a Subsidiary,
as the case may be, as a reserve, in accordance with GAAP, against any
liabilities associated with an Asset Disposition and retained by the Borrower or
such Subsidiary, as the case may be, after such Asset Disposition, including,
without limitation, pension and benefit liabilities, liabilities related to
environmental matters or liabilities under any indemnification obligations
associated with such Asset Disposition except that such reserves shall become
Net Cash Proceeds when released and (d) taxes paid or payable as a result
thereof; it being understood that "Net Cash Proceeds" shall include, without
limitation, (i) any cash received upon the sale or other disposition of any non-
cash consideration received by the Borrower or any Subsidiary in any Asset
Disposition, Equity Issuance or Debt Issuance and (ii) any "Net Cash Proceeds"
under the Subordinated Debt Documentation.
"Note" or "Notes" shall mean the Revolving Notes, the Swingline Note and/or
---- -----
the Term Notes, collectively, separately or individually, as appropriate.
"Notice of Borrowing" shall mean the written notice of borrowing as referenced
-------------------
and defined in Section 2.1(b)(i) or 2.3(b)(i), as appropriate.
"Notice of Conversion" shall mean the written notice of extension or
--------------------
conversion as referenced and defined in Section 2.10.
"Obligations" shall mean, collectively, Loans and LOC Obligations.
-----------
"Owens Corning" shall mean Owens Corning, a Delaware corporation.
-------------
"Participant" shall have the meaning set forth in Section 9.6(b).
-----------
"Participation Interest" shall mean the purchase by a Lender of a
----------------------
participation interest in Swingline Loans as provided in Section 2.3(b)(ii) or
in Letters of Credit as provided in Section 2.4.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Business" shall mean the business conducted by the Borrower and
------------------
its Subsidiaries as of the Closing Date and any business reasonably related
thereto.
"Permitted Investments" shall mean:
---------------------
(i) cash and Cash Equivalents;
17
<PAGE>
(ii) receivables owing to the Borrower or any of its Subsidiaries or
any receivables and advances to suppliers, in each case if created,
acquired or made in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms;
(iii) investments in and loans to any Credit Parties;
(iv) loans and advances to officers, directors, employees and
Affiliates in an aggregate amount not to exceed $1,500,000 at any time
outstanding;
(v) investments (including debt obligations) received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with, customers
and suppliers arising in the ordinary course of business;
(vi) investments, acquisitions or transactions permitted under
Section 6.5(b);
(vii) investments consisting of consigned inventory in an aggregate
amount not to exceed $5,000,000 at any time outstanding;
(viii) that certain loan to Glass Holdings evidenced by a certain
promissory note (the "Glass Holdings Note") dated the Closing Date in a
-------------------
principal amount of $135,043,844.62 executed by Glass Holdings in favor of
the Borrower;
(ix) investments in Foreign Subsidiaries and Glass Holdings in an
aggregate amount not to exceed $5,000,000 at any time;
(x) additional loan advances and/or investments of a nature not
contemplated by the foregoing clauses hereof, provided that such loans,
--------
advances and/or investments made pursuant to this clause (x) together with
investments permitted pursuant to clause (ix) shall not exceed an aggregate
amount of $10,000,000 at any time; and
(xi) investments in non-cash consideration to the extent permitted
by Section 6.5(iv).
As used herein, "investment" means all investments, in cash or by delivery
----------
of property made, directly or indirectly in, to or from any Person, whether by
acquisition of shares of Capital Stock, property, assets, indebtedness or other
obligations or securities or by loan advance, capital contribution or otherwise.
18
<PAGE>
"Permitted Liens" shall mean:
---------------
(i) Liens created by or otherwise existing, under or in connection
with this Agreement or the other Credit Documents in favor of the Agent,
the Issuing Bank, the Swingline Lender and the other Lenders;
(ii) Liens in favor of a Lender hereunder in connection with Hedging
Agreements, but only (A) to the extent such Liens secure obligations under
Hedging Agreements with any Lender, or any Affiliate of a Lender, (B) to
the extent such Liens are on the same collateral as to which the Agent on
behalf of the Lenders also has a Lien and (C) if such provider and the
Lenders shall share pari passu in the collateral subject to such Liens;
---- -----
(iii) purchase money Liens securing purchase money indebtedness and
Liens arising under Capital Leases (and refinancings thereof) to the extent
permitted under Section 6.1(c);
(iv) Liens for taxes, assessments, charges or other governmental
levies not yet due or as to which the period of grace (not to exceed 60
days), if any, related thereto has not expired or which are being contested
in good faith by appropriate proceedings, provided that adequate reserves
--------
with respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP (or, in the case
of Subsidiaries with significant operations outside of the United States of
America, generally accepted accounting principles in effect from time to
time in their respective jurisdictions of incorporation);
(v) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, contractors', subcontractors' or other like Liens arising in
the ordinary course of business which are not overdue for a period of more
than 60 days or which are being contested in good faith by appropriate
proceedings;
(vi) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements ;
(vii) deposits to secure the performance of bids, trade contracts,
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(viii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and suppliers (including sellers of
goods) and other Liens imposed by law or pursuant to customary reservations
or retentions of title arising in the ordinary course of business, provided
--------
that such Liens secure only amounts not yet due and payable or, if due and
payable, are unfiled and no other action has been taken to enforce the same
or are being contested in good faith by appropriate proceedings for which
adequate reserves determined in
19
<PAGE>
accordance with GAAP have been established (and as to which the property
subject to any such Lien is not yet subject to foreclosure, sale or loss on
account thereof);
(ix) Liens in connection with attachments or judgments (including
judgment or appeal bonds) provided that the judgments secured shall, within
--------
30 days after the entry thereof, have been discharged or execution thereof
stayed pending appeal, or shall have been discharged within 30 days after
the expiration of any such stay;
(x) (a) easements (including, without limitation, reciprocal
easement agreements and utility agreements), rights-of-way, covenants,
consents, reservations, encroachments, variations and other restrictions,
charges or encumbrances (whether or not recorded) affecting the use of
property, which do not materially detract from the value of such property
or impair the use thereof and (b) any other Lien or exception to coverage
described in mortgagee policies of title insurance issued in favor of and
accepted by the Agent with respect to the Mortgaged Properties;
(xi) leases or subleases granted to others not interfering in any
material respect with the business of any Credit Party;
(xii) any interest of title of a lessor under, and Liens arising from
UCC financing statements (or equivalent filings, registrations or
agreements in foreign jurisdictions) relating to, leases permitted by this
Credit Agreement;
(xiii) Liens deemed to exist in connection with Investments in
repurchase agreements permitted under Section 6.6;
(xiv) normal and customary rights of setoff upon deposits of cash in
favor of banks or other depository institutions;
(xv) Liens securing Indebtedness not to exceed $2,000,000 in an
aggregate principal amount outstanding at any time;
(xvi) any extension, renewal or replacement (or successive
extensions, renewals or replacements) , in whole or in part, of any Lien
referred to in the foregoing clauses; provided that such extension, renewal
--------
or replacement Lien shall be limited to all or a part of the property which
secured the Lien so extended, renewed or replaced (plus improvements on
such property); and
(xvii) Liens existing as of the Closing Date and set forth on Schedule
--------
1.1(c); provided that (a) no such Lien shall at any time be extended to or
------- --------
cover any property other than the property subject thereto on the Closing
Date and (b) the principal amount of the Indebtedness secured by such Liens
shall not be extended, renewed, refunded or refinanced.
20
<PAGE>
"Person" shall mean an individual, partnership, corporation, limited liability
------
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan" shall mean, at any particular time, any employee benefit plan which is
----
covered by Title IV of ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"Pledge Agreement" shall mean the Pledge Agreement dated as of the Closing
----------------
Date given by the Borrower and the other Credit Parties to the Agent, as the
same may from time to time be amended, supplemented or otherwise modified in
accordance with the terms hereof and thereof.
"Prime Rate" shall have the meaning set forth in the definition of Alternate
----------
Base Rate.
"Properties" shall have the meaning set forth in Section 3.10(a).
----------
"Property" shall mean any interest in any kind of property or asset, whether
--------
real, personal or mixed, or tangible or intangible.
"Purchasing Lenders" shall have the meaning set forth in Section 9.6(c).
------------------
"Recovery Event" shall mean the receipt by the Borrower or any of its
--------------
Subsidiaries of any cash insurance proceeds or condemnation award payable by
reason of theft, loss, physical destruction or damage, taking or similar event
with respect to any of their respective property or assets.
"Register" shall have the meaning set forth in Section 9.6(d).
--------
"Reorganization" shall mean, with respect to any Multiemployer Plan, the
--------------
condition that such Plan is in reorganization within the meaning of such term as
used in Section 4241 of ERISA.
"Reportable Event" shall mean any of the events set forth in Section 4043(c)
----------------
of ERISA, other than those events as to which the thirty-day notice period is
waived under PBGC Reg. (S)4043.
"Required Lenders" shall mean Lenders holding in the aggregate not less than
----------------
51% of (i) all Revolving Loans and LOC Obligations then outstanding at such time
plus (ii) the aggregate unused Revolving Commitments at such time (treating for
- ----
purposes hereof in the case of Swingline Loans and LOC Obligations, in the case
of the Swingline Lender and the Issuing Lender, only the portion of the
Swingline Loans and the LOC Obligations of the Swingline Lender and the Issuing
Lender, respectively, which is not subject to the Participation Interests of the
other Lenders and, in the case of the Lenders other than the Swingline Lender
and the Issuing Lender, the Participation Interests of such Lenders in Swingline
Loans and LOC Obligations hereunder as direct Obligations) plus (iii) all Term
----
Loans then outstanding at such time; provided,
--------
21
<PAGE>
however, that if any Lender shall be a Defaulting Lender at such time, then
- -------
there shall be excluded from the determination of Required Lenders, Obligations
(including Participation Interests) owing to such Defaulting Lender and such
Defaulting Lender's Commitments, or after termination of the Commitments, the
principal balance of the Obligations owing to such Defaulting Lender.
"Requirement of Law" shall mean, as to any Person, the Certificate of
------------------
Incorporation and By-laws or other organizational or governing documents of such
Person, and each law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer" shall mean, as to any Credit Party, the President, Chief
-------------------
Executive Officer, Chief Financial Officer or General Manager thereof.
"Restricted Payment" shall mean (a) any dividend or other distribution, direct
------------------
or indirect, on account of any shares of any class of Capital Stock of the
Borrower or any of its Subsidiaries, now or hereafter outstanding, (b) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of Capital
Stock of the Borrower or any of its Subsidiaries, now or hereafter outstanding,
(c) any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of Capital
Stock of the Borrower or any of its Subsidiaries, now or hereafter outstanding,
or (d) any payment or prepayment of principal of, premium, if any, or interest
on, redemption, purchase, retirement, defeasance, sinking fund or similar
payment with respect to, the Subordinated Debt (except as permitted pursuant to
Section 6.12).
"Revolving Commitment" shall mean, with respect to each Lender, the commitment
--------------------
of such Lender to make Revolving Loans in an aggregate principal amount at any
time outstanding up to such Lender's Revolving Committed Amount as specified in
Schedule 2.1(a), as such amount may be reduced from time to time in accordance
- ---------------
with the provisions hereof.
"Revolving Commitment Percentage" shall mean, for each Lender, the percentage
-------------------------------
identified as its Revolving Commitment Percentage on Schedule 2.1(a), as such
---------------
percentage may be modified in connection with any assignment made in accordance
with the provisions of Section 9.6(c).
"Revolving Commitment Termination Date" shall mean September 30, 2003.
-------------------------------------
"Revolving Committed Amount" shall mean, collectively, the aggregate amount of
--------------------------
all Revolving Commitments as referenced in Section 2.1(a), as such amount may be
reduced from time to time in accordance with the provisions hereof, and,
individually, the amount of each Lender's Revolving Commitment as specified on
Schedule 2.1(a).
- ---------------
"Revolving Loans" shall have the meaning set forth in Section 2.1.
---------------
22
<PAGE>
"Revolving Note" or "Revolving Notes" shall mean the promissory notes of the
-------------- ---------------
Borrower in favor of each of the Lenders evidencing the Revolving Loans provided
pursuant to Section 2.1(e), individually or collectively, as appropriate, as
such promissory notes may be amended, modified, supplemented, extended, renewed
or replaced from time to time.
"S&P" shall mean Standard & Poor's Ratings Group, a division of McGraw Hill,
---
Inc. and its successors and assigns.
"Security Agreement" shall mean the Security Agreement dated as of the Closing
------------------
Date given by the Borrower and the other Credit Parties to the Agent, as
amended, modified or supplemented from time to time in accordance with its
terms.
"Security Documents" shall mean the Security Agreement, the Pledge Agreement,
------------------
the GHC Pledge Agreements, any Mortgage Instrument and such other documents
executed and delivered in connection with the attachment and perfection of the
Agent's security interests and liens arising thereunder, including, without
limitation, UCC financing statements and patent and trademark filings.
"Single Employer Plan" shall mean any Plan which is not a Multiemployer Plan.
--------------------
"Specified Sales" shall mean (a) the sale, transfer, lease or other
---------------
disposition of inventory and materials in the ordinary course of business and
(b) the sale, transfer or other disposition of Permitted Investments described
in clause (i) of the definition thereof.
"Subordinated Debt" shall mean (a) the Bridge Notes due 2008 (the "Bridge
----------------- ------
Notes") in the amount of $65,000,000 issued by the Borrower pursuant to the
- -----
Senior Subordinated Credit Agreement among the Borrower and First Union
Investors, Inc. dated as of the Closing Date (the "Senior Subordinated Credit
--------------------------
Agreement") and (b) the refinancing of such Bridge Notes in accordance with the
- ---------
terms hereof. Additionally, the Borrower shall be permitted to issue an
additional $35,000,000 of Subordinated Debt on the same terms as the
Subordinated Debt described in clause (b) of the preceding sentence so long as
the Net Cash Proceeds thereof are used to prepay the Revolving Loans.
"Subordinated Debt Documentation" shall mean the agreements, indentures, notes
-------------------------------
and other documentation and instruments evidencing the Subordinated Debt.
"Subsidiary" shall mean, as to any Person, a corporation, partnership, limited
----------
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall
refer to a Subsidiary or Subsidiaries of the Borrower.
23
<PAGE>
"Swingline Commitment" shall mean the commitment of the Swingline Lender to
--------------------
make Swingline Loans in an aggregate principal amount at any time outstanding up
to the Swingline Committed Amount, and the commitment of the Lenders to purchase
participation interests in the Swingline Loans as provided in Section
2.3(b)(ii), as such amounts may be reduced from time to time in accordance with
the provisions hereof.
"Swingline Committed Amount" shall mean the amount of the Swingline Lender's
--------------------------
Swingline Commitment as specified in Section 2.3(a).
"Swingline Lender" shall mean First Union, in its capacity as such.
----------------
"Swingline Loan" or "Swingline Loans" shall have the meaning set forth in
-------------- ---------------
Section 2.3(a).
"Swingline Note" shall mean the promissory note of the Borrower in favor of
--------------
the Swingline Lender evidencing the Swingline Loans provided pursuant to Section
2.3(d), as such promissory note may be amended, modified, supplemented,
extended, renewed or replaced from time to time.
"Taxes" shall have the meaning set forth in Section 2.18.
-----
"Term Loan" shall have the meaning set forth in Section 2.2(a).
---------
"Term Loan Commitment" shall mean, with respect to each Lender, the commitment
--------------------
of such Lender to make its portion of the Term Loan in a principal amount equal
to such Lender's Term Loan Commitment Percentage of the Term Loan Committed
Amount (and for purposes of making determinations of Required Lenders hereunder
after the Closing Date, the principal amount outstanding on the Term Loan).
"Term Loan Commitment Percentage" shall mean, for any Lender, the percentage
-------------------------------
identified as its Term Loan Commitment Percentage on Schedule 2.1(a), as such
---------------
percentage may be modified in connection with any assignment made in accordance
with the provisions of Section 9.6.
"Term Loan Committed Amount" shall have the meaning set forth in Section
--------------------------
2.2(a).
"Term Note" or "Term Notes" shall mean the promissory notes of the Borrower in
--------- ----------
favor of each of the Lenders evidencing the portion of the Term Loan provided
pursuant to Section 2.2(d), individually or collectively, as appropriate, as
such promissory notes may be amended, modified, restated, supplemented,
extended, renewed or replaced from time to time.
"Tranche" shall mean the collective reference to LIBOR Rate Loans whose
-------
Interest Periods begin and end on the same day. A Tranche may sometimes be
referred to as a "LIBOR Tranche".
24
<PAGE>
"Transfer Effective Date" shall have the meaning set forth in each
-----------------------
Commitment Transfer Supplement.
"2.18 Certificate" shall have the meaning set forth in Section 2.18.
----------------
"Type" shall mean, as to any Loan, its nature as an Alternate Base Rate
----
Loan, LIBOR Rate Loan or Swingline Loan, as the case may be.
"Year 2000 Compliant" shall have the meaning set forth in Section 3.24.
-------------------
SECTION 1.2 OTHER DEFINITIONAL PROVISIONS.
-----------------------------
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in the Notes or other
Credit Documents or any certificate or other document made or delivered
pursuant hereto.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 1.3 ACCOUNTING TERMS.
----------------
Unless otherwise specified herein, all accounting terms used herein shall
be interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP applied on a basis consistent with the most recent audited
consolidated financial statements of the Borrower delivered to the Lenders;
provided that, if the Borrower notifies the Agent that it wishes to amend any
- --------
covenant in Section 5.9 (including, without limitation, for the purposes of the
definition of "Applicable Percentage" set forth in Section 1.1) to eliminate the
effect of any change in GAAP on the operation of such covenant (or if the Agent
notifies the Borrower that the Required Lenders wish to amend Section 5.9 for
such purpose), then the Borrower's compliance with such covenant shall be
determined on the basis of GAAP in effect immediately before the relevant change
in GAAP became effective, until either such notice is withdrawn or such covenant
is amended in a manner satisfactory to the Borrower and the Required Lenders.
The Borrower shall deliver to the Agent and each Lender at the same time as
the delivery of any annual or quarterly financial statements given in accordance
with the provisions of Section 5.1, (i) a description in reasonable detail of
any material change in the application of accounting principles employed in the
preparation of such financial statements from those applied in the most recently
preceding quarterly or annual financial statements as to which no objection
shall have
25
<PAGE>
been made in accordance with the provisions above and (ii) a reasonable estimate
of the effect on the financial statements on account of such changes in
application.
ARTICLE II
THE LOANS; AMOUNT AND TERMS
SECTION 2.1 REVOLVING LOANS.
---------------
(a) Revolving Commitment. During the Commitment Period, subject to
--------------------
the terms and conditions hereof, each Lender severally agrees to make
revolving credit loans ("Revolving Loans") to the Borrower from time to
---------------
time for the purposes hereinafter set forth; provided, however, that (i)
-------- -------
with regard to each Lender individually, the sum of such Lender's share of
outstanding Revolving Loans plus such Lender's Revolving Commitment
Percentage of Swingline Loans plus such Lender's LOC Commitment Percentage
of LOC Obligations shall not exceed such Lender's Revolving Commitment
Percentage of the aggregate Revolving Committed Amount, and (ii) with
regard to the Lenders collectively, the sum of the aggregate amount of
outstanding Revolving Loans plus Swingline Loans plus LOC Obligations shall
not exceed the aggregate Revolving Committed Amount then in effect. For
purposes hereof, the aggregate amount available hereunder shall be SEVENTY-
FIVE MILLION DOLLARS ($75,000,000) (as such aggregate maximum amount may be
reduced from time to time as provided in Section 2.6, the "Revolving
---------
Committed Amount"). Revolving Loans may consist of Alternate Base Rate
----------------
Loans or LIBOR Rate Loans, or a combination thereof, as the Borrower may
request, and may be repaid and reborrowed in accordance with the provisions
hereof. LIBOR Rate Loans shall be made by each Lender at its LIBOR Lending
Office and Alternate Base Rate Loans at its Domestic Lending Office.
Notwithstanding any provision herein to the contrary, (x) the initial LIBOR
borrowing under Section 2.1 shall be made as a LIBOR Rate Loan having an
Interest Period of fourteen (14) days and (y) subsequent to such initial
LIBOR borrowing but prior to the closing of the initial syndication of the
Commitment and the Loans to the Lenders, all LIBOR Rate Loans under Section
2.1 shall be made or continued as LIBOR Rate Loans having an Interest
Period of fourteen (14) days. All LIBOR Rate Loans having an Interest
Period of fourteen (14) days shall bear interest at the same rate as LIBOR
Rate Loans having an Interest Period of one month.
(b) Revolving Loan Borrowings.
-------------------------
(i) Notice of Borrowing. The Borrower shall request a Revolving
-------------------
Loan borrowing by written notice (or telephone notice promptly
confirmed in writing which confirmation may be by fax) to the Agent
not later than 11:00 A.M. (Charlotte, North Carolina time) on the
Business Day prior to the date of requested borrowing in the case of
Alternate Base Rate Loans, and on the third
26
<PAGE>
Business Day prior to the date of the requested borrowing in the case
of LIBOR Rate Loans. Each such request for borrowing shall be
irrevocable and shall specify (A) that a Revolving Loan is requested,
(B) the date of the requested borrowing (which shall be a Business
Day), (C) the aggregate principal amount to be borrowed and (D)
whether the borrowing shall be comprised of Alternate Base Rate Loans,
LIBOR Rate Loans or a combination thereof, and if LIBOR Rate Loans are
requested, the Interest Period(s) therefor. A form of Notice of
Borrowing (a "Notice of Borrowing") is attached as Schedule 2.1(b)(i).
------------------- ------------------
If the Borrower shall fail to specify in any such Notice of Borrowing
(I) an applicable Interest Period in the case of a LIBOR Rate Loan,
then such notice shall be deemed to be a request for an Interest
Period of one month, or (II) the type of Revolving Loan requested,
then such notice shall be deemed to be a request for an Alternate Base
Rate Loan hereunder. The Agent shall give notice to each Lender
promptly upon receipt of each Notice of Borrowing, the contents
thereof and each such Lender's share thereof.
(ii) Minimum Amounts. Each Revolving Loan borrowing shall be in
---------------
a minimum aggregate amount of $3,000,000 and integral multiples of
$1,000,000 in excess thereof (or the remaining amount of the Revolving
Committed Amount, if less).
(iii) Advances. Each Lender will make its Revolving Commitment
--------
Percentage of each Revolving Loan borrowing available to the Agent for
the account of the Borrower at the office of the Agent specified in
Schedule 9.2, or at such other office as the Agent may designate in
-------------
writing, by 1:00 P.M. (Charlotte, North Carolina time) on the date
specified in the applicable Notice of Borrowing in Dollars and in
funds immediately available to the Agent. Such borrowing will then be
made available to the Borrower by the Agent by crediting the account
of the Borrower on the books of such office with the aggregate of the
amounts made available to the Agent by the Lenders and in like funds
as received by the Agent.
(c) Repayment. The principal amount of all Revolving Loans shall be
---------
due and payable in full on the Revolving Commitment Termination Date.
(d) Interest. Subject to the provisions of Section 2.9, Revolving
--------
Loans shall bear interest as follows:
(i) Alternate Base Rate Loans. During such periods as Revolving
-------------------------
Loans shall be comprised of Alternate Base Rate Loans, each such
Alternate Base Rate Loan shall bear interest at a per annum rate equal
to the sum of the Alternate Base Rate plus the Applicable Percentage;
----
and
(ii) LIBOR Rate Loans. During such periods as Revolving Loans
----------------
shall be comprised of LIBOR Rate Loans, each such LIBOR Rate Loan
shall bear
27
<PAGE>
interest at a per annum rate equal to the sum of the LIBOR Rate plus
----
the Applicable Percentage.
Interest on Revolving Loans shall be payable in arrears on each Interest
Payment Date.
(e) Revolving Notes. Each Lender's RevoLving Commitment Percentage of
---------------
the Revolving Loans shall be evidenced by a duly executed promissory note
of the Borrower to such Lender in substantially the form of Schedule
--------
2.1(e).
------
SECTION 2.2 TERM LOAN.
---------
(a) Term Loan. Subject to the terms and conditions hereof and in
reliance upon the representations and warranties set forth herein, each
Lender severally agrees to make available to the Borrower on the Closing
Date such Lender's Term Loan Commitment Percentage of a term loan in
Dollars (the "Term Loan") in the aggregate principal amount of FIFTY
---------
MILLION DOLLARS ($50,000,000) (the "Term Loan Committed Amount") for the
--------------------------
purposes hereinafter set forth. The Term Loan may consist of Alternate Base
Rate Loans or LIBOR Rate Loans, or a combination thereof, as the Borrower
may request. The Borrower shall request the initial Term Loan borrowing by
written notice (or telephone notice promptly confirmed in writing which
confirmation may be by fax) to the Agent not later than 11:00 A.M.
(Charlotte, North Carolina time) on the Business Day prior to the date of
requested borrowing. Amounts repaid on the Term Loan may not be reborrowed.
LIBOR Rate Loans shall be made by each Lender at its LIBOR Lending Office
and Alternate Base Rate Loans at its Domestic Lending Office.
Notwithstanding any provision herein to the contrary, (x) the LIBOR
borrowing under Section 2.2 shall be made as a LIBOR Rate Loan having an
Interest Period of fourteen (14) days and (y) subsequent to such initial
LIBOR borrowing but prior to the closing of the initial syndication of the
Commitment and the Loans to the Lenders, all LIBOR Rate Loans under Section
2.2 shall be continued as LIBOR Rate Loans having an Interest Period of
fourteen (14) days. All LIBOR Rate Loans having an Interest Period of
fourteen (14) days shall bear interest at the same rate as LIBOR Rate Loans
having an Interest Period of one month.
(b) Repayment of Term Loan. The principal amount of the Term Loan
----------------------
shall be repaid in twenty (20) consecutive fiscal quarterly installments,
unless accelerated sooner pursuant to Section 7.2, commencing on December
31, 1999 and ending on September 30, 2004. Installments one (1) through
four (4), inclusive, shall each be in an amount equal to $1,000,000,
installments five (5) through eight (8), inclusive, shall each be in an
amount equal to $1,750,000, installments nine (9) through twelve (12),
inclusive, shall each be in an amount equal to $2,500,000, installments
thirteen (13) through sixteen (16), inclusive, shall each be in an amount
equal to $3,250,000, and installments seventeen (17) through (20),
inclusive, shall each be in an amount equal to $4,000,000.
(c) Interest on the Term Loan. Subject to the provisions of Section
-------------------------
2.9, the Term Loan shall bear interest as follows:
28
<PAGE>
(i) Alternate Base Rate Loans. During such periods as the Term
-------------------------
Loan shall be comprised of Alternate Base Rate Loans, each such
Alternate Base Rate Loan shall bear interest at a per annum rate equal
to the sum of the Alternate Base Rate plus the Applicable Percentage;
----
and
(ii) LIBOR Rate Loans. During such periods as the Term Loan shall
----------------
be comprised of LIBOR Rate Loans, each such LIBOR Rate Loan shall bear
interest at a per annum rate equal to the sum of the LIBOR Rate plus
----
the Applicable Percentage.
Interest on the Term Loan shall be payable in arrears on each
Interest Payment Date.
(d) Term Notes. Each Lender's Term Loan Commitment Percentage of the
----------
Term Loan outstanding as of the Closing Date shall be evidenced by a duly
executed promissory note of the Borrower to such Lender in substantially
the form of Schedule 2.2(d).
SECTION 2.3 SWINGLINE LOAN SUBFACILITY.
--------------------------
(a) Swingline Commitment. During the Commitment Period, subject to
the terms and conditions hereof, the Swingline Lender, in its individual
capacity, agrees to make certain revolving credit loans to the Borrower
(each a "Swingline Loan" and, collectively, the "Swingline Loans") for the
-------------- ---------------
purposes hereinafter set forth; provided, however, (i) the aggregate amount
-------- -------
of Swingline Loans outstanding at any time shall not exceed FIVE MILLION
DOLLARS ($5,000,000) (the "Swingline Committed Amount"), and (ii) the sum
--------------------------
of the aggregate amount of outstanding Revolving Loans plus Swingline Loans
plus LOC Obligations shall not exceed the aggregate Revolving Committed
Amount then in effect. Swingline Loans hereunder may be repaid and
reborrowed in accordance with the provisions hereof.
(b) Swingline Loan Borrowings.
-------------------------
(i) Notice of Borrowing and Disbursement. The Swingline Lender
------------------------------------
will make Swingline Loans available to the Borrower on any Business
Day upon request made by the Borrower not later than 12:00 Noon
(Charlotte, North Carolina time) on such Business Day. A notice of
request for Swingline Loan borrowing shall be made in the form of
Schedule 2.1(b)(i) with appropriate modifications. Swingline Loan
------------------
borrowings hereunder shall be made in minimum amounts of $100,000 and
in integral amounts of $100,000 in excess thereof.
(ii) Repayment of Swingline Loans. Each Swingline Loan borrowing
----------------------------
shall be due and payable on the Revolving Commitment Termination Date.
The Swingline Lender may, at any time, in its sole discretion, by
written notice to the
29
<PAGE>
Borrower and the Agent, demand repayment of its Swingline Loans by way
of a Revolving Loan borrowing, in which case the Borrower shall be
deemed to have requested a Revolving Loan borrowing comprised entirely
of Alternate Base Rate Loans in the amount of such Swingline Loans;
provided, however, that, in the following circumstances, any such
-------- -------
demand shall also be deemed to have been given one Business Day prior
to each of (i) the Revolving Commitment Termination Date, (ii) the
occurrence of any Event of Default described in Section 7.1(e), (iii)
upon acceleration of the Credit Party Obligations hereunder, whether
on account of an Event of Default described in Section 7.1(e) or any
other Event of Default, and (iv) the exercise of remedies in
accordance with the provisions of Section 7.2 hereof (each such
Revolving Loan borrowing made on account of any such deemed request
therefor as provided herein being hereinafter referred to as a
"Mandatory Borrowing"). Each Lender hereby irrevocably agrees to make
-------------------
such Revolving Loans promptly upon any such request or deemed request
on account of each Mandatory Borrowing in the amount and in the manner
specified in the preceding sentence and on the same such date
notwithstanding (I) the amount of Mandatory Borrowing may not comply
---------------
with the minimum amount for borrowings of Revolving Loans otherwise
required hereunder, (II) whether any conditions specified in Section
4.2 are then satisfied, (III) whether a Default or an Event of Default
then exists, (IV) failure of any such request or deemed request for
Revolving Loans to be made by the time otherwise required in Section
2.1(b)(i), (V) the date of such Mandatory Borrowing, or (VI) any
reduction in the Revolving Committed Amount or termination of the
Revolving Commitments immediately prior to such Mandatory Borrowing or
contemporaneously therewith. In the event that any Mandatory Borrowing
cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to the Borrower),
then each Lender hereby agrees that it shall forthwith purchase (as of
the date the Mandatory Borrowing would otherwise have occurred, but
adjusted for any payments received from the Borrower on or after such
date and prior to such purchase) from the Swingline Lender such
participations in the outstanding Swingline Loans as shall be
necessary to cause each such Lender to share in such Swingline Loans
ratably based upon its respective Revolving Commitment Percentage
(determined before giving effect to any termination of the Commitments
pursuant to Section 7.2), provided that (A) all interest payable on
--------
the Swingline Loans shall be for the account of the Swingline Lender
until the date as of which the respective participation is purchased,
and (B) at the time any purchase of participations pursuant to this
sentence is actually made, the purchasing Lender shall be required to
pay to the Swingline Lender interest on the principal amount of such
participation purchased for each day from and including the day upon
which the Mandatory Borrowing would otherwise have occurred to but
excluding the date of payment for such participation, at the rate
equal to, if paid within two (2) Business Days of the date of the
Mandatory Borrowing, the Federal Funds Effective Rate, and thereafter
at a rate equal to the Alternate Base Rate.
30
<PAGE>
(c) Interest on Swingline Loans. Subject to the provisions of Section
---------------------------
2.9, Swingline Loans shall bear interest at a per annum rate equal to the
Alternate Base Rate plus the Applicable Percentage for Loans that are
----
Alternate Base Rate Loans. Interest on Swingline Loans shall be payable in
arrears on each Interest Payment Date.
(d) Swingline Note. The Swingline Loans shall be evidenced by a duly
--------------
executed promissory note of the Borrower to the Swingline Lender in the
original amount of the Swingline Committed Amount and substantially in the
form of Schedule 2.3(d).
---------------
SECTION 2.4 LETTER OF CREDIT SUBFACILITY.
----------------------------
(a) Issuance. Subject to the terms and conditions hereof and of the
--------
LOC Documents, if any, and any other terms and conditions which the Issuing
Lender may reasonably require, during the Commitment Period the Issuing
Lender shall issue, and the Lenders shall participate in, Letters of Credit
for the account of the Borrower from time to time upon request in a form
acceptable to the Issuing Lender; provided, however, that (i) the aggregate
-------- -------
amount of LOC Obligations shall not at any time exceed TWENTY MILLION
DOLLARS ($20,000,000) (the "LOC Committed Amount"), (ii) the sum of the
--------------------
aggregate amount of Revolving Loans plus Swingline Loans plus LOC
---- ----
Obligations shall not at any time exceed the aggregate Revolving Committed
Amount then in effect, (iii) all Letters of Credit shall be denominated in
U.S. Dollars and (iv) Letters of Credit shall be issued for the purpose of
supporting tax-advantaged variable rate demand note financing and for other
lawful corporate purposes and may be issued as standby letters of credit,
including in connection with workers' compensation and other insurance
programs, and trade letters of credit. Except as otherwise expressly
agreed upon by all the Lenders, no Letter of Credit shall have an original
expiry date more than twelve (12) months from the date of issuance;
provided, however, so long as no Default or Event of Default has occurred
-------- -------
and is continuing and subject to the other terms and conditions to the
issuance of Letters of Credit hereunder, the expiry dates of Letters of
Credit may be extended annually or periodically from time to time on the
request of the Borrower or by operation of the terms of the applicable
Letter of Credit to a date not more than twelve (12) months from the date
of extension; provided, further, that no Letter of Credit, as originally
-------- -------
issued or as extended, shall have an expiry date extending beyond the
Revolving Commitment Termination Date. Each Letter of Credit shall comply
with the related LOC Documents. The issuance and expiry date of each
Letter of Credit shall be a Business Day. Any Letters of Credit issued
hereunder shall be in a minimum original face amount of $50,000 or such
other amount as agreed by the Agent and the Borrower (except for the
Belmont Letter of Credit). There will be no more than 12 Letters of Credit
outstanding at any time or such other amount as agreed by the Agent and the
Borrower. First Union shall be the Issuing Lender on all Letters of Credit
issued after the Closing Date.
(b) Notice and Reports. The request for the issuance of a Letter of
Credit shall be submitted to the Issuing Lender at least three (3) Business
Days prior to the requested date of issuance. The Issuing Lender will
promptly upon request provide to the Agent for
31
<PAGE>
dissemination to the Lenders a detailed report specifying the Letters of
Credit which are then issued and outstanding and any activity with respect
thereto which may have occurred since the date of any prior report, and
including therein, among other things, the account party, the beneficiary,
the face amount, expiry date as well as any payments or expirations which
may have occurred. The Issuing Lender will further provide to the Agent
promptly upon request copies of the Letters of Credit. The Issuing Lender
will provide to the Agent promptly upon request a summary report of the
nature and extent of LOC Obligations then outstanding.
(c) Participations. Each Lender upon issuance of a Letter of Credit
--------------
(or, in the case of each Existing Letter of Credit, on the Closing Date),
shall be deemed to have purchased without recourse a risk participation
from the Issuing Lender in such Letter of Credit and the obligations
arising thereunder and any collateral relating thereto, in each case in an
amount equal to its LOC Commitment Percentage of the obligations under such
Letter of Credit and shall absolutely, unconditionally and irrevocably
assume, as primary obligor and not as surety, and be obligated to pay to
the Issuing Lender therefor and discharge when due, its LOC Commitment
Percentage of the obligations arising under such Letter of Credit. Without
limiting the scope and nature of each Lender's participation in any Letter
of Credit, to the extent that the Issuing Lender has not been reimbursed as
required hereunder or under any LOC Document, each such Lender shall pay to
the Issuing Lender its LOC Commitment Percentage of such unreimbursed
drawing in same day funds on the day of notification by the Issuing Lender
of an unreimbursed drawing pursuant to the provisions of subsection (d)
hereof. The obligation of each Lender to so reimburse the Issuing Lender
shall be absolute and unconditional and shall not be affected by the
occurrence of a Default, an Event of Default or any other occurrence or
event. Any such reimbursement shall not relieve or otherwise impair the
obligation of the Borrower to reimburse the Issuing Lender under any Letter
of Credit, together with interest as hereinafter provided. Each Existing
Letter of Credit shall be deemed for all purposes of this Agreement and the
other Credit Documents to be a Letter of Credit.
(d) Reimbursement. In the event of any drawing under any Letter of
-------------
Credit, the Issuing Lender will promptly notify the Borrower and the Agent.
The Borrower shall reimburse the Issuing Lender on the day of drawing under
any Letter of Credit (either with the proceeds of a Swingline Loan or
Revolving Loan obtained hereunder or otherwise) in same day funds as
provided herein or in the LOC Documents. If the Borrower shall fail to
reimburse the Issuing Lender as provided herein, the unreimbursed amount of
such drawing shall bear interest at the Default Rate. Unless the Borrower
shall immediately notify the Issuing Lender and the Agent of its intent to
otherwise reimburse the Issuing Lender, the Borrower shall be deemed to
have requested a Swingline Loan, or if and to the extent Swingline Loans
shall not be available, a Revolving Loan in the amount of the drawing as
provided in subsection (e) hereof, the proceeds of which will be used to
satisfy the reimbursement obligations. The Borrower's reimbursement
obligations hereunder shall be absolute and unconditional under all
circumstances irrespective of any rights of set-off, counterclaim or
defense to payment the Borrower may claim or have against the
32
<PAGE>
Issuing Lender, the Agent, the Lenders, the beneficiary of the Letter of
Credit drawn upon or any other Person, including without limitation any
defense based on any failure of the Borrower to receive consideration or
the legality, validity, regularity or unenforceability of the Letter of
Credit. The Issuing Lender will promptly notify the other Lenders of the
amount of any unreimbursed drawing and each Lender shall promptly pay to
the Agent for the account of the Issuing Lender in Dollars and in
immediately available funds, the amount of such Lender's LOC Commitment
Percentage of such unreimbursed drawing. Such payment shall be made on the
day such notice is received by such Lender from the Issuing Lender if such
notice is received at or before 2:00 P.M. (Charlotte, North Carolina time),
otherwise such payment shall be made at or before 12:00 Noon (Charlotte,
North Carolina time) on the Business Day next succeeding the day such
notice is received. If such Lender does not pay such amount to the Issuing
Lender in full upon such request, such Lender shall, on demand, pay to the
Agent for the account of the Issuing Lender interest on the unpaid amount
during the period from the date of such drawing until such Lender pays such
amount to the Issuing Lender in full at a rate per annum equal to, if paid
within two (2) Business Days of the date of drawing, the Federal Funds
Effective Rate and thereafter at a rate equal to the Alternate Base Rate.
Each Lender's obligation to make such payment to the Issuing Lender, and
the right of the Issuing Lender to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance whatsoever and
without regard to the termination of this Agreement or the Commitments
hereunder, the existence of a Default or Event of Default or the
acceleration of the Credit Party Obligations hereunder and shall be made
without any offset, abatement, withholding or reduction whatsoever.
(e) Repayment with Revolving Loans. On any day on which the Borrower
shall have requested, or been deemed to have requested, (i) a Swingline
Loan borrowing to reimburse a drawing under a Letter of Credit, the
Swingline Lender shall make the Swingline Loan advance pursuant to the
terms of the request or deemed request in accordance with the provisions
for Swingline Loan advances hereunder, or (ii) a Revolving Loan to
reimburse a drawing under a Letter of Credit, the Agent shall give notice
to the Lenders that a Revolving Loan has been requested or deemed requested
in connection with a drawing under a Letter of Credit, in which case a
Revolving Loan borrowing comprised entirely of Alternate Base Rate Loans
(each such borrowing, a "Mandatory Borrowing") shall be immediately made
-------------------
(without giving effect to any termination of the Commitments pursuant to
Section 7.2) pro rata based on each Lender's respective Revolving
--- ----
Commitment Percentage (determined before giving effect to any termination
of the Commitments pursuant to Section 7.2) and in the case of both clauses
(i) and (ii) the proceeds thereof shall be paid directly to the Issuing
Lender for application to the respective LOC Obligations. Each Lender
hereby irrevocably agrees to make such Revolving Loans immediately upon any
such request or deemed request on account of each Mandatory Borrowing in
the amount and in the manner specified in the preceding sentence and on the
same such date notwithstanding (i) the amount of Mandatory Borrowing may
---------------
not comply with the minimum amount for borrowings of Revolving Loans
otherwise required hereunder, (ii) whether any conditions specified in
Section 4.2 are then satisfied, (iii) whether a Default or an Event of
Default then exists, (iv) failure for any such
33
<PAGE>
request or deemed request for Revolving Loan to be made by the time
otherwise required in Section 2.1(b), (v) the date of such Mandatory
Borrowing, or (vi) any reduction in the Revolving Committed Amount after
any such Letter of Credit may have been drawn upon; provided, however, that
-------- -------
in the event any such Mandatory Borrowing should be less than the minimum
amount for borrowings of Revolving Loans otherwise provided in Section
2.1(b)(ii), the Borrower shall pay to the Agent for its own account an
administrative fee of $500. In the event that any Mandatory Borrowing
cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to the Borrower), then
each such Lender hereby agrees that it shall forthwith fund (as of the date
the Mandatory Borrowing would otherwise have occurred, but adjusted for any
payments received from the Borrower on or after such date and prior to such
purchase) its Participation Interests in the outstanding LOC Obligations;
provided, further, that in the event any Lender shall fail to fund its
-------- -------
Participation Interest on the day the Mandatory Borrowing would otherwise
have occurred, then the amount of such Lender's unfunded Participation
Interest therein shall bear interest payable to the Issuing Lender upon
demand, at the rate equal to, if paid within two (2) Business Days of such
date, the Federal Funds Effective Rate, and thereafter at a rate equal to
the Alternate Base Rate.
(f) Modification, Extension. The issuance of any supplement,
-----------------------
modification, amendment, renewal, or extension to any Letter of Credit
shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.
(g) Uniform Customs and Practices. The Issuing Lender shall have the
-----------------------------
Letters of Credit be subject to The Uniform Customs and Practice for
Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (the "UCP"), in which case the UCP may be
---
incorporated therein and deemed in all respects to be a part thereof.
SECTION 2.5 FEES.
----
(a) Commitment Fee. In consideration of the Revolving Commitment, the
--------------
Borrower agrees to pay to the Agent for the ratable benefit of the Lenders
a commitment fee (the "Commitment Fee") in an amount equal to the
--------------
Applicable Percentage per annum on the average daily unused amount of the
aggregate Revolving Committed Amount. For purposes of computing the
Commitment hereunder, Swingline Loans and LOC Obligations shall be
considered usage under the aggregate Revolving Committed Amount. The
Commitment Fee shall be payable quarterly in arrears on the 15th day
following the last day of each calendar quarter for the prior calendar
quarter.
(b) Letter of Credit Fees. In consideration of the LOC Commitments,
---------------------
the Borrower agrees to pay to the Issuing Lender a fee (the "Letter of
---------
Credit Fee") equal to the Applicable Percentage per annum on the average
----------
daily maximum amount available to be drawn under each Letter of Credit from
the date of issuance to the date of expiration. In addition to such Letter
of Credit Fee, the Issuing Lender may charge, and retain for its
34
<PAGE>
own account without sharing by the other Lenders, an additional facing fee
of one-fourth of one percent (1/4%) per annum on the average daily maximum
amount available to be drawn under each such Letter of Credit issued by it.
The Issuing Lender shall promptly pay over to the Agent for the ratable
benefit of the Lenders (including the Issuing Lender) the Letter of Credit
Fee. The Letter of Credit Fee shall be payable quarterly in arrears on the
15th day following the last day of each calendar quarter for the prior
calendar quarter.
(c) Issuing Lender Fees. In addition to the Letter of Credit Fees
-------------------
payable pursuant to subsection (b) hereof, the Borrower shall pay to the
Issuing Lender for its own account without sharing by the other Lenders the
reasonable and customary charges from time to time of the Issuing Lender
with respect to the amendment, transfer, administration, cancellation and
conversion of, and drawings under, such Letters of Credit (collectively,
the "Issuing Lender Fees").
-------------------
(d) Administrative Fee. The Borrower agrees to pay to the Agent the
------------------
annual administrative fee as described in the Fee Letter.
SECTION 2.6 COMMITMENT REDUCTIONS.
---------------------
(a) Voluntary Reductions. The Borrower shall have the right to
--------------------
terminate or permanently reduce the unused portion of the Revolving
Committed Amount at any time or from time to time upon not less than three
Business Days' prior notice to the Agent (which shall notify the Lenders
thereof as soon as practicable) of each such termination or reduction,
which notice shall specify the effective date thereof and the amount of any
such reduction which shall be in a minimum amount of $3,000,000 or a whole
multiple of $1,000,000 in excess thereof and shall be irrevocable and
effective upon receipt by the Agent, provided that no such reduction or
--------
termination shall be permitted if after giving effect thereto, and to any
prepayments of the Revolving Loans made on the effective date thereof, the
sum of the then outstanding aggregate principal amount of the Revolving
Loans plus Swingline Loans plus LOC Obligations would exceed the aggregate
---- ----
Revolving Committed Amount then in effect.
(b) Mandatory Reductions. On any date that the Revolving Loans are
--------------------
required to be prepaid pursuant to the terms of Section 2.7(b) (ii), (iii),
(iv), (v), and (vi), the Revolving Committed Amount shall be automatically
permanently reduced by the amount of such required prepayment and/or
reduction; provided, however, that a permanent reduction in the Revolving
Committed Amount shall not occur in connection with a prepayment of
Revolving Loans with Net Cash Proceeds from the Subordinated Debt.
(c) Revolving Commitment Termination Date. The Revolving Commitment,
-------------------------------------
the LOC Commitment and the Swingline Commitment shall automatically
terminate on the Revolving Commitment Termination Date.
35
<PAGE>
SECTION 2.7 PREPAYMENTS.
-----------
(a) Optional Prepayments. The Borrower shall have the right to prepay
--------------------
Loans in whole or in part from time to time; provided, however, that each
-------- -------
partial prepayment of Revolving Loans and Term Loans shall be in a minimum
principal amount of $3,000,000 and integral multiples of $1,000,000 in
excess thereof and each prepayment of Swingline Loans shall be in a minimum
principal amount of $100,000 (or if the outstanding principal balance of
the Swingline Loans is less than $100,000, such lesser amount) and integral
multiples of $100,000 in excess thereof. The Borrower shall give three
Business Days' irrevocable notice in the case of LIBOR Rate Loans and one
Business Day's irrevocable notice in the case of Alternate Base Rate Loans,
to the Agent (which shall notify the Lenders thereof as soon as
practicable). Subject to the foregoing terms, amounts prepaid under this
Section 2.7(a) shall be applied as the Borrower may elect; provided that if
--------
the Borrower fails to specify the application of an optional prepayment
then such prepayment shall be applied first to Revolving Loans and then pro
---
rata to the remaining principal installments of the Term Loans, in each
----
case first to Alternate Base Rate Loans and then to LIBOR Rate Loans in
direct order of Interest Period maturities. All prepayments under this
Section 2.7(a) shall be subject to Section 2.17, but otherwise without
premium or penalty. Interest on the principal amount prepaid shall be
payable on the next occurring Interest Payment Date that would have
occurred had such loan not been prepaid or, at the request of the Agent,
interest on the principal amount prepaid shall be payable on any date that
a prepayment is made hereunder through the date of prepayment. Amounts
prepaid on the Swingline Loan and the Revolving Loans may be reborrowed in
accordance with the terms hereof. Amounts prepaid on the Term Loans may
not be reborrowed.
(b) Mandatory Prepayments.
---------------------
(i) Revolving Committed Amount. If at any time the sum of the
--------------------------
aggregate principal amount of outstanding Revolving Loans plus
----
Swingline Loans plus LOC Obligations shall exceed the aggregate
----
Revolving Committed Amount then in effect, the Borrower immediately
shall prepay the Revolving Loans and (after all Revolving Loans have
been repaid) cash collateralize the LOC Obligations, in an amount
sufficient to eliminate such excess.
(ii) Excess Cash Flow. Within ninety (90) days after the end of
----------------
each fiscal year (commencing with the fiscal year ending December 31,
1999), the Borrower shall prepay the Term Loans in an amount equal to
(x) fifty percent (50%) of the Excess Cash Flow earned during such
prior fiscal year less (y) the amount of any optional prepayments of
the Term Loans or (to the extent accompanied by a permanent reduction
in the Revolving Committed Amount) the Revolving Loans during such
prior fiscal year. Any payments of Excess Cash Flow shall be applied
as set forth in clause (vii) below. Notwithstanding the foregoing to
the contrary, the prepayment of Loans from Excess Cash Flow shall not
be required for any prior fiscal year if the Leverage Ratio for the
four fiscal quarters ending on the last day of such fiscal year is
less than 3.0 to 1.0.
36
<PAGE>
(iii) Asset Dispositions. Upon any Asset Disposition (except in
------------------
connection with a Recovery Event), the Borrower shall prepay the Loans
in an aggregate amount equal to the Net Cash Proceeds derived from
such Asset Disposition to the extent such Net Cash Proceeds are not
used to purchase or otherwise acquire replacement Property within 90
days prior to or 180 days after receipt of such cash proceeds (or such
shorter period as specified in the Subordinated Debt Documentation)
(such prepayment to be applied as set forth in clause (vii) below).
(iv) Debt Issuances. Immediately upon receipt by any Credit
--------------
Party of proceeds from any Debt Issuance (other than the issuance of
the Subordinated Debt except as provided in the definition thereof),
the Borrower shall prepay the Loans in an aggregate amount equal to
one-hundred percent (100%) of the Net Cash Proceeds of such Debt
Issuance to the Lenders (such prepayment to be applied as set forth in
clause (vii) below).
(v) Issuances of Equity. Immediately upon receipt by a Credit
-------------------
Party of proceeds from any Equity Issuance (other than equity
contributed by Glass Holdings), the Borrower shall prepay the Loans in
an aggregate amount equal to: (A) seventy-five percent (75%) of the
Net Cash Proceeds of such Equity Issuance if the Leverage Ratio for
the four fiscal quarters ending on the last day of the fiscal quarter
most recently ended for which the Agent shall have received the
compliance certificate described in Section 5.2(b) shall be greater
than or equal to 3.0 to 1.0 and (B) fifty percent (50%) of the Net
Cash Proceeds of such Equity Issuance if the Leverage Ratio for the
four fiscal quarters ending on the last day of the fiscal quarter most
recently ended for which the Agent shall have received the compliance
certificate described in Section 5.2(b) shall be less than 3.0 to 1.0
(such prepayment to be applied as set forth in clause (vii) below).
(vi) Recovery Event. To the extent of cash proceeds received in
--------------
connection with a Recovery Event, the Borrower shall prepay the Loans
in an aggregate amount equal to one-hundred percent (100%) of such
cash proceeds to the Lenders to the extent such cash proceeds are not
used (A) to repair such damaged assets within 180 days after receipt
of such cash proceeds or property or (B) to purchase or otherwise
acquire replacement assets or property, provided that such purchase or
acquisition is committed within 180 days after receipt of such cash
proceeds and consummated within 270 days thereof (or such shorter
period as specified in the Subordinated Debt Documentation) (such
prepayment to be applied as set forth in clause (vii) below).
Notwithstanding anything to the contrary contained herein, after the
occurrence and during the continuation of an Event of Default, the
Required Lenders shall have the option to require such cash proceeds
to be applied immediately to prepay the Loans in accordance with
clause (vii) below.
37
<PAGE>
(vii) Application of Mandatory Prepayments. All amounts required
------------------------------------
to be paid pursuant to this Section 2.7(b) shall be applied as
follows: (A) with respect to all amounts prepaid pursuant to Section
2.7(b)(i), to Revolving Loans and (after all Revolving Loans have been
repaid) to a cash collateral account in respect of LOC Obligations and
(B) with respect to all amounts prepaid pursuant to Sections
2.7(b)(ii) through (vi), (1) first pro rata to the Term Loans (ratably
----- --- ----
to the remaining principal installments thereof) and (2) second to the
------
Revolving Loans and (after all Revolving Loans have been repaid) to a
cash collateral account in respect of LOC Obligations. Within the
parameters of the applications set forth above, prepayments shall be
applied first to Alternate Base Rate Loans and then to LIBOR Rate
Loans in direct order of Interest Period maturities. All prepayments
under this Section 2.7(b) shall be subject to Section 2.17 and be
accompanied by interest on the principal amount prepaid through the
date of prepayment.
SECTION 2.8 MINIMUM PRINCIPAL AMOUNT OF TRANCHES.
------------------------------------
All borrowings, payments and prepayments in respect of Revolving Loans and
Term Loans shall be in such amounts and be made pursuant to such elections so
that after giving effect thereto the aggregate principal amount of the Revolving
Loans and Term Loans comprising any Tranche shall not be less than $3,000,000 or
a whole multiple of $1,000,000 in excess thereof.
SECTION 2.9 DEFAULT RATE AND PAYMENT DATES.
------------------------------
(a) If all or a portion of the principal amount of any Loan which is
a LIBOR Rate Loan shall not be paid when due or continued as a LIBOR Rate
Loan in accordance with the provisions of Section 2.10 (whether at the
stated maturity, by acceleration or otherwise), such overdue principal
amount of such Loan shall be converted to an Alternate Base Rate Loan at
the end of the Interest Period applicable thereto.
(b) If all or a portion of (i) the principal amount of any Loan, (ii)
any interest payable thereon, or (iii) any fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear interest at a
rate per annum (the "Default Rate") which is (x) in the case of overdue
------------
principal, the rate that would otherwise be applicable thereto assuming
Level I interest rate margins (as appearing in the definition of
"Applicable Percentage") were then in effect, plus 2% or (y) in the case of
----
overdue interest (to the extent permitted by applicable law), fees or other
amounts, the Alternate Base Rate, plus the highest Applicable Percentage
----
for Loans which are Alternate Base Rate Loans, plus 2%, in each case from
----
the date of such non-payment until such amount is paid in full (after as
well as before judgment). Upon the occurrence and during the continuance of
any other Event of Default hereunder, the principal of and, to the extent
permitted by law, interest on the Loans and any other amounts owing
hereunder or under the other Credit Documents shall bear interest, payable
on demand, at the Default Rate (after as well as before judgment).
38
<PAGE>
(c) Interest on each Loan shall be payable in arrears on each
Interest Payment Date, provided that interest accruing pursuant to
paragraph (b) of this Section 2.9 shall be payable from time to time on
demand.
SECTION 2.10 CONVERSION OPTIONS.
------------------
(a) The Borrower may, in the case of Revolving Loans and the Term
Loans, elect from time to time to convert Alternate Base Rate Loans to
LIBOR Rate Loans, by giving the Agent at least three Business Days' prior
irrevocable written notice of such election. A form of Notice of
Conversion/ Extension is attached as Schedule 2.10. If the date upon which
-------------
an Alternate Base Rate Loan is to be converted to a LIBOR Rate Loan is not
a Business Day, then such conversion shall be made on the next succeeding
Business Day and during the period from such last day of an Interest Period
to such succeeding Business Day such Loan shall bear interest as if it were
an Alternate Base Rate Loan. All or any part of outstanding Alternate Base
Rate Loans may be converted as provided herein, provided that (i) no Loan
--------
may be converted into a LIBOR Rate Loan when any Default or Event of
Default has occurred and is continuing and (ii) partial conversions shall
be in an aggregate principal amount of $3,000,000 or a whole multiple of
$1,000,000 in excess thereof.
(b) Any LIBOR Rate Loans may be continued as such upon the expiration
of an Interest Period with respect thereto by compliance by the Borrower
with the notice provisions contained in Section 2.10(a); provided, that no
--------
LIBOR Rate Loan may be continued as such when any Default or Event of
Default has occurred and is continuing, in which case such Loan shall be
automatically converted to an Alternate Base Rate Loan at the end of the
applicable Interest Period with respect thereto. If the Borrower shall fail
to give timely notice of an election to continue a LIBOR Rate Loan, or the
continuation of LIBOR Rate Loans is not permitted hereunder, such LIBOR
Rate Loans shall be automatically converted to Alternate Base Rate Loans at
the end of the applicable Interest Period with respect thereto.
SECTION 2.11 COMPUTATION OF INTEREST AND FEES.
--------------------------------
(a) Interest payable hereunder with respect to Alternate Base Rate
Loans shall be calculated on the basis of a year of 365 days (or 366 days,
as applicable) for the actual days elapsed. All other fees, interest and
all other amounts payable hereunder shall be calculated on the basis of a
360 day year for the actual days elapsed. The Agent shall as soon as
practicable notify the Borrower and the Lenders of each determination of a
LIBOR Rate on the Business Day of the determination thereof. Any change in
the interest rate on a Loan resulting from a change in the Alternate Base
Rate shall become effective as of the opening of business on the day on
which such change in the Alternate Base Rate shall become effective. The
Agent shall as soon as practicable notify the Borrower and the Lenders of
the effective date and the amount of each such change.
39
<PAGE>
(b) Each determination of an interest rate by the Agent pursuant to
any provision of this Agreement shall be conclusive and binding on the
Borrower and the Lenders in the absence of manifest error. The Agent shall,
at the request of the Borrower, deliver to the Borrower a statement showing
the computations used by the Agent in determining any interest rate.
SECTION 2.12 PRO RATA TREATMENT AND PAYMENTS.
-------------------------------
Each borrowing of Revolving Loans and any reduction of the Revolving
Commitments shall be made pro rata according to the respective Commitment
--- ----
Percentages of the Lenders. Each payment under this Agreement or any Note shall
be applied, first, to any fees then due and owing by the Borrower pursuant to
Section 2.5, second, to interest then due and owing in respect of the Notes of
the Borrower and, third, to principal then due and owing hereunder and under the
Notes of the Borrower. Each payment on account of any fees pursuant to Section
2.5 shall be made pro rata in accordance with the respective amounts due and
--- ----
owing (except as to the portion of the Letter of Credit retained by the Issuing
Lender and the Issuing Lender Fees). Each payment (other than prepayments) by
the Borrower on account of principal of and interest on the Revolving Loans and
on the Term Loans shall be made pro rata according to the respective amounts due
--- ----
and owing in accordance with Section 2.7 hereof. Each optional prepayment on
account of principal of the Loans shall be applied, to such of the Loans as the
Borrower may designate (to be applied pro rata among the Lenders); provided,
--- ---- --------
that prepayments made pursuant to Section 2.15 shall be applied in accordance
with such section. Each mandatory prepayment on account of principal of the
Loans shall be applied in accordance with Section 2.7(b). All payments
(including prepayments) to be made by the Borrower on account of principal,
interest and fees shall be made without defense, set-off or counterclaim (except
as provided in Section 2.18(b)) and shall be made to the Agent for the account
of the Lenders at the Agent's office specified on Schedule 9.2 in Dollars and in
------------
immediately available funds not later than 1:00 P.M. (Charlotte, North Carolina
time) on the date when due. The Agent shall distribute such payments to the
Lenders entitled thereto promptly upon receipt in like funds as received. If
any payment hereunder (other than payments on the LIBOR Rate Loans) becomes due
and payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day, and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension. If any payment on a LIBOR Rate Loan becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day.
SECTION 2.13 NON-RECEIPT OF FUNDS BY THE AGENT.
---------------------------------
(a) Unless the Agent shall have been notified in writing by a Lender
prior to the date a Loan is to be made by such Lender (which notice shall be
effective upon receipt) that such Lender does not intend to make the
proceeds of such Loan available to the Agent, the Agent may assume that such
Lender has made such proceeds available to the Agent on such date, and the
Agent may in reliance upon such assumption (but shall not be
40
<PAGE>
required to) make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Agent, the Agent
shall be able to recover such corresponding amount from such Lender. If
such Lender does not pay such corresponding amount forthwith upon the
Agent's demand therefor, the Agent will promptly notify the Borrower, and
the Borrower shall immediately pay such corresponding amount to the Agent.
The Agent shall also be entitled to recover from the Lender or the
Borrower, as the case may be, interest on such corresponding amount in
respect of each day from the date such corresponding amount was made
available by the Agent to the Borrower to the date such corresponding
amount is recovered by the Agent at a per annum rate equal to (i) from the
Borrower at the applicable rate for the applicable borrowing pursuant to
the Notice of Borrowing and (ii) from a Lender at the Federal Effective
Funds Rate.
(b) Unless the Agent shall have been notified in writing by the
Borrower, prior to the date on which any payment is due from it hereunder
(which notice shall be effective upon receipt) that the Borrower does not
intend to make such payment, the Agent may assume that such Borrower has
made such payment when due, and the Agent may in reliance upon such
assumption (but shall not be required to) make available to each Lender on
such payment date an amount equal to the portion of such assumed payment to
which such Lender is entitled hereunder, and if the Borrower has not in
fact made such payment to the Agent, such Lender shall, on demand, repay to
the Agent the amount made available to such Lender. If such amount is
repaid to the Agent on a date after the date such amount was made available
to such Lender, such Lender shall pay to the Agent on demand interest on
such amount in respect of each day from the date such amount was made
available by the Agent to such Lender to the date such amount is recovered
by the Agent at a per annum rate equal to the Federal Funds Effective Rate.
(c) A certificate of the Agent submitted to the Borrower or any
Lender with respect to any amount owing under this Section 2.13 shall be
conclusive in the absence of manifest error.
SECTION 2.14 INABILITY TO DETERMINE INTEREST RATE.
------------------------------------
Notwithstanding any other provision of this Agreement, if (i) the Agent
shall reasonably determine (which determination shall be conclusive and binding
absent manifest error) that, by reason of circumstances affecting the relevant
market, reasonable and adequate means do not exist for ascertaining LIBOR for
such Interest Period, or (ii) the Required Lenders shall reasonably determine
(which determination shall be conclusive and binding absent manifest error) that
the LIBOR Rate does not adequately and fairly reflect the cost to such Lenders
of funding LIBOR Rate Loans that the Borrower has requested be outstanding as a
LIBOR Tranche during such Interest Period, the Agent shall forthwith give
telephone notice of such determination, confirmed in writing, to the Borrower,
and the Lenders at least two Business Days prior to the first day of such
Interest Period. Unless the Borrower shall have notified the Agent upon receipt
of such telephone notice that it wishes to rescind or modify its request
regarding such LIBOR Rate Loans, any Loans that were requested to be made as
LIBOR Rate Loans shall be made as
41
<PAGE>
Alternate Base Rate Loans and any Loans that were requested to be converted into
or continued as LIBOR Rate Loans shall be converted into Alternate Base Rate
Loans. Until any such notice has been withdrawn by the Agent, no further Loans
shall be made as, continued as, or converted into, LIBOR Rate Loans for the
Interest Periods so affected.
SECTION 2.15 ILLEGALITY.
----------
Notwithstanding any other provision of this Agreement, if the adoption of
or any change in any Requirement of Law or in the interpretation or application
thereof by the relevant Governmental Authority to any Lender shall make it
unlawful for such Lender or its LIBOR Lending Office to make or maintain LIBOR
Rate Loans as contemplated by this Agreement or to obtain in the interbank
eurodollar market through its LIBOR Lending Office the funds with which to make
such Loans, (a) such Lender shall promptly notify the Agent and the Borrower
thereof, (b) the commitment of such Lender hereunder to make LIBOR Rate Loans or
continue LIBOR Rate Loans as such shall forthwith be suspended until the Agent
shall give notice that the condition or situation which gave rise to the
suspension shall no longer exist, and (c) such Lender's Loans then outstanding
as LIBOR Rate Loans, if any, shall be converted on the last day of the Interest
Period for such Loans or within such earlier period as required by law as
Alternate Base Rate Loans. The Borrower hereby agrees promptly to pay any
Lender, upon its demand, any additional amounts necessary to compensate such
Lender for actual and direct costs (but not including anticipated profits)
reasonably incurred by such Lender in making any repayment in accordance with
this Section including, but not limited to, any interest or fees payable by such
Lender to lenders of funds obtained by it in order to make or maintain its LIBOR
Rate Loans hereunder; provided, however, that the liability of the Borrower
-------- -------
shall be limited to costs incurred within 180 days prior to the receipt of such
notice. A certificate as to any additional amounts payable pursuant to this
Section submitted by such Lender, through the Agent, to the Borrower shall be
conclusive in the absence of manifest error. Each Lender agrees to use
reasonable efforts (including reasonable efforts to change its LIBOR Lending
Office) to avoid or to minimize any amounts which may otherwise be payable
pursuant to this Section; provided, however, that such efforts shall not cause
-------- -------
the imposition on such Lender of any additional costs or legal or regulatory
burdens deemed by such Lender in its sole discretion to be material.
SECTION 2.16 REQUIREMENTS OF LAW.
-------------------
(a) If the adoption of or any change in any Requirement of Law or in
the interpretation or application thereof or compliance by any Lender with
any request or directive (whether or not having the force of law) from any
central bank or other Governmental Authority made subsequent to the date
hereof:
(i) shall subject such Lender to any tax of any kind whatsoever
with respect to any Letter of Credit or any application relating
thereto, any LIBOR Rate Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for
changes in the rate of tax on the overall net income of such Lender);
42
<PAGE>
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the LIBOR Rate hereunder;
or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such
Lender of making or maintaining LIBOR Rate Loans or the Letters of Credit
or to reduce any amount receivable hereunder or under any Note, then, in
any such case, the Borrower shall promptly pay such Lender, upon its
demand, any additional amounts necessary to compensate such Lender for such
additional cost or reduced amount receivable which such Lender reasonably
deems to be material as determined by such Lender with respect to its LIBOR
Rate Loans or Letters of Credit; provided, however, that the liability of
-------- -------
the Borrower shall be limited to costs incurred within 180 days of such
demand. A certificate as to any additional amounts payable pursuant to
this Section submitted by such Lender, through the Agent, to the Borrower
shall be conclusive in the absence of manifest error. Each Lender agrees
to use reasonable efforts (including reasonable efforts to change its
Domestic Lending Office or LIBOR Lending Office, as the case may be) to
avoid or to minimize any amounts which might otherwise be payable pursuant
to this paragraph of this Section; provided, however, that such efforts
-------- -------
shall not cause the imposition on such Lender of any additional costs or
legal or regulatory burdens deemed by such Lender to be material.
(b) If any Lender shall have reasonably determined that the adoption
of or any change in any Requirement of Law regarding capital adequacy or in
the interpretation or application thereof or compliance by such Lender or
any corporation controlling such Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from
any central bank or Governmental Authority made subsequent to the date
hereof does or shall have the effect of reducing the rate of return on such
Lender's or such corporation's capital as a consequence of its obligations
hereunder to a level below that which such Lender or such corporation could
have achieved but for such adoption, change or compliance (taking into
consideration such Lender's or such corporation's policies with respect to
capital adequacy) by an amount reasonably deemed by such Lender to be
material, then from time to time, within fifteen (15) days after demand by
such Lender, the Borrower shall pay to such Lender such additional amount
as shall be certified by such Lender as being required to compensate it for
such reduction. Such a certificate as to any additional amounts payable
under this Section submitted by a Lender (which certificate shall include a
description of the basis for the computation), through the Agent, to the
Borrower shall be conclusive absent manifest error.
(c) The agreements in this Section 2.16 shall survive the termination
of this Agreement and payment of the Notes and all other amounts payable
hereunder.
43
<PAGE>
SECTION 2.17 INDEMNITY.
---------
The Borrower hereby agrees to indemnify each Lender and to hold such Lender
harmless from any funding loss or expense which such Lender actually sustains or
incurs as a consequence of (a) default by the Borrower in payment of the
principal amount of or interest on any LIBOR Rate Loan by such Lender in
accordance with the terms hereof, (b) default by the Borrower in accepting a
borrowing after the Borrower has given a notice in accordance with the terms
hereof, (c) default by the Borrower in making any prepayment after the Borrower
has given a notice in accordance with the terms hereof, and/or (d) the making by
the Borrower of a prepayment of a LIBOR Rate Loan, or the conversion thereof, on
a day which is not the last day of the Interest Period with respect thereto, in
each case including, but not limited to, any such loss or expense arising from
interest or fees payable by such Lender to lenders of funds obtained by it in
order to maintain its Loans hereunder. A certificate as to any additional
amounts payable pursuant to this Section submitted by any Lender, through the
Agent, to the Borrower (which certificate must be delivered to the Agent within
thirty days following such default, prepayment or conversion) shall be
conclusive in the absence of manifest error. The agreements in this Section
shall survive termination of this Agreement and payment of the Notes and all
other amounts payable hereunder.
SECTION 2.18 TAXES.
-----
(a) All payments made by the Borrower hereunder or under any Note
will be, except as provided in Section 2.18(b), made free and clear of, and
without deduction or withholding for, any present or future taxes, levies,
imposts, duties, fees, assessments or other charges of whatever nature now
or hereafter imposed by any Governmental Authority or by any political
subdivision or taxing authority thereof or therein with respect to such
payments (but excluding any tax imposed on or measured by the net income or
profits of a Lender or the Agent pursuant to the laws of the jurisdiction
in which it is organized or the jurisdiction in which the principal office
or applicable lending office of such Lender or the Agent is located or any
subdivision thereof or therein and also excluding franchise taxes, doing
business taxes or minimum taxes imposed on it in such jurisdiction) and all
interest, penalties or similar liabilities with respect thereto (all such
non-excluded taxes, levies, imposts, duties, fees, assessments or other
charges being referred to collectively as "Taxes"). If any Taxes are so
-----
levied or imposed, the Borrower agrees to pay the full amount of such
Taxes, and such additional amounts as may be necessary so that every
payment of all amounts due under this Agreement or under any Note, after
withholding or deduction for or on account of any Taxes, will not be less
than the amount provided for herein or in such Note. The Borrower will
furnish to the Agent as soon as practicable after the date the payment of
any Taxes is due pursuant to applicable law certified copies (to the extent
reasonably available and required by law) of tax receipts evidencing such
payment by the Borrower. The Borrower agrees to indemnify and hold
harmless each Lender, and reimburse such Lender upon its written request,
for the amount of any Taxes so levied or imposed and paid by such Lender.
(b) Each Lender that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the
Borrower and the Agent on or
44
<PAGE>
prior to the Closing Date, or in the case of a Lender that is an assignee
or transferee of an interest under this Agreement pursuant to Section
9.6(d) (unless the respective Lender was already a Lender hereunder
immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Lender, (i) if the Lender is a "bank" within
the meaning of Section 881(c)(3)(A) of the Code, two accurate and complete
original signed copies of Internal Revenue Service Form 4224 or 1001 (or
successor forms) certifying such Lender's entitlement to a complete
exemption from United States withholding tax with respect to payments to be
made under this Agreement and under any Note, or (ii) if the Lender is not
a "bank" within the meaning of Section 881(c)(3)(A) of the Code, either
Internal Revenue Service Form 1001 or 4224 as set forth in clause (i)
above, or (x) a certificate substantially in the form of Schedule 2.18 (any
-------------
such certificate, a "2.18 Certificate") and (y) two accurate and complete
----------------
original signed copies of Internal Revenue Service Form W-8 (or successor
form) certifying such Lender's entitlement to an exemption from United
States withholding tax with respect to payments of interest to be made
under this Agreement and under any Note. In addition, each Lender agrees
that it will deliver upon the Borrower's request updated versions of the
foregoing, as applicable, whenever the previous certification has become
obsolete or inaccurate in any material respect, together with such other
forms as may be required in order to confirm or establish the entitlement
of such Lender to a continued exemption from or reduction in United States
withholding tax with respect to payments under this Agreement and any Note.
Each Lender shall, promptly upon the reasonable request of the Borrower to
that effect, deliver to the Borrower such other forms or documentation as
may be required from time to time by any applicable law, treaty, rule or
regulation in order to establish such Lender's tax status for withholding
purposes. Notwithstanding anything to the contrary contained in Section
2.18(a), but subject to the immediately succeeding sentence, (x) each
Borrower shall be entitled, to the extent it is required to do so by law,
to deduct or withhold Taxes imposed by the United States (or any political
subdivision or taxing authority thereof or therein) from interest, fees or
other amounts payable hereunder for the account of any Lender which is not
a United States person (as such term is defined in Section 7701(a)(30) of
the Code) for U.S. Federal income tax purposes to the extent that such
Lender has not provided to the Borrower U.S. Internal Revenue Service Forms
that establish a complete exemption from such deduction or withholding and
(y) the Borrower shall not be obligated pursuant to Section 2.18(a) hereof
to gross-up payments to be made to a Lender in respect of Taxes imposed by
the United States if (I) such Lender has not complied with the requirements
of this Section 2.18(b) or (II) the obligation to withhold existed on the
date such Lender became a party to this Agreement. Notwithstanding anything
to the contrary contained in the preceding sentence or elsewhere in this
Section 2.18, the Borrower agrees to pay additional amounts and to
indemnify each Lender in the manner set forth in Section 2.18(a) (without
regard to the identity of the jurisdiction requiring the deduction or
withholding) in respect of any amounts deducted or withheld by it as
described in the immediately preceding sentence as a result of any changes
after the Closing Date in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation thereof, relating
to the deducting or withholding of Taxes.
45
<PAGE>
(c) Each Lender agrees to use reasonable efforts (including
reasonable efforts to change its Domestic Lending Office or LIBOR Lending
Office, as the case may be) to avoid or to minimize any amounts which might
otherwise be payable pursuant to this Section; provided, however, that such
-------- -------
efforts shall not cause the imposition on such Lender of any additional
costs or legal or regulatory burdens deemed by such Lender in its sole
discretion to be material.
(d) If the Borrower pays any additional amount pursuant to this
Section 2.18 with respect to a Lender, such Lender shall use reasonable
efforts to obtain a refund of tax or credit against its tax liabilities on
account of such payment; provided that such Lender shall have no obligation
--------
to use such reasonable efforts if it believes in good faith, in its sole
discretion, that claiming a refund or credit would cause material adverse
tax consequences to it. In the event that such Lender receives such a
refund or credit, such Lender shall pay to the Borrower an amount that such
Lender reasonably determines is equal to the net tax benefit obtained by
such Lender as a result of such payment by the Borrower. In the event that
no refund or credit is obtained with respect to the Borrower's payments to
such Lender pursuant to this Section 2.18, then such Lender shall upon
request provide a certification that such Lender has not received a refund
or credit for such payments. Nothing contained in this Section 2.18 shall
require a Lender to disclose or detail the basis of its calculation of the
amount of any tax benefit or any other amount or the basis of its
determination referred to in the proviso to the first sentence of this
Section 2.18 to the Borrower or any other party.
(e) The agreements in this Section 2.18 shall survive the termination
of this Agreement and the payment of the Notes and all other amounts
payable hereunder.
SECTION 2.19 INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES.
--------------------------------------------------
(a) In addition to its other obligations under Section 2.4, the
Borrower hereby agrees to protect, indemnify, pay and save each Issuing
Lender harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable
attorneys' fees) that the Issuing Lender may incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of any Letter of
Credit or (ii) the failure of the Issuing Lender to honor a drawing under a
Letter of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or omissions, herein called
"Government Acts").
---------------
(b) As between the Borrower and the Issuing Lender, the Borrower
shall assume all risks of the acts, omissions or misuse of any Letter of
Credit by the beneficiary thereof. The Issuing Lender shall not be
responsible: (i) for the form, validity, sufficiency, accuracy, genuineness
or legal effect of any document submitted by any party in connection with
the application for and issuance of any Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of
any instrument transferring or assigning or
46
<PAGE>
purporting to transfer or assign any Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, that may
prove to be invalid or ineffective for any reason; (iii) for failure of the
beneficiary of a Letter of Credit to comply fully with conditions required
in order to draw upon a Letter of Credit; (iv) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by
mail, cable, telegraph, telex or otherwise, whether or not they be in
cipher; (v) for errors in interpretation of technical terms; (vi) for any
loss or delay in the transmission or otherwise of any document required in
order to make a drawing under a Letter of Credit or of the proceeds
thereof; and (vii) for any consequences arising from causes beyond the
control of the Issuing Lender, including, without limitation, any
Government Acts. None of the above shall affect, impair, or prevent the
vesting of the Issuing Lender's rights or powers hereunder.
(c) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by
the Issuing Lender, under or in connection with any Letter of Credit or the
related certificates, if taken or omitted in good faith (except in the case
of gross negligence or willful misconduct), shall not put such Issuing
Lender under any resulting liability to the Borrower. It is the intention
of the parties that this Agreement shall be construed and applied to
protect and indemnify the Issuing Lender against any and all risks involved
in the issuance of the Letters of Credit, all of which risks are hereby
assumed by the Borrower (except for the gross negligence or willful
misconduct of the Issuing Lender), including, without limitation, any and
all risks of the acts or omissions, whether rightful or wrongful, of any
Government Authority. The Issuing Lender shall not, in any way, be liable
for any failure by the Issuing Lender or anyone else to pay any drawing
under any Letter of Credit as a result of any Government Acts or any other
cause beyond the control of the Issuing Lender.
(d) Nothing in this Section 2.19 is intended to limit the
reimbursement obligation of the Borrower contained in Section 2.4(d)
hereof. The obligations of the Borrower under this Section 2.19 shall
survive the termination of this Agreement. No act or omissions of any
current or prior beneficiary of a Letter of Credit shall in any way affect
or impair the rights of the Issuing Lender to enforce any right, power or
benefit under this Agreement.
(e) Notwithstanding anything to the contrary contained in this
Section 2.19, the Borrower shall have no obligation to indemnify any
Issuing Lender in respect of any liability incurred by such Issuing Lender
arising out of the gross negligence or willful misconduct of the Issuing
Lender (including action not taken by an Issuing Lender), as determined by
a court of competent jurisdiction.
SECTION 2.20 DEFAULTING LENDERS.
------------------
(a) Generally. In addition to the rights and remedies that may be
---------
available to the Agent or the Borrower under this Agreement or applicable
law, if at any time a Lender is a Defaulting Lender such Defaulting
Lender's right to participate in the administration of
47
<PAGE>
the Loans, this Agreement and the other Credit Documents, including without
limitation, any right to vote in respect of, to consent to or to direct any
action or inaction of the Agent or to be taken into account in the
calculation of the Required Lenders, shall be suspended during the pendency
of such failure or refusal. If a Lender is a Defaulting Lender because it
has failed to make timely payment to the Agent of any amount required to be
paid to the Agent hereunder (without giving effect to any notice or cure
periods), in addition to other rights and remedies which the Agent or the
Borrower may have under the immediately preceding provisions or otherwise,
the Agent shall be entitled (i) to collect interest from such Defaulting
Lender on such delinquent payment for the period from the date on which the
payment was due until the date on which the payment is made at the Federal
Funds Effective Rate, (ii) to withhold or setoff and to apply in
satisfaction of the defaulted payment and any related interest, any amounts
otherwise payable to such Defaulting Lender under this Agreement or any
other Credit Document until such defaulted payment and related interest has
been paid in full and such default no longer exists and (iii) to bring an
action or suit against such Defaulting Lender in a court of competent
jurisdiction to recover the defaulted amount and any related interest. Any
amounts received by the Agent in respect of a Defaulting Lender's Loans
shall not be paid to such Defaulting Lender and shall be held uninvested by
the Agent and either applied against the purchase price of such Loans under
the following subsection (b) or paid to such Defaulting Lender upon the
default of such Defaulting Lender being cured.
(b) Purchase of Defaulting Lender's Commitment. Any Lender who is not
------------------------------------------
a Defaulting Lender shall have the right, but not the obligation, in its
sole discretion, to acquire all of a Defaulting Lender's Commitment. If
more than one Lender exercises such right, each such Lender shall have the
right to acquire such proportion of such Defaulting Lender's Commitment on
a pro rata basis. Upon any such purchase, the Defaulting Lender's interest
in the Loans and its rights hereunder (but not its liability in respect
thereof or under the Credit Documents or this Agreement to the extent the
same relate to the period prior to the effective date of the purchase)
shall terminate on the date of purchase, and the Defaulting Lender shall
promptly execute all documents reasonably requested to surrender and
transfer such interest to the purchaser thereof subject to and in
accordance with the requirements set forth in Section 9.6, including an
appropriate Commitment Transfer Supplement. The purchase price for the
Commitment of a Defaulting Lender shall be equal to the amount of the
principal balance of the Loans outstanding and owed by the Borrower to the
Defaulting Lender. Prior to payment of such purchase price to a Defaulting
Lender, the Agent shall apply against such purchase price any amounts
retained by the Agent pursuant to the last sentence of the immediately
preceding subsection (a). The Defaulting Lender shall be entitled to
receive amounts owed to it by the Borrower under the Credit Documents which
accrued prior to the date of the default by the Defaulting Lender, to the
extent the same are received by the Agent from or on behalf of the
Borrower. There shall be no recourse against any Lender or the Agent for
the payment of such sums except to the extent of the receipt of payments
from any other party or in respect of the Loans.
48
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Extensions of Credit herein provided for, the Borrower hereby represents and
warrants to the Agent and to each Lender that:
SECTION 3.1 FINANCIAL CONDITION.
-------------------
The balance sheets and the related statements of income and of cash flows
of the Borrower for fiscal year 1997 audited by Coopers & Lybrand, LLP are
complete and correct and present fairly the financial condition of the Borrower
and its Subsidiaries as of such dates. All such financial statements, including
the related schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as disclosed
therein).
SECTION 3.2 NO CHANGE.
---------
Since December 31, 1997 (and after delivery of annual audited financial
statements in accordance Section 5.1(a), from the date of the most recently
delivered annual audited financial statements) there has been no development or
event which has had or could reasonably be expected to have a Material Adverse
Effect.
SECTION 3.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW.
----------------------------------------
Each of the Borrower and its Subsidiaries (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the requisite power and authority and the legal right to
own and operate all its material property, to lease the material property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified to conduct business and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification except to the extent that
the failure to so qualify or be in good standing could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect and (d) is in
compliance with all Requirements of Law except to the extent that the failure to
comply therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
SECTION 3.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
-------------------------------------------------------
Each of the Borrower and the other Credit Parties has full power and
authority and the legal right to make, deliver and perform the Credit Documents
to which it is party and has taken all necessary limited liability company or
corporate action to authorize the execution, delivery and performance by it of
the Credit Documents to which it is party. No consent or authorization of,
filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the borrowings
hereunder or with the execution, delivery or
49
<PAGE>
performance of any Credit Document by the Borrower or the other Credit Parties
(other than those which have been obtained) or with the validity or
enforceability of any Credit Document against the Borrower or the other Credit
Parties (except such filings as are necessary in connection with the perfection
of the Liens created by such Credit Documents), except for such consents or
authorizations of any Governmental Authority, the failure of which to possess or
obtain could not reasonably be expected to have a Material Adverse Effect. Each
Credit Document to which it is a party has been duly executed and delivered on
behalf of the Borrower or the other Credit Parties, as the case may be. Each
Credit Document to which it is a party constitutes a legal, valid and binding
obligation of the Borrower or the other Credit Parties, as the case may be,
enforceable against the Borrower or such other Credit Party, as the case may be,
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
SECTION 3.5 NO LEGAL BAR; NO DEFAULT.
------------------------
The execution, delivery and performance of the Credit Documents, the
borrowings thereunder and the use of the proceeds of the Loans will not violate
any Requirement of Law or any Material Contract of the Borrower or its
Subsidiaries (except those as to which waivers or consents have been obtained),
and will not result in, or require, the creation or imposition of any Lien on
any of its or their respective properties or revenues pursuant to any
Requirement of Law or any Material Contract other than the Liens arising under
or contemplated in connection with the Credit Documents. Neither the Borrower
nor any of its Subsidiaries is in default under or with respect to any of its
Material Contracts. No Default or Event of Default has occurred and is
continuing.
SECTION 3.6 NO MATERIAL LITIGATION.
----------------------
Except as set forth in Schedule 3.6, no litigation, investigation or
------------
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the best knowledge of the Borrower, threatened by or against the Borrower or
any of its Subsidiaries or against any of its or their respective properties or
revenues (a) with respect to the Credit Documents or any Loan or any of the
transactions contemplated hereby, or (b) which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect.
SECTION 3.7 INVESTMENT COMPANY ACT.
----------------------
Neither the Borrower nor any Credit Party is an "investment company", or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
50
<PAGE>
SECTION 3.8 MARGIN REGULATIONS.
------------------
No part of the proceeds of any Loan hereunder will be used directly or
indirectly for any purpose which violates, or which would be inconsistent with,
the provisions of Regulation T, U or X of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect. The Borrower
and its Subsidiaries taken as a group do not own "margin stock" except as
identified in the financial statements referred to in Section 3.1 and the
aggregate value of all "margin stock" owned by the Borrower and its Subsidiaries
taken as a group does not exceed 25% of the value of their assets.
SECTION 3.9 ERISA.
-----
Except as set forth in Schedule 3.9, neither a Reportable Event nor an
------------
"accumulated funding deficiency" (within the meaning of Section 412 of the Code
or Section 302 of ERISA) has occurred during the five-year period prior to the
date on which this representation is made or deemed made with respect to any
Plan, and to the Borrower's knowledge, each Plan has complied in all material
respects with the applicable provisions of ERISA and the Code, except to the
extent that any such occurrence or failure to comply would not reasonably be
expected to have a Material Adverse Effect. No termination of a Single Employer
Plan has occurred resulting in any liability that has remained underfunded, and
no Lien in favor of the PBGC or a Plan has arisen, during such five-year period
which could reasonably be expected to have a Material Adverse Effect. The
present value of all accrued benefits under each Single Employer Plan (based on
those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits by an amount which, as determined in accordance with GAAP, could
reasonably be expected to have a Material Adverse Effect. Neither the Borrower
nor any Commonly Controlled Entity is currently subject to any liability for a
complete or partial withdrawal from a Multiemployer Plan which could reasonably
be expected to have a Material Adverse Effect.
SECTION 3.10 ENVIRONMENTAL MATTERS.
---------------------
Except as set forth on Schedule 3.10, and with the exception of matters
-------------
that have been resolved or are not reasonably expected to give rise to a
Material Adverse Effect:
(a) To the best knowledge of the Borrower, the facilities and
properties owned, leased or operated by the Borrower or any of its
Subsidiaries (the "Properties") do not contain any Materials of
----------
Environmental Concern in amounts or concentrations which constitute a
current violation of any Environmental Law.
(b) To the best knowledge of the Borrower, the Properties and all
operations of the Borrower and/or its Subsidiaries at the Properties are in
compliance, and have in the last five years been in compliance, in all
material respects with all applicable Environmental Laws, and there is no
contamination at, under or about the Properties requiring remediation under
any Environmental Law or violation of any Environmental
51
<PAGE>
Law with respect to the Properties or the business operated by the Borrower
or any of its Subsidiaries (the "Business").
--------
(c) Neither the Borrower nor any of its Subsidiaries has received any
outstanding unresolved written or actual notice of violation, alleged
violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with regard to
any of the Properties or the Business, nor does the Borrower or any of its
Subsidiaries have knowledge or reason to believe that any such notice will
be received or is being threatened.
(d) To the best knowledge of the Borrower, Materials of Environmental
Concern have not been transported or disposed of from the Properties in
violation of, or in a manner or to a location which could reasonably be
expected to give rise to material liability under any Environmental Law,
nor have any Materials of Environmental Concern been generated, treated,
stored or disposed of at, on or under any of the Properties in material
violation of any applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary is or will be
named as a party with respect to the Properties or the Business, nor are
there any unresolved consent decrees or other unresolved decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect
to the Properties or the Business.
(f) To the best knowledge of the Borrower, there has been no
unresolved release or threat of release of Materials of Environmental
Concern at or from the Properties, or arising from or related to the
operations of the Borrower or any Subsidiary in connection with the
Properties or otherwise in connection with the Business, in material
violation of or in amounts or in a manner that could reasonably be expected
to give rise to material liability under Environmental Laws.
SECTION 3.11 PURPOSE OF LOANS.
----------------
The proceeds of the Loans will be used to fund a portion of a secured loan
of $135,043,844.62 to Glass Holdings on the Closing Date to finance the
Acquisition in part, to refinance existing indebtedness of the Borrower and its
Subsidiaries and for general corporate purposes, including working capital and
letters of credit.
SECTION 3.12 SUBSIDIARIES.
------------
Set forth on Schedule 3.12 is a complete and accurate list of all
-------------
Subsidiaries of the Borrower as of the Closing Date. Information on the
attached Schedule includes state of incorporation; the number of shares of each
class of Capital Stock or other equity interests outstanding; the number and
percentage of outstanding shares of each class of stock; and the
52
<PAGE>
number and effect, if exercised, of all outstanding options, warrants, rights of
conversion or purchase and similar rights. The outstanding Capital Stock and
other equity interests of all Subsidiaries is validly issued, fully paid and
non-assessable and is owned, free and clear of all Liens (other than those
arising under or contemplated in connection with the Credit Documents).
SECTION 3.13 OWNERSHIP.
---------
Each of the Borrower and its Subsidiaries is the owner of, and has good and
marketable title to, or a valid leasehold interest in, all of its respective
assets, except as may be permitted pursuant Section 6.13 hereof, and none of
such assets is subject to any Lien other than Permitted Liens.
SECTION 3.14 INDEBTEDNESS.
------------
Except as otherwise permitted under Section 6.1, the Borrower and its
Subsidiaries have no Indebtedness.
SECTION 3.15 TAXES.
-----
Each of the Borrower and its Subsidiaries has filed, or caused to be filed,
all tax returns (federal, state, local and foreign) required to be filed and
paid (a) all amounts of taxes shown thereon to be due (including interest and
penalties) and (b) all other taxes, fees, assessments and other governmental
charges (including mortgage recording taxes, documentary stamp taxes and
intangibles taxes) owing by it, except for such taxes (i) which are not yet
delinquent, (ii) that are being contested in good faith and by proper
proceedings, and against which adequate reserves are being maintained in
accordance with GAAP or (iii) where the failure to file or pay could not
reasonably be expected to have a Material Adverse Effect. Neither the Borrower
nor any of its Subsidiaries is aware as of the Closing Date of any proposed tax
assessments against it or any of its Subsidiaries which could reasonably be
expected to have a Material Adverse Effect.
SECTION 3.16 INTELLECTUAL PROPERTY.
---------------------
Each of the Borrower and its Subsidiaries owns, or has the legal right to
use, all trademarks, tradenames, copyrights, technology, know-how and processes
necessary for each of them to conduct its business as currently conducted. Set
forth on Schedule 3.16 is a list of all Intellectual Property owned by each of
-------------
the Borrower and its Subsidiaries or that the Borrower or any of its
Subsidiaries has the right to use. Except as provided on Schedule 3.16, no
-------------
claim has been asserted and is pending by any Person challenging or questioning
the use of any such Intellectual Property or the validity or effectiveness of
any such Intellectual Property, nor does the Borrower or any of its Subsidiaries
know of any such claim, and, to the knowledge of the Borrower or any of its
Subsidiaries, the use of such Intellectual Property by the Borrower or any of
its Subsidiaries does not infringe on the rights of any Person, except for such
claims and infringements that in the aggregate, could not reasonably be expected
to have a Material Adverse Effect. Schedule 3.16 may be updated from time to
-------------
time by the Borrower to include new Intellectual Property by giving written
notice thereof to the Agent.
53
<PAGE>
SECTION 3.17 SOLVENCY.
--------
The fair saleable value of each Credit Party's assets, measured on a going
concern basis, exceeds all probable liabilities, including those to be incurred
pursuant to this Credit Agreement. None of the Credit Parties (a) has
unreasonably small capital in relation to the business in which it is or
proposes to be engaged or (b) has incurred, or believes that it will incur after
giving effect to the transactions contemplated by this Credit Agreement, debts
beyond its ability to pay such debts as they become due.
SECTION 3.18 INVESTMENTS.
-----------
All investments of each of the Borrower and its Subsidiaries are Permitted
Investments.
SECTION 3.19 LOCATION OF COLLATERAL.
----------------------
Set forth on Schedule 3.19(a) is a list of the Properties of the Borrower
----------------
and its Subsidiaries with street address, county and state where located. Set
forth on Schedule 3.19(b) is a list of all locations where any tangible personal
----------------
property (other than property in transit and consigned goods, and with respect
to consigned goods, the fair market value of which is less than $1,000,000 at
any one location) of the Borrower and its Subsidiaries is located, including
county and state where located. Set forth on Schedule 3.19(c) is the chief
----------------
executive office and principal place of business of each of the Borrower and its
Subsidiaries. Schedule 3.19(a), 3.19(b) and 3.19(c) may be updated from time to
---------------- ------- -------
time by the Borrower without the consent of the Agent or any Lender to include
new properties or locations by giving written notice thereof to the Agent.
SECTION 3.20 NO BURDENSOME RESTRICTIONS.
--------------------------
None of the Borrower or any of its Subsidiaries is a party to any agreement
or instrument or subject to any other obligation or any charter or corporate
restriction or any provision of any applicable law, rule or regulation which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
SECTION 3.21 BROKERS' FEES.
-------------
None of the Borrower or any of its Subsidiaries has any obligation to any
Person in respect of any finder's, broker's, investment banking or other similar
fee in connection with any of the transactions contemplated under the Credit
Documents other than the closing and other fees payable pursuant to this Credit
Agreement.
SECTION 3.22 LABOR MATTERS.
-------------
There are no collective bargaining agreements or Multiemployer Plans
covering the employees of the Borrower or any of its Subsidiaries as of the
Closing Date, other than as set forth in Schedule 3.22 hereto, and none of the
-------------
Borrower or any of its Subsidiaries (i) has suffered
54
<PAGE>
any strikes, walkouts, work stoppages or other material labor difficulty within
the last five years prior to the Closing Date, other than as set forth in
Schedule 3.22 hereto or (ii) has knowledge of any potential or pending strike,
- -------------
walkout or work stoppage.
SECTION 3.23 ACCURACY AND COMPLETENESS OF INFORMATION.
----------------------------------------
All factual information heretofore, contemporaneously or hereafter
furnished by or on behalf of the Borrower or any of its Subsidiaries to the
Agent or any Lender for purposes of or in connection with this Agreement or any
other Credit Document, or any transaction contemplated hereby or thereby, is or
will be true and accurate in all material respects and not incomplete by
omitting to state any material fact necessary to make such information not
misleading. There is no fact now known to the Borrower or any of its
Subsidiaries which has, or could reasonably be expected to have, a Material
Adverse Effect which fact has not been set forth herein, in the financial
statements of the Borrower and its Subsidiaries furnished to the Agent and/or
the Lenders, or in any certificate, opinion or other written statement made or
furnished by the Borrower to the Agent and/or the Lenders.
SECTION 3.24 YEAR 2000 ISSUE.
---------------
Any reprogramming and related testing required to permit the proper
functioning of the Credit Parties' computer systems in and following the year
2000 will be completed in all material respects prior to September 1, 1999 (that
is, the Credit Parties will be "Year 2000 Compliant"), and the cost to the
Credit Parties of such reprogramming and testing will not result in a Default or
Event of Default or a Material Adverse Effect. Except for such reprogramming
referred to in the preceding sentence as may be necessary, the computer and
management information systems of the Credit Parties and their Subsidiaries are
and, with ordinary course upgrading and maintenance, will continue for the term
of this Agreement to be, adequate for the conduct of its business.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 CONDITIONS TO CLOSING DATE AND INITIAL REVOLVING LOANS AND
----------------------------------------------------------
TERM LOANS.
- ----------
This Agreement shall become effective upon, and the obligation of each
Lender to make the initial Revolving Loans and Term Loans on the Closing Date is
subject to, the satisfaction of the following conditions precedent:
(a) Execution of Agreement. The Agent shall have received (i)
----------------------
counterparts of this Agreement, executed by a duly authorized officer of
each party hereto, (ii) for the account of each Lender, Revolving Notes and
Term Notes, and for the account of the Swingline Lender, a Swingline Note
and (iii) counterparts of the Security Agreement, the Pledge Agreement and
the GHC Pledge Agreements, in each case conforming to the
55
<PAGE>
requirements of this Agreement and executed by duly authorized officers of
the Credit Parties or other Person, as applicable.
(b) Authority Documents. The Agent shall have received the following:
-------------------
(i) Articles of Incorporation. Copies of the articles of
-------------------------
incorporation or other charter documents, as applicable, of each
Credit Party certified to be true and complete as of a recent date by
the appropriate governmental authority of the state of its
incorporation.
(ii) Resolutions. Copies of resolutions of the board of
-----------
directors of each Credit Party approving and adopting the Credit
Documents, the transactions contemplated therein and authorizing
execution and delivery thereof, certified by an officer of such Credit
Party as of the Closing Date to be true and correct and in force and
effect as of such date.
(iii) Bylaws. A copy of the bylaws of each Credit Party certified
------
by an officer of such Credit Party as of the Closing Date to be true
and correct and in force and effect as of such date.
(iv) Good Standing. Copies of (i) certificates of good standing,
-------------
existence or its equivalent with respect to the each Credit Party
certified as of a recent date by the appropriate governmental
authorities of the state of incorporation and each other state in
which the failure to so qualify and be in good standing could
reasonably be expected to have a Material Adverse Effect on the
business or operations of the Borrower and its Subsidiaries in such
state and (ii) a certificate indicating payment of all corporate
franchise taxes certified as of a recent date by the appropriate
governmental taxing authorities.
(v) Incumbency. An incumbency certificate of each Credit Party
----------
certified by a secretary or assistant secretary to be true and correct
as of the Closing Date.
(c) Legal Opinions of Counsel. The Agent shall have received an
-------------------------
opinion of Alston & Bird, LLP, counsel for the Credit Parties, dated the
Closing Date and addressed to the Agent and the Lenders, in form and
substance acceptable to the Agent.
(d) Personal Property Collateral. The Agent shall have received, in
----------------------------
form and substance satisfactory to the Agent:
(i) searches of Uniform Commercial Code filings in the
jurisdiction of the chief executive office of each Credit Party and
each jurisdiction where any Collateral is located or where a filing
would need to be made in order to perfect the Agent's security
interest in the Collateral, copies of the financing statements on
56
<PAGE>
file in such jurisdictions and evidence that no Liens exist other than
Permitted Liens;
(ii) duly executed UCC financing statements for each
appropriate jurisdiction as is necessary, in the Agent's sole
discretion, to perfect the Agent's security interest in the
Collateral;
(iii) searches of ownership of Intellectual Property in the
appropriate governmental offices and such patent/trademark/copyright
filings as requested by the Agent in order to perfect the Agent's
security interest in the Collateral;
(iv) all stock certificates evidencing the Capital Stock
pledged to the Agent pursuant to the Pledge Agreement and the GHC
Pledge Agreements, together with duly executed in blank undated stock
powers attached thereto (unless, with respect to the pledged Capital
Stock of any Foreign Subsidiary, such stock powers are deemed
unnecessary by the Agent in its reasonable discretion under the law of
the jurisdiction of incorporation of such Person);
(v) such patent/trademark/copyright filings as requested by
the Agent in order to perfect the Agent's security interest in the
Intellectual Property;
(vi) all instruments and chattel paper in the possession of any
of the Credit Parties, together with allonges or assignments as may be
necessary or appropriate to perfect the Agent's security interest in
the Collateral;
(vii) duly executed consents as are necessary, in the Agent's
sole discretion, to perfect the Lenders' security interest in the
Collateral; and
(viii) in the case of any personal property Collateral located at
premises leased by a Credit Party the fair market value of which is
greater than $250,000, such estoppel letters, consents and waivers
from the landlords on such real property as may be required by the
Agent.
(e) Real Property Collateral. The Agent shall have received, in form
------------------------
and substance satisfactory to the Agent:
(i) fully executed and notarized mortgages, deeds of trust or
deeds to secure debt (each, as the same may be amended, modified,
restated or supplemented from time to time, a "Mortgage Instrument"
-------------------
and collectively the "Mortgage Instruments") encumbering the fee
--------
interest and/or ground leasehold interest of any Credit Party in each
real property asset designated as a fee interest or ground lease in
Schedule 3.19(a) (each a "Mortgaged Property" and collectively the
---------------- ------------------
"Mortgaged Properties");
--------------------
57
<PAGE>
(ii) a title report obtained by the Credit Parties in respect of
each of the Mortgaged Properties;
(iii) in the case of each real property leasehold interest of any
Credit Party constituting Mortgaged Property, (a) such estoppel
letters, consents and waivers from the landlords on such real property
as may be required by the Agent, which estoppel letters shall be in
the form and substance reasonably satisfactory to the Agent and (b)
evidence that the applicable lease, a memorandum of lease with respect
thereto, or other evidence of such lease in form and substance
reasonably satisfactory to the Agent, has been or will be recorded in
all places to the extent necessary or desirable, in the reasonable
judgment of the Agent, so as to enable the Mortgage Instrument
encumbering such leasehold interest to effectively create a valid and
enforceable first priority lien (subject to Permitted Liens) on such
leasehold interest in favor of the Agent (or such other Person as may
be required or desired under local law) for the benefit of Lenders;
(iv) ALTA mortgagee title insurance policies issued by Chicago
Title Insurance Company (the "Mortgage Policies"), in amounts not less
-----------------
than the respective amounts designated in Schedule 3.19(a) with
----------------
respect to any particular Mortgaged Property, assuring the Agent that
each of the Mortgage Instruments creates a valid and enforceable first
priority mortgage lien on the applicable Mortgaged Property, free and
clear of all defects and encumbrances except Permitted Liens, which
Mortgage Policies shall be in form and substance reasonably
satisfactory to the Agent and shall provide for affirmative insurance
and such reinsurance as the Agent may reasonably request, all of the
foregoing in form and substance reasonably satisfactory to the Agent;
(v) evidence as to (A) whether any Mortgaged Property is in an
area designated by the Federal Emergency Management Agency as having
special flood or mud slide hazards (a "Flood Hazard Property") and (B)
---------------------
if any Mortgaged Property is a Flood Hazard Property, (1) whether the
community in which such Mortgaged Property is located is participating
in the National Flood Insurance Program, (2) the applicable Credit
Party's written acknowledgment of receipt of written notification from
the Agent (a) as to the fact that such Mortgaged Property is a Flood
Hazard Property and (b) as to whether the community in which each such
Flood Hazard Property is located is participating in the National
Flood Insurance Program and (3) copies of insurance policies or
certificates of insurance of the Borrower and its Subsidiaries
evidencing flood insurance satisfactory to the Agent and naming the
Agent as sole loss payee on behalf of the Lenders;
(vi) maps or plats of an as-built survey of the sites of the
Mortgaged Properties certified to the Agent and the Title Insurance
Company in a manner reasonably satisfactory to them, dated a date
satisfactory to each of the Agent and the Title Insurance Company by
an independent professional licensed land surveyor reasonably
satisfactory to each of the Agent and the Title Insurance
58
<PAGE>
Company, which maps or plats and the surveys on which they are based
shall be sufficient to delete any standard printed survey exception
contained in the applicable title policy and be made in accordance
with the Minimum Standard Detail Requirements for Land Title Surveys
jointly established and adopted by the American Land Title Association
and the American Congress on Surveying and Mapping in 1992, and,
without limiting the generality of the foregoing, there shall be
surveyed and shown on such maps, plats or surveys the following: (A)
the locations on such sites of all the buildings, structures and other
improvements and the established building setback lines; (B) the lines
of streets abutting the sites and width thereof; (C) all access and
other easements appurtenant to the sites necessary to use the sites;
(D) all roadways, paths, driveways, easements, encroachments and
overhanging projections and similar encumbrances affecting the site,
whether recorded, apparent from a physical inspection of the sites or
otherwise known to the surveyor; (E) any encroachments on any
adjoining property by the building structures and improvements on the
sites; and (F) if the site is described as being on a filed map, a
legend relating the survey to said map; and
(vii) evidence satisfactory to the Agent that each of the
Mortgaged Properties, and the uses of the Mortgaged Properties, are in
compliance in all material respects with all applicable laws,
regulations and ordinances including without limitation health and
environmental protection laws, erosion control ordinances, storm
drainage control laws, doing business and/or licensing laws, zoning
laws (the evidence submitted as to zoning should include the zoning
designation made for each of the Mortgaged Properties, the permitted
uses of each such Mortgaged Properties under such zoning designation
and zoning requirements as to parking, lot size, ingress, egress and
building setbacks) and laws regarding access and facilities for
disabled persons including, but not limited to, the federal
Architectural Barriers Act, the Fair Housing Amendments Act of 1988,
the Rehabilitation Act of 1973 and the Americans with Disabilities Act
of 1990.
(f) Liability and Casualty Insurance. The Agent shall have received
--------------------------------
copies of insurance policies or certificates of insurance evidencing
liability and casualty insurance meeting the requirements set forth herein
or in the Security Documents. The Agent shall be named as loss payee and
additional insured on all such insurance policies for the benefit of the
Lenders.
(g) Fees. The Agent shall have received all fees, if any, owing
----
pursuant to the Fee Letter and Section 2.5.
(h) Litigation. There shall not exist any pending litigation or
----------
investigation affecting or relating to the Borrower or any of its
Subsidiaries, this Agreement and the other Credit Documents that in the
reasonable judgment of the Agent could materially adversely affect the
Borrower or any of its Subsidiaries, this Agreement and the other
59
<PAGE>
Credit Documents, that has not been settled, dismissed, vacated, discharged
or terminated prior to the Closing Date.
(i) Solvency Evidence. (A) The Agent shall have received an officer's
-----------------
certificate for each Credit Party prepared by the chief financial officer
of each such Credit Party as to the financial condition, solvency and
related matters of each such Credit Party, in each case after giving effect
to the Acquisition and the initial borrowings under the Credit Documents,
in substantially the form of Schedule 4.1(i-A) hereto and (B) the Agent
-----------------
shall have received a solvency opinion (obtained at the sole cost and
expense of the Agent) from a firm satisfactory to the Agent as to the
solvency and related matters of the Borrower after giving effect to the
Acquisition, the loan to Glass Holdings described in clause (k) immediately
below and the initial borrowings under the Credit Documents.
(j) Account Designation Letter. The Agent shall have received the
--------------------------
executed Account Designation Letter in the form of Schedule 1.1(a) hereto.
---------------
(k) Loan to Glass Holdings. Simultaneously with the making of the
----------------------
Term Loans and the initial Revolving Loan hereunder, the Borrower shall
have loaned $135,043,844.62 to Glass Holdings, and Glass Holdings shall
have loaned such amount to GHC Sub, to finance the Acquisition in part.
Such loan to Glass Holdings shall be evidenced by a secured promissory note
which the Borrower shall have pledged to the Agent together with an
undated, executed allonge.
(l) Bridge Loan. Simultaneously with the making of the Term Loans and
-----------
the initial Revolving Loan hereunder, GHC Sub shall have received the
proceeds from a interim bridge loan of at least $198,900,000 to finance the
Acquisition in part.
(m) Advanced Glassfiber Yarns Credit Agreement. The closing of the
------------------------------------------
Advanced Glassfiber Yarns Credit Agreement shall have occurred, and all
conditions precedent contained therein shall have been satisfied.
(n) Corporate Structure. The corporate capital and ownership
-------------------
structure of the Borrower and its Subsidiaries shall be as described in
Schedule 3.12. The Agent shall be satisfied with management structure,
-------------
legal structure, voting control, liquidity, total leverage and total
capitalization of the Borrower as of the Closing Date.
(o) Subordinated Debt. The Borrower shall have received gross
-----------------
proceeds from the issuance of the Subordinated Debt in an aggregate
principal amount of not less than $65,000,000. The terms and conditions
governing the Subordinated Debt shall be acceptable to the Agent and the
Agent shall have received a copy, certified by an officer of the Borrower
as true and complete, of the Subordinated Debt Documentation as originally
executed and delivered, together with all exhibits and schedules thereto.
(p) Government Consent. The Agent shall have received evidence that
------------------
all governmental, shareholder and material third party consents and
approvals necessary in
60
<PAGE>
connection with the financings and other transactions contemplated hereby
have been obtained and all applicable waiting periods have expired without
any action being taken by any authority that could restrain, prevent or
impose any material adverse conditions on such transactions or that could
seek or threaten any of the foregoing.
(q) Compliance with Laws. The financings and other transactions
--------------------
contemplated hereby shall be in compliance with all applicable laws and
regulations (including all applicable securities and banking laws, rules
and regulations).
(r) Bankruptcy. There shall be no bankruptcy or insolvency
----------
proceedings with respect to the Borrower or any of its Subsidiaries.
(s) Consolidated EBITDA. Consolidated EBITDA of the Borrower and its
-------------------
Subsidiaries for the twelve month period ending August 31, 1998 shall be
greater than or equal to $40,000,000.
(t) Existing Indebtedness. All of the existing senior bank
---------------------
indebtedness and publicly issued senior indebtedness of the Borrower shall
be repaid in full and all security interests related thereto shall be
terminated on the Closing Date.
(u) Financial Statements. The Agent shall have received copies of the
--------------------
financial statements referred to in Section 3.1 hereof, each in form and
substance satisfactory to it.
(v) Environmental Reports. The Agent shall have received satisfactory
---------------------
environmental reports, including Phase I reports of a recent date relating
to the Mortgaged Properties addressed to the Agent and the Lenders or
accompanied by a satisfactory reliance letter from the environmental
consultant that prepared such reports.
(w) Projections. The Agent shall have received the seven year
-----------
financial and operational projections for the Borrower and its Subsidiaries
for the fiscal years 1998 through 2005, together with a detailed
explanation of all management assumptions contained therein, which
projections shall be in form and substance satisfactory to the Agent.
(x) Year 2000 Plan. The Agent shall have received the Borrower's plan
--------------
for becoming Year 2000 Compliant, which plan shall be in form and substance
satisfactory to the Agent.
(y) Additional Matters. All other documents and legal matters in
------------------
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Agent and its counsel.
61
<PAGE>
SECTION 4.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
--------------------------------------
The obligation of each Lender to make any Extension of Credit hereunder is
subject to the satisfaction of the following conditions precedent on the date of
making such Extension of Credit:
(a) Representations and Warranties. The representations and
------------------------------
warranties made by the Credit Parties herein, in the Security Documents or
which are contained in any certificate furnished at any time under or in
connection herewith shall be true and correct in all material respects on
and as of the date of such Extension of Credit as if made on and as of such
date (except for those which expressly relate to an earlier date).
(b) No Default or Event of Default. No Default or Event of Default
------------------------------
shall have occurred and be continuing on such date or after giving effect
to the Extension of Credit to be made on such date unless such Default or
Event of Default shall have been waived in accordance with this Agreement.
(c) Compliance with Commitments. Immediately after giving effect to
---------------------------
the making of any such Extension of Credit (and the application of the
proceeds thereof), (i) the sum of the aggregate principal amount of
outstanding Revolving Loans plus Swingline Loans plus LOC Obligations shall
---- ----
not exceed the aggregate Revolving Committed Amount then in effect, (ii)
the LOC Obligations shall not exceed the LOC Committed Amount and (iii) the
Swingline Loans shall not exceed the Swingline Commitment.
(d) Additional Conditions to Revolving Loans. If such Loan is made
----------------------------------------
pursuant to Section 2.1, all conditions set forth in such Section shall
have been satisfied.
(e) Additional Conditions to Term Loans. If such Loan is made
-----------------------------------
pursuant to Section 2.2, all conditions set forth in such Section shall
have been satisfied.
(f) Additional Conditions to Swingline Loan. If such Loan is made
---------------------------------------
pursuant to Section 2.3, all conditions set forth in such Section shall
have been satisfied.
(g) Additional Conditions to Letters of Credit. If such Extension of
------------------------------------------
Credit is made pursuant to Section 2.4, all conditions set fort in such
Section shall have been satisfied.
Each request for an Extension of Credit and each acceptance by the Borrower
of any such Extension of Credit shall be deemed to constitute a representation
and warranty by the Borrower as of the date of such Extension of Credit that the
applicable conditions in paragraphs (a) through (g) of this Section have been
satisfied.
62
<PAGE>
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that on the Closing Date, and
thereafter for so long as this Agreement is in effect and until the Commitments
have terminated, no Note remains outstanding and unpaid and the Credit Party
Obligations, together with interest, Commitment Fees and all other amounts owing
to the Agent or any Lender hereunder, are paid in full, the Borrower shall, and
shall cause each of its Subsidiaries (other than in the case of Sections 5.1,
5.2 or 5.7 hereof), to:
SECTION 5.1 FINANCIAL STATEMENTS.
--------------------
Furnish to the Agent and each of the Lenders:
(a) Annual Financial Statements. As soon as available, but in any
---------------------------
event within ninety (90) days after the end of each fiscal year of the
Borrower, a copy of the consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income and retained earnings and of cash flows
of the Borrower and its consolidated Subsidiaries for such year, audited by
a firm of independent certified public accountants of nationally recognized
standing reasonably acceptable to the Required Lenders, setting forth in
each case in comparative form the figures for the previous year, reported
on without a "going concern" or like qualification or exception, or
qualification indicating that the scope of the audit was inadequate to
permit such independent certified public accountants to certify such
financial statements without such qualification;
(b) Quarterly Financial Statements. As soon as available and in any
------------------------------
event within forty-five (45) days after the end of each of the first three
fiscal quarters of the Borrower, a company-prepared consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at the end of
such period and related company-prepared statements of income and retained
earnings and of cash flows for the Borrower and its consolidated
Subsidiaries for such quarterly period and for the portion of the fiscal
year ending with such period, in each case setting forth in comparative
form consolidated figures for the corresponding period or periods of the
preceding fiscal year (subject to normal recurring year-end audit
adjustments); and
(c) Annual Budget Plan. As soon as available, but in any event within
------------------
forty-five (45) days after the end of each fiscal year, a copy of the
detailed annual budget or plan of the Borrower for the next fiscal year, in
form and detail reasonably acceptable to the Agent and the Required
Lenders, together with a summary of the material assumptions made in the
preparation of such annual budget or plan;
all such financial statements to be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring year-
end audit adjustments) and to be prepared in
63
<PAGE>
reasonable detail and, in the case of the annual and quarterly financial
statements provided in accordance with subsections (a) and (b) above, in
accordance with GAAP applied consistently throughout the periods reflected
therein and further accompanied by a description of, and an estimation of the
effect on the financial statements on account of, a change, if any, in the
application of accounting principles as provided in Section 1.3.
SECTION 5.2 CERTIFICATES; OTHER INFORMATION.
-------------------------------
Furnish to the Agent and each of the Lenders:
(a) concurrently with the delivery of the financial statements
referred to in Section 5.1(a) above, a certificate of the independent
certified public accountants reporting on such financial statements stating
that in making the examination necessary therefor no knowledge was obtained
of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements
referred to in Sections 5.1(a) and 5.1(b) above, a certificate of a
Responsible Officer stating that, to the best of such Responsible Officer's
knowledge, each of the Credit Parties during such period observed or
performed in all material respects all of its covenants and other
agreements, and satisfied in all material respects every condition,
contained in this Agreement to be observed, performed or satisfied by it,
and that such Responsible Officer has obtained no knowledge of any Default
or Event of Default except as specified in such certificate and such
certificate shall include the calculations in reasonable detail required to
indicate compliance with Section 5.9;
(c) within thirty (30) days after the same are sent, copies of all
reports (other than those otherwise provided pursuant to Section 5.1 and
those which are of a promotional nature) and other financial information
which the Borrower sends to its members, and within thirty days after the
same are filed, copies of all financial statements and non-confidential
reports which the Borrower may make to, or file with the Securities and
Exchange Commission or any successor or analogous Governmental Authority;
(d) [INTENTIONALLY OMITTED]
(e) within ninety (90) days after the end of each fiscal year of the
Borrower, a certificate containing information regarding (i) the
calculation of Excess Cash Flow and (ii) the amount of all Asset
Dispositions, Debt Issuances, and Equity Issuances that were made during
the prior fiscal year and amounts received in connection with any Recovery
Event during the prior fiscal year;
(f) promptly upon receipt thereof, a copy of any other report or
"management letter" submitted by independent accountants to the Borrower or
any of its Subsidiaries in connection with any annual, interim or special
audit of the books of such Person; and
64
<PAGE>
(g) promptly, such additional financial and other information as the
Agent, on behalf of any Lender, may from time to time reasonably request.
SECTION 5.3 PAYMENT OF OBLIGATIONS.
----------------------
Pay, discharge or otherwise satisfy at or before maturity or before they
become delinquent, as the case may be, in accordance with industry practice
(subject, where applicable, to specified grace periods) all its obligations of
whatever nature and any additional costs that are imposed as a result of any
failure to so pay, discharge or otherwise satisfy such obligations, except (i)
when the amount or validity of such obligations and costs is currently being
contested in good faith by appropriate proceedings and reserves, if applicable,
in conformity with GAAP with respect thereto have been provided on the books of
the Borrower or its Subsidiaries, as the case may be or (ii) where the failure
to pay, discharge or satisfy could not reasonably be expected to have a Material
Adverse Effect.
SECTION 5.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.
------------------------------------------------
Continue to engage in business of the same general type as now conducted by
it on the Closing Date and preserve, renew and keep in full force and effect its
corporate existence and take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business; comply with all Contractual Obligations and Requirements of Law
applicable to it except to the extent that failure to comply therewith could
not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 5.5 MAINTENANCE OF PROPERTY; INSURANCE.
----------------------------------
(a) Keep all material property useful and necessary in its business
in good working order and condition (ordinary wear and tear and
obsolescence excepted);
(b) Maintain with financially sound and reputable insurance companies
insurance on all its material property (including without limitation its
material tangible Collateral) in at least such amounts and against at least
such risks as are usually insured against in the same general area by
companies engaged in the same or a similar business; and furnish to the
Agent, upon written request, full information as to the insurance carried;
provided, however, that the Borrower and its Subsidiaries may maintain self
-------- -------
insurance plans to the extent companies of similar size and in similar
businesses do so. The Agent shall be named as loss payee or mortgagee, as
its interest may appear, and/or additional insured with respect to any such
insurance providing coverage in respect of any Collateral, and each
provider of any such insurance shall agree, by endorsement upon the policy
or policies issued by it or by independent instruments furnished to the
Agent, that it will give the Agent thirty (30) days prior written notice
before any such policy or policies shall be altered or canceled, and that
no act or default of the Borrower or any of its Subsidiaries or any other
Person shall affect the rights of the Agent or the Lenders under such
policy or policies. The present insurance coverage of the Borrower and its
Subsidiaries is outlined as to carrier, policy number, expiration date,
type and amount on Schedule 5.5(b); and
---------------
65
<PAGE>
(c) In case of any material loss, damage to or destruction of the
Collateral of any Credit Party or any part thereof, such Credit Party shall
promptly give written notice thereof to the Agent generally describing the
nature and extent of such damage or destruction. In case of any loss,
damage to or destruction of the Collateral of any Credit Party or any part
thereof, after the occurrence and during the continuation of an Event of
Default, such Credit Party, whether or not the insurance proceeds, if any,
received on account of such damage or destruction shall be sufficient for
that purpose, at such Credit Party's cost and expense, will at the option
of the Required Lenders, (i) promptly repair or replace the Collateral of
such Credit Party so lost, damaged or destroyed or (ii) immediately prepay
the Loans with the insurance proceeds received on account thereof in
accordance with Section 2.7(c)(vi).
SECTION 5.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.
------------------------------------------------------
Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its businesses and activities; and
permit, during regular business hours and upon reasonable notice by the Agent or
any Lender, the Agent or any Lender to visit and inspect any of its properties
and examine and make abstracts from any of its books and records (other than
materials protected by the attorney-client privilege and materials which the
Borrower may not disclose without violation of a confidentiality obligation
binding upon it) at any reasonable time and as often as may reasonably be
desired, subject to the rights of tenants in possession of all or a portion of
the Mortgaged Properties pursuant to leases or other occupancy agreements
permitted by hereunder, and to discuss the business, operations, properties and
financial and other condition of the Borrower and its Subsidiaries with officers
and employees of the Borrower and its Subsidiaries and with its independent
certified public accountants.
SECTION 5.7 NOTICES.
-------
Give notice in writing to the Agent (which shall promptly transmit such
notice to each Lender) of:
(a) within five Business Days after the Borrower knows or has reason
to know thereof, the occurrence of any Default or Event of Default;
(b) promptly, any default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect;
(c) promptly, any litigation, or any investigation or proceeding
known to the Borrower, affecting the Borrower or any of its Subsidiaries
which, if adversely determined, could reasonably be expected to have a
Material Adverse Effect;
(d) as soon as possible and in any event within thirty (30) days
after the Borrower knows or has reason to know thereof: (i) the occurrence
or expected
66
<PAGE>
occurrence of any Reportable Event with respect to any Plan, a failure to
make any required contribution to a Plan, the creation of any Lien in favor
of the PBGC (other than a Permitted Lien) or a Plan or any withdrawal from,
or the termination, Reorganization or Insolvency of, any Multiemployer Plan
or (ii) the institution of proceedings or the taking of any other action by
the PBGC or the Borrower or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan; and
(e) promptly, any other development or event which could reasonably
be expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto. In
the case of any notice of a Default or Event of Default, the Borrower shall
specify that such notice is a Default or Event of Default notice on the face
thereof.
SECTION 5.8 ENVIRONMENTAL LAWS.
------------------
(a) Comply in all material respects with, and ensure compliance in
all material respects by all tenants and subtenants, if any, with, all
applicable Environmental Laws and obtain and comply in all material
respects with and maintain, and ensure that all tenants and subtenants
obtain and comply in all material respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws except to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all
lawful orders and directives of all Governmental Authorities regarding
Environmental Laws except to the extent that the same are being contested
in good faith by appropriate proceedings and the pendency of such
proceedings could not reasonably be expected to have a Material Adverse
Effect; and
(c) Defend, indemnify and hold harmless the Agent and the Lenders,
and their respective employees, agents, officers and directors, from and
against any and all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known
or unknown, contingent or otherwise, arising out of, or in any way relating
to the material violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the Borrower any of its
Subsidiaries or the Properties, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
reasonable attorney's and consultant's fees, investigation and laboratory
fees, response costs, court costs and litigation expenses, provided,
--------
however, that the Borrower shall be given notice and the reasonable
-------
opportunity as reasonable under the circumstances to address, correct and,
as appropriate, remediate
67
<PAGE>
any violations of, noncompliance with or liability under such Environmental
Laws before the Agent or any Lender (i) undertakes any action to address
such violations, noncompliance or liability or (ii) seeks indemnification
for claims, demands, penalties, fines, liabilities, settlements, damages,
costs or other expenses arising therefrom or relating thereto; provided,
--------
further, that the Borrower shall not be obligated to defend, indemnify, or
-------
hold harmless the Agent or any Lender in the event the Agent or any Lender
fails to give the Borrower such notices or such opportunity as is
reasonably under the circumstances to correct or, as appropriate, remediate
any of the foregoing which arise out of the voluntary and unnecessary
intervention, gross negligence or willful misconduct of the party seeking
indemnification therefor. The agreements in this paragraph shall survive
repayment of the Notes and all other amounts payable hereunder.
SECTION 5.9 FINANCIAL COVENANTS.
-------------------
Commencing on the day immediately following the Closing Date, the Borrower
shall, and shall cause each of its Subsidiaries to, comply with the following
financial covenants:
(a) Leverage Ratio. The Leverage Ratio as of the last day of each
--------------
fiscal quarter of the Credit Parties shall be less than or equal to:
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Fiscal Year March 31 June 30 September 30 December 31
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 5.00 to 1.0 5.00 to 1.0
------------------------------------------------------------------------
1999 5.00 to 1.0 4.75 to 1.0 4.75 to 1.0 4.50 to 1.0
------------------------------------------------------------------------
2000 4.50 to 1.0 4.00 to 1.0 4.00 to 1.0 3.75 to 1.0
------------------------------------------------------------------------
2001 3.75 to 1.0 3.75 to 1.0 3.75 to 1.0 3.50 to 1.0
------------------------------------------------------------------------
2002 3.50 to 1.0 3.50 to 1.0 3.50 to 1.0 3.25 to 1.0
------------------------------------------------------------------------
thereafter 3.25 to 1.0
------------------------------------------------------------------------
</TABLE>
(b) Consolidated Net Worth. As of the end of any fiscal quarter,
----------------------
commencing with the fiscal quarter ending September 30, 1998, Consolidated
Net Worth of the Borrower and its Subsidiaries shall be greater than or
equal to (i) negative $43,000,000 plus (ii) 50% of cumulative quarterly
Consolidated Net Income beginning with the fiscal quarter ended December
31, 1998 (without deduction for any quarterly losses) plus (iii) 100% of
the Net Cash Proceeds received by the Borrower or any of its Subsidiaries
of any Equity Issuance by the Borrower or any of its Subsidiaries
subsequent to the Closing Date.
68
<PAGE>
(c) Interest Coverage Ratio. The Interest Coverage Ratio as of the
-----------------------
last day of each fiscal quarter of the Credit Parties shall be greater than
or equal to:
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Fiscal Year March 31 June 30 September 30 December 31
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 2.25 to 1.0 2.25 to 1.0
------------------------------------------------------------------------
1999 2.25 to 1.0 2.25 to 1.0 2.25 to 1.0 2.25 to 1.0
------------------------------------------------------------------------
2000 2.25 to 1.0 2.25 to 1.0 2.25 to 1.0 2.50 to 1.0
------------------------------------------------------------------------
2001 2.50 to 1.0 2.50 to 1.0 2.50 to 1.0 2.75 to 1.0
------------------------------------------------------------------------
2002 2.75 to 1.0 2.75 to 1.0 2.75 to 1.0 3.00 to 1.0
------------------------------------------------------------------------
thereafter 3.00 to 1.0
------------------------------------------------------------------------
</TABLE>
(d) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio as
---------------------------
of the last day of each fiscal quarter of the Credit Parties shall be
greater than or equal to:
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Fiscal Year March 31 June 30 September 30 December 31
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 1.05 to 1.0 1.05 to 1.0
------------------------------------------------------------------------
1999 1.05 to 1.0 1.05 to 1.0 1.05 to 1.0 1.05 to 1.0
------------------------------------------------------------------------
2000 1.05 to 1.0 1.05 to 1.0 1.05 to 1.0 1.1 to 1.0
------------------------------------------------------------------------
2001 1.1 to 1.0 1.1 to 1.0 1.1 to 1.0 1.2 to 1.0
------------------------------------------------------------------------
2002 1.2 to 1.0 1.2 to 1.0 1.2 to 1.0 1.3 to 1.0
------------------------------------------------------------------------
2003 1.3 to 1.0 1.3 to 1.0 1.3 to 1.0 1.4 to 1.0
------------------------------------------------------------------------
thereafter 1.4 to 1.0
------------------------------------------------------------------------
</TABLE>
SECTION 5.10 ADDITIONAL GUARANTORS.
----------------------
The Credit Parties will cause each of their Domestic Subsidiaries, whether
newly formed, after acquired or otherwise existing, to promptly become a
Guarantor hereunder by way of execution of a Joinder Agreement. The guaranty
obligations of any such Additional Credit Party shall be secured by, among other
things, the Collateral of the Additional Credit Party and a pledge of 100% of
the Capital Stock or other equity interest of its Domestic Subsidiaries and 65%
of the Capital Stock or other equity interest of its Foreign Subsidiaries to the
extent that such pledge is permissible under applicable law, and a pledge by the
Borrower or other Credit Party which is the owner of the Capital Stock or other
equity interest in such Subsidiary of 100% of the Capital Stock if it is a
Domestic Subsidiary and 65% of its Capital Stock or other equity interest if it
is a Foreign Subsidiary.
SECTION 5.11 COMPLIANCE WITH LAW.
-------------------
Each Credit Party will, and will cause each of its Subsidiaries to, comply
with all laws, rules, regulations and orders, and all applicable restrictions
imposed by all Governmental Authorities, applicable to it and its Property if
noncompliance with any such law, rule, regulation, order or restriction could
reasonably be expected to have a Material Adverse Effect.
69
<PAGE>
SECTION 5.12 PLEDGED ASSETS.
--------------
(a) The Borrower will cause 100% of the Capital Stock of each direct
or indirect Domestic Subsidiaries owned by the Borrower and its Domestic
Subsidiaries and 65% of the Capital Stock in each of the first tier Foreign
Subsidiaries owned by the Borrower and its Domestic Subsidiaries to be
subject at all times to a first priority, perfected Lien in favor of the
Agent pursuant to the terms and conditions of the Security Documents or
such other security documents as the Agent shall reasonably request.
(b) If, subsequent to the Closing Date, a Credit Party shall (a)
acquire any Intellectual Property, securities, instruments, chattel paper
or other personal property required to be delivered to the Agent as
Collateral hereunder or under any of the Security Documents or (b) acquire
or lease any real property, the Borrower shall promptly (and in any event
within twenty (20) Business Days) after any Responsible Officer of a Credit
Party acquires knowledge of same notify the Agent of same. Each Credit
Party shall, and shall cause each of its Subsidiaries to, take such action
at its own expense as requested by the Agent (including, without
limitation, any of the actions described in Section 4.1(d) or (e) hereof)
to ensure that the Agent has a first priority perfected Lien to secure the
Credit Party Obligations in (i) all personal property of the Credit Parties
located in the United States, (ii) all real property of the Credit Parties
located in the United States and (iii) to the extent deemed to be material
by the Agent or the Required Lenders in its or their sole reasonable
discretion, all other personal and real property of the Credit Parties,
subject in each case only to Permitted Liens. Each Credit Party shall, and
shall cause each of its Subsidiaries to, adhere to the covenants regarding
the location of personal property as set forth in the Security Documents.
SECTION 5.13 INTEREST RATE PROTECTION AGREEMENTS.
-----------------------------------
Until such time as the Subordinated Debt referred to in clause (a) of the
definition thereof is refinanced with the Subordinated Debt referred to in
clause (b) of the definition thereof, the Borrower shall cause at least 50% of
all Indebtedness arising under this Agreement outstanding on the Closing Date to
be hedged at fixed rates pursuant to Hedging Agreements with a counterparty
reasonably acceptable to the Agent within 90 days following the Closing Date.
Thereafter, the Borrower shall cause at least 50% of all Consolidated Funded
Indebtedness to be hedged at fixed rates pursuant to Hedging Agreements with a
counterparty reasonably acceptable to the Agent; for purposes of this sentence,
the Subordinated Debt shall be deemed to be hedged to the extent it bears a
fixed rate of interest.
SECTION 5.14 YEAR 2000 COMPLIANCE.
--------------------
The Credit Parties will promptly notify the Agent in the event any Credit
Party discovers or determines that any computer application (including those of
its suppliers, vendors and customers) that is material to its or any of its
Subsidiaries' business and operations will not be Year 2000 Compliant, except to
the extent that such failure could not reasonably be expected to have a Material
Adverse Effect.
70
<PAGE>
ARTICLE VI
NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that on the Closing Date, and
thereafter for so long as this Agreement is in effect and until the Commitments
have terminated, no Note remains outstanding and unpaid and the Credit Party
Obligations, together with interest, Commitment Fees and all other amounts owing
to the Agent or any Lender hereunder, are paid in full:
SECTION 6.1 INDEBTEDNESS.
------------
The Borrower will not, nor will it permit any Subsidiary to, contract,
create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising or existing under this Agreement and the
other Credit Documents and the Subordinated Debt;
(b) Indebtedness existing as of the Closing Date as referenced in the
financial statements referenced in Section 3.1 (and set out more
specifically in Schedule 6.1(b)) hereto and renewals, refinancings or
---------------
extensions thereof in a principal amount not in excess of that outstanding
as of the date of such renewal, refinancing or extension (plus any interest
and fees that have accrued on such principal amount being refinanced);
(c) Indebtedness incurred after the Closing Date consisting of
Capital Leases or Indebtedness incurred to provide all or a portion of the
purchase price or cost of construction of an asset provided that (i) such
Indebtedness when incurred shall not exceed the purchase price or cost of
construction of such asset; (ii) no such Indebtedness shall be refinanced
for a principal amount in excess of the principal balance outstanding
thereon at the time of such refinancing; and (iii) the total amount of all
such Indebtedness shall not exceed $1,000,000 at any time outstanding;
(d) Unsecured intercompany Indebtedness among the Borrower and its
Subsidiaries, provided that any such Indebtedness shall be fully
--------
subordinated to the Credit Party Obligations hereunder on terms reasonably
satisfactory to the Agent;
(e) Indebtedness and obligations owing under Hedging Agreements
relating to the Loans hereunder and other Hedging Agreements entered into
in order to manage existing or anticipated interest rate, exchange rate or
commodity price risks and not for speculative purposes;
71
<PAGE>
(f) Indebtedness and obligations of Credit Parties owing under
documentary letters of credit for the purchase of goods or other
merchandise (but not under standby, direct pay or other letters of credit
except for the Letters of Credit hereunder) generally;
(g) Indebtedness of a Subsidiary of the Borrower, which Subsidiary
was acquired after the Closing Date and which Indebtedness was in existence
at the time of acquisition by the Borrower of such Subsidiary, and not
incurred in contemplation of such acquisition, so long as such Indebtedness
is non-recourse debt (except with respect to such Subsidiary and its
Subsidiaries);
(h) Indebtedness of the Borrower in the form of holdback notes or
deferred purchase price in connection with an acquisition;
(i) obligations in respect of performance bonds and completion
guarantees provided by the Borrower or any Subsidiary of the Borrower in
the ordinary course of business not to exceed an aggregate amount of
$500,000 at any time;
(j) Indebtedness of Foreign Subsidiaries in an aggregate principal
amount not to exceed $2,000,000 at any time;
(k) other unsecured Indebtedness of Credit Parties which (together
with Indebtedness permitted pursuant to clauses (g) and (h) above) does not
exceed $7,500,000 in the aggregate at any time outstanding; and
(l) Guaranty Obligations permitted by Section 6.3.
SECTION 6.2 LIENS.
-----
The Borrower will not, nor will it permit any Subsidiary to, contract,
create, incur, assume or permit to exist any Lien with respect to any of its
property or assets of any kind (whether real or personal, tangible or
intangible), whether now owned or hereafter acquired, except for Permitted
Liens.
SECTION 6.3 GUARANTY OBLIGATIONS.
--------------------
The Borrower will not, nor will it permit any Subsidiary to, enter into or
otherwise become or be liable in respect of any Guaranty Obligations (excluding
specifically therefrom endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) other than (i) those in favor
of the Lenders in connection herewith, (ii) Guaranty Obligations by the Borrower
or its Subsidiaries of Indebtedness and other obligations referred to in and
permitted under Section 6.1 and (iii) Guaranty Obligations of other obligations
not constituting Indebtedness including real property leases and other contracts
entered into in the ordinary course of business.
72
<PAGE>
SECTION 6.4 NATURE OF BUSINESS.
------------------
The Borrower will not, nor will it permit any Subsidiary to engage in any
business other than a Permitted Business.
SECTION 6.5 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC.
------------------------------------------------------
The Borrower will not, nor will it permit any Subsidiary to,
(a) dissolve, liquidate or wind up its affairs, sell, transfer, lease
or otherwise dispose of its property or assets or agree to do so at a
future time except the following, without duplication, shall be expressly
permitted:
(i) Specified Sales; and
(ii) the sale, transfer, lease or other disposition of property
or assets (a) to an unrelated party not in the ordinary course of
business (other than Specified Sales), where and to the extent that
they are the result of a Recovery Event or (b) the sale, lease,
transfer or other disposition of machinery, parts and equipment, no
longer used or useful in the conduct of the business of the Borrower
or any of its Subsidiaries, as appropriate, in its reasonable
discretion;
(iii) the sale, lease or transfer of property or assets (at fair
value) between or among Credit Parties;
(iv) the sale, lease or transfer of property or assets
(including sale leaseback transactions not prohibited by Section 6.13)
not to exceed $5,000,000 in the aggregate in any fiscal year; and
(v) the voluntary dissolution, liquidation or winding-up in
connection with a merger or sale of all or substantially all of the
assets of a Credit Party otherwise permitted hereunder.
provided, that in each case (except for clause (iii) above) at least 75% of
--------
the consideration received therefor by the Borrower or any such Subsidiary
is in the form of cash or Cash Equivalents; or
(b) purchase, lease or otherwise acquire (in a single transaction or
a series of related transactions) the property or assets of any Person
(other than purchases or other acquisitions of inventory, leases,
materials, property and equipment in the ordinary course of business, and
other Capital Expenditures permitted hereunder and other than as permitted
pursuant to Section 2.7(b)(vi) and Section 6.7), or enter into any
transaction of merger or consolidation, except for (i) investments or
acquisitions permitted pursuant to Section 6.6, and (ii) the merger or
consolidation of a Credit Party with and into another
73
<PAGE>
Credit Party, provided that if the Borrower is a party thereto, the
--------
Borrower will be the surviving corporation.
SECTION 6.6 ADVANCES, INVESTMENTS AND LOANS.
-------------------------------
The Borrower will not, nor will it permit any Subsidiary to, lend money or
extend credit or make advances to any Person, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any Person except for Permitted Investments.
SECTION 6.7 TRANSACTIONS WITH AFFILIATES.
----------------------------
Except as permitted in subsection (iv) of the definition of Permitted
Investments and otherwise to an extent not judged material by the Required
Lenders in their discretion, the Borrower will not, nor will it permit any
Subsidiary to, enter into any transaction or series of transactions, whether or
not in the ordinary course of business, with any officer, director, shareholder
or Affiliate other than (a) on terms and conditions substantially as favorable
to the Borrower and/or its Subsidiaries as would be obtainable in a comparable
arm's-length transaction with a Person other than an officer, director,
shareholder or Affiliate or (b) as set forth on Schedule 6.7.
------------
SECTION 6.8 OWNERSHIP OF SUBSIDIARIES; RESTRICTIONS.
---------------------------------------
The Borrower will not, nor will it permit any Subsidiary to, create, form
or acquire any Subsidiaries, except for Domestic Subsidiaries which are joined
as Additional Credit Parties in accordance with the terms hereof and except for
Foreign Subsidiaries, so long as (i) the total aggregate investment in such
Foreign Subsidiaries does not exceed $5,000,000 at any time and (ii) 65% of the
Capital Stock of such Foreign Subsidiaries is pledged under the Credit
Documents. The Borrower will not sell, transfer, pledge or otherwise dispose of
any Capital Stock or other equity interests in any of its Subsidiaries, nor will
it permit any of its Subsidiaries to issue, sell, transfer, pledge or otherwise
dispose of any of their Capital Stock or other equity interests, except in a
transaction permitted by Sections 6.5 or 6.6.
SECTION 6.9 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS; MATERIAL CONTRACTS.
---------------------------------------------------------
The Borrower will not, nor will it permit any of its Subsidiaries to,
change its fiscal year. The Borrower will not, nor will it permit any
Subsidiary to, amend, modify or change its articles of incorporation (or
corporate charter or other similar organizational document) or bylaws (or other
similar document) in any way which could reasonably be expected to have a
Material Adverse Effect without the prior written consent of the Required
Lenders. The Borrower will not, nor will it permit any of its Subsidiaries to,
without the prior written consent of the Agent, amend, modify, waive any default
of or breach under, cancel or terminate or fail to renew or extend or permit the
amendment, modification, waiver of any default of or breach under cancellation
or termination of any of the Material Contracts, except in the event that such
74
<PAGE>
amendments, modifications, waivers, cancellations or terminations could not
reasonably be expected to have a Material Adverse Effect.
SECTION 6.10 LIMITATION ON RESTRICTED ACTIONS.
--------------------------------
The Borrower will not permit any Subsidiary to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of any such Subsidiary to (a) pay dividends or
make any other distributions to any Credit Party on its Capital Stock or with
respect to any other interest or participation in, or measured by, its profits,
(b) pay any Indebtedness or other obligation owed to any Credit Party, (c) make
loans or advances to any Credit Party, (d) sell, lease or transfer any of its
properties or assets to any Credit Party, or (e) act as a Guarantor and pledge
its assets pursuant to the Credit Documents or any renewals, refinancings,
exchanges, refundings or extension thereof, except (in respect of any of the
matters referred to in clauses (a)-(d) above) for such encumbrances or
restrictions existing under or by reason of (i) this Agreement and the other
Credit Documents, (ii) the Subordinated Debt, (iii) applicable law, (iv) any
document or instrument governing Indebtedness incurred pursuant to Sections
6.1(c), (g) and (h), provided that in the case of Section 6.1(c) any such
--------
restriction contained therein relates only to the asset or assets constructed or
acquired in connection therewith or (v) any Permitted Lien or any document or
instrument governing any Permitted Lien, provided that any such restriction
--------
contained therein relates only to the asset or assets subject to such Permitted
Lien.
SECTION 6.11 RESTRICTED PAYMENTS.
-------------------
The Borrower will not, nor will it permit any Subsidiary to, directly or
indirectly, declare, order, make or set apart any sum for or pay any Restricted
Payment, except (a) to make dividends payable solely in the same class of
Capital Stock of such Person, (b) to make dividends or other distributions
payable to any Credit Party (directly or indirectly through Subsidiaries), (c)
as permitted by Section 6.12, (d) to make dividends or other distributions to
Glass Holdings in an amount not to exceed the amount permitted in clause (ix) of
the definition of "Permitted Investments" and (e) book-entry dividends from the
Borrower to Glass Holdings to make payments of interest on the Glass Holdings
Note so long as (i) Glass Holdings makes a book-entry contribution to GHC Sub to
enable GHC Sub to pay interest on the GHC Sub Note, (ii) GHC Sub uses such
contribution to pay interest on the GHC Sub Note, (iii) Glass Holdings applies
such interest payment to the payment of interest on the Glass Holdings Note and
(iv) after giving effect to such dividend and the application of the interest
payment on the Glass Holdings Note, there is no change to the retained earnings
of the Borrower or Consolidated Net Income solely as a result of the making of
such dividend and the payment of such interest.
SECTION 6.12 PREPAYMENTS OF INDEBTEDNESS, ETC.
---------------------------------
The Borrower will not, nor will it permit any Subsidiary to, (a) after the
issuance thereof, amend or modify (or permit the amendment or modification of)
any of the terms of any Indebtedness (which by its terms is expressly
subordinated to the Indebtedness hereunder) if such amendment or modification
would add or change any terms in a manner adverse to the issuer of
75
<PAGE>
such Indebtedness, or shorten the final maturity or average life to maturity or
require any payment to be made sooner than originally scheduled or increase the
interest rate applicable thereto or change any subordination provision thereof,
or (b) make (or give any notice with respect thereto) any voluntary or optional
payment or prepayment, redemption, acquisition for value or defeasance of
(including without limitation, by way of depositing money or securities with the
trustee with respect thereto before due for the purpose of paying when due),
refund, refinance or exchange of any Subordinated Debt; provided, however, that
-------- -------
(i) the Borrower may prepay the Subordinated Debt with up to 50% of the proceeds
of any public offering of the Borrower's Capital Stock if after giving effect
thereto on a Pro Forma Basis the Leverage Ratio for the four fiscal quarters
ending on the last day of the most recent fiscal quarter end shall be less than
3.0 to 1.0 and (ii) the Borrower may refinance the Subordinated Debt (including
any interest and fees accrued thereon) on terms and conditions at least as
favorable to the Lenders as then existing under the Subordinated Debt
Documentation so long as the refinancing Indebtedness is subordinated to the
same or greater extent as the Subordinated Debt with an applicable interest rate
not to exceed 13%, has a weighted average life to maturity equal to or greater
than the Subordinated Debt and requires no amortization of principal prior to
the tenth anniversary of the Closing Date; provided, however, the Borrower may
-------- -------
refinance the Bridge Notes by issuing Exchange Notes (as defined in the Senior
Subordinated Credit Agreement) in accordance with the Senior Subordinated Credit
Agreement.
SECTION 6.13 SALE LEASEBACKS.
---------------
The Borrower will not, nor will it permit any Subsidiary to, directly or
indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an operating lease or a Capital Lease, of any
property (whether real, personal or mixed), whether now owned or hereafter
acquired, (a) which the Borrower or any Subsidiary has sold or transferred or is
to sell or transfer to a Person which is not the Borrower or any Subsidiary or
(b) which the Borrower or any Subsidiary intends to use for substantially the
same purpose as any other property which has been sold or is to be sold or
transferred by the Borrower or any Subsidiary to another Person which is not the
Borrower or any Subsidiary in connection with such lease unless the Net Cash
Proceeds of such transactions are applied in accordance with the provisions of
Section 2.7(b)(iii).
SECTION 6.14 NO FURTHER NEGATIVE PLEDGES.
---------------------------
The Borrower will not, nor will it permit any Subsidiary to, enter into,
assume or become subject to any agreement prohibiting or otherwise restricting
the creation or assumption of any Lien upon its properties or assets, whether
now owned or hereafter acquired, or requiring the grant of any security for such
obligation if security is given for some other obligation unless such agreement
permits that the obligations of the Credit Parties hereunder may be secured to
the extent contemplated by this Agreement and the other Credit Documents.
76
<PAGE>
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT.
-----------------
An Event of Default shall exist upon the occurrence of any of the following
specified events (each an "Event of Default"):
----------------
(a) The Borrower shall fail to pay any principal on any Note when due
in accordance with the terms thereof or hereof; or the Borrower shall fail
to reimburse the Issuing Lender for any LOC Obligations when due in
accordance with the terms hereof; or the Borrower shall fail to pay any
interest on any Note or any fee or other amount payable hereunder when due
in accordance with the terms thereof or hereof and any such failure shall
continue unremedied for five (5) calendar days (or any Guarantor shall fail
to pay on the Guaranty in respect of any of the foregoing or in respect of
any other Guaranty Obligations thereunder); or
(b) Any representation or warranty made or deemed made herein, in the
Security Documents or in any of the other Credit Documents or which is
contained in any certificate, document or financial or other statement
furnished at any time under or in connection with this Agreement shall
prove to have been incorrect, false or misleading in any material respect
on or as of the date made or deemed made; or
(c) (i) Any Credit Party shall fail to perform, comply with or
observe any term, covenant or agreement applicable to it contained in
Section 5.7(a), Section 5.9 or Article VI hereof ; or (ii) any Credit Party
shall fail to comply with any other covenant, contained in this Credit
Agreement or the other Credit Documents or any other agreement, document or
instrument among any Credit Party, the Agent and the Lenders or executed by
any Credit Party in favor of the Agent or the Lenders (other than as
described in Sections 7.1(a) or 7.1(c)(i) above), and in the event such
breach or failure to comply is capable of cure, is not cured within thirty
(30) days of its occurrence; or
(d) The Borrower or any of its Subsidiaries shall (i) default in any
payment of principal of or interest on (A) the Subordinated Debt or (B) any
Indebtedness (other than the Notes or the Subordinated Debt) in a principal
amount outstanding of at least $3,000,000 in the aggregate for the Borrower
and any of its Subsidiaries beyond the period of grace (not to exceed 30
days), if any, provided in the instrument or agreement under which such
Indebtedness was created; or (ii) default in the observance or performance
of any other agreement or condition relating to (A) the Subordinated Debt
or (B) any Indebtedness (other than the Notes or the Subordinated Debt) in
a principal amount outstanding of at least $3,000,000 in the aggregate for
the Borrower and its Subsidiaries or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
77
<PAGE>
Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity; or
(e) (i) The Borrower, any of its Subsidiaries or Glass Holdings shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking (x) to
have an order for relief entered with respect to it or (y) to adjudicate it
a bankrupt or insolvent or (z) reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian, conservator or other similar official for it or for all
or any substantial part of its assets, or the Borrower or any Subsidiary
shall make a general assignment for the benefit of its creditors; or (ii)
there shall be commenced against the Borrower or any Subsidiary any case,
proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
the Borrower or any Subsidiary any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in
the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days from
the entry thereof; or (iv) the Borrower or any Subsidiary shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) the Borrower or any Subsidiary shall generally not, or shall
be unable to, or shall admit in writing its inability to, pay its debts as
they become due; or
(f) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a liability
(to the extent not paid when due or covered by insurance) of $3,000,000 or
more and all such judgments or decrees shall not have been paid and
satisfied, vacated, discharged, stayed or bonded pending appeal within 30
days from the entry thereof; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan (other than a Permitted Lien) shall
arise on the assets of the Borrower or any Commonly Controlled Entity,
(iii) a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable
Event or commencement of proceedings or appointment of a Trustee is, in the
reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the
Borrower, any of its Subsidiaries or any Commonly Controlled Entity shall,
or in the
78
<PAGE>
reasonable opinion of the Required Lenders is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, any Multiemployer Plan or (vi) any other similar event
or condition shall occur or exist with respect to a Plan; and in each case
in clauses (i) through (vi) above, such event or condition, together with
all other such events or conditions, if any, would reasonably foreseeably
have a Material Adverse Effect; or
(h) Either (A) Robert Porcher and members of his immediate family, or
trusts for their benefit, shall fail to own, directly or indirectly, at
least 40%, and control, directly or indirectly, at least 51%, of the issued
and outstanding voting stock of Glass Holdings; (B) Glass Holdings shall
cease to own 100% of the Capital Stock of the Borrower; or (C) a "Change of
Control" as defined in the Subordinated Debt Documentation shall occur; or
(i) The Guaranty or any provision thereof shall cease to be in full
force and effect or any Guarantor or any Person acting by or on behalf of
any Guarantor shall deny or disaffirm any Guarantor's obligations under the
Guaranty; or
(j) Any other Credit Document shall fail to be in full force and
effect or to give the Agent and/or the Lenders the security interests,
liens, rights, powers and privileges purported to be created thereby
(except as such documents may be terminated by the Agent and/or the Lenders
or no longer in force and effect in accordance with the terms thereof,
other than those indemnities and provisions which by their terms shall
survive); or
(k) There shall occur and be continuing any Event of Default under
and as defined in the Advanced Glassfiber Yarns Credit Agreement; or
(l) There shall occur and be continuing any Event of Default under
and as defined in the Subordinated Debt Documentation or any of the Credit
Party Obligations for any reason shall cease to be designated as senior
indebtedness thereunder.
SECTION 7.2 ACCELERATION; REMEDIES.
----------------------
Upon the occurrence of an Event of Default, then, and in any such event,
(a) if such event is an Event of Default specified in Section 7.1(e) above,
automatically the Commitments shall immediately terminate and the Loans (with
accrued interest thereon), and all other amounts under the Credit Documents
(including without limitation the maximum amount of all contingent liabilities
under Letters of Credit) shall immediately become due and payable, and (b) if
such event is any other Event of Default, either or both of the following
actions may be taken: (i) with the written consent of the Required Lenders, the
Agent may, or upon the written request of the Required Lenders, the Agent shall,
by notice to the Borrower declare the Commitments to be terminated forthwith,
whereupon the Commitments shall immediately terminate; and (ii) with the written
consent of the Required Lenders, the Agent may, or upon the written request of
the Required Lenders, the Agent shall, by notice of default to the Borrower,
declare the Loans (with accrued interest thereon) and all other amounts owing
under this Agreement and the Notes to be due and payable forthwith and direct
the Borrower to pay to the Agent cash collateral as security
79
<PAGE>
for the LOC Obligations for subsequent drawings under then outstanding Letters
of Credit an amount equal to the maximum amount of which may be drawn under
Letters of Credit then outstanding, whereupon the same shall immediately become
due and payable. Thereupon, the Agent may also, and upon the written request of
the Required Lenders shall, pursuant to the Indenture, advise the Credit
Facility Trustee that an Event of Default has occurred and instruct the Credit
Facility Trustee to declare the principal of all Bonds then outstanding and
interest thereon to be immediately due and payable. Except as expressly provided
above in this Section 7.2, presentment, demand, protest and all other notices of
any kind are hereby expressly waived.
ARTICLE VIII
THE AGENT
SECTION 8.1 APPOINTMENT.
-----------
Each Lender hereby irrevocably designates and appoints First Union National
Bank as the Agent of such Lender under this Agreement, and each such Lender
irrevocably authorizes First Union National Bank, as the Agent for such Lender,
to take such action on its behalf under the provisions of this Agreement and to
exercise such powers and perform such duties as are expressly delegated to the
Agent by the terms of this Agreement, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Agent.
SECTION 8.2 DELEGATION OF DUTIES.
--------------------
The Agent may execute any of its duties under this Agreement by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care. Without limiting the foregoing, the Agent
may appoint one of its affiliates as its agent to perform the functions of the
Agent hereunder relating to the advancing of funds to the Borrower and
distribution of funds to the Lenders and to perform such other related functions
of the Agent hereunder as are reasonably incidental to such functions.
SECTION 8.3 EXCULPATORY PROVISIONS.
----------------------
Neither the Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower or any
officer thereof contained
80
<PAGE>
in this Agreement or in any certificate, report, statement or other document
referred to or provided for in, or received by the Agent under or in connection
with, this Agreement or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of any of the Credit Documents or for any failure
of the Borrower to perform its obligations hereunder or thereunder. The Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance by the Borrower of any of the agreements contained
in, or conditions of, this Agreement, or to inspect the properties, books or
records of the Borrower.
SECTION 8.4 RELIANCE BY AGENT.
-----------------
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any Note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it in good faith
to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrower), independent accountants and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless (a) a written notice of
assignment, negotiation or transfer thereof shall have been filed with the Agent
and (b) the Agent shall have received the written agreement of such assignee to
be bound hereby as fully and to the same extent as if such assignee were an
original Lender party hereto, in each case in form satisfactory to the Agent.
The Agent shall be fully justified in failing or refusing to take any action
under this Agreement unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate or it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in refraining from
acting, under any of the Credit Documents in accordance with a request of the
Required Lenders or all of the Lenders, as may be required under this Agreement,
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all the Lenders and all future holders of the Notes.
SECTION 8.5 NOTICE OF DEFAULT.
-----------------
The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default hereunder unless the Agent has received
notice from a Lender or the Borrower referring to this Agreement, describing
such Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Agent receives such a notice, the Agent shall
give prompt notice thereof to the Lenders. The Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Required Lenders; provided, however, that unless and until the Agent
-------- -------
shall have received such directions, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Lenders except to the extent that this Credit Agreement expressly requires
that such action be taken, or not taken, only with the consent or upon the
authorization of the Required Lenders, or all of the Lenders, as the case may
be.
81
<PAGE>
SECTION 8.6 NON-RELIANCE ON AGENT AND OTHER LENDERS.
---------------------------------------
Each Lender expressly acknowledges that neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has made
any representation or warranty to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Borrower, shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Borrower and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon 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 analysis, appraisals and decisions in
taking or not taking action under this Agreement, and to make such investigation
as it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Borrower. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
SECTION 8.7 INDEMNIFICATION.
---------------
The Lenders agree to indemnify the Agent in its capacity hereunder (to the
extent not reimbursed by the Borrower and without limiting the obligation of the
Borrower to do so), ratably according to their respective Commitment Percentages
in effect on the date on which indemnification is sought under this Section,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Notes) be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of any Credit Document
or any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Agent under or in connection with any of the foregoing; provided, however,
-------- -------
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements to the extent resulting from the Agent's gross
negligence or willful misconduct, as determined by a court of competent
jurisdiction. The agreements in this Section 8.7 shall survive the termination
of this Agreement and payment of the Notes and all other amounts payable
hereunder.
SECTION 8.8 AGENT IN ITS INDIVIDUAL CAPACITY.
--------------------------------
The Agent and its affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower as though the Agent
were not the Agent hereunder. With respect to its Loans made or renewed by it
and any Note issued to it, the Agent shall have
82
<PAGE>
the same rights and powers under this Agreement as any Lender and may exercise
the same as though it were not the Agent, and the terms "Lender" and "Lenders"
shall include the Agent in its individual capacity.
SECTION 8.9 SUCCESSOR AGENT.
---------------
The Agent may resign as Agent upon 30 days' prior notice to the Borrower
and the Lenders. If the Agent shall resign as Agent under this Agreement and
the Notes, then the Required Lenders shall appoint from among the Lenders a
successor agent for the Lenders, which successor agent shall be approved by the
Borrower, whereupon such successor agent shall succeed to the rights, powers and
duties of the Agent, and the term "Agent" shall mean such successor agent
effective upon such appointment and approval, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further act
or deed on the part of such former Agent or any of the parties to this Agreement
or any holders of the Notes. After any retiring Agent's resignation as Agent,
the provisions of this Section 8.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 AMENDMENTS, WAIVERS AND RELEASE OF COLLATERAL.
---------------------------------------------
Neither this Agreement, nor any of the Notes, nor any of the other Credit
Documents, nor any terms hereof or thereof may be amended, supplemented, waived
or modified except in accordance with the provisions of this Section nor may be
released except as specifically provided herein or in the Security Documents or
in accordance with the provisions of this Section 9.1. The Required Lenders
may, or, with the written consent of the Required Lenders, the Agent may, from
time to time, (a) enter into with the Borrower written amendments, supplements
or modifications hereto and to the other Credit Documents for the purpose of
adding any provisions to this Agreement or the other Credit Documents or
changing in any manner the rights of the Lenders or of the Borrower hereunder or
thereunder or (b) waive, on such terms and conditions as the Required Lenders
may specify in such instrument, any of the requirements of this Agreement or the
other Credit Documents or any Default or Event of Default and its consequences
or (c) release collateral in accordance with the terms hereof or of any Security
Document or on such other terms and conditions as the Required Lenders may
agree; provided, however, that no such waiver and no such amendment, waiver,
-------- -------
supplement, modification or release shall:
(i) reduce the amount or extend the scheduled date of maturity
of any Loan or Note or any installment thereon, or reduce the stated
rate of any interest or fee payable hereunder (other than interest at
the Default Rate) or extend the scheduled date of any payment thereof
or increase the amount or extend the
83
<PAGE>
expiration date of any Lender's Commitment, in each case without the
written consent of each Lender directly affected thereby, or
(ii) amend, modify or waive any provision of this Section 9.1 or
reduce the percentage specified in the definition of Required Lenders,
without the written consent of all the Lenders, or
(iii) amend, modify or waive any provision of Article VIII
without the written consent of the then Agent, or
(iv) release any of the Guarantors from their obligations under
the Guaranty, without the written consent of all of the Lenders, or
(v) release all or substantially all of the Collateral, without
the written consent of all of the Lenders, or
(vi) amend, modify or waive the Lender approval requirements of
any provision of the Credit Documents which at such time requires the
consent, approval or request of the Required Lenders or all Lenders,
as the case may be, without the written consent of all of the Lenders
and, provided, further, that no amendment, waiver or consent affecting
-------- -------
the rights or duties of the Agent or the Issuing Lender under any
Credit Document shall in any event be effective, unless in writing and
signed by the Agent and/or the Issuing Lender, as applicable, in
addition to the Lenders required hereinabove to take such action.
Any such waiver, any such amendment, supplement or modification and any
such release shall apply equally to each of the Lenders and shall be binding
upon the Borrower, the other Credit Parties, the Lenders, the Agent and all
future holders of the Notes. In the case of any waiver, the Borrower, the other
Credit Parties, the Lenders and the Agent shall be restored to their former
position and rights hereunder and under the outstanding Loans and Notes and
other Credit Documents, and any Default or Event of Default waived shall be
deemed to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any right consequent
thereon.
Notwithstanding any of the foregoing to the contrary, the consent of the
Borrower shall not be required for any amendment, modification or waiver of the
provisions of Article VIII (other than the provisions of Section 8.9); provided,
--------
however, that the Agent will provide written notice to the Borrower of any such
- -------
amendment, modification or waiver. In addition, the Borrower and the Lenders
hereby authorize the Agent to modify this Credit Agreement by unilaterally
amending or supplementing Schedule 2.1(a) from time to time in the manner
---------------
requested by the Borrower, the Agent or any Lender in order to reflect any
assignments or transfers of the Loans as provided for hereunder; provided,
--------
however, that the Agent shall promptly deliver a copy of any such modification
- -------
to the Borrower and each Lender.
84
<PAGE>
Notwithstanding the fact that the consent of all the Lenders is required in
certain circumstances as set forth above, (x) each Lender is entitled to vote as
such Lender sees fit on any bankruptcy reorganization plan that affects the
Loans, and each Lender acknowledges that the provisions of Section 1126(c) of
the Bankruptcy Code supersedes the unanimous consent provisions set forth herein
and (y) the Required Lenders may consent to allow a Credit Party to use cash
collateral in the context of a bankruptcy or insolvency proceeding.
SECTION 9.2 NOTICES.
-------
Except as otherwise provided in Article II, all notices, requests and
demands to or upon the respective parties hereto to be effective shall be in
writing (including by telecopy), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made (a) when delivered by
hand, (b) when transmitted via telecopy (or other facsimile device) to the
number set out herein, (c) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (d)
the third Business Day following the day on which the same is sent by certified
or registered mail, postage prepaid, in each case, addressed as follows in the
case of the Borrower, the other Credit Parties and the Agent, and as set forth
on Schedule 9.2 in the case of the Lenders, or to such other address as may be
------------
hereafter notified by the respective parties hereto and any future holders of
the Notes:
The Borrower BGF Industries, Inc.
and the other 3802 Robert Porcher Way
Credit Greensboro, North Carolina 27410
Parties: Attention: President
Telecopier: (336) 545-7715
Telephone: (336) 545-0011
The Agent: First Union National Bank
One First Union Center, TW10
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telecopier: (704) 383-0288
Telephone: (704) 374-2698
with a copy to:
First Union National Bank
One First Union Center, DC-5
Charlotte, North Carolina 28288-0737
Attention: Roger Pelz
Senior Vice President
Telecopier: (704) 374-3300
Telephone: (704) 374-4793
85
<PAGE>
SECTION 9.3 NO WAIVER; CUMULATIVE REMEDIES.
------------------------------
No failure to exercise and no delay in exercising, on the part of the Agent
or any Lender, any right, remedy, power or privilege hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
SECTION 9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
------------------------------------------
All representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the Notes and the
making of the Loans, provided that all such representations and warranties shall
--------
terminate on the date upon which the Commitments have been terminated and all
amounts owing hereunder and under any Notes have been paid in full.
SECTION 9.5 PAYMENT OF EXPENSES AND TAXES.
-----------------------------
The Borrower agrees (a) to pay or reimburse the Agent for all its
reasonable out-of-pocket costs and expenses incurred in connection with the
development, preparation, negotiation, printing and execution of, and any
amendment, supplement or modification to, this Agreement and the other Credit
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, together with the reasonable fees and disbursements of counsel to
the Agent, (b) to pay or reimburse each Lender and the Agent for all its
reasonable costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the Notes and any such other
documents, including, without limitation, the reasonable fees and disbursements
of counsel to the Agent and to the Lenders (including reasonable allocated costs
of in-house legal counsel), and (c) on demand, to pay, indemnify, and hold each
Lender and the Agent harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other similar taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, the Credit Documents and any such other documents, and (d) to
pay, indemnify, and hold each Lender and the Agent and their Affiliates harmless
from and against, any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of the Credit Documents and any such other
documents and the use, or proposed use, of proceeds of the Loans (all of the
foregoing, collectively, the "indemnified liabilities"); provided, however, that
----------------------- -------- -------
the Borrower shall not have any obligation hereunder to the Agent or any Lender
with respect to indemnified liabilities arising from the gross negligence or
willful misconduct of the Agent or any such Lender, as determined by a court of
competent jurisdiction.
86
<PAGE>
The agreements in this Section 9.5 shall survive repayment of the Loans, Notes
and all other amounts payable hereunder.
SECTION 9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING LENDERS.
----------------------------------------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Lenders, the Agent, all future holders of the Notes and
their respective successors and assigns, except that the Borrower may not
assign or transfer any of its rights or obligations under this Agreement or
the other Credit Documents without the prior written consent of each
Lender.
(b) Any Lender may, in the ordinary course of its lending business
and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any
------------
Loan owing to such Lender, any Note held by such Lender, any Commitment of
such Lender, or any other interest of such Lender hereunder. In the event
of any such sale by a Lender of participating interests to a Participant,
such Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the
holder of any such Note for all purposes under this Agreement, and the
Borrower and the Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. No Lender shall transfer or grant any participation under which
the Participant shall have rights to approve any amendment to or waiver of
this Agreement or any other Credit Document except to the extent such
amendment or waiver would (i) extend the scheduled maturity of any Loan or
Note or any installment thereon in which such Participant is participating,
or reduce the stated rate or extend the time of payment of interest or fees
thereon (except in connection with a waiver of interest at the Default
Rate) or reduce the principal amount thereof, or increase the amount of the
Participant's participation over the amount thereof then in effect (it
being understood that a waiver of any Default or Event of Default shall not
constitute a change in the terms of such participation, and that an
increase in any Commitment or Loan shall be permitted without consent of
any participant if the Participant's participation is not increased as a
result thereof), (ii) release any of the Guarantors from their obligations
under the Guaranty, (iii) release all or substantially all of the
collateral, or (iv) consent to the assignment or transfer by the Borrower
of any of its rights and obligations under this Agreement. In the case of
any such participation, the Participant shall not have any rights under
this Agreement or any of the other Credit Documents (the Participant's
rights against such Lender in respect of such participation to be those set
forth in the agreement executed by such Lender in favor of the Participant
relating thereto) and all amounts payable by the Borrower hereunder shall
be determined as if such Lender had not sold such participation, provided
--------
that each Participant shall be entitled to the benefits of Sections 2.16,
2.17, 2.18 and 9.5 with respect to its participation in the Commitments and
the Loans outstanding from time to time; provided, that no Participant
--------
shall be entitled to receive any greater amount pursuant to such Sections
than the transferor Lender would
87
<PAGE>
have been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such
transfer occurred.
(c) Any Lender may, in the ordinary course of its lending business
and in accordance with applicable law, at any time, sell or assign to any
Lender or any affiliate thereof or any fund that invests in bank loans and
is advised or managed by an investment advisor to an existing Lender and
with the consent of the Agent and, so long as no Event of Default has
occurred and is continuing, the Borrower (in each case, which consent shall
not be unreasonably withheld), to one or more Eligible Assignees
("Purchasing Lenders"), all or any part of its rights and obligations under
------------------
this Agreement and the Notes in minimum amounts of $5,000,000 with respect
to its Revolving Commitment, its Revolving Loans and its Term Loans (or, if
less, the entire amount of such Lender's obligations), pursuant to a
Commitment Transfer Supplement, executed by such Purchasing Lender and such
transferor Lender (and, in the case of a Purchasing Lender that is not then
a Lender or an affiliate thereof, the Agent and, so long as no Event of
Default has occurred and is continuing, the Borrower), and delivered to the
Agent for its acceptance and recording in the Register; provided, however,
-------- -------
that any sale or assignment to an existing Lender or any affiliate thereof
shall not require the consent of the Agent or the Borrower nor shall any
such sale or assignment be subject to the minimum assignment amounts
specified herein. Upon such execution, delivery, acceptance and recording,
from and after the Transfer Effective Date specified in such Commitment
Transfer Supplement, (x) the Purchasing Lender thereunder shall be a party
hereto and, to the extent provided in such Commitment Transfer Supplement,
have the rights and obligations of a Lender hereunder with a Commitment as
set forth therein, and (y) the transferor Lender thereunder shall, to the
extent provided in such Commitment Transfer Supplement, be released from
its obligations under this Agreement (and, in the case of a Commitment
Transfer Supplement covering all or the remaining portion of a transferor
Lender's rights and obligations under this Agreement, such transferor
Lender shall cease to be a party hereto). Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only
to the extent, necessary to reflect the addition of such Purchasing Lender
and the resulting adjustment of Commitment Percentages arising from the
purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the Notes.
On or prior to the Transfer Effective Date specified in such Commitment
Transfer Supplement, the Borrower, at its own expense, shall execute and
deliver to the Agent in exchange for the Notes delivered to the Agent
pursuant to such Commitment Transfer Supplement new Notes to the order of
such Purchasing Lender in an amount equal to the Commitment assumed by it
pursuant to such Commitment Transfer Supplement and, unless the transferor
Lender has not retained a Commitment hereunder, new Notes to the order of
the transferor Lender in an amount equal to the Commitment retained by it
hereunder. Such new Notes shall be dated the Closing Date and shall
otherwise be in the form of the Notes replaced thereby. The Notes
surrendered by the transferor Lender shall be returned by the Agent to the
Borrower marked "canceled".
88
<PAGE>
(d) The Agent shall maintain at its address referred to in Section
9.2 a copy of each Commitment Transfer Supplement delivered to it and a
register (the "Register") for the recordation of the names and addresses of
--------
the Lenders and the Commitment of, and principal amount of the Loans owing
to, each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the Agent
and the Lenders may treat each Person whose name is recorded in the
Register as the owner of the Loan recorded therein for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower
or any Lender at any reasonable time and from time to time upon reasonable
prior notice.
(e) Upon its receipt of a duly executed Commitment Transfer
Supplement, together with payment to the Agent by the transferor Lender or
the Purchasing Lender, as agreed between them, of a registration and
processing fee of $3,000 for each Purchasing Lender listed in such
Commitment Transfer Supplement and the Notes subject to such Commitment
Transfer Supplement, the Agent shall (i) accept such Commitment Transfer
Supplement, (ii) record the information contained therein in the Register
and (iii) give prompt notice of such acceptance and recordation to the
Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to any
Participant or Purchasing Lender (each, a "Transferee") and any prospective
----------
Transferee any and all financial information in such Lender's possession
concerning the Borrower and its Affiliates which has been delivered to such
Lender by or on behalf of the Borrower pursuant to this Agreement or which
has been delivered to such Lender by or on behalf of the Borrower in
connection with such Lender's credit evaluation of the Borrower and its
Affiliates prior to becoming a party to this Agreement, in each case
subject to Section 9.16.
(g) At the time of each assignment pursuant to this Section 9.6 to a
Person which is not already a Lender hereunder and which is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code)
for Federal income tax purposes, the respective assignee Lender shall
provide to the Borrower and the Agent the appropriate Internal Revenue
Service Forms (and, if applicable, a 2.18 Certificate) described in Section
2.18.
(h) Nothing herein shall prohibit any Lender, without the consent of
the Agent or the Borrower, from pledging or assigning any of its rights
under this Agreement as collateral security for its obligations, including
without limitation, any right to payment of principal and interest under
any Note, to (i) any Federal Reserve Bank in accordance with applicable
laws or (ii) in the case of any Lender which has made Term Loans hereunder
and is an investment fund, to the trustee under the indenture to which such
fund is a party in support of its obligations to such trustee for the
benefit of the applicable trust beneficiaries; provided, however, that in
-------- -------
either case, (A) such Lender shall remain a "Lender" under this Agreement
and shall continue to be bound by all the terms and conditions set forth in
this Agreement and the other Credit Documents and (B) any assignment to
such trustee shall be subject to the provisions of Section 9.6(c).
89
<PAGE>
SECTION 9.7 ADJUSTMENTS; SET-OFF.
--------------------
(a) Each Lender agrees that if any Lender (a "benefited Lender")
----------------
shall at any time receive any payment of all or part of its Loans, or
interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings
of the nature referred to in Section 7.1(e), or otherwise) in a greater
proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Loans, or interest
thereon, such benefited Lender shall purchase for cash from the other
Lenders a participating interest in such portion of each such other
Lender's Loan, or shall provide such other Lenders with the benefits of any
such collateral, or the proceeds thereof, as shall be necessary to cause
such benefited Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, however,
-------- -------
that if all or any portion of such excess payment or benefits is thereafter
recovered from such benefited Lender, such purchase shall be rescinded, and
the purchase price and benefits returned, to the extent of such recovery,
but without interest. The Borrower agrees that each Lender so purchasing a
portion of another Lender's Loans may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such
portion as fully as if such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided by
law (including, without limitation, other rights of set-off), each Lender
shall have the right, without prior notice to the Borrower, any such notice
being expressly waived by the Borrower to the extent permitted by
applicable law, upon the occurrence and continuance of any Event of
Default, to setoff and appropriate and apply any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case
whether direct or indirect, absolute or contingent, matured or unmatured,
at any time held or owing by such Lender or any branch or agency thereof to
or for the credit or the account of the Borrower, or any part thereof in
such amounts as such Lender may elect, against and on account of the
obligations and liabilities of the Borrower to such Lender hereunder and
claims of every nature and description of such Lender against the Borrower,
in any currency, whether arising hereunder, under the Notes or under any
documents contemplated by or referred to herein or therein, as such Lender
may elect, whether or not such Lender has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The aforesaid right of set-off may be exercised by such Lender
against the Borrower or against any trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, receiver or execution,
judgment or attachment creditor of the Borrower, or against anyone else
claiming through or against the Borrower or any such trustee in bankruptcy,
debtor in possession, assignee for the benefit of creditors, receiver, or
execution, judgment or attachment creditor, notwithstanding the fact that
such right of set-off shall not have been exercised by such Lender prior to
the occurrence of any Event of Default. Each Lender agrees promptly to
notify the Borrower and the Agent after any
90
<PAGE>
such set-off and application made by such Lender; provided, however, that
-------- -------
the failure to give such notice shall not affect the validity of such set-
off and application.
SECTION 9.8 TABLE OF CONTENTS AND SECTION HEADINGS.
--------------------------------------
The table of contents and the Section and subsection headings herein are
intended for convenience only and shall be ignored in construing this Agreement.
SECTION 9.9 COUNTERPARTS.
------------
This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the copies of this Agreement signed by all the parties shall be lodged with
the Borrower and the Agent.
SECTION 9.10 EFFECTIVENESS.
-------------
This Credit Agreement shall become effective on the date on which all of
the parties have signed a copy hereof (whether the same or different copies) and
shall have delivered the same to the Agent pursuant to Section 9.2 or, in the
-----------
case of the Lenders, shall have given to the Agent written, telecopied or telex
notice (actually received) at such office that the same has been signed and
mailed to it.
SECTION 9.11 SEVERABILITY.
------------
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 9.12 INTEGRATION.
-----------
This Agreement and the Notes represent the agreement of the Borrower, the
Agent and the Lenders with respect to the subject matter hereof, and there are
no promises, undertakings, representations or warranties by the Agent, the
Borrower or any Lender relative to the subject matter hereof not expressly set
forth or referred to herein or in the Notes.
SECTION 9.13 GOVERNING LAW.
-------------
This Agreement and the Notes and the rights and obligations of the parties
under this Agreement and the Notes shall be governed by, and construed and
interpreted in accordance with, the law of the State of North Carolina.
91
<PAGE>
SECTION 9.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
----------------------------------------------
All judicial proceedings brought against the Borrower and/or any other
Credit Party with respect to this Agreement, any Note or any of the other Credit
Documents may be brought in any state or federal court of competent jurisdiction
in the State of North Carolina, and, by execution and delivery of this
Agreement, each of the Borrower and the other Credit Parties accepts, for itself
and in connection with its properties, generally and unconditionally, the non-
exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any final judgment rendered thereby in connection with this Agreement
from which no appeal has been taken or is available. Each of the Borrower and
the other Credit Parties irrevocably agrees that all service of process in any
such proceedings in any such court may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of mail),
postage prepaid, to it at its address set forth in Section 9.2 or at such other
address of which the Agent shall have been notified pursuant thereto, such
service being hereby acknowledged by the each of the Borrower and the other
Credit Parties to be effective and binding service in every respect. Each of
the Borrower, the other Credit Parties, the Agent and the Lenders irrevocably
waives any objection, including, without limitation, any objection to the laying
of venue or based on the grounds of forum non conveniens which it may now or
hereafter have to the bringing of any such action or proceeding in any such
jurisdiction. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of any Lender to bring
proceedings against the Borrower or the other Credit Parties in the court of any
other jurisdiction.
SECTION 9.15 ARBITRATION.
-----------
(a) Notwithstanding the provisions of Section 9.14 to the contrary,
upon demand of any party hereto, whether made before or within three (3)
months after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this Agreement
and other Credit Documents ("Disputes") between or among parties to this
Agreement shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of
that party to demand arbitration hereunder. Disputes may include, without
limitation, tort claims, counterclaims, disputes as to whether a matter is
subject to arbitration, claims brought as class actions, claims arising
from Credit Documents executed in the future, or claims arising out of or
connected with the transaction reflected by this Agreement.
Arbitration shall be conducted under and governed by the Commercial
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") and Title 9 of the U.S. Code. All arbitration
hearings shall be conducted in Charlotte, North Carolina. A hearing shall
begin within 90 days of demand for arbitration and all hearings shall be
concluded within 120 days of demand for arbitration. These time limitations
may not be extended unless a party shows cause for extension and then no
more than a total extension of 60 days. The expedited procedures set forth
in Rule 51 et seq. of the Arbitration Rules shall be applicable to claims
-- ---
of less than $1,000,000. All applicable statutes of limitation shall apply
to any Dispute. A judgment upon the award may be entered in any court
having jurisdiction. Arbitrators shall be licensed attorneys selected
92
<PAGE>
from the Commercial Financial Dispute Arbitration Panel of the AAA. The
parties hereto do not waive applicable Federal or state substantive law
except as provided herein. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to Hedging
Agreements.
(b) Notwithstanding the preceding binding arbitration provisions, the
Agent, the Lenders, the Borrower and the other Credit Parties agree to
preserve, without diminution, certain remedies that the Agent on behalf of
the Lenders may employ or exercise freely, independently or in connection
with an arbitration proceeding or after an arbitration action is brought.
The Agent on behalf of the Lenders shall have the right to proceed in any
court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable (i) all rights to foreclose against any
real or personal property or other security by exercising a power of sale
granted under Credit Documents or under applicable law or by judicial
foreclosure and sale, including a proceeding to confirm the sale; (ii) all
rights of self-help including peaceful occupation of real property and
collection of rents, set-off, and peaceful possession of personal property;
(iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Preservation of these remedies does not
limit the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute.
(c) The parties hereto agree that they shall not have a remedy of
punitive or exemplary damages against the other in any Dispute and hereby
waive any right or claim to punitive or exemplary damages they have now or
which may arise in the future in connection with any Dispute whether the
Dispute is resolved by arbitration or judicially.
(d) By execution and delivery of this Agreement, each of the parties
hereto accepts, for itself and in connection with its properties, generally
and unconditionally, the non-exclusive jurisdiction relating to any
arbitration proceedings conducted under the Arbitration Rules in Charlotte,
North Carolina and irrevocably agrees to be bound by any final judgment
rendered thereby in connection with this Agreement from which no appeal has
been taken or is available.
SECTION 9.16 CONFIDENTIALITY.
---------------
The Agent and each of the Lenders agrees that it will use its best efforts
not to disclose without the prior consent of the Borrower (other than to its
employees, affiliates, auditors or counsel or to another Lender) any information
with respect to the Borrower and its Subsidiaries which is furnished pursuant to
this Agreement, any other Credit Document or any documents contemplated by or
referred to herein or therein and which is designated by the Borrower to the
Lenders in writing as confidential or as to which it is otherwise reasonably
clear such information is not public, except that any Lender may disclose any
such information (a) as has become generally available to the public other than
by a breach of this Section 9.16, (b) as may be required or appropriate in any
report, statement or testimony submitted to any municipal, state or federal
93
<PAGE>
regulatory body having or claiming to have jurisdiction over such Lender or to
the National Association of Insurance Commissioners or the Federal Reserve Board
or the Federal Deposit Insurance Corporation or the OCC or similar organizations
(whether in the United States or elsewhere) or their successors, (c) as may be
required or appropriate in response to any summons or subpoena or any law,
order, regulation or ruling applicable to such Lender, (d) to any prospective
Participant or assignee in connection with any contemplated transfer pursuant to
Section 9.6, provided that such prospective transferee shall have been made
--------
aware of this Section 9.16 and shall have agreed to be bound by its provisions
as if it were a party to this Agreement, (e) to Gold Sheets and other similar
-----------
bank trade publications; such information to consist of deal terms and other
information regarding the credit facilities evidenced by this Credit Agreement
customarily found in such publications or (f) to any Person listed on Schedule
9.2 hereof (so long as such Person agrees to be bound by the provisions of this
Section 9.16).
SECTION 9.17 ACKNOWLEDGMENTS.
---------------
The Borrower and the other Credit Parties each hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of each Credit Document;
(b) neither the Agent nor any Lender has any fiduciary relationship
with or duty to the Borrower or any other Credit Party arising out of or in
connection with this Agreement and the relationship between Agent and
Lenders, on one hand, and the Borrower and the other Credit Parties, on the
other hand, in connection herewith is solely that of debtor and creditor;
and
(c) no joint venture exists among the Lenders or among the Borrower
or the other Credit Parties and the Lenders.
SECTION 9.18 WAIVERS OF JURY TRIAL.
---------------------
THE BORROWER, THE OTHER CREDIT PARTIES, THE AGENT AND THE LENDERS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
ARTICLE X
GUARANTY
SECTION 10.1 THE GUARANTY.
------------
In order to induce the Lenders to enter into this Agreement and to extend
credit hereunder and in recognition of the direct benefits to be received by the
Guarantors from the Extensions of
94
<PAGE>
Credit hereunder, each of the Guarantors hereby agrees with the Agent and the
Lenders as follows: the Guarantor hereby unconditionally and irrevocably jointly
and severally guarantees as primary obligor and not merely as surety the full
and prompt payment when due, whether upon maturity, by acceleration or
otherwise, of any and all indebtedness of the Borrower to the Agent and the
Lenders, including, without limitation, all obligations of the Borrower under
Hedging Agreements. If any or all of the indebtedness of the Borrower to the
Agent and the Lenders becomes due and payable hereunder, each Guarantor
unconditionally promises to pay such indebtedness to the Agent and the Lenders,
or order, on demand, together with any and all reasonable expenses which may be
incurred by the Agent or the Lenders in collecting any of the indebtedness. The
word "indebtedness" is used in this Article X in its most comprehensive sense
and includes any and all advances, debts, obligations and liabilities of the
Borrower arising in connection with this Agreement, in each case, heretofore,
now, or hereafter made, incurred or created, whether voluntarily or
involuntarily, absolute or contingent, liquidated or unliquidated, determined or
undetermined, whether or not such indebtedness is from time to time reduced, or
extinguished and thereafter increased or incurred, whether the Borrower may be
liable individually or jointly with others, whether or not recovery upon such
indebtedness may be or hereafter become barred by any statute of limitations,
and whether or not such indebtedness may be or hereafter become otherwise
unenforceable.
Notwithstanding any provision to the contrary contained herein or in any
other of the Credit Documents, to the extent the obligations of a Guarantor
shall be adjudicated to be invalid or unenforceable for any reason (including,
without limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of each such Guarantor
hereunder shall be limited to the maximum amount that is permissible under
applicable law (whether federal or state and including, without limitation, the
Bankruptcy Code).
SECTION 10.2 BANKRUPTCY.
----------
Additionally, each of the Guarantors unconditionally and irrevocably
guarantees jointly and severally the payment of any and all indebtedness of the
Borrower to the Lenders whether or not due or payable by the Borrower upon the
occurrence of any of the events specified in Section 7.1(e), and unconditionally
promises to pay such indebtedness to the Agent for the account of the Lenders,
or order, on demand, in lawful money of the United States. Each of the
Guarantors further agrees that to the extent that the Borrower or a Guarantor
shall make a payment or a transfer of an interest in any property to the Agent
or any Lender, which payment or transfer or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, or otherwise is avoided,
and/or required to be repaid to the Borrower or a Guarantor, the estate of the
Borrower or a Guarantor, a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such avoidance or repayment, the obligation or part thereof intended
to be satisfied shall be revived and continued in full force and effect as if
said payment had not been made.
95
<PAGE>
SECTION 10.3 NATURE OF LIABILITY.
-------------------
The liability of each Guarantor hereunder is exclusive and independent of
any security for or other guaranty of the indebtedness of the Borrower whether
executed by any such Guarantor, any other guarantor or by any other party, and
no Guarantor's liability hereunder shall be affected or impaired by (a) any
direction as to application of payment by the Borrower or by any other party, or
(b) any other continuing or other guaranty, undertaking or maximum liability of
a guarantor or of any other party as to the indebtedness of the Borrower, or (c)
any payment on or in reduction of any such other guaranty or undertaking, or (d)
any dissolution, termination or increase, decrease or change in personnel by the
Borrower, or (e) any payment made to the Agent or the Lenders on the
indebtedness which the Agent or such Lenders repay the Borrower pursuant to
court order in any bankruptcy, reorganization, arrangement, moratorium or other
debtor relief proceeding, and each of the Guarantors waives any right to the
deferral or modification of its obligations hereunder by reason of any such
proceeding.
SECTION 10.4 INDEPENDENT OBLIGATION.
----------------------
The obligations of each Guarantor hereunder are independent of the
obligations of any other guarantor or the Borrower, and a separate action or
actions may be brought and prosecuted against each Guarantor whether or not
action is brought against any other guarantor or the Borrower and whether or not
any other Guarantor or the Borrower is joined in any such action or actions.
SECTION 10.5 AUTHORIZATION.
-------------
Each of the Guarantors authorizes the Agent and each Lender without notice
or demand (except as shall be required by applicable statute and cannot be
waived), and without affecting or impairing its liability hereunder, from time
to time to (a) renew, compromise, extend, increase, accelerate or otherwise
change the time for payment of, or otherwise change the terms of the
indebtedness or any part thereof in accordance with this Agreement, including
any increase or decrease of the rate of interest thereon, (b) take and hold
security from any guarantor or any other party for the payment of this Guaranty
or the indebtedness and exchange, enforce waive and release any such security,
(c) apply such security and direct the order or manner of sale thereof as the
Agent and the Lenders in their discretion may determine and (d) release or
substitute any one or more endorsers, guarantors, the Borrower or other
obligors.
SECTION 10.6 RELIANCE.
--------
It is not necessary for the Agent or the Lenders to inquire into the
capacity or powers of the Borrower or the officers, directors, partners or
agents acting or purporting to act on its behalf, and any indebtedness made or
created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.
96
<PAGE>
SECTION 10.7 WAIVER.
------
(a) Each of the Guarantors waives any right (except as shall be
required by applicable statute and cannot be waived) to require the Agent
or any Lender to (i) proceed against the Borrower, any other guarantor or
any other party, (ii) proceed against or exhaust any security held from the
Borrower, any other guarantor or any other party, or (iii) pursue any other
remedy in the Agent's or any Lender's power whatsoever. Each of the
Guarantors waives any defense based on or arising out of any defense of the
Borrower, any other guarantor or any other party other than payment in full
of the indebtedness, including without limitation any defense based on or
arising out of the disability of the Borrower, any other guarantor or any
other party, or the unenforceability of the indebtedness or any part
thereof from any cause, or the cessation from any cause of the liability of
the Borrower other than payment in full of the indebtedness. Without
limiting the generality of the provisions of this Article X, each of the
Guarantors hereby specifically waives the benefits of N.C. Gen. Stat. (S)
26-7 through 26-9, inclusive. The Agent or any of the Lenders may, at their
election, foreclose on any security held by the Agent or a Lender by one or
more judicial or nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable (to the extent such sale is permitted by
applicable law), or exercise any other right or remedy the Agent and any
Lender may have against the Borrower or any other party, or any security,
without affecting or impairing in any way the liability of any Guarantor
hereunder except to the extent the indebtedness has been paid. Each of the
Guarantors waives any defense arising out of any such election by the Agent
and each of the Lenders, even though such election operates to impair or
extinguish any right of reimbursement or subrogation or other right or
remedy of the Guarantors against the Borrower or any other party or any
security.
(b) Each of the Guarantors waives all presentments, demands for
performance, protests and notices, including without limitation notices of
nonperformance, notice of protest, notices of dishonor, notices of
acceptance of this Guaranty, and notices of the existence, creation or
incurring of new or additional indebtedness. Each Guarantor assumes all
responsibility for being and keeping itself informed of the Borrower's
financial condition and assets, and of all other circumstances bearing upon
the risk of nonpayment of the indebtedness and the nature, scope and extent
of the risks which such Guarantor assumes and incurs hereunder, and agrees
that neither the Agent nor any Lender shall have any duty to advise such
Guarantor of information known to it regarding such circumstances or risks.
(c) Each of the Guarantors hereby agrees it will not exercise any
rights of subrogation which it may at any time otherwise have as a result
of this Guaranty (whether contractual, under Section 509 of the U.S.
Bankruptcy Code, or otherwise) to the claims of the Lenders against the
Borrower or any other guarantor of the indebtedness of the Borrower owing
to the Lenders (collectively, the "Other Parties") and all contractual,
-------------
statutory or common law rights of reimbursement, contribution or indemnity
from any Other Party which it may at any time otherwise have as a result of
this Guaranty until such time as the Loans hereunder shall have been paid
and the Commitments have been
97
<PAGE>
terminated. Each of the Guarantors hereby further agrees not to exercise
any right to enforce any other remedy which the Agent and the Lenders now
have or may hereafter have against any Other Party, any endorser or any
other guarantor of all or any part of the indebtedness of the Borrower and
any benefit of, and any right to participate in, any security or collateral
given to or for the benefit of the Lenders to secure payment of the
indebtedness of the Borrower until such time as the Loans hereunder shall
have been paid and the Commitments have been terminated.
SECTION 10.8 LIMITATION ON ENFORCEMENT.
-------------------------
The Lenders agree that this Guaranty may be enforced only by the action of
the Agent acting upon the instructions of the Required Lenders and that no
Lender shall have any right individually to seek to enforce or to enforce this
Guaranty, it being understood and agreed that such rights and remedies may be
exercised by the Agent for the benefit of the Lenders upon the terms of this
Agreement. The Lenders further agree that this Guaranty may not be enforced
against any director, officer, employee, stockholder or other equity holder of
the Guarantors.
SECTION 10.9 CONFIRMATION OF PAYMENT.
-----------------------
The Agent and the Lenders will, upon request after payment of the
indebtedness and obligations which are the subject of this Guaranty and
termination of the commitments relating thereto, confirm to the Borrower, the
Guarantors or any other Person that the such indebtedness and obligations have
been paid and the commitments relating thereto terminated, subject to the
provisions of Section 10.2.
98
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Charlotte, North Carolina by its proper and duly
authorized officers as of the day and year first above written.
BORROWER: BGF INDUSTRIES, INC.
- --------
BY: /s/ Philippe R. Dorier
------------------------------
Name: Phillipe R. Dorier
-------------------------
TITLE: CFO, Secretary
------------------------
AGENT AND LENDERS: FIRST UNION NATIONAL BANK,
- ------------------
AS AGENT AND AS A LENDER
BY: /s/ Roger Pelz
------------------------------
Name: Roger Pelz
-------------------------
Title: Senior Vice President
------------------------
<PAGE>
EXHIBIT 10.11
$65,000,000
SENIOR SUBORDINATED CREDIT AGREEMENT
dated as of
September 30, 1998
among
BGF INDUSTRIES, INC.
as Borrower,
CERTAIN SUBSIDIARIES
TIME TO TIME PARTY HERETO,
as Guarantors,
THE LENDERS PARTIES HERETO
AND
FIRST UNION INVESTORS, INC. as Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 DEFINITIONS................................................................ 1
1.1 Certain Defined Terms................................................... 1
1.2 Accounting Terms........................................................ 28
1.3 Other Definitional Provisions........................................... 28
SECTION 2 AMOUNT AND TERMS OF BRIDGE LOAN COMMITMENT AND LOANS; BRIDGE NOTES......... 28
2.1 Bridge Loan and Bridge Note............................................. 28
2.2 Interest on the Bridge Loan............................................. 30
2.3 Fees.................................................................... 31
2.4 Prepayments and Payments................................................ 31
2.5 Use of Proceeds......................................................... 35
SECTION 3 CONDITIONS................................................................. 35
3.1 Conditions to Bridge Loan............................................... 35
SECTION 4 REPRESENTATIONS AND WARRANTIES............................................. 39
4.1 Organization and Good Standing; Capitalization.......................... 39
4.2 Authorization and Power................................................. 40
4.3 No Conflicts or Consents................................................ 40
4.4 Enforceable Obligations................................................. 41
4.5 Properties; Liens....................................................... 41
4.6 Financial Condition..................................................... 41
4.7 Full Disclosure......................................................... 43
4.8 No Default.............................................................. 43
4.9 Compliance with Contracts, Etc.......................................... 43
4.10 No Litigation.......................................................... 43
4.11 Use of Proceeds; Margin Stock, Etc..................................... 44
4.12 Taxes.................................................................. 44
4.13 ERISA.................................................................. 44
4.14 Compliance with Law.................................................... 44
4.15 Government Regulation.................................................. 45
4.16 Intellectual Property.................................................. 45
4.17 Environmental Matters.................................................. 45
4.18 Survival of Representations and Warranties............................. 47
4.19 Permits................................................................ 47
4.20 Insurance.............................................................. 47
4.21 Labor Matters.......................................................... 47
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.22 Guarantees......................................................................... 48
4.23 Senior Subordinated Indenture; Etc................................................. 48
4.24 Broker's or Finder's Fees.......................................................... 49
4.25 Year 2000 Compliance............................................................... 49
SECTION 5 AFFIRMATIVE COVENANTS.................................................................. 49
5.1 Financial Statements and Other Reports.............................................. 49
5.2 Corporate Existence, Etc............................................................ 54
5.3 Payment of Taxes and Claims; Tax Consolidation...................................... 54
5.4 Maintenance of Properties; Insurance................................................ 54
5.5 Inspection.......................................................................... 55
5.6 Equal Security for Bridge Loan...................................................... 55
5.7 Compliance with Laws, Etc........................................................... 55
5.8 Maintenance of Accurate Records, Etc................................................ 56
5.9 Take-Out Financing.................................................................. 56
5.10 Exchange of Bridge Notes........................................................... 56
5.11 ERISA Compliance................................................................... 58
5.12 Payments in U.S. Dollars........................................................... 58
5.13 Register........................................................................... 58
5.14 Lenders Meeting.................................................................... 58
5.15 Guarantors......................................................................... 59
5.16 Marketing Bridge Notes and Take-Out Securities..................................... 59
5.17 Environmental Matters.............................................................. 59
SECTION 6 NEGATIVE COVENANTS..................................................................... 60
6.1 Indebtedness........................................................................ 60
6.2 Liens............................................................................... 61
6.3 Restricted Payments................................................................. 63
6.4 Contingent Obligations.............................................................. 64
6.5 Layering of Indebtedness............................................................ 65
6.6 Restriction on Fundamental Changes.................................................. 65
6.7 Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries........ 66
6.8 Transactions with Shareholders and Affiliates....................................... 67
6.9 Subsidiary Stock; Borrower Restrictions............................................. 67
6.10 Business Activities................................................................ 68
6.11 Amendment or Waivers of Certain Documents.......................................... 68
6.12 Amendment to Charter Documents..................................................... 68
6.13 Asset Sales........................................................................ 68
6.14 Transfer of Assets to Subsidiaries................................................. 68
6.15 Sale and Leaseback Transactions.................................................... 69
6.16 Refinancing of the Bridge Loan in Part............................................. 69
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 7 EVENTS OF DEFAULT..................................................................... 69
7.1 Failure to Make Payments When Due.................................................. 69
7.2 Default in Other Agreements........................................................ 69
7.3 Breach of Certain Covenants........................................................ 70
7.4 Breach of Warranty................................................................. 70
7.5 Other Defaults Under Agreement or Loan Documents................................... 70
7.6 Involuntary Bankruptcy; Appointment of Custodian, Etc.............................. 70
7.7 Voluntary Bankruptcy; Appointment of Custodian, Etc................................ 70
7.8 Judgments and Attachments.......................................................... 71
7.9 Dissolution........................................................................ 71
7.10 Guarantee......................................................................... 71
7.11 ERISA............................................................................. 71
7.12 Foreclosure....................................................................... 72
7.13 Security for Glass Holdings Loan.................................................. 72
7.14 Failure to Make Tax Payments When Due............................................. 72
SECTION 8 SUBORDINATION......................................................................... 73
8.1 Obligations Subordinated to Senior Indebtedness of the Borrower.................... 73
8.2 Priority and Payment Over of Proceeds in Certain Events............................ 73
8.3 Payments May Be Paid Prior to Dissolution.......................................... 75
8.4 Rights of Holders of Senior Indebtedness of the Borrower Not To Be Impaired........ 76
8.5 Subrogation........................................................................ 76
8.6 Obligations of the Borrower Unconditional.......................................... 77
8.7 Lenders Authorize Agent to Effectuate Subordination................................ 77
SECTION 9 THE AGENT............................................................................. 78
9.1 Appointment........................................................................ 78
9.2 Delegation of Duties............................................................... 78
9.3 Exculpatory Provisions............................................................. 78
9.4 Reliance by Agent.................................................................. 79
9.5 Notice of Default.................................................................. 79
9.6 Non-Reliance on Agent and Other Lenders............................................ 80
9.7 Indemnification.................................................................... 80
9.8 Agent in Its Individual Capacity................................................... 81
9.9 Resignation of the Agent; Successor Agent.......................................... 81
SECTION 10 GUARANTEE............................................................................ 81
10.1 Unconditional Guarantee........................................................... 81
10.2 Subordination of Guarantee........................................................ 82
10.3 Severability...................................................................... 82
10.4 Limitation of Guarantor's Liability............................................... 83
10.5 Guarantors May Consolidate, etc., on Certain Terms................................ 83
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
10.6 Contribution...................................................................... 83
10.7 Waiver of Subrogation............................................................. 84
10.8 Evidence Guarantee................................................................ 84
10.9 Waiver of Stay, Extension or Usury Laws........................................... 85
SECTION 11 SUBORDINATION OF GUARANTEE OBLIGATIONS............................................... 85
11.1 Guarantee Obligations Subordinated to Guarantor Senior Indebtedness............... 85
11.2 Priority and Payment Over of Proceeds in Certain Events........................... 85
11.3 Payments May Be Paid Prior to Dissolution......................................... 87
11.4 Rights of Holders of Guarantor Senior Indebtedness Not To Be Impaired............. 87
11.5 Subrogation....................................................................... 88
11.6 Obligations of the Guarantors Unconditional....................................... 89
11.7 Lenders Authorize Agent to Effectuate Subordination............................... 89
SECTION 12 MISCELLANEOUS........................................................................ 90
12.1 Representation of the Lenders..................................................... 90
12.2 Participations in and Assignments of Bridge Loan.................................. 90
12.3 Expenses.......................................................................... 92
12.4 Indemnitee........................................................................ 92
12.5 Setoff............................................................................ 93
12.6 Amendments and Waivers............................................................ 93
12.7 Independence of Covenants......................................................... 94
12.8 Entirety.......................................................................... 94
12.9 Notices........................................................................... 95
12.10 Survival of Warranties and Certain Agreements.................................... 95
12.11 Failure or Indulgence Not Waiver; Remedies Cumulative............................ 95
12.12 Severability..................................................................... 95
12.13 Headings......................................................................... 96
12.14 Applicable Law................................................................... 96
12.15 Successors and Assigns; Subsequent Holders of Bridge Notes....................... 96
12.16 Counterparts; Effectiveness...................................................... 96
12.17 Consent to Jurisdiction; Venue; Waiver of Jury Trial............................. 96
12.18 Payments Pro Rata................................................................ 97
12.19 Taxes............................................................................ 98
12.20 Waiver of Stay, Extension or Usury Laws.......................................... 99
12.21 Requirements of Law.............................................................. 99
12.22 Confidentiality..................................................................100
12.23 Compensation.....................................................................100
</TABLE>
iv
<PAGE>
SCHEDULES
A EXISTING LIENS
B ENVIRONMENTAL MATTERS
C EXISTING INDEBTEDNESS
D AFFILIATE TRANSACTION
EXHIBITS
I FORM OF BRIDGE NOTE
II FORM OF COMPLIANCE CERTIFICATE
III FORM OF NOTICE OF BORROWING
IV FORM OF REGISTRATION RIGHTS AGREEMENT
V FORM OF OPINION OF ALSTON & BIRD- COUNSELTHE COMPANY AND THE GUARANTORS
VI FORM OF OPINION OF CLEARY, GOTTLIEB, STEEN & HAMILTON - FOR THE LENDERS
VII FORM OF NOTATION OF GUARANTEE VIII FORM OF ASSIGNMENT AND ASSUMPTION
AGREEMENT
IX FORM OF SECTION 12.2E(ii) CERTIFICATE
v
<PAGE>
This Senior Subordinated Credit Agreement is dated as of September 30,
1998, and entered into by and among BGF Industries, Inc., a Delaware corporation
(the "Borrower"), such Subsidiaries of the Borrower as may from time to time
become a party hereto (the "Guarantors"), the banks and other financial
institutions from time to time parties hereto (the "Lenders" and individually a
"Lender") and First Union Investors, Inc. ("First Union"), as agent for the
Lenders (in such capacity, the "Agent").
RECITALS
WHEREAS, the Borrower desires that the Lenders extend a senior subordinated
credit facility to the Borrower in connection with the JV Transactions (as
defined herein);
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereby agree as follows:
SECTION 1 DEFINITIONS
1.1 Certain Defined Terms
---------------------
The following terms used in this Agreement shall have the following
meanings:
"Acquired Assets" means all or substantially all of the assets constituting
the Business.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Subsidiary of the
Borrower or at the time it merges or consolidates with the Borrower or any of
its Subsidiaries or assumed in connection with the acquisition of assets from
such Person and in each case not incurred by such Person in connection with, or
in anticipation or contemplation of, such Person becoming a Subsidiary of the
Borrower or such acquisition, merger or consolidation. Such Indebtedness shall
be deemed to have been Incurred at the time such Person becomes a Subsidiary of
the Borrower or at the time it merges or consolidates with the Borrower or a
Subsidiary of the Borrower or at the time such Indebtedness is assumed in
connection with the acquisition of assets from such Person.
"Acquisition" means, collectively, (i) the acquisition by AGY of the
Acquired Assets pursuant to the Asset Contribution and Sale Agreements and (ii)
the AGY Holdings Acquisition.
"Adjusted Net Assets" shall have the meaning provided in Section 10.6.
"Affiliate," means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling", "controlled by" and "under common control with" have
meanings correlative of the foregoing; provided, however, that beneficial
-------- -------
ownership of 10% or more of the Voting Stock of a Person shall be deemed to be
control; provided that none of First Union or any
--------
<PAGE>
of its Affiliates shall be treated as an Affiliate of the Borrower or of any
Subsidiary of the Borrower.
"Affiliate Transaction" has the meaning ascribed to it in Section 6.8.
"Agent" has the meaning ascribed to it in the introduction to this
Agreement.
"AGY" means Advanced Glassfiber Yarns, LLC, a limited liability company
formed under the Delaware Limited Liability Company Act.
"AGY Bridge Loan Facility" means that certain credit agreement to be
entered into on or before the Closing Date between AGY, AGY Capital, the
guarantors from time to time that are parties thereto, the lenders from time to
time a party thereto and First Union and Warburg Dillon Read LLC, as co-agents,
pursuant to which AGY and AGY Capital may borrow up to $150,000,000 in the
aggregate at any one time outstanding together with the documents related
thereto (including, without limitation, any guarantee agreements), as such
agreements may be amended (including any amendment and restatement thereof),
supplemented or otherwise modified from time to time, including any agreement
extending the maturity of, refinancing, replacing or otherwise restructuring
(including adding Subsidiaries of AGY and AGY Capital as additional borrowers or
guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement and whether by the same or
any other agent, lender or group of lenders.
"AGY Capital" means AGY Capital Corp., a Delaware corporation.
"AGY Holdings" means AGY Holdings Inc., a Delaware corporation and Wholly-
Owned Subsidiary of Glass Holdings.
"AGY Holdings Acquisition" means the acquisition by AGY Holdings of a 51%
interest in AGY pursuant to the LLC Sale and Purchase Agreement.
"AGY Holdings Distribution" means the cash payment of approximately $199.0
million made by AGY to AGY Holdings concurrently with the consummation of the
other JV Transactions.
"AGY Senior Credit Facility" means that certain credit agreement to be
entered into on or before the Closing Date between AGY, AGY Capital, the
guarantors from time to time a party thereto, the lenders from time to time a
party thereto and First Union National Bank, as agent, pursuant to which the
Borrower may borrow up to $315,000,000 in the aggregate at any one time
outstanding together with the documents related thereto (including, without
limitation, any guarantee agreements and security documents), as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including adding
Subsidiaries of AGY and AGY Capital as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or any
2
<PAGE>
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders.
"Agreement" means this Senior Subordinated Credit Agreement dated as of
September 30, 1998, as it may be amended, supplemented or otherwise modified
from time to time in accordance with the terms hereof.
"Amended and Restated Commitment Letter" means the (i) letter agreement
dated September 30, 1998, among the Borrower, FUCM and First Union pursuant to
which First Union committed to provide the Bridge Loan to the Borrower, subject
to the terms and conditions thereof and (ii) the letter agreement dated
September 30, 1998 among the Borrower, FUCM and First Union pursuant to which
the Borrower committed to pay First Union and its Affiliates certain fees and to
satisfy certain other obligations to First Union and its Affiliates in respect
of the commitment set forth in (i) above.
"Amount of Unfunded Benefit Liability" means, with respect to any Pension
Plan, (i) if set forth on the most recent actuarial valuation report with
respect to such Pension Plan, the amount of unfunded benefit liabilities (as
defined in Section 4001(a) (18) of ERISA) and (ii) otherwise, the excess of (a)
the greater of the current liability (as defined in Section 412(1) (7) of the
Internal Revenue Code) or the actuarial present value of the accrued benefits
with respect to such Pension Plan over (b) the market value of the assets of
such Pension Plan.
"Applicable Interest Rate" means for each Interest Period, (i) the greater
of the Applicable LIBOR Based Rate and the Applicable Treasury Based Rate plus
(ii) the Applicable Spread; provided, however, that in no event shall the
-------- -------
Applicable Interest Rate exceed 18% per annum.
"Applicable LIBOR Based Rate" means for any Interest Period, (i) an
interest rate per annum equal to the rate of interest appearing on Telerate Page
3750 (or any successor page) or if no such rate is available, the rate of
interest determined by the Agent to be the rate or the arithmetic mean of rates
(rounded upward, if necessary, to the nearest 1/16 of one percentage point) at
which Dollar deposits in immediately available funds are offered by First Union
to first-tier banks in the London interbank Euro-dollar market, at approximately
11:00 a.m., London time, on the Interest Rate Determination Date for such
Interest Period in the amount of the Bridge Loan outstanding plus (ii) 4.25% per
annum.
"Applicable Redemption Premium" means, (i) with respect to any redemption
of Exchange Notes occurring in the first year following the fifth anniversary of
the Closing Date, a redemption premium equal to 50.0% of the interest rate borne
by the Exchange Notes, (ii) with respect to any redemption of Exchange Notes
occurring in the second year following the fifth anniversary of the Closing
Date, a redemption premium equal to 33.3% of the interest rate borne by the
Exchange Notes, (iii) with respect to any redemption of Exchange Notes occurring
in the third year following the fifth anniversary of the Closing Date, a
redemption premium equal to 16.6% of the interest rate borne by the Exchange
Notes and (iv) with respect to any redemption of Exchange Notes occurring in or
after the fourth year following the fifth anniversary of the
3
<PAGE>
Closing Date, a redemption premium equal to 0.0% of the interest rate borne by
the Exchange Notes.
"Applicable Spread" means (i) 0.0% per annum for the Interest Period
commencing on the Closing Date, (ii) 0.25% per annum for the Interest Period
commencing on the last day of the Interest Period referred to in clause (i), and
(iii) for each subsequent Interest Period, the Applicable Spread in effect for
the immediately preceding Interest Period plus 0.25% per annum.
"Applicable Treasury Based Rate" means for any Interest Period, (i) a rate
per annum determined by the Agent on the Interest Rate Determination Date for
such Interest Period (such determination to be based upon quotes obtained by the
Agent from established dealers in such market) to be the yield expressed as a
rate in the secondary market on United States Treasury securities of
substantially the same principal amount as the Bridge Notes and having a
maturity of one, three, five or ten years, whichever maturity produces the
highest yield for such Interest Period plus (ii) 4.25% per annum.
"Asset Acquisition" means (a) an Investment by the Borrower or any
Subsidiary of the Borrower in any other person pursuant to which such Person
shall be merged with or into the Borrower or any Subsidiary of the Borrower, or
(b) the acquisition by the Borrower or any Subsidiary of the Borrower of the
assets of any person (other than a Subsidiary of the Borrower) which constitute
all or substantially all of the assets of such Person or comprises any division
or line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Contribution Agreement" means the Amended and Restated Asset
Purchase Agreement, dated as of July 31, 1998, between Owens and AGY.
"Asset Contribution and Sale Agreements" means, collectively, (i) the Asset
Contribution Agreement, (ii) the NVOC Asset Purchase Agreement, (iii) the OCC
Asset Purchase Agreement and (iv) the OC Japan Asset Purchase Agreement.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
assignment, transfer or other disposition for value (including, without
limitation, pursuant to any amalgamation, merger or consolidation or pursuant to
any Sale and Leaseback Transaction) by the Borrower or by any of its
Subsidiaries to any Person other than the Borrower or any of its Wholly-Owned
Subsidiaries (any such transaction, a "disposition") of (i) any of the stock of
any of the Borrower's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of the Borrower or of any of its Subsidiaries, or
(iii) any other assets (whether tangible or intangible) of the Borrower or of
any of its Subsidiaries; excluding (a) any disposition of Cash Equivalents or
---------
inventory in the ordinary course of business or obsolete equipment in the
ordinary course of business consistent with past practices of the Borrower or
any of its Subsidiaries or the lease or sublease of any real or personal
property in the ordinary course of business, (b) any disposition of stock or
assets in any single transaction or related series of transactions the aggregate
value of which does not exceed $2,000,000.
4
<PAGE>
"Asset Sale Transaction" means Asset Sales and, whether or not
constituting an Asset Sale, (i) any sale or other disposition of Capital Stock
and (ii) any sale or other disposition excluded from the definition set forth
herein of "Asset Sale" by clause (iii)(b) of such definition.
"Assignment and Assumption Agreement" means the Assignment and Assumption
Agreement, dated the Closing Date, between AGY and AGY Holdings.
"Bankruptcy Law" means Title 11 of the United States Code entitled
"bankruptcy", as now and hereafter in effect, or any successor statute or any
other United States federal, state or local law or the law of any other
jurisdiction relating to bankruptcy, insolvency, winding up, liquidation,
reorganization or relief of debtors, whether in effect on the date hereof or
hereafter.
"Bankruptcy Order" means any court order made in a proceeding pursuant to
or within the meaning of any Bankruptcy Law, containing an adjudication of
bankruptcy or insolvency, or providing for liquidation, winding up, dissolution
or reorganization, or appointing a custodian of- a debtor or of all or any
substantial part of a debtor's property, or providing for the staying,
arrangement, adjustment or composition of indebtedness or other relief of a
debtor.
"Belmont" shall mean Belmont of America, Inc., a Delaware corporation.
"Board of Directors" means, (i) in the case of a Person that is a
corporation, the board of directors of such person or any committee authorized
to act therefor and (ii) in the case of any other person, the board of
directors, management committee, or similar governing body or any authorized
committee thereof responsible for the management and affairs of such Person.
"Borrower" has the meaning ascribed to it in the introduction to this
Agreement.
"Borrower Transactions" means, collectively, (i) the incurrence by the
Borrower of the Bridge Loan hereunder on the Closing Date, (ii) the incurrence
by the Borrower of the Senior Credit Facility on or prior to the Closing Date,
(iii) the Glass Holdings Loan, (iv) any other transactions on or prior to the
Closing Date contemplated in relation to any of the foregoing and (v) the
payment of fees and expenses in connection with any of the foregoing; provided,
--------
that the term "Borrower Transactions" shall not include the transactions
referred to in clauses (ii) - (x) of the definition of "JV Transactions."
"Bridge Loan" has the meaning ascribed to it in Section 2.1A
"Bridge Loan Commitment" means the commitment of the Lenders to make the
Bridge Loan as set forth in Section 2.1A.
"Bridge Notes" has the meaning ascribed to it in Section 2.1D.
"Business" means the glass yarns and specialty materials business of Owens.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of Charlotte, North Carolina or New York, New
York or is a day on which banking institutions therein located are authorized or
required by law or other
5
<PAGE>
governmental action to close; provided, however, that when used in connection
-------- --------
with a rate determination, borrowing or payment with respect to the Bridge
Notes, the term "Business Day" shall also exclude any day on which banks in
London, England are not open for dealings in Dollar deposits in the London
interbank market.
"Capital Lease," as applied to any person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is required to be accounted for as a capital lease on the balance
sheet of that Person.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including, without
limitation, each class of Common Stock and Preferred Stock of such Person and
(ii) with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"Capitalized Lease Obligation" means obligations under a Capital Lease, and
the amount of Indebtedness represented by such obligations shall be the
capitalized amount of such obligations determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $500 million; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Cash Proceeds" means, with respect to any Asset Sale, cash payments
(including any cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise but only as and when so
received) received from such Asset Sale.
"Change of Control" means the occurrence of any of the following: (A)
Robert Porcher and members of his immediate family, or trusts solely for their
benefit, shall fail to own and control, directly or indirectly, at least 69.6%
of the issued and outstanding Capital Stock and of the voting power of the
issued and outstanding Voting Stock of Societe Saumuroise de
6
<PAGE>
Participations S.A. ("SSP"); (B) SSP shall fail to own and control, directly or
indirectly, at least 63.3% of the Capital Stock and of the voting power of the
issued and outstanding Voting Stock of Porcher Industries S.A. ("Porcher"); (C)
Porcher shall fail to own and control, directly or indirectly, at least 100% of
the Capital Stock and of the voting power of the issued and outstanding Voting
Stock of Glass Holdings; or (D) Glass Holdings shall fail to own and control,
directly or indirectly, at least 100% of the Capital Stock and of the voting
power of the issued and outstanding Voting Stock of the Borrower; provided,
--------
however, that the failure by Glass Holdings to own and control 100% of the
- -------
Capital Stock and of the voting power of the Voting Stock of the Borrower shall
not be deemed to constitute a Change of Control if such failure results solely
from the issuance to First Union or its assignee of warrants to purchase Capital
Stock of the Borrower issued pursuant to the Amended and Restated Commitment
Letter. Each percentage in the preceding sentence shall be calculated on a fully
diluted basis after giving effect to the conversion, exchange or exercise of all
outstanding warrants, options and other similar agreements or obligations of the
relevant Person that are or could become convertible, exchangeable or
exercisable for Capital Stock or Voting Stock of the relevant Person.
"Change of Control Date" has the meaning ascribed to it in Section
2.4A(iv).
"Change of Control Offer" has the meaning ascribed to it in Section
2.4A(iv).
"Change of Control Payment Date" has the meaning ascribed to it in Section
2.4A(iv).
"Change of Control Purchase Price" has the meaning ascribed to it in
Section 2.4A(iv).
"Closing Date" has the meaning ascribed to it in Section 2.1B.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of, such Person's common stock, whether outstanding on the
Closing Date or issued after the Closing Date, and includes, without limitation,
all series and classes of such common stock
"Compliance Certificate" means a certificate substantially in the form of
Exhibit II delivered to the Agent by the Borrower pursuant to Section 5.1.
- ----------
"Consolidated EBITDA" means, for any period, Consolidated Net Income for
such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) Consolidated Income Tax Expense for such period;
(ii) Consolidated Interest Expense for such period; and (iii) Consolidated Non-
cash Charges for such period; less (A) all non-cash items increasing
Consolidated Net Income for such period and (B) all cash payments during such
period relating to non-cash charges that were added back in determining
Consolidated EBITDA in any prior period.
"Consolidated Fixed Charge Coverage Ratio" means, as of any date of
determination, the ratio of the aggregate amount of Consolidated EBITDA for the
four most recent full fiscal
7
<PAGE>
quarters for which financial statements are available ending prior to the date
of such determination (the "Four Quarter Period") to Consolidated Fixed Charges
for such Four Quarter Period. In addition to and without limitation of the
foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the Incurrence or
repayment of any Indebtedness of the Borrower or any of its Subsidiaries (and
the application of the proceeds thereof), including the Incurrence of any
Indebtedness (and the application of the proceeds thereof) giving rise to the
need to make such determination, occurring during such Four Quarter Period or at
any time subsequent to the last day of such Four Quarter Period and on or prior
to such date of determination, as if such Incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of such Four Quarter Period and (ii) any Asset Sale Transactions or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving rise
to the need to make such determination as a result of the Borrower or one of its
Subsidiaries (including any Person who becomes a Subsidiary as a result of the
Asset Acquisition) Incurring Acquired Indebtedness and including, without
limitation, by giving pro forma effect to any Consolidated EBITDA (provided that
such pro forma Consolidated EBITDA shall be calculated in a manner consistent
with the exclusions in the definition of "Consolidated Net Income" but without
giving effect to clause (c) of the definition of Consolidated Net Income)
attributable to the assets which are the subject of the Asset Sale Transaction
or Asset Acquisition during the Four Quarter Period) occurring during the Four
Quarter Period or at any time subsequent to the last day of the Four Quarter
Period and on or prior to such date of determination, as if such Asset Sale
Transaction or Asset Acquisition (including the Incurrence of any such Acquired
Indebtedness) occurred on the first day of the Four Quarter Period. If the
Borrower or any of its Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to the
Incurrence of such guaranteed Indebtedness as if the Borrower or any of its
Subsidiaries had directly Incurred such guaranteed Indebtedness. Furthermore, in
calculating "Consolidated Fixed Charges" for purposes of determining the
denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage
Ratio," (1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the date of determination and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on such date of
determination; (2) if interest on any Indebtedness actually Incurred on such
date of determination may optionally be determined at an interest rate based
upon a factor of a prime or similar rate, a eurocurrency interbank offered rate,
or other rates, then the interest rate in effect on such date of determination
will be deemed to have been in effect during the Four Quarter Period; and (3)
notwithstanding clause (1) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by Hedging
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, for any period, the sum, without
duplication, of (i) Consolidated Interest Expense, plus (ii) the product of (x)
the amount of all dividend payments on any series of Preferred Stock of the
Borrower (other than dividends paid in Qualified Capital Stock) paid, accrued or
scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus
8
<PAGE>
the then current effective consolidated federal, state and local tax rate of the
Borrower (determined by treating the Borrower as the common parent of a
consolidated group consisting of the Borrower and its Subsidiaries), expressed
as a decimal.
"Consolidated Income Tax Expense" means, with respect to the Borrower for
any period, the provision for Federal, state, local and foreign income taxes
payable by or on behalf of the Borrower and its Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP (determined by
treating the Borrower as the common parent of a consolidated group consisting of
the Borrower and its Subsidiaries).
"Consolidated Interest Expense" means, for any period, the sum of, without
duplication: (i) the aggregate of cash and non-cash interest expense of the
Borrower and its Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP, including, without limitation (whether or not
interest expense in accordance with GAAP), (a) any amortization of debt discount
and any amortization or write off of deferred financing costs, (b) the net costs
under Hedging Obligations related to Indebtedness (including amortization of
fees), (c) all capitalized interest, (d) the interest portion of any deferred
payment obligation, (e) commissions, discounts and other fees and charges
Incurred in respect of letters of credit or bankers' acceptances and (f) any
interest expense on Indebtedness of another Person that is guaranteed by such
Person or one of its Subsidiaries or secured by a Lien on the assets of such
Person or one of its Subsidiaries (whether or not such guarantee or Lien is
called upon); and (ii) the interest component of Capitalized Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by the Borrower and its
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" means, for any period, the aggregate net income
(or loss) of the Borrower and its Subsidiaries for such period on a
consolidated basis (after giving effect to any decrease (but not increase)
attributable to minority interests in Subsidiaries), determined in accordance
with GAAP; provided, however, that there shall be excluded therefrom (a) net
-------- -------
after-tax gains and losses from Asset Sale Transactions or abandonments or
reserves relating thereto, (b) net after-tax items classified as extraordinary
gains or losses, (c) the net income of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a Subsidiary or is
merged or consolidated with the Borrower or any Subsidiary, (d) the net income
(but not loss) of any Subsidiary to the extent that the declaration of
dividends or similar distributions by that Subsidiary of that income is
restricted by contract, operation of law or otherwise, (e) the net income of any
Person, other than a Subsidiary, except to the extent of cash dividends or
distributions paid to the Borrower or to a Subsidiary by such Person and (f)
any restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Exchange Date.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
9
<PAGE>
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses of the Borrower and its
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP (excluding any such charge which requires an accrual of or a reserve
for cash charges for any future period).
"Contested Claim" means any Tax, Indebtedness or other claim or liability
(i) the validity or amount of which is being diligently contested in good faith,
(ii) for which adequate reserve, or other appropriate provision, if any, as
required in conformity with GAAP shall have been made, and (iii) with respect to
which any right to execute upon or sell any assets of the Borrower or of any of
its Subsidiaries has not matured or has been and continues to be effectively
enjoined, superseded or stayed.
"Contingent Obligation," as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of such
other Person that such obligation of such other Person will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such obligation will be protected (in whole or in part)
against loss in respect thereof, (ii) with respect to any letter of credit
issued for the account of that Person or as to which that Person is otherwise
liable for reimbursement of drawings, or (iii) under Hedging Obligations.
Contingent Obligations shall include, without limitation, (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by the referent Person of the obligation of another, (b) the obligation
to make take-or-pay or similar payments if required regardless of non-
performance by any other party or parties to an agreement, and (c) any liability
of the referent Person for the obligation of another through any agreement
(contingent or otherwise) (X) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (Y) to maintain the solvency
or any balance sheet item, level of income or financial condition of another if,
in the case of any agreement described under subclauses (X) or (Y) of this
sentence, the primary purpose or intent thereof is as described in the preceding
sentence. The amount of any Contingent Obligation shall be equal to the amount
of the obligation so guaranteed or otherwise supported or, if less, the amount
to which such Contingent Obligation is specifically limited.
"Contractual Obligation", as applied to any Person, means any provision of
any Security issued by that Person or of any indenture, mortgage, deed of trust,
contract, undertaking, agreement or other instrument to which that Person is a
party or by which it or any of its properties is bound or to which it or any of
its properties is subject.
"CSG" means Compagnie Saint-Gobain, a corporation organized under the laws
of France.
10
<PAGE>
"Currency Agreement" means, in respect of any Person, any foreign exchange
contract, currency swap agreement other similar agreement or arrangement as to
which such Person is a party.
"Custodian" means any receiver, interim receiver, receiver and manager,
trustee, assignee, liquidator, sequestrator or similar official charged with
maintaining possession or control over property for one or more creditors,
whether under any Bankruptcy Law or otherwise.
"Daylight Loan" means the loan of approximately $199.0 million from First
Union National Bank to AGY Holdings pursuant to the Daylight Loan Agreement.
"Daylight Loan Agreement" means the definitive documentation as executed on
the Closing Date evidencing the Daylight Loan including, without limitation all
related instruments and documents (including security documents).
"Demand Take-Out Notes" means senior subordinated notes of the Borrower
issued under an indenture to be negotiated by the Borrower and the Take-Out
Bank, which Demand Take-Out Notes shall be guaranteed by each entity that
guarantees the Bridge Notes. The Demand Take-Out Notes shall be in such amount
as determined by the Take-Out Bank up to a maximum aggregate amount of
$100,000,000 and the proceeds of which shall be used to repay the Bridge Loan in
whole or in part, and any excess thereof shall be used to repay any amounts
outstanding under the Senior Credit Facility.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the sole option of the
holder thereof, in any case, on or prior to the 91st day after the Maturity
Date.
"Dollars" or the sign "$" means the lawful money of the United States of
America.
"Eligible Assignee" means (A) (i) a commercial bank organized under the
laws of the United States of America or any state thereof; (ii) a savings and
loan association or savings bank organized under the laws of the United States
or any state thereof; (iii) a commercial bank organized under the laws of any
other country or a political subdivision thereof; provided that (x) such bank is
--------
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; provided, however, that, at the time of determination, the Lender
-------- -------
making the assignment or transfer to such bank, believes that such bank will be
entitled to an exemption form U.S. withholding tax (assuming compliance with the
first sentence of Section 12.2E); and (iv) any other entity which is an
"accredited investor" (as defined in Regulation D under the Securities Act of
1933) which extends credit or buys loans as one of its businesses including, but
not limited to, insurance companies, mutual funds and lease financing companies,
in each case (under clauses (i) through
11
<PAGE>
(iv) above) that is reasonably acceptable to the Agent; and (B) any Lender and
any Affiliate of any Lender; provided, however, that the term "Eligible
-------- -------
Assignee" shall not include CSG.
"Employee Pension Benefit Plan" means any "employee pension benefit plan"
as defined in Section 3(2) of ERISA (i) which is, or, at any time within the
five calendar years immediately preceding the date hereof, was at any time,
sponsored, maintained or contributed to by the Borrower or its Subsidiaries or
any of their respective ERISA Affiliates or (ii) with respect to which the
Borrower or its Subsidiaries retains any liability, including any potential
joint and several liability as a result of an affiliation with an ERISA
Affiliate or a party that would be an ERISA Affiliate except for the fact the
affiliation ceased more than five calendar years prior to the date hereof.
"Environmental Claim" means any allegation, notice of violation, claim,
demand, abatement order or other order or direction (conditional or otherwise)
by any governmental authority or any person for any response or corrective
action, any damage, including, without limitation, personal injury (including
sickness, disease or death), property damage, contribution, indemnity, indirect
or consequential damages, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the environment, or for fines,
penalties or restrictions, in each case arising under any Environmental Law,
including without limitation, relating to, resulting from or in connection with
Hazardous Materials and relating to the Borrower, any of its Subsidiaries or any
of their respective Facilities or predecessors in interest.
"Environmental Indemnity Agreement" means the Environmental Indemnity
Agreement, dated as of the Closing Date, by and between the Borrower, Porcher
Industries, Inc., First Union National Bank and First Union.
"Environmental Laws" means the common law and all statutes, ordinances,
orders, rules, regulations, requirements, judgments, plans, policies or decrees
and the like relating to (i) environmental matters, including, without
limitation, those relating to fines, injunctions, penalties, damages,
contribution, cost recovery compensation, losses or injuries resulting from the
Release or threatened Release of Hazardous Materials, (ii) the generation, use,
storage, transportation or disposal of Hazardous Materials including, without
limitation, investigation, study, assessment, testing, monitoring, containment,
removal, remediation, or clean-up of any such Release, or (iii) occupational
safety and health, industrial hygiene or the protection of the environment,
natural resources, human, plant or animal health or welfare, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. (S) 9601 et. seq.), the Hazardous Materials
-- ---
Transportation Act (49 U.S.C. (S) 1801 et seq.), the Resource Conservation and
-- ---
Recovery Act (42 U.S.C. (S) 6901 et seq.), the Federal Water Pollution Control
-- ---
Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C. (S) 7401 et
-- --- --
seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq.), the
- --- -- ---
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. (S) 136 et seq.),
-- ---
the Occupational Safety and Health Act (29 U.S.C. (S) 651 et seq.) and the
-- ---
Emergency Planning and Community Right-to-Know Act (42 U.S.C. (S) 11001 et
--
seq.), each as amended or supplemented, and any analogous future or present
- ---
statutes, orders, rules, regulations, requirements, judgments or decrees
promulgated pursuant thereto, each as in effect as of the date of determination.
12
<PAGE>
"Environmental Liabilities and Costs" means any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the actual and reasonable fees and disbursements of counsel
in connection with any investigative, administrative or judicial proceeding
commenced or threatened), suffered by, imposed on, incurred by or asserted
against the Lenders, the Agent, and any holders of the Bridge Notes and their
respective officers, directors, employees, agents, representatives and
affiliates arising from or relating to any: (1) Environmental Claim; (2) failure
of the Borrower and its Subsidiaries (including, without limitation, all
operations and conditions at or in the Facilities) to comply with applicable
Environmental Laws, including without limitation fines, penalties, and costs or
expenses incurred to achieve compliance with applicable Environmental Laws; (3)
presence of Hazardous Materials on or related to or generated by the operations
at or in the Facilities; or (4) assertion or attachment of any lien under
Environmental Laws on any of the Facilities.
"Environmental Lien" means a Lien in favor of a Tribunal or other Person
(i) for any liability under an Environmental Law or (ii) for damages arising
from or costs incurred by such Tribunal or other Person in response to a release
or threatened release of Hazardous Materials into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder and any successor statute, regulations and rulings.
"ERISA Affiliate," as applied to any Person, means (i) any corporation
which is, or was at any time within the five calendar years immediately
preceding the date hereof, a member of a controlled group of corporations within
the meaning of Section 414(b) of the Internal Revenue Code of which that Person
is, or was at any time within the five calendar years immediately preceding the
date hereof, a member; (ii) any trade or business (whether or not incorporated)
which is, or was at any time within the five calendar years immediately
preceding the date hereof, a member of a group of trades or businesses under
common control within the meaning of Section 414(c) of the Internal Revenue Code
of which that Person is, or was at any time within the five calendar years
immediately preceding the date hereof, a member; and (iii) any member of an
affiliated service group within the meaning of Section 414(m) or (o) of the
Internal Revenue Code of which that Person, any corporation described in clause
(i) above or any trade or business described in clause (ii) above is, or was at
any time within the five calendar years immediately preceding the date hereof, a
member.
"ERISA Event" means (i) a "reportable event" within the meaning of Section
4043 of ERISA and the regulations issued thereunder with respect to any Pension
Plan (excluding those for which the provision for 30-day notice to the PBGC has
been waived by regulation); (ii) the failure to meet the minimum funding
standard of Section 412 of the Internal Revenue Code with respect to any Pension
Plan (whether or not waived) or the failure to make any required contribution
within 30 days of its due date with respect to any Multiemployer Plan; (iii) the
provision by the administrator of any Pension Plan pursuant to Section 4041 (a)
(2) of ERISA of a notice of intent to terminate such plan in a distress
termination described in Section 4041(c) of
13
<PAGE>
ERISA; (iv) the withdrawal by the Borrower or any of its Subsidiaries or any of
their respective ERISA Affiliates from any Multiple Employer Plan or the
termination of any such Multiple Employer Plan resulting in liability pursuant
to Sections 4063 or 4064 of ERISA; (v) the institution by the PBGC of
proceedings to terminate any Pension Plan, or the occurrence of any event or
condition which might reasonably be expected to constitute grounds under ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan; (vi) the imposition of liability on the Borrower or any of its
Subsidiaries or any of their respective ERISA Affiliates pursuant to Section
4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of
ERISA; (vii) the withdrawal by the Borrower or any of its Subsidiaries or any of
their respective ERISA Affiliates in a complete or partial withdrawal (within
the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if
there is any potential liability therefor, or the receipt by the Borrower or any
of its Subsidiaries or any of their respective ERISA Affiliates of notice from
any Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated
under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or
omission which could reasonably be expected to give rise to the imposition on
the Borrower or any of its Subsidiaries or any of their respective ERISA
Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the
Internal Revenue Code or under Section 406, 409 or 502(i) or (1) of ERISA in
respect of any Employee Benefit Pension Plan; (ix) receipt from the Internal
Revenue Service of notice of the failure of any Pension Plan (or any other
Employee Pension Benefit Plan intended to be qualified under Section 401(a) of
the Internal Revenue Code) to qualify under Section 401(a) of the Internal
Revenue Code, or the failure of any trust forming part of any Pension Plan or
Employee Pension Benefit Plan to qualify for exemption from taxation under
Section 501(a) of the Internal Revenue Code; or (x) the imposition of a Lien
pursuant to Section 401(a) (29) or 412(n) of the Internal Revenue Code or
pursuant to ERISA with respect to any Pension Plan.
"Event of Default" means each of the events set forth in Section 7.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time and any successor statute.
"Exchange Date" means the eighteen month anniversary of the Closing Date.
"Exchange Notes" has the meaning ascribed to it in Section 5.10(b)(i).
"Exchange Request" has the meaning ascribed to it in Section 5.10.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased, operated or used by the Borrower, its
Subsidiaries or any of their respective predecessors in interest.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
equal for each day during such period to the weighted average of the rates on
overnight Federal Funds transactions with members of the Federal Reserve System
arranged by Federal Funds brokers, as published
14
<PAGE>
for such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of the quotations
for such day on such transactions received by the Agent from three Federal Funds
brokers of recognized standing selected by the Agent.
"First Union" has the meaning assigned to it in the first paragraph hereof.
"Foreign Plan" means any employee benefit plan maintained outside the U.S.
by the Borrower, any of its Subsidiaries or any of their respective Affiliates
for employees substantially all of whom are non-resident aliens of the U.S. and
for which the Borrower or any of its Subsidiaries may be directly or indirectly
liable.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio" above.
"FUCM" means First Union Capital Markets.
"Funding Guarantor" has the meaning ascribed to it in Section 10.6.
"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 may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Closing Date.
"Glass Holdings" means Glass Holdings Corp., a Delaware corporation.
"Glass Holdings Loan" means the secured loan of approximately $135.0
million from the Borrower to Glass Holdings pursuant to the Glass Holdings Loan
Agreement to fund a portion of the Purchase Price Loan and certain fees payable
by Glass Holdings in connection with the Acquisition.
"Glass Holdings Loan Agreement" means the definitive documentation as
executed on the Closing Date evidencing the Glass Holdings Loan, including,
without limitation, all instruments and documents relating thereto and all
instruments and documents relating to the Glass Holdings Pledge and all other
security documents.
"Glass Holdings Pledge" shall mean the pledge by Glass Holdings to the
Borrower of all of the Capital Stock of AGY Holdings and Belmont as security for
the Glass Holdings Loan.
"Guarantee Obligations" has the meaning ascribed to it in Section 11.1.
"Guarantees" means, collectively, the guarantees delivered to the Lenders
by the Guarantors pursuant to Section 10 which guarantees shall be evidenced by
notations of guarantee substantially in the form of Exhibit VII.
-----------
"Guarantor Payment Blockage Period" has the meaning ascribed to it in
Section 11.2(b).
15
<PAGE>
"Guarantor Senior Indebtedness" means, with respect to any Guarantor, the
principal of, premium, if any, and interest on, and all amounts payable in
respect of, all obligations of every nature of such Guarantor from time to time
owed to the lenders under the Senior Credit Facility, including, without
limitation, all obligations with respect to letters of credit and principal of
and interest on, and all fees, indemnities and expenses payable under, the
Senior Credit Facility and all obligations under Interest Rate Agreements
entered into with lenders under the Senior Credit Facility and their respective
Affiliates and any guarantees thereof including any agreement refinancing all or
any portion of the Indebtedness under such Senior Credit Facility but only to
the extent such Indebtedness is fully and adequately secured. Without limiting
the generality of the foregoing, "Guarantor Senior Indebtedness" shall include
interest accruing thereon subsequent to the occurrence of any Event of Default
specified in Sections 7.6 and 7.7 relating to the Guarantors, whether or not the
claim for such interest is allowed under any applicable Bankruptcy Law.
Notwithstanding the foregoing, "Guarantor Senior Indebtedness" shall not include
that portion of any Indebtedness which is incurred by such Guarantor in
violation of this Agreement.
"Guarantors" means each future Wholly-Owned Subsidiary of the Borrower that
is organized under the laws of the United States or any state or commonwealth
thereof or under the laws of the District of Columbia.
"Hazardous Materials" means (i) any chemical, material or substance at any
time defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," "infectious waste," "toxic substances" or any
other formulations intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable Environmental Laws or
publications promulgated pursuant thereto; (ii) any oil, petroleum, petroleum
fraction or petroleum derived substance; (iii) any drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources; (iv) any flammable
substances or explosives; (v) any radioactive materials; (vi) asbestos in any
form; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which
contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million; (ix) pesticides; and (x) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any governmental authority or which may or could pose a hazard
to human health or safety or the environment.
"Hedging Obligations" means the obligations of any Person pursuant to any
Interest Rate Agreement or Currency Agreement.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become directly or indirectly liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred," "Incurrable" and
16
<PAGE>
"Incurring" shall have meanings correlative to the foregoing); provided that any
--------
amendment, modification or waiver of any document pursuant to which Indebtedness
was previously Incurred shall only be deemed to be an Incurrence of Indebtedness
if and to the extent such amendment, modification or waiver (i) increases the
principal thereof or interest rate or premium payable thereon or (ii) changes to
an earlier date the stated maturity thereof or the date of any scheduled or
required principal payment thereon or the time or circumstances under which such
Indebtedness shall be redeemed; provided, further, that any Indebtedness of a
-------- -------
Person existing at the time such Person becomes a Subsidiary of the Borrower
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be Incurred by such Subsidiary at the time it becomes a Subsidiary of the
Borrower.
"Indebtedness" means, with respect to any Person, (i) all indebtedness,
obligations and liabilities of such Person for borrowed money, (ii) that portion
of obligations with respect to Capital Leases that is properly classified as a
liability on a balance sheet of such person in conformity with GAAP, (iii) notes
payable and drafts accepted representing extensions of credit, whether or not
representing obligations for borrowed money, of such Person, (iv) any
indebtedness, obligation or liability of such Person owed for all or any part of
the deferred purchase price of property or services (excluding any such
obligations incurred under ERISA), which purchase price is (a) due more than six
months (or a longer period of up to one year, if such terms are available from
suppliers in the ordinary course of business) from the date of incurrence of the
obligation in respect thereof or (b) evidenced by a note or similar written
instrument, (v) all indebtedness, obligations and liabilities secured by any
Lien on any property or asset owned or held by that Person regardless of whether
the indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person except that "Indebtedness" shall not
include trade payables and accrued liabilities Incurred in the ordinary course
of business for the purchase of goods or services which are not secured by a
Lien other than a Lien permitted pursuant to Section 6.2(ii) and Hedging
Obligations (which constitute Contingent Obligations, not Indebtedness), (vi)
guarantees of such Person in respect of Indebtedness of other Persons and (vii)
all Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall be required
to be determined pursuant to this Agreement, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such fair
market value to be determined reasonably and in good faith by the board of
directors of the issuer of such Disqualified Capital Stock.
"Indemnified Liabilities" has the meaning ascribed to it in Section 12.4.
"Indemnitees" has the meaning ascribed to it in Section 12.4.
17
<PAGE>
"Independent Financial Advisor" means an accounting firm, appraisal firm or
investment banking firm (i) which does not, and whose directors, officers and
employees or Affiliates do not, have a direct or indirect financial interest in
the Borrower or any of its Subsidiaries and (ii) which, in the judgment of the
Board of Directors of the Borrower or any of its Subsidiaries is otherwise
independent and qualified to perform the task for which it is to be engaged.
"Initial Exchange Request" has the meaning ascribed to it in Section 5.10.
"Initial Request Date" has the meaning ascribed to it in Section 5.9.
"Intellectual Property" means all patents, trademarks, tradenames,
copyrights, technology, know-how and processes used in or necessary for the
conduct of the business of the Borrower or any of its Subsidiaries as currently
conducted that are material to the condition (financial or otherwise), business,
operations or prospects of the Borrower and its Subsidiaries, taken as a whole.
"Interest Payment Date" means the last day of each Interest Period.
"Interest Period" shall mean, in respect of the Bridge Loan and subject to
Section 2.2E, (a) the period commencing on the Closing Date and ending three
months thereafter on the same numerical day of the month as the Closing Date and
(b) each subsequent period beginning on the last day of the preceding Interest
Period and ending three months thereafter on the same numerical day of the month
as that last day.
"Interest Rate Agreement" of any Person means any interest rate protection
agreement (including, without limitation, interest rate swaps, caps, floors,
collars, derivative instruments and similar agreements) and/or other types of
interest hedging agreements.
"Interest Rate Determination Date" means, with respect to any Interest
Period, the second Business Day on which banks in New York and London are open
prior to the first Business Day of such Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor code or statute.
"Investment" means (i) any direct or indirect purchase or other acquisition
of, or of a beneficial interest in, any Securities of any other Person or (ii)
any direct or indirect loan, advance (other than advances to employees for
moving, entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business), extension of credit or capital
contribution to any other Person, including all indebtedness and accounts
receivable from that other Person that are not current assets or did not arise
from sales to that other Person in the ordinary course of business. The amount
of any Investment shall be the original cost of such Investment plus the cost of
all additions thereto, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment.
"Investment" shall not include bank demand deposit accounts.
18
<PAGE>
"Jefferson" means Jefferson Holdings, Inc., a Delaware corporation.
"Jefferson Distribution" means the cash payment of approximately $191.0
million made by AGY to Owens concurrently with the consummation of other JV
Transactions.
"JV Supply and Service Agreements" means all of the agreements and
contracts (i) entered into between AGY and Owens Corning (and such other Persons
as may be parties thereto) and (ii) that Owens Corning is transferring or
assigning to, or otherwise conferring rights thereunder upon, AGY in connection
with the Acquisition.
"JV Transactions" means, collectively, (i) the Borrower Transactions, (ii)
the Acquisition, (iii) the Purchase Price Loan, (iv) the Daylight Loan, (v) the
Jefferson Distribution, (vi) the AGY Holdings Distribution, (vii) the AGY
Bridge Loan Facility, (viii) the AGY Senior Credit Facility, (ix) each of the
transactions contemplated to occur on or prior to the Closing Date by the JV
Supply and Service Agreements, (x) the Assignment and Assumption Agreement and
(xi) any other transactions on or prior to the Closing Date contemplated in
relation to any of the foregoing.
"JV Transaction Documents" means, collectively, (i) the LLC Sale and
Purchase Agreement, (ii) the LLC Operating Agreement, (iii) the Asset
Contribution and Sale Agreements, (iv) the JV Supply and Service Agreements, (v)
the Purchase Price Loan Agreement, (vi) the Daylight Loan Agreement, (vii) the
Glass Holdings Loan Agreement, (viii) the Senior Credit Facility, (ix) the AGY
Bridge Loan Facility, (x) the Assignment and Assumption Agreement and (xi) the
AGY Senior Credit Facility.
"Laws" means all applicable statutes, laws, ordinances, regulations, rules,
orders, judgments, writs, injunctions or decrees of any state, commonwealth,
nation, territory, possession, province, county, parish, township, village,
municipality or Tribunal, and "Law" means each of the foregoing.
"Lenders" has the meaning ascribed to that term in the introduction to this
Agreement and shall include any assignee of any Bridge Loan, Bridge Note or
Bridge Loan Commitment to the extent of such assignment.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest) and any option, trust or other preferential arrangement
having the practical effect of any of the foregoing.
"Litigation" means any action, suit, proceeding, claim, lawsuit and/or
investigation conducted or threatened by or before any Tribunal.
"LLC Operating Agreement" means the Amended and Restated Limited Liability
Operating Agreement for the Company, dated as of the Closing Date, by and
between AGY Holdings and Jefferson.
19
<PAGE>
"LLC Sale and Purchase Agreement" means the LLC Interest Sale and Purchase
Agreement dated as of July 31, 1998 among Owens, AGY and Glass Holdings and all
instruments and documents related thereto, as amended by Amendment No. 1 to the
LLC Interest Sale and Purchase Agreement, dated as of the Closing Date.
"Loan Documents" means this Agreement, the Bridge Notes, the Guarantees,
the Senior Subordinated Indenture, the Exchange Notes, the Registration Rights
Agreement and the Environmental Indemnity Agreement.
"Margin Stock" has the meaning assigned to that term in Regulation U and
Regulation G of the Board of Governors of the Federal Reserve System as in
effect from time to time.
"Material Adverse Change" means a material adverse change in the business,
operations, properties, assets, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries, taken as a whole.
"Material Adverse Effect" means (i) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries, taken as a whole, whether before
or after giving effect to the Borrower Transactions or (ii) a material
impairment of the ability of the Borrower and its Subsidiaries, taken as a
whole, to perform or consummate, or the material impairment of the ability of
the Agent or Lenders to enforce, the Obligations or the Borrower Transactions.
"Maturity Date" means the tenth anniversary of the Closing Date.
"Maximum Cash Interest Rate" means an interest rate of 14% per annum;
provided that in computing such interest rate, fees paid to the Lenders shall
- --------
not be deemed an interest payment.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower, its Subsidiaries or any of its ERISA
Affiliates is making or accruing an obligation to make contributions, or has
within any of the preceding five years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the
Borrower, its Subsidiaries or any of their ERISA Affiliates and at least one
Person other than the Borrower, its Subsidiaries and their ERISA Affiliates or
(ii) was so maintained and in respect of which such Borrower, Subsidiaries or
ERISA Affiliates could have liability under Section 4064 or Section 4069 of
ERISA in the event such plan has been or were to be terminated.
"Net Cash Proceeds" means, with respect to any Asset Sale, Cash Proceeds of
such Asset Sale net of bona fide direct costs of sale including, but not limited
to, (i) income taxes reasonably estimated to be actually payable as a result of
such Asset Sale within two years of the date of such Asset Sale, (ii) payment of
the outstanding principal amount of, premium or penalty, if any, and interest
on, any Indebtedness that is secured by a Lien on the stock or assets in
question and that is required to be repaid under the terms thereof as a result
of such Asset Sale, (iii) out-of-pocket expenses and fees relating to such Asset
Sale (including, without limitation, legal,
20
<PAGE>
accounting and investment banking fees and sales commissions) and (iv) any
portion of Cash Proceeds which the Borrower determines in good faith should be
reserved for post-closing adjustments or liabilities relating to the Asset Sale
retained by the Borrower or any of its Subsidiaries, it being understood and
agreed that on the day that all such post-closing adjustments have been
determined, the amount (if any) by which the reserved amount in respect of such
Asset Sale exceeds the actual post-closing adjustments, payable by the Borrower
or any of its Subsidiaries, shall constitute Net Cash Proceeds on such date.
"Non-Payment Default" means any event (other than a Payment Default) the
occurrence of which entitles one or more Persons to act to accelerate the
maturity of any Senior Indebtedness.
"Notice of Borrowing" means a notice substantially in the form of Exhibit
-------
III hereto with respect to a proposed borrowing.
- ---
"NVOC Asset Purchase Agreement" means the NVOC Asset Purchase Agreement,
dated as of September 29, 1998, between N.V. Owens Corning S.A. and AGY and all
instruments and documents related thereto.
"Obligations" means all obligations of every nature of the Borrower from
time to time owed to the Lenders and the Agent under the Loan Documents, whether
for principal, reimbursements, interest, fees, expenses, indemnities or
otherwise, and whether primary, secondary, direct, indirect, contingent, fixed
or otherwise (including obligations of performance).
"OC Japan Asset Purchase Agreement" means the Asset Purchase Agreement,
dated as of September 29, 1998, between Owens-Corning (Japan) Ltd. and AGY.
"OCC Asset Purchase Agreement" means the OCC Asset Purchase Agreement,
dated as of September 29, 1998, between Owens-Corning Canada Inc., and AG Yarns
Canada Inc.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Chief Financial Officer, the Controller, the Treasurer, the
Secretary or Assistant Secretary of each of the Borrower and its Subsidiaries.
"Officers' Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by two Officers; provided that every
Officers' Certificate with respect to the compliance with a condition precedent
to the making of the Bridge Loans hereunder shall include (i) a statement that
the officer or officers making or giving such Officers' Certificate have read
such condition and any definitions or other provisions contained in this
Agreement relating thereto, (ii) a statement that, in the opinion of the
signers, they have made or have caused to be made such examination or
investigation as is necessary to enable them to express an informed opinion as
to whether or not such condition has been complied with, and (iii) a statement
as to whether, in the opinion of the signers, such condition has been complied
with.
"Original Bridge Notes" has the meaning assigned to it in Section 2.1D.
21
<PAGE>
"Overseas" means BGF Overseas Inc., a company organized under the laws of
the Virgin Islands and a Wholly-Owned Subsidiary of the Borrower.
"Owens" means Owens Corning, a Delaware corporation.
"Payment Blockage Period" has the meaning ascribed to it in Section 8.2(b).
"Payment Default" means any default in the payment of principal, premium,
if any, or interest on any Senior Indebtedness beyond any applicable grace
period with respect thereto.
"Payment Office" shall mean the office of the Agent located at 301 South
College Street, DC-4 Charlotte, NC 28288-0680 or such other office as the Agent
may designate to the Borrower and the Lenders from time to time.
"Payment Restriction" has the meaning ascribed to it in Section 6.8.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor to
all or any of the Pension Benefit Guaranty Corporation's functions under ERISA.
"Pension Plan" means a Single Employer Plan or Multiple Employer Plan.
"Permits" has the meaning ascribed to it in Section 4.19.
"Permitted Business" means the business conducted by the Borrower and its
Subsidiaries as of the Closing Date and any business reasonably related thereto.
"Permitted Holders" means Robert Porcher, his immediate family members and
any trusts, the only beneficiaries of which are Robert Porcher and his immediate
family members.
"Permitted Indebtedness" has the meaning ascribed to it in Section 6.1.
"Permitted Investments" means
(i) Investments by the Borrower or any Subsidiary of the Borrower in
any Person that is or will become immediately after such Investment a
Wholly-Owned Subsidiary of the Borrower or that will merge or consolidate
into the Borrower or a Wholly-Owned Subsidiary of the Borrower;
(ii) Investments in the Borrower by any Subsidiary of the Borrower;
provided that any Indebtedness evidencing such Investment is unsecured and
--------
subordinated, pursuant to a written agreement, to the Borrower's
obligations under the Bridge Notes and Exchange Notes;
(iii) Investments in cash and Cash Equivalents;
22
<PAGE>
(iv) loans and advances to employees and officers of the Borrower
and its Subsidiaries in the ordinary course of business for bona fide
business purposes not in excess of $1,500,000 at any one time outstanding;
(v) Hedging Obligations entered into in the ordinary course of the
Borrower's or its Subsidiaries' businesses and not for speculative purposes
and otherwise in compliance with this Agreement;
(vi) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement upon
the bankruptcy or insolvency of such trade creditors or customers;
(vii) Investments made by the Borrower or its Subsidiaries as a
result of consideration received in connection with an Asset Sale made in
compliance with Section 6.13;
(viii) The Glass Holdings Loan; and
(ix) Investments permitted pursuant to Section 6.8(b)(5).
"Permitted Liens" has the meaning ascribed to it in Section 6.2.
"Permitted Refinancing Indebtedness" means (A) any Refinancing by the
Borrower of Indebtedness of the Borrower or of its Subsidiaries (other than
Indebtedness Incurred or outstanding pursuant to clause (ii), (iv), (v), (vi),
(vii), (viii), (ix) or (xi) of Section 6.1) and (B) any Indebtedness incurred
pursuant to a Refinancing by any Subsidiary of the Borrower of Indebtedness
Incurred by such Subsidiary (other than Indebtedness Incurred or outstanding
pursuant to clause (ii), (iv), (v), (vi), (vii), (viii), (ix) or (xi) of Section
6.l), in the case of each of (A) and (B), that does not (1) result in an
increase in the total of the aggregate principal amount of the Indebtedness of
such Person being Refinanced as of the date of such proposed Refinancing (if
such Indebtedness that is Refinancing the existing Indebtedness is issued at a
price less than 100% of the principal amount thereof, an increase shall not be
deemed to have occurred unless the gross proceeds of such Indebtedness that is
Refinancing the existing Indebtedness is in excess of the total of the aggregate
principal amount of the Indebtedness being Refinanced as of the date of such
proposed Refinancing) or (2) create Indebtedness with a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced; provided that (x) if such Indebtedness being
--------
Refinanced is Indebtedness of the Borrower, then such Refinancing Indebtedness
shall be Indebtedness solely of the Borrower, (y) if such Indebtedness being
Refinanced is subordinate or junior in right of payment to the Bridge Loan or
the Guarantees, as the case may be, or if recourse in respect of the
Indebtedness being Refinanced is limited in any respect, then such Indebtedness
proposed to be Incurred to Refinance the existing Indebtedness shall be
subordinate in right of payment to the Bridge Loan or the Guarantees, as the
case may be, and recourse with respect thereto, as the case may be, shall be
limited at least to the same extent and in the same manner as the Indebtedness
being Refinanced and (z) if such Indebtedness being Refinanced is Senior
Subordinated Indebtedness, then such Indebtedness proposed to be incurred to
Refinance the existing Indebtedness shall be
23
<PAGE>
Senior Subordinated Indebtedness; provided, further, that Permitted Refinancing
-------- -------
Indebtedness shall include any Indebtedness Incurred concurrently with an
irrevocable offer to purchase, on a date not more than 60 days from the date of
the Incurrence of such Indebtedness, an amount of Bridge Notes equal to such
Indebtedness.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities and governments and agencies and political subdivisions thereof.
"PIK Interest Amount" has the meaning ascribed to it in Section 2.2B.
"Potential Event of Default" means a condition or event which, after notice
or lapse of time or both, would constitute an Event of Default if that condition
or event were not cured or removed within any applicable grace or cure period.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights over any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of this Agreement, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act as interpreted by the
Borrower's chief financial officer or Board of Directors in consultation with
its independent certified public accountants.
"Purchase Price Loan" means the loan of approximately $133.0 million loan
from Glass Holdings to AGY Holdings to fund the AGY Holdings Acquisition.
"Purchase Price Loan Agreement" means the definitive documentation as
executed on the Closing Date evidencing the Purchase Price loan including,
without limitation, all related instruments and documents (including all
security documents).
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Recovery Event" means the receipt by the Borrower or any of its
Subsidiaries of any cash insurance proceeds or condemnation award payable by
reason of theft, loss, physical destruction or damage, taking or similar event
with respect to any of their respective properties or assets.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund or defease, or to issue a security or
Indebtedness in exchange or replacement for, such security or Indebtedness in
whole or in part. "Refinanced" and "Refinancing" shall have correlative
meanings.
"Register" has the meaning ascribed to it in Section 5.12.
24
<PAGE>
"Registration Rights Agreement" means a registration rights agreement
substantially in the form contemplated by Exhibit V (with such changes therein
---------
as the Agent and the Borrower shall approve).
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
onto or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Required Lenders" means the Lender or Lenders holding at least 51% of the
aggregate outstanding principal amount of Bridge Notes.
"Restricted Payment" has the meaning ascribed to it in Section 6.3.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party providing for the leasing
to the Borrower or a Subsidiary of the Borrower of any property, whether owned
by the Borrower or any Subsidiary of the Borrower at the Closing Date or later
acquired, which has been or is to be sold or transferred by the Borrower or such
Subsidiary to such Person or to any other Person by whom funds have been or are
to be advanced on the security of such Property.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit sharing
agreement or arrangement, bonds, debentures, options, warrants, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Senior Credit Facility" means that certain credit agreement to be entered
into on or before the Closing Date between the Borrower, the guarantors from
time to time a party thereto, the lenders from time to time a party thereto and
First Union National Bank, as agent, pursuant to which the Borrower may, as of
the Closing Date, borrow up to $125,000,000 in the aggregate at any one time
outstanding together with the documents related thereto (including, without
limitation, any guarantee agreements and security documents), as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including adding
Subsidiaries of the Borrower as additional borrowers or guarantors thereunder or
increasing the principal amount available thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Senior Indebtedness" means for any Person the principal of, premium, if
any, and interest on, and all amounts payable in respect of, all obligations of
every nature of the Borrower
25
<PAGE>
from time to time owed to the lenders under the Senior Credit Facility;
including, without limitation, all obligations in respect of letters of credit
and principal of and interest on and all fees, indemnities, and expenses payable
under the Senior Credit Facility and all obligations under Interest Rate
Agreements entered into with lenders under the Senior Credit Facility and their
respective Affiliates and any guarantees thereof including any agreement
refinancing all or any portion of the Indebtedness under such Senior Credit
Facility. Without limiting the generality of the foregoing "Senior Indebtedness"
shall include interest accruing thereon subsequent to the occurrence of any
Event of Default specified in Sections 7.6 and 7.7 relating to the Borrower,
whether or not the claim for such interest is allowed under any applicable
Bankruptcy Law. Notwithstanding the foregoing, "Senior Indebtedness" of any
Person shall not include that portion of any Indebtedness which is incurred by
such Person in violation of this Agreement.
"Senior Subordinated Indebtedness" means, with respect to the Borrower or
any Guarantor, Indebtedness of such Person that specifically provides that such
Indebtedness is to rank pari passu in right of payment with the terms set forth
in this Agreement and the Bridge Loan or the Guarantee of such Guarantor, as the
case may be, and is not subordinated by its terms in right of payment to any
Indebtedness or other obligation of the Borrower or such Guarantor which is not
Senior Indebtedness in the case of the Borrower or Guarantor Senior Indebtedness
in the case of such Guarantor.
"Senior Subordinated Indenture" means an indenture among the Borrower, the
Guarantors and a trustee having terms substantially similar to the terms set
forth in this Agreement and the Bridge Notes except where the context of this
Agreement provides otherwise (with such changes therein as the Agent and the
Borrower shall approve, and at such time as notes issued thereunder are sold in
a public offering, with other appropriate changes to reflect such public
offering), as the same may at any time be amended, modified and supplemented and
in effect.
"Single Employer Plan" means a "single-employer plan," as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the
Borrower, any of its Subsidiaries or any of their ERISA Affiliates and no Person
other than the Borrower, any of its Subsidiaries or any of their ERISA
Affiliates or (ii) was so maintained and in respect of which such Borrower, its
Subsidiaries or their ERISA Affiliates could have liability under Section 4069
of ERISA in the event such plan has been or were to be terminated.
"Subordinated Indebtedness" means Indebtedness of the Borrower or any
Guarantor which is expressly subordinated in right of payment to the Bridge
Notes or the Guarantee of such Guarantor, as the case may be.
"Subsequent Bridge Note" has the meaning ascribed to it in Section 2.1D.
"Subsequent Exchange Request" has the meaning ascribed to it in Section
5.10.
"Subsidiary" with respect to any Person, means (i) any corporation of which
the outstanding Capital 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
26
<PAGE>
such Person; or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or indirectly,
owned by such Person.
"Take-Out Bank" means FUCM.
"Take-Out Request" has the meaning ascribed to it in Section 5.9.
"Take-Out Securities" means (i) any debt securities of the Borrower and/or
the Guarantors the proceeds of which are used to repay the Bridge Loan in full
(and to the extent of any excess thereof, a portion of the Senior Credit
Facility) and (ii) any debt securities of the Borrower issued in accordance with
Section 5.9, the proceeds of which are used to Refinance the Bridge Notes in
part, including, without limitation, the Demand Take-Out Notes.
"Taxes" means any present or future taxes, assessments, fees, levies,
imposts, duties, deductions, liabilities, withholdings or other charges of any
nature whatsoever, including interest, penalties and additions thereto from time
to time or at any time imposed by any Law or any Tribunal.
"Tax Return" means a report, return or other information (including any
amendments) required to be supplied to a Tribunal with respect to Taxes
including, where permitted or required, combined or consolidated returns for any
group of entities that includes the Borrower or any Subsidiary.
"Transaction Date" means the date on which any transaction that would give
rise to the need to calculate the Consolidated Fixed Change Coverage Ratio
occurs.
"Tribunal" means any government, any arbitration panel, any court or any
governmental department, commission, board, bureau, agency, authority or
instrumentality of any state, province, commonwealth, nation, territory,
possession, county, parish, town, township, village or municipality, whether now
or hereafter constituted and/or existing.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
board of directors or the governing body of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the total of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.
27
<PAGE>
"Wholly-Owned Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which 100% of the total
voting power of shares of stock or other equity interest 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 that Person or one or more of the other Wholly-Owned
Subsidiaries of that Person or a combination thereof.
"Year 2000 Compliant" has the meaning ascribed to it in Section 4.25.
1.2 Accounting Terms
----------------
For the purposes of this Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to them in conformity with GAAP.
1.3 Other Definitional Provisions
-----------------------------
Any of the terms defined in Section 1.1 may, unless the context otherwise
requires, be used in the singular or the plural depending on the reference.
SECTION 2 AMOUNT AND TERMS OF BRIDGE LOAN COMMITMENT AND LOANS; BRIDGE NOTES
2.1 Bridge Loan and Bridge Note
---------------------------
A. Bridge Loan Commitment. Subject to the terms and conditions of this
----------------------
Agreement and in reliance upon the representations and warranties of the
Borrower herein set forth, the Lenders hereby agree to lend to the Borrower on
the Closing Date $65,000,000 in the aggregate (the "Bridge Loan"), each such
Lender committing to lend the aggregate amount set forth next to such Lender's
name on the signature pages hereto. The Lenders' commitments to make the Bridge
Loan to the Borrower pursuant to this Section 2.1 A are herein called
individually, the "Bridge Loan Commitment" and collectively, the "Bridge Loan
Commitments."
B. Notice of Borrowing. When the Borrower desires to borrow under this
-------------------
Section 2.1, it shall deliver to the Agent a Notice of Borrowing no later than
11:00 A.M. (New York time), at least two Business Days in advance of the date of
the funding of the Bridge Loan (the "Closing Date") or such later date as shall
be agreed to by the Agent. Upon receipt of such Notice of Borrowing, the Agent
shall promptly notify each Lender of its share of the Bridge Loan and the
matters covered by the Notice of Borrowing.
C. Disbursement of Funds. (a) No later than 5:00 p.m. (New York time)
---------------------
on the Closing Date, each Lender will make available its pro rata share of the
Bridge Loan requested to be made on such date in the manner provided below. All
amounts shall be made available to the Agent in U.S. Legal Tender and
immediately available funds at the Payment Office and the Agent promptly will
make available to the Borrower by depositing to its account at the Payment
Office the aggregate of the amounts so made available in the type of funds
received. Unless the Agent shall have been notified by any Lender prior to the
Closing Date that such Lender does not
28
<PAGE>
intend to make available to the Agent its pro rata share of the Bridge Loan to
be made on such date, the Agent may assume that such Lender has made such amount
available to the Agent on such date, and the Agent, in reliance upon such
assumption, may (in its sole discretion and without any obligation to do so)
make available to the Borrower a corresponding amount. If such corresponding
amount is not in fact made available to the Agent by such Lender and the Agent
has made available same to the Borrower, the Agent shall be entitled to recover
such corresponding amount from such Lender. If such Lender does not pay such
corresponding amount forthwith upon the Agent's demand therefor, the Agent shall
promptly notify the Borrower, and the Borrower shall immediately pay such
corresponding amount to the Agent. The Agent shall also be entitled to recover
from such Lender or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Agent to the Borrower to the date such
corresponding amount is recovered by the Agent, at a rate per annum equal to (x)
if paid by such Lender, the overnight Federal Funds Rate or (y) if paid by the
Borrower, the then applicable rate of interest on the Bridge Loan.
(b) Nothing herein shall be deemed to relieve any Lender from its
obligation to fulfill its Bridge Loan Commitment hereunder or to prejudice any
rights which the Borrower may have against any Lender as a result of any default
by such Lender hereunder.
D. Bridge Notes. The Borrower shall execute and deliver to each Lender
------------
on the Closing Date, a note dated the Closing Date, substantially in the form
of Exhibit I to evidence such Lender's portion of its Bridge Loan Commitment
---------
and with appropriate insertions (the "Original Bridge Notes"). On each
interest payment date on which the Borrower elects to pay a PIK Interest
Amount pursuant to Section 2.2B, the Borrower shall execute and deliver
to each Lender on such interest payment date a note dated such interest
payment date substantially in the form of Exhibit I in a principal amount
---------
equal to such Lender's pro rata portion of such PIK Interest Amount and a
"Subsequent Bridge Note" and, together with the Original Bridge Notes, the with
other appropriate insertions (each"Bridge Notes"). A Subsequent Bridge Note
shall bear interest from the date of its issuance at the same rate borne by all
Bridge Notes.
E. Maturity of Bridge Loan. The Bridge Loan shall mature and the
-----------------------
Borrower shall pay in full the outstanding principal amount thereof and accrued
interest thereon on the Maturity Date.
F. Termination of Bridge Loan Commitment. The Bridge Loan Commitment
-------------------------------------
hereunder shall terminate on the earlier of (i) consummation of the Acquisition
or another transaction or series of transactions in which the Borrower or any of
its Affiliates acquires the Acquired Assets, (ii) the termination of the LLC
Sale and Purchase Agreement (iii) the occurrence of any event that First Union
reasonably believes in good faith has, or could reasonably be expected to have,
a Material Adverse Effect and (iv) 5:00 p.m. (Charlotte time) on October 15,
1998, if the closing of the Acquisition shall not have occurred by such time.
G. Pro Rata Borrowings. The Bridge Loan made under this Agreement shall
-------------------
be made by the Lenders pro rata on the basis of their respective Bridge Loan
Commitments. It is
29
<PAGE>
understood that no Lender shall be responsible for any default by any other
Lender of its obligation to make its portion of the Bridge Loan hereunder and
that each Lender shall be obligated to make its portion of the Bridge Loan
hereunder, regardless of the failure of any other Lender to fulfill its
commitments hereunder.
2.2 Interest on the Bridge Loan
---------------------------
A. Rate of Interest. The Bridge Loan shall bear interest on the unpaid
----------------
principal amount thereof from the date made through maturity (whether by
prepayment, acceleration or otherwise) at a rate per annum equal to the
Applicable Interest Rate for each Interest Period.
Notwithstanding this Section 2.2A or any other provision herein, in no
event will the combined sum of interest (cash or otherwise) on the Bridge Loan
exceeds 18.00% per annum.
B. Interest Payments. Interest shall be payable with respect to the
-----------------
Bridge Loan, in arrears, on each Interest Payment Date, commencing on the first
Interest Payment Date following the Closing Date and upon any prepayment of the
Bridge Loan (to the extent accrued on the amount being prepaid) and at maturity
(whether by prepayment, acceleration or otherwise); provided, however, that if,
-------- -------
on any Interest Payment Date on which interest is required to be paid (other
than at maturity), the interest rate borne by the Bridge Loan exceeds the
Maximum Cash Interest Rate, the Borrower may pay all or a portion of the
interest payable in excess of the amount of interest that would be payable on
such date at the Maximum Cash Interest Rate by issuance of Subsequent Bridge
Notes, in an aggregate principal amount equal to the amount of such interest
being so paid (the "PIK Interest Amount").
C. Post-Maturity Interest. Any principal payments on the Bridge Loan not
----------------------
paid when due and, to the extent permitted by applicable law, any interest
payment on the Bridge Loan not paid when due, in each case whether at maturity,
by notice of prepayment, by acceleration or otherwise, shall thereafter bear
interest payable upon demand at a rate which is 2.00% per annum in excess of the
rate of interest otherwise payable under this Agreement for the Bridge Loan.
D. Computation of Interest. Interest on the Bridge Loan shall be
-----------------------
computed on the basis of a 360-day year and the actual number of days elapsed in
the period during which it accrues. In computing interest on the Bridge Loan,
the date of the making of the Bridge Loan shall be included and the date of
payment shall be excluded; provided that if the Bridge Loan is repaid on the
--------
same day on which it is made, one day's interest shall be paid on the Bridge
Loan.
E. Making of Payments. Any payment stated to be due in respect of any
------------------
Bridge Loan, and any Interest Period stated to end, on a given day in a
specified month shall instead be made or end (as the case may be) (i) if there
is no such day in that month, on the last Business Day of that month or (ii) if
that day is not a Business Day, on the following Business Day, unless that
following Business Day falls in a different calendar month, in which case that
payment shall be made or that Interest Period shall end (as the case may be) on
the preceding Business Day.
30
<PAGE>
2.3 Fees
----
The Borrower agrees to pay to First Union and its Affiliates all fees and
other obligations in accordance with, and at the times specified by, the Amended
and Restated Commitment Letter.
2.4 Prepayments and Payments
------------------------
A. Prepayments
-----------
(i) Voluntary Prepayments. The Borrower may prepay the Bridge Loan
---------------------
at any time or from time to time in whole or in part upon not less than
three Business Days' prior written notice to the Agent which notice shall
specify the effective date thereof and the amount of any such prepayment,
which shall be in a minimum amount of $5,000,000 and integral multiples of
$1,000,000 in excess of that amount, or shall be in the amount of the
balance outstanding, at a prepayment price equal to the principal amount to
be prepaid plus accrued and unpaid interest thereon to the date of
prepayment.
Notice of prepayment having been given as aforesaid, the principal
amount of the Bridge Loan to be prepaid shall become due and payable on the
prepayment date. Amounts of the Bridge Loan so prepaid may not be
reborrowed.
(ii) Mandatory Prepayments.
---------------------
(a) Prepayments from Asset Sales. Upon receipt by the Borrower or
----------------------------
any Subsidiary of the Borrower of Cash Proceeds of any Asset Sale occurring
after the Closing Date, the Borrower shall, or shall cause its Subsidiaries
to, apply an amount equal to the Net Cash Proceeds of such Asset Sale to
prepay loans outstanding under the Senior Credit Facility; provided that
--------
the commitment thereunder is permanently reduced to the extent of the
prepayment. Concurrently with the consummation of any such Asset Sale, the
Borrower shall deliver to the Agent an Officer's Certificate demonstrating
the derivation of Net Cash Proceeds from the gross sales price of such
Asset Sale.
The Borrower shall, or shall cause its Subsidiaries to, prepay the
Bridge Loan in an amount equal to the Net Cash Proceeds not used as
provided in the preceding paragraph on a date not later than the Business
Day next succeeding the 30th day after the consummation of such Asset Sale.
(b) Prepayments from Capital Contributions and Sales or Issuances of
----------------------------------------------------------------
Capital Stock. Concurrently with the receipt by the Borrower or any
-------------
Subsidiary of the Borrower of cash proceeds from any capital contribution
or any sale or issuance of its Capital Stock, other than any cash proceeds
from any capital contribution by, or any sale of Capital Stock to, Glass
Holdings, the Borrower or any of the Borrower's Subsidiaries, the Borrower
shall, or shall cause its Subsidiaries to, to the extent that such proceeds
are not required by the Senior Credit Facility to prepay any amounts
outstanding thereunder, prepay the Bridge Loan in a principal amount equal
to the lesser of the cash proceeds
31
<PAGE>
thereof (net of underwriting or placement discounts or commissions and
other reasonable costs associated therewith) or the aggregate principal
amount of the Bridge Loan then outstanding.
(c) Prepayments from Issuances of Certain Indebtedness. Concurrently
--------------------------------------------------
with the receipt by the Borrower of proceeds from the issuance or
incurrence of Indebtedness for borrowed money (other than the Senior Credit
Facility and Indebtedness represented by Take-Out Securities), the Borrower
shall, or shall cause its Subsidiaries to, to the extent that such proceeds
are not required by the Senior Credit Facility to prepay any amounts
outstanding thereunder, prepay the Bridge Loan in an amount equal to the
lesser of the cash proceeds thereof (net of underwriting or placement
discounts or commissions and other reasonable costs associated therewith)
or the aggregate principal amount of the Bridge Loan then outstanding.
(d) Prepayments from Issuances of Take-Out Securities. Concurrently
-------------------------------------------------
with the receipt by the Borrower of proceeds from the issuance or
incurrence of Take-Out Securities, the Borrower shall, or shall cause its
Subsidiaries to prepay the Bridge Loan in an amount equal to the lesser of
the cash proceeds thereof (net of underwriting or placement discounts or
commissions and other reasonable costs associated therewith) or the
aggregate principal amount of the Bridge Loan then outstanding.
(e) Prepayments from Recovery Events. Concurrently with the
--------------------------------
occurrence of a Recovery Event, the Borrower shall, or shall cause its
Subsidiaries to, to the extent that such proceeds are not (A) required by
the Senior Credit Facility to prepay any amounts outstanding thereunder or
(B) used to repair such damaged assets or to purchase or otherwise acquire
replacement assets or property, provided that such repair, purchase or
acquisition is committed within 30 days after receipt of such cash proceeds
and consummated within 180 days thereof, prepay the Bridge Loan in an
aggregate amount equal to the lesser of the cash proceeds thereof or the
aggregate amount of the Bridge Loan then outstanding. Notwithstanding
anything to the contrary contained herein, after the occurrence and during
the continuation of an Event of Default, the Agent shall have the option to
require such cash proceeds, to the extent not required by the Senior Credit
Facility to prepay amounts outstanding thereunder, to be applied
immediately to prepay the Bridge Loan in an aggregate amount equal to the
lesser of the cash proceeds thereof or the aggregate amount of the Bridge
Loan then outstanding.
(f) Prepayments from Payments of the Glass Holdings Loan.
----------------------------------------------------
Concurrently with the receipt by the Borrower of any repayment or
prepayment of the Glass Holdings Loan shall, to the extent that any such
repayment or prepayment is not required by the Senior Credit Facility to
prepay any amounts outstanding thereunder, prepay the Bridge Loan in an
amount equal to the lesser of the aggregate amount of any such repayment or
prepayment or the aggregate amount of the Bridge Loan then outstanding.
(g) Any prepayment of the Bridge Loan pursuant to clause (a), (b),
(c), (d), (e) or (f) of this Section 2.4A(ii) shall be made at a prepayment
price equal to the principal
32
<PAGE>
amount of the Bridge Loan so prepaid plus accrued and unpaid interest
thereon to the date of prepayment.
(h) Notice. The Borrower shall notify the Agent in writing of any
------
prepayment to be made pursuant to this Section 2.4A(ii) at least three
Business Days prior to such prepayment date (unless shorter notice is
satisfactory to the Agent).
(iii) Application of Prepayments. All prepayments shall include
--------------------------
payment of accrued interest on the principal amount so prepaid and shall be
applied to payment of interest before application to principal.
(iv) Mandatory Offer to Purchase Notes.
---------------------------------
(a) Upon the occurrence of a Change of Control (the date of such
occurrence, the "Change of Control Date"), the Lenders shall have the right
to require the Borrower to purchase (the "Change of Control Offer") all of
the Bridge Notes at a purchase price equal to 103% of the aggregate
principal amount thereof plus accrued and unpaid interest thereon to the
date of purchase (the "Change of Control Purchase Price"). Prior to the
mailing of the notice to the Agent provided for in paragraph (b) below but
in any event within 30 days following any Change of Control, the Borrower
hereby covenants to (i) repay in full all Indebtedness under the Senior
Credit Facility or to offer to repay in full all such Indebtedness and to
repay the Indebtedness of each lender under the Senior Credit Facility who
has accepted such offer or (ii) obtain the requisite consents under the
Senior Credit Facility to permit the payment of the Bridge Notes as
provided for in paragraph (d) below. The Borrower shall first comply with
the covenant in the preceding sentence before it shall be required to
purchase the Bridge Notes pursuant to this Section 2.4A(iv).
(b) Within 30 days following any Change of Control the Borrower
shall mail a notice to the Agent that shall contain all instructions and
materials necessary to enable the Lenders to tender Bridge Notes and
stating:
(1) that the Change of Control Offer is being made pursuant to
this Section 2.4(A) (iv) and that all Bridge Notes validly tendered
will be accepted for payment;
(2) the Change of Control Purchase Price and the purchase date,
which shall be no earlier than 30 days nor later than 60 days from the
date such notice is mailed (the "Change of Control Payment Date");
(3) that any Bridge Note not tendered will continue to accrue
interest;
(4) that any Bridge Note accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date unless the Borrower shall default in
the payment of the Change of Control Purchase Price with respect to
Bridge Notes tendered for purchase;
33
<PAGE>
(5) that if a Lender elects to have a Bridge Note purchased
pursuant to the Change of Control Offer it will be required to
surrender the Bridge Note, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Bridge Note completed, to the
Borrower prior to 5:00 p.m. New York time on the third Business Day
prior to the Change of Control Payment Date;
(6) that a Lender will be entitled to withdraw its election if
the Borrower receives, not later than 5:00 p.m. New York time on the
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the principal
amount of Bridge Notes such Lender surrendered for purchase, and a
statement that such Lender is withdrawing its election to have such
Bridge Notes (or portions thereof) purchased; and
(7) that if Bridge Notes surrendered for purchase are purchased
only in part a new Bridge Note of the same type will be issued in
principal amount equal to the unpurchased portion of the Bridge Notes
surrendered.
(c) On or before the Change of Control Payment Date, the Borrower
shall (i) accept for payment Bridge Notes or portions thereof which are to
be purchased in accordance with the above, and (ii) deposit at the Payment
Office U.S. Legal Tender sufficient to pay the Change of Control Purchase
Price of all Bridge Notes surrendered for purchase and not withdrawn
pursuant to clause (b)(6) of this Section 2.4(A)(iv). The Agent shall
promptly mail to the Lenders whose Bridge Notes are so accepted payment in
an amount equal to the Change of Control Purchase Price for such Bridge
Notes unless such payment is prohibited pursuant to Section 8 or otherwise.
(d) The Borrower 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 purchase of Bridge Notes pursuant to a Change of
Control Offer. To the extent the provisions of any securities laws or
regulations conflict with the provisions under this Section, the Borrower
shall comply with the applicable securities laws and regulations and shall
not be deemed to have breached its obligations under this Section by virtue
thereof.
B. Manner and Time of Payment. All payments of principal and interest
--------------------------
hereunder and under the Bridge Notes by the Borrower shall be made without
defense, set-off or counterclaim and in same-day funds and delivered to the
Agent, unless otherwise specified, not later than 12:00 Noon (New York time) on
the date due at the Payment Office for the account of the Lenders; funds
received by the Agent after that time shall be deemed to have been paid by the
Borrower on the next succeeding Business Day. The Borrower hereby authorizes
the Agent to charge its account with the Agent in order to cause timely payment
to be made of all principal, interest and fees due hereunder (subject to
sufficient funds being available in its account for that purpose).
C. Notation of Payment. Each Lender agrees that before disposing of any
-------------------
Bridge Note held by it, or any part thereof (other than by granting
participations therein), such Lender
34
<PAGE>
will make a notation thereon of all principal payments previously made thereon
and of the date to which interest thereon has been paid and will notify the
Borrower and First Union (such notice to First Union to be made to it at the
Payment Office) of the name and address of the transferee of that Bridge Note;
provided that the failure to make (or any error in the making of) such a
- --------
notation or to notify the Borrower of the name and address of such transferee
shall not limit or otherwise affect the obligation of the Borrower hereunder or
under such Bridge Notes with respect to the Bridge Loan and payments of
principal or interest on any such Bridge Note.
2.5 Use of Proceeds
---------------
The proceeds of the Bridge Loan shall be used by the Borrower to fund a
portion of the Glass Holdings Loan.
SECTION 3 CONDITIONS
3.1 Conditions to Bridge Loan
-------------------------
The obligations of the Lenders to make the Bridge Loan hereunder are
subject to the satisfaction of, or waiver of, immediately prior to or concurrent
with the making of such Bridge Loan on the Closing Date, the following
conditions precedent:
(a) On or prior to the Closing Date, all corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby and
all documents incidental thereto, not previously found acceptable to the Agent,
shall be acceptable to the Agent, and the Agent shall have received on behalf of
the Lenders the following items, each of which shall be in form and substance
satisfactory to the Agent and, unless otherwise noted, dated the Closing Date:
(1) a certified copy of the Borrower's and Overseas' charter
together with a certificate of status, compliance, good standing or
like certificate dated within a reasonable time prior to the Closing
Date issued by the appropriate government officials of the
jurisdiction of incorporation of each of the foregoing and of each
jurisdiction in which each of the foregoing owns any material assets
or carries on any material business; and
(2) a copy of the Borrower's and Overseas' bylaws, certified by
one of its Officers; and
(3) resolutions of the Borrower's Board of Directors approving
and authorizing the execution, delivery and performance of this
Agreement, each of the other Loan Documents and any other documents,
instruments and certificates required to be executed by the Borrower
in connection herewith and therewith and approving and authorizing the
execution, delivery and payment of the Bridge Notes and the
consummation of the Borrower Transactions, each certified by one of
its Officers as being in full force and effect without modification or
amendment; and
35
<PAGE>
(4) signature and incumbency certificates of the Borrower's
Officers executing this Agreement and the Bridge Notes; and
(5) executed copies of this Agreement and the Original Bridge
Notes substantially in the form of Exhibit I executed in accordance
---------
with Section 2.1D drawn to the order of the Lenders and with
appropriate insertions; and
(6) an originally executed Notice of Borrowing substantially
in the form of Exhibit III, signed by the President or a Vice
-----------
President of the Borrower on behalf of the Borrower delivered to the
Agent; and
(7) originally executed copies of one or more favorable written
opinions of (I) Alston & Bird, counsel for the Borrower, substantially
in the form of Exhibit V and addressed to the Lenders and (II) Cleary,
---------
Gottlieb, Steen & Hamilton, special counsel for the Lenders,
substantially in the form of Exhibit VI and addressed to the Lenders;
----------
and (III) such other opinions of counsel and such certificates or
opinions of accountants, appraisers or other professionals as the
Agent shall have reasonably requested, including, without limitation,
receipt of an environmental report and technical reports from
independent consultants in respect of the Borrower and Overseas and
their respective properties, reasonably satisfactory to the Agent; and
(8) a certificate, delivered by the Borrower and signed by the
President or a Vice President and the Chief Financial or Accounting
Officer of the Borrower and addressed to the Lenders in form and
substance reasonably satisfactory to the Agent, with appropriate
attachments, stating that, after giving effect to the consummation of
the Borrower Transactions, the fair saleable value of the assets of
the Borrower and Overseas will not be less than the probable liability
on their debts, that each of the Borrower and Overseas will be able to
pay its debts as they mature and that each will not have unreasonably
small capital to conduct its business, and the Agent shall have
received such opinions of value, other appropriate factual information
and expert advice supporting the conclusions reached in such letter as
the Agent may reasonably request, all in form and substance reasonably
satisfactory to the Agent; and
(9) executed or conformed copies of each of the JV Transaction
Documents and a copy of each legal opinion delivered in connection
therewith, and all documents and instruments relating thereto; and
(10) an Officers' Certificate in form and substance satisfactory
to the Agent to the effect that (i) the representations and warranties
in Section 4 hereof are true, correct and complete on and as of the
Closing Date to the same extent as though made on and as of the
Closing Date, (ii) the Borrower has performed and complied with all
covenants and agreements to be performed and observed by the Borrower
on or prior to the Closing Date and (iii) all conditions to the
consummation of the Borrower Transactions have been satisfied on the
terms set
36
<PAGE>
forth therein and have not been waived or amended without the Agent's
prior written consent.
(11) such further information, certificates and documents as the
Agent may reasonably request.
(b) The Borrower and Overseas shall have performed or complied with all
covenants and agreements which this Agreement provides shall be performed or
complied with prior to the Closing Date, except as otherwise disclosed to and
agreed to in writing by the Agent.
(c) The form, terms and substance of each of the JV Transaction Documents
shall be reasonably satisfactory to the Agent; all of the covenants and
agreements to be performed or observed in connection with each of the JV
Transaction Documents and any agreements or documents related thereto prior to
the Closing Date shall have been performed or complied with and all conditions
contained in each of the JV Transaction Documents shall have been satisfied and
not waived without the prior written consent of the Agent; and all of the
transactions contemplated by the JV Transaction Documents and any agreements or
documents related thereto to occur on or prior to the Closing Date shall have
been consummated in accordance with the terms thereof concurrently with the
transactions contemplated by this Agreement.
(d) All authorizations, consents and approvals necessary in connection
with the JV Transactions shall have been obtained and remain in full force and
effect and evidence of the receipt of such authorizations, consents and
approvals satisfactory to the Agent shall have been delivered to the Agent.
(e) There shall not be pending or, to the knowledge of the Borrower,
threatened any action, suit, proceeding, governmental investigation or
arbitration which has not been settled, dismissed, vacated, discharged or
terminated, against or affecting the Borrower, Overseas or any of their
respective Affiliates or any property or asset of the Borrower, Overseas or any
of their respective Affiliates which has not been disclosed by the Borrower in
writing to the Agent (and the Agent shall have received an Officer's Certificate
dated the Closing Date attesting to the same) and there shall have occurred no
development not so disclosed in any such action, suit, proceeding, governmental
investigation or arbitration so disclosed, which, in each case, singly or in the
aggregate, in the opinion of the Agent, could reasonably be expected to have a
Material Adverse Effect or a material adverse effect on the JV Transactions. No
injunction or other restraining order shall have been issued and no hearing to
cause an injunction or other restraining order to be issued shall be pending or
noticed with respect to any action, suit or proceeding seeking to restrain,
enjoin, delay, prohibit or otherwise prevent the consummation of, or to recover
any damages or obtain relief as a result of, the JV Transactions. There shall
not be threatened, instituted or pending any action, suit, proceeding or
application before or by any Tribunal, or any other Person, domestic or foreign
(i) challenging the JV Transactions or seeking to restrain, delay or prohibit
the consummation thereof; (ii) seeking to prohibit or impose material
limitations on the Borrower's ownership or operation of all or any portion of
the Borrower's business or assets (including the business and assets of
Overseas) or to compel the Borrower to dispose of or hold separate all or any
portion of the Borrower's business or assets
37
<PAGE>
(including the business and assets of Overseas) as a result of the JV
Transactions; (iii) which, in any event, might materially adversely affect the
JV Transactions; or (iv) seeking to impose any materially adverse conditions
upon the JV Transactions.
(f) The Agent and its counsel shall be reasonably satisfied that the
consummation of the JV Transactions shall be in compliance with all Laws
(including, without limitation, all applicable U.S. securities and banking laws,
rules and regulations).
(g) All of the covenants and agreements to be performed or observed in
connection with the JV Transactions prior to the Closing Date shall have been
performed or complied with; all of the conditions to the consummation of the JV
Transactions shall have been satisfied and not waived without the prior written
consent of the Agent and the JV Transactions, and all other transactions
contemplated thereby, shall have been consummated on terms acceptable to the
Agent.
(h) No event shall have occurred and be continuing or would result from
the consummation of the borrowing contemplated by the Notice of Borrowing which
would constitute an Event of Default or Potential Event of Default.
(i) There shall be no bankruptcy, insolvency, liquidation or other similar
proceeding affecting, in any manner, all or a portion of the Acquired Assets.
(j) The making of the Bridge Loan in the manner contemplated in this
Agreement shall not violate the applicable provisions of Regulation T, U or X of
the Board of Governors of the Federal Reserve Board or any other regulation of
the Federal Reserve Board.
(k) The Borrower shall have complied with all agreements and obligations
under the Amended and Restated Commitment Letter, including the payment to First
Union and its Affiliates of all fees payable pursuant to Section 2.3 hereof.
(l) The Agent shall have received the seven year financial and operational
projections for the Borrower and its Subsidiaries for the fiscal years 1998
through 2005, together with a detailed explanation of all management assumptions
contained therein, which projections shall be in form and substance satisfactory
to the Agent.
(m) The Borrower shall have generated a minimum EBITDA (as defined in the
Prior Commitment Letter (as defined in the Amended and Restated Commitment
Letter)) of at least $40 million for the 12 month period ending August 31, 1998.
(n) The Agent shall have received the Borrower's plan for becoming Year
2000 Compliant, which plan shall be in form and substance satisfactory to the
Agent.
(o) Neither the Borrower nor Overseas shall have sustained any loss or
interference with respect to its businesses or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by insurance, or
from any labor dispute or any legal or governmental proceeding, which loss or
interference, in the sole judgment of the Agent, has had or could
38
<PAGE>
reasonably be expected to have a Material Adverse Effect or a material adverse
effect on the ability of the Borrower to consummate the Borrower Transactions
and to execute, deliver and perform its obligations under the Loan Documents,
the Senior Credit Facility and each other document or instrument to be delivered
in connection with the Borrower Transactions executed or to be executed by it;
there shall not have been, in the reasonable judgment of the Agent, any Material
Adverse Change, or any development involving a prospective Material Adverse
Change.
(p) There shall not have occurred (i) any general suspension of, or
limitation on times or prices for, trading in securities on the New York Stock
Exchange or American Stock Exchange or in the over-the-counter market in the
United States or minimum or maximum prices established on any such exchanges;
(ii) a declaration of a banking moratorium or any suspension of payments in
respect of the banks in the United States or New York; or (iii) either (A) an
outbreak or escalation of hostilities between the United States and any foreign
power, or (B) an outbreak or escalation of any other insurrection or armed
conflict involving the United States or any other national or international
calamity or emergency, or (C) any material change in the financial markets of
the United States, which, in the case of clause (A), (B) or (C) of this
sentence, in the sole judgment of the Agent, (x) makes it impractical or
inadvisable to proceed with the consummation of the Borrower Transactions or the
Bridge Loan or any of the other transactions contemplated hereby including,
without limitation, the issuance and sale of the Demand Take-Out Securities, or
(y) would materially affect the ability to sell or syndicate the Bridge Loan.
(q) There shall not have been any disclosure of information relating to
conditions or events not previously disclosed to the Lenders, or new information
regarding previously disclosed matters, in the course of the Lenders' continuing
legal, financial, tax, environmental, business and accounting due diligence
review which the Lenders shall reasonably determine is material and adverse to
the Borrower and Overseas.
(r) The Borrower shall have had discussions with the Agent regarding the
Borrower's financial condition and results of operations for the month of
September 1998 based on the most current information reasonably available to the
management of the Borrower and which discussions shall not have disclosed any
information which the Agent shall reasonably determine is material and adverse
to the Borrower.
SECTION 4 REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement and to make the
Bridge Loan, the Borrower represents and warrants to the Lenders that, at the
time of execution hereof the following statements are, and on the Closing Date
will be, true, correct and complete.
4.1 Organization and Good Standing; Capitalization
----------------------------------------------
(a) Each of the Borrower and Overseas is a corporation duly organized and
existing and in good standing under the laws of its jurisdiction of
incorporation. Each of the Borrower and Overseas have the corporate power and
authority to own and operate its properties and to
39
<PAGE>
carry on its business as now conducted and as proposed to be conducted and is
duly qualified as a foreign corporation and in good standing in all
jurisdictions in which it is doing business, except where failure to be so
qualified or in good standing, singly or in the aggregate, has not had and could
not reasonably be expected to have a Material Adverse Effect.
(b) BGF Overseas Inc., a company organized under the laws of the Virgin
Islands ("Overseas") is the only Subsidiary of the Borrower in existence on the
date of this Agreement. The Capital Stock of Overseas is duly authorized,
validly issued, fully paid and nonassessable and none of such Capital Stock
constitutes Margin Stock. All of the outstanding shares of Capital Stock of
Overseas are beneficially owned directly by the Borrower, free and clear of any
perfected security interest or any other security interests, claims, Liens or
encumbrances, other than Liens granted to secure the Senior Credit Facility.
(c) All of the outstanding shares of Capital Stock of the Borrower have
been duly and validly issued and are fully paid and nonassessable.
4.2 Authorization and Power
-----------------------
The Borrower has the corporate power and requisite authority, and has taken
all corporate action necessary, to consummate the Borrower Transactions and to
execute, deliver and perform their respective obligations under the Loan
Documents, the Senior Credit Facility, the Glass Holdings Loan Agreement and
each other document and instrument to be executed, delivered or performed by it
in connection with the Borrower Transactions.
4.3 No Conflicts or Consents
------------------------
(a) The execution, delivery and performance of the Loan Documents, the
Senior Credit Facility, the Glass Holdings Loan Agreement and each other
document and instrument to be executed, delivered or performed by the Borrower
in connection with the Borrower Transactions, the consummation of each of the
transactions herein or therein contemplated and, the compliance with each of the
terms and provisions hereof or thereof, and the issuance, delivery and
performance of the Bridge Notes and the Senior Credit Facility do not and on the
Closing Date will not (i) violate any Law applicable to the Borrower or Overseas
or any judgment, order, writ, injunction or decree of any Tribunal binding on
the Borrower or Overseas, (ii) conflict with, result in a breach or violation of
or constitute a default under the certificate of incorporation or bylaws of the
Borrower or Overseas or any Contractual Obligation of the Borrower or Overseas,
(iii) result in or require the creation or imposition of any Lien upon any of
the properties or assets of the Borrower or Overseas (other than any Liens
created under the Senior Credit Facility) or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of the Borrower or Overseas except for such approvals or consents
which have been obtained and disclosed in writing to the Agent or which have
been waived in writing by the Agent on behalf of the Lenders.
(b) No consent, approval, authorization or order of any Tribunal or other
Person is required in connection with the execution and delivery by the Borrower
of the Loan Documents, the Senior Credit Facility, the Glass Holdings Loan
Agreement or any other document or
40
<PAGE>
instrument to be delivered, executed or performed by the Borrower or Overseas in
connection with the Borrower Transactions or the consummation of the
transactions contemplated hereby or thereby, other than any such consent,
approval, authorization or order that has been obtained and remains in full
force and effect or which has been waived in writing by the Agent on behalf of
the Lenders.
4.4 Enforceable Obligations
-----------------------
Each of the Loan Documents, the Glass Holdings Loan Agreement, the Senior
Credit Facility and each other document or instrument to be delivered in
connection therewith has been duly authorized by all necessary corporate action
of the Borrower; each of the Loan Documents, the Glass Holdings Loan Agreement,
the Senior Credit Facility and each other document or instrument to be delivered
in connection therewith to be executed and delivered on or prior to the date
hereof has been duly executed and delivered by the Borrower; and each of the
Loan Documents, the Glass Holdings Loan Agreement, the Senior Credit Facility
and each other document or instrument to be delivered in connection therewith to
be executed and delivered on or prior to the date hereof is, and each of the
Loan Documents, the Glass Holdings Loan Agreement, the Senior Credit Facility
and each other document or instrument to be delivered in connection therewith to
be executed and delivered after the Closing Date, will be, upon such execution
and delivery, the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.5 Properties; Liens
-----------------
Each of the Borrower and Overseas own, lease or have sufficient rights to
use such properties and assets as are necessary to the conduct of its operations
as presently conducted and as contemplated to be conducted following
consummation of the Borrower Transactions, and neither the Borrower nor Overseas
and, to the knowledge of the Borrower, any other party thereto, is in default
under any lease, except in each case for such defects or defaults that, singly
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect. None of the material assets of the Borrower or Overseas is subject to
any restriction which would prevent continuation of the use currently made, or
contemplated to be made, thereof or which would materially adversely affect the
value thereof.
4.6 Financial Condition
-------------------
(a) The Borrower has delivered copies of the following financial
statements to the Agent: (i) the audited consolidated balance sheet of the
Borrower and Overseas at December 31, 1997 and December 31, 1996 and the related
consolidated statements of income, shareholders equity and cash flows of the
Borrower and Overseas for the three-year period ended December 31, 1997,
certified by the independent certified public accountants of the Borrower and
(ii) the unaudited consolidated balance sheet of the Borrower and Overseas at
August 31, 1998 and the
41
<PAGE>
related statements of income, retained earnings and cash flows for the Borrower
and Overseas for the eight-month periods ended August 31, 1997 and August 31,
1998. The foregoing financial statements referred to in clauses (i) and (ii)
were prepared in accordance with GAAP, have been prepared from, and are
consistent with, the books and records of the Borrower and Overseas,
respectively, and fairly present in all material respects the consolidated
financial position of the Borrower and Overseas, respectively, as at the
respective dates thereof and the consolidated results of operations and cash
flows of the Borrower and Overseas, respectively, for the periods then ended.
Neither the Borrower nor Overseas had at December 31, 1997 any material
contingent liabilities, liabilities for Taxes or long-term leases, unusual
forward or long-term commitments or unrealized or unanticipated losses from any
unfavorable commitments which are of a type required by GAAP to be reflected in
financial statements or the notes thereto which are not so reflected. No events
which have had or could reasonably be expected to have a Material Adverse Effect
have occurred since December 31, 1997 except as reflected therein.
(b) Upon giving effect to the Borrower Transactions:
(i) The fair saleable value of the assets of the Borrower and
Overseas, on a stand-alone basis, exceeds the amount that will be required
to be paid on or in respect of the existing debts and other liabilities
(including contingent liabilities) of such Person as they mature.
(ii) The assets of the Borrower and Overseas, on a stand-alone
basis, do not constitute unreasonably small capital for any such Person to
carry out its business as now conducted and as proposed to be conducted
including the capital needs of any such Person, taking into account the
particular capital requirements of the business conducted by such Person,
and projected capital requirements and capital availability thereof.
(iii) The Borrower does not intend to, and will not permit any of its
Subsidiaries to, Incur debts beyond such Person's ability to pay such debts
as they mature (taking into account the timing and amounts of cash to be
payable on or in respect of debt of each of such Person). The cash flow of
the Borrower and each of its Subsidiaries, after taking into account all
anticipated uses of the cash of each such Person, will at all times be
sufficient to pay all amounts on or in respect of debt of each such Person
when such amounts are required to be paid.
(iv) The Borrower does not intend, and does not believe, that final
judgments against the Borrower or Overseas in actions for money damages
will be rendered at a time when, or in an amount such that, any such Person
will be unable to satisfy any such judgments promptly in accordance with
their terms (taking into account the maximum reasonable amount of such
judgments in any such actions and the earliest reasonable time at which
such judgments might be rendered). The cash flow of the Borrower and
Overseas, on a stand-alone basis, after taking into account all other
anticipated uses of the cash of each such Person (including the payments on
or in respect of debt referred to in paragraph (iii) of this Section
4.6(b)), will at all times be sufficient to pay all such judgments promptly
in accordance with their terms.
42
<PAGE>
4.7 Full Disclosure
---------------
The financial projections (including, without limitation, the pro forma
financial statements included therewith) heretofore furnished to the Agent by
the Borrower are complete, were prepared by or under the direction of an officer
of the Borrower and were prepared in good faith on the basis of information and
assumptions that the Borrower believed to be fair, complete and reasonable as of
the date of such information, and which assumptions are believed to be fair,
complete and reasonable as of the date hereof. All other factual information
heretofore or contemporaneously furnished in writing by or on behalf of the
Borrower or Overseas to the Agent or Lenders for purposes of or in connection
with the Loan Documents, the Glass Holdings Loan Agreement, the Senior Credit
Facility and all exhibits and appendices thereto does not contain any untrue
statement by such party or, to its knowledge, any other party of a material fact
or omit to state any material fact necessary to keep the statements made by such
party or, to its knowledge, any other party contained herein or therein from
being misleading in a material respect. No fact is known, no condition exists
nor has any event occurred which has not been disclosed herein or in any other
document or certificate furnished to the Agent or the Lenders for use in the
transactions contemplated hereby which, singly or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
4.8 No Default
----------
No event has occurred and is continuing which constitutes a Potential Event
of Default or an Event of Default.
4.9 Compliance with Contracts, Etc.
-------------------------------
Neither the Borrower nor Overseas is in violation of its charter, by-laws
or other organizational documents, and no Event of Default or event that but for
the giving of notice or the lapse of time, or both, would constitute an Event of
Default on the part of the Borrower or any of its Subsidiaries exists under any
Contractual Obligation of the Borrower or Overseas which could reasonably be
expected to have a Material Adverse Effect.
4.10 No Litigation
-------------
There is no Litigation pending or, to the best knowledge of the Borrower
after due investigation, threatened, by, against, or which may relate to or
affect (a) any benefit plan or any fiduciary or administrator thereof, (b) the
JV Transactions, or (c) the Borrower or Overseas which singly or in the
aggregate, could reasonably be expected to have a Material Adverse Effect or
that could reasonably be expected to materially and adversely affect the ability
of the Borrower to consummate the Borrower Transactions in a timely manner.
There are no outstanding injunctions or restraining orders prohibiting
consummation of any of the JV Transactions or any other transactions
contemplated by the Loan Documents, the Glass Holdings Loan Agreement or the
Senior Credit Facility. Neither the Borrower nor Overseas is in default with
respect to any judgment, order, writ, injunction or decree of any Tribunal, and
there are no unsatisfied judgments against the Borrower or Overseas or their
respective businesses or properties. Neither of the Borrower nor Overseas has
been advised that there is a reasonable
43
<PAGE>
likelihood of an adverse determination of any Litigation which adverse
determination, should it occur, could reasonably be expected to have a Material
Adverse Effect.
4.11 Use of Proceeds; Margin Stock, Etc.
-----------------------------------
The proceeds of the Bridge Loan will be used solely to fund the Glass
Holdings Loan. None of such proceeds will be used in violation of Regulation T,
U or X. Neither the Borrower nor Overseas has taken or will take any action
which might cause any of the Loan Documents to violate the applicable provisions
of Regulation T, U or X, or any other regulation of the Board of Governors of
the Federal Reserve System.
4.12 Taxes
-----
All material Tax Returns, foreign and domestic, required to be filed by or
on behalf of the Borrower and Overseas in any jurisdiction have been filed, and
all material Taxes for which they are directly or indirectly liable or to which
any of their respective properties or assets are subject have been paid prior to
the time that such Taxes could give rise to a Lien thereon other than Contested
Claims. There is no material proposed tax assessment with respect to Taxes due
by or on behalf of the Borrower or Overseas, and, to the best knowledge of the
Borrower, there is no basis for such assessment, except for Contested Claims.
4.13 ERISA
-----
A. No ERISA Events have occurred or are reasonably expected to occur
which individually or in the aggregate resulted in or might reasonably be
expected to result in a liability of the Borrower or Overseas or any of their
respective ERISA Affiliates which could reasonably be expected to have a
Material Adverse Effect.
B. In accordance with the most recent actuarial valuations, the Amount of
Unfunded Benefit Liabilities individually or in the aggregate for all Pension
Plans (excluding for purposes of such computation any Pension Plans which have a
negative Amount of Unfunded Benefit Liabilities), is not an amount which would
reasonably be expected to have a Material Adverse Effect.
C. Neither the Borrower nor Overseas has incurred or is reasonably
expected to incur any liability with respect to any Foreign Plan or Foreign
Plans which individually or in the aggregate has or could reasonably be expected
to have a Material Adverse Effect.
4.14 Compliance with Law
-------------------
Each of the Borrower and Overseas is in compliance with all Laws, except
where the failure to comply, singly or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
44
<PAGE>
4.15 Government Regulation
---------------------
Neither the Borrower nor Overseas is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Investment
Company Act of 1940 (as any of the preceding acts have been amended) or other
Law which regulates the Incurrence by the Borrower or Overseas of Indebtedness,
including, but not limited to, Laws relating to common contract carriers or the
sale of electricity, gas, steam, water or other public utility services.
4.16 Intellectual Property
---------------------
A. The Borrower and Overseas own or are licensed to use all Intellectual
Property necessary to permit the operation of their businesses as currently
conducted except where the failure to own or license the use of such
Intellectual Property could not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
B. To the Borrower's knowledge, no material claim has been asserted by
any Person with respect to the use of any such Intellectual Property, or
challenging or questioning the validity or effectiveness of any such
Intellectual Property. To the Borrower's knowledge, the use of such Intellectual
Property by the Borrower or Overseas does not infringe on the rights of any
Person, subject to such claims and infringements as could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The
consummation of the Borrower Transactions will not impair the ownership of (or
the license to use, as the case may be) of such Intellectual Property by the
Borrower or Overseas.
4.17 Environmental Matters
---------------------
(i) The operations of each of the Borrower and Overseas (including,
without limitation, as the term is used throughout this Section 4.17, all
operations and conditions at or in the Facilities) comply in all material
respects with all Environmental Laws except for any such noncompliance
which could not reasonably be expected to have a Material Adverse Effect;
(ii) Each of the Borrower and Overseas has obtained all Permits
under Environmental Laws necessary to their respective operations under
currently applicable Laws, and all such Permits are being maintained in
good standing, and each of the Borrower and Overseas is in compliance with
all material terms and conditions of such Permits except for any such
failure to obtain, maintain or comply which could not reasonably be
expected to have a Material Adverse Effect;
(iii) Neither of the Borrower nor Overseas has received (a) any
notice or claim to the effect that it is or may be liable to any Person
under any Environmental Law, including without limitation, any relating to
any Hazardous Materials except as could not reasonably be expected to have
a Material Adverse Effect or (b) any letter or request for information
under Section 104 of the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. (S) 9604) or comparable foreign
or state laws
45
<PAGE>
regarding any matter which could reasonably be expected to result in a
Material Adverse Effect, and, to the best of the Borrower's knowledge,
neither of the Borrower nor Overseas is involved in any investigation,
response or corrective action relating to or in connection with any
Hazardous Materials at any Facility or at any other location except for
such of the foregoing which could not reasonably be expected to have a
Material Adverse Effect;
(iv) Neither of the Borrower nor Overseas is subject to any judicial
or administrative proceeding alleging the violation of or liability under
any Environmental Laws which if adversely determined could reasonably be
expected to have a Material Adverse Effect;
(v) Neither of the Borrower nor Overseas or any of their respective
Facilities or operations are subject to any outstanding written order or
agreement with any governmental authority or private party relating to (a)
any actual or potential violation of or liability under Environmental Laws
or (b) any Environmental Claims except for such of the foregoing which
would reasonably be expected to have a Material Adverse Effect;
(vi) Neither of the Borrower nor Overseas has any contingent
liability in connection with any Release or threatened Release of any
Hazardous Materials by either of the Borrower or Overseas except for such
of the foregoing which would not reasonably be expected to have a Material
Adverse Effect;
(vii) Neither of the Borrower nor Overseas or any predecessor of
either of the Borrower or Overseas has filed any notice under any
Environmental Law indicating past or present treatment, storage or disposal
of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state
equivalent;
(viii) No Hazardous Materials exist on, under or about any Facility in
a manner that would reasonably be expected to give rise to an Environmental
Claim having a Material Adverse Effect, and neither of the Borrower nor
Overseas has filed any notice or report of a Release of any Hazardous
Materials that would reasonably be expected to give rise to an Environment
al Claim having a Material Adverse Effect;
(ix) Neither of the Borrower nor Overseas or, to the best of the
Borrower's knowledge, any of their respective predecessors has disposed of
any Hazardous Materials in a manner that would reasonably be expected to
give rise to an Environmental Claim having a Material Adverse Effect;
(x) No unregistered or noncompliant underground storage tanks and
no unmonitored or otherwise noncompliant surface impoundments are on or at
any Facility; and
(xi) No Lien in favor of any Person relating to or in connection
with any Environmental Claim has been filed or has been attached to any
Facility or other assets of
46
<PAGE>
the Borrower or Overseas except for any such Lien which would not
reasonably be expected to have a Material Adverse Effect.
Notwithstanding anything in this Section 4.17 to the contrary, no event or
condition has occurred which may interfere with present compliance by the
Borrower or Overseas with any Environmental Law, or which may give rise to any
liability under any Environmental Law, including, without limitation, any matter
disclosed on Schedule B which, individually or in the aggregate, has had a
----------
Material Adverse Effect.
4.18 Survival of Representations and Warranties
------------------------------------------
Subject to Section 12.10(B), all representations and warranties in the Loan
Documents shall survive delivery of the Bridge Notes and the making of the
Bridge Loan and shall continue until one year after repayment of the Bridge
Notes and the Obligations, and any investigation at any time made by or on
behalf of the Lenders shall not diminish the Lenders' right to rely thereon.
4.19 Permits
-------
The Borrower and Overseas have such certificates, permits, licenses,
franchises, consents, approvals, authorizations and clearances ("Permits"), and
are in compliance in all material respects with all Laws as are necessary to
own, lease or operate their respective properties and to conduct their
businesses in the manner as presently conducted and to be conducted immediately
after the consummation of the Borrower Transactions except where the failure to
have such Permits or to comply with such Laws could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect, and all
such Permits are valid and in full force and effect. The Borrower and Overseas
are in compliance in all material respects with their respective obligations
under such Permits and no event has occurred that allows, or after notice or
lapse of time would allow, revocation or termination of such Permits, except for
any such revocation or termination as could not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
4.20 Insurance
---------
The Borrower and Overseas carry or are entitled to the benefits of
insurance in such amounts and covering such risks as is generally maintained by
companies of established repute engaged in the same or similar businesses, and
all such insurance is (and will be immediately after the consummation of the JV
Transactions) in full force and effect.
4.21 Labor Matters
-------------
No labor disturbance by the employees of the Borrower or Overseas exists
or, to the best knowledge of the Borrower, is threatened and the Borrower is not
aware of any existing or imminent labor disturbance by the employees of the
principal suppliers, manufacturers or customers of the Borrower or Overseas.
47
<PAGE>
4.22 Guarantees
----------
Each Guarantor shall, on the date it executes and delivers a Guarantee
hereunder, have the full corporate power, authority and capacity to execute and
deliver such Guarantee and to perform all of its obligations to be performed
thereunder; all corporate and other acts, conditions and things required to be
done and performed or to have occurred prior to such execution and delivery to
constitute such Guarantee as a valid and legally binding obligation of such
Guarantor enforceable in accordance with its terms shall have been done and
performed and shall have occurred in due compliance with all Laws; on the date
of such execution and delivery, the execution, delivery and performance of such
Guarantee by such Guarantor will not (i) violate any Law or the charter or
bylaws of such Guarantor, or (ii) result in a breach of, a default under
(including, without limitation, any event which with notice or lapse of time, or
both, would constitute a breach of or a default under), or the creation of any
Lien on the properties or assets of such Guarantor, the Borrower or any other
Subsidiary of the Borrower under any Contractual Obligation of such Guarantor or
the Borrower or any other Subsidiary of the Borrower (other than Permitted
Liens); on the date of such execution and delivery, each Guarantee executed and
delivered by a Guarantor shall constitute legal, valid, binding and
unconditional obligations of such Guarantor, enforceable in accordance with its
terms, except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the enforcement of creditors' rights generally or by
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law); and the foregoing
representations and warranties of the Borrower shall be deemed for all purposes
to have been made on each date when a Guarantee is delivered hereunder with
respect solely to that Guarantee and the Guarantor so issuing such Guarantee.
4.23 Senior Subordinated Indenture; Etc.
-----------------------------------
The Borrower and each Guarantor shall (to the extent such documents are
executed), on the date they execute and deliver the Senior Subordinated
Indenture and the Exchange Notes (and the guarantees related thereto, as the
case may be) and the Demand Take-Out Notes and the indenture governing the
Demand Take-Out Notes (or the guarantees related thereto, as the case may be),
have the full corporate power, authority and capacity to do so and to perform
all of their respective obligations to be performed thereunder; all corporate
and other acts, conditions and things required to be done and performed or to
have occurred prior to such execution and delivery to constitute them as valid
and legally binding obligations of the Borrower and the Guarantors enforceable
against the Borrower and the Guarantors in accordance with their respective
terms except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the enforcement of creditors' rights generally or by
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law), shall have been done and
performed and shall have occurred in due compliance with all applicable Laws; on
the date, if any, of such execution and delivery by the Borrower and the
Guarantors, the Senior Subordinated Indenture and the Exchange Notes (and the
guarantees thereof) and the Demand Take-Out Notes and the indenture governing
the Demand Take-Out Notes (and the guarantees
48
<PAGE>
thereof) shall constitute legal, valid, binding and unconditional obligations of
the Borrower and the Guarantors, as the case may be, enforceable against the
Borrower and the Guarantors, as the case may be, in accordance with their
respective terms, except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the enforcement of creditors' rights
generally or by general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
4.24 Broker's or Finder's Fees
-------------------------
Other than as contemplated in the Amended and Restated Commitment Letter
and other than fees payable to First Union and its Affiliates in connection with
the Acquisition, no broker's or finder's fees or commissions will be payable by
the Borrower or Overseas with respect to any transaction contemplated by any of
the Loan Documents, the Glass Holdings Loan Agreement or the Senior Credit
Facility and no similar fees or commissions will be payable by the Borrower or
Overseas for any other services rendered to the Borrower or Overseas in
connection with the transactions contemplated hereby and thereby. The Borrower
represents, warrants, covenants and agrees that the Borrower will indemnify the
Lenders and the Agent against, and hold each of them completely harmless from
and against, any and all claims, demands or liabilities for broker's or finder's
fees or similar fees or commissions asserted to have been incurred in connection
with any of the Loan Documents, the Glass Holdings Loan Agreement or the Senior
Credit Facility or any of the transactions contemplated thereunder.
4.25 Year 2000 Compliance
--------------------
Any reprogramming and related testing required to permit the proper
functioning of each of the Borrower's and Overseas' computer systems in and
following the year 2000 will be completed in all material respects prior to
September 1, 1999 (that is, each of the Borrower and Overseas will be "Year 2000
Compliant"), and the cost to each of the Borrower and Overseas of such
reprogramming and testing will not result in a Default or Potential Event of
Default or a Material Adverse Effect. Except for such reprogramming referred to
in the preceding sentence as may be necessary, the computer and management
information systems of each of the Borrower and Overseas are and, with ordinary
course upgrading and maintenance, will continue for the term of this Agreement
to be, adequate for the conduct of its business.
SECTION 5 AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that until the satisfaction in full of
the Bridge Loan and the Bridge Notes and all other amounts due under this
Agreement have been paid in full, it shall, and shall cause its Subsidiaries to,
fully and timely perform all covenants in this Section 5:
5.1 Financial Statements and Other Reports
--------------------------------------
The Borrower will maintain, and cause each of its Subsidiaries to maintain,
a system of accounting established and administered in accordance with sound
business practices to permit
49
<PAGE>
preparation of consolidated financial statements in conformity with GAAP. The
Borrower will deliver to each Lender and the Agent:
(i) as soon as available and in any event within 30 days after the
end of each month ending after the Closing Date, (1) the consolidated
balance sheets of the Borrower and its Subsidiaries as at the end of such
month, (2) the related summary statements of income, stockholders' equity
and cash flows, in each case for such month and for the period from the
beginning of the then current fiscal year to the end of such month, setting
forth in each case in comparative form the corresponding consolidated
figures for the corresponding periods of the previous fiscal year and the
corresponding figures from the consolidated plan and financial forecast for
the current fiscal year delivered pursuant to Section 5.l(x), all certified
by the chief financial officer or the controller of the Borrower that they
fairly present in all material respects the financial condition of such
entities as at the dates indicated and the results of their operations and
their cash flows for the periods indicated, subject to changes resulting
from audit and normal year-end adjustments, and (3) a conference call with
senior management to discuss the operations of the Borrower and its
Subsidiaries for such monthly period and for the period from the beginning
of the then current fiscal year to the end of such monthly period;
(ii) as soon as available and in any event within 45 days after the
end of each of the first three fiscal quarters of each fiscal year, (1) the
consolidated balance sheets of the Borrower and its Subsidiaries as at the
end of such fiscal quarter, (2) the related consolidated statements of
income, stockholders' equity and cash flows for such fiscal quarter and for
the period from the beginning of the then current fiscal year to the end of
such fiscal quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous fiscal
year and the corresponding figures from the consolidated plan and financial
forecast for the current fiscal year delivered pursuant to Section 5.1(x),
all in reasonable detail and certified by the chief financial officer or
the controller of the Borrower that they fairly present in all material
respects the financial condition of the Borrower and its Subsidiaries at
the dates indicated and the results of their operations and their cash
flows for the periods indicated, subject to changes resulting from audit
and normal year-end adjustments, (3) the Borrower's quarterly report on
Form 10-Q for such quarterly period, and (4) only if the Borrower does not
file quarterly reports on Form 10-Q with the Commission, a narrative report
describing the operations of the Borrower and its Subsidiaries (in the form
of management's discussion and analysis of such operations which would
comply with the disclosure requirements of the Exchange Act and rules and
regulations promulgated thereunder with respect to management's discussion
and analysis set forth in quarterly reports on Form 10-Q) prepared for such
fiscal quarter and for the period from the beginning of the then current
fiscal year to the end of such fiscal quarter;
(iii) as soon as available and in any event within 90 days after the
end of each fiscal year, (1) the consolidated balance sheets of the
Borrower and its Subsidiaries as at the end of such fiscal year, (2) the
related consolidated statements of income, stockholders' equity and cash
flows for such fiscal year, setting forth in each case in
50
<PAGE>
comparative form the corresponding figures for the previous fiscal year and
the corresponding figures from the consolidated plan and financial forecast
for the current fiscal year delivered pursuant to section 5.1(x) for the
fiscal year covered by such financial statements, all in reasonable detail
and certified by the chief financial officer or the controller of the
Borrower that they fairly present in all material respects the financial
condition of the Borrower and its Subsidiaries, at the dates indicated and
the results of their operations and their cash flows for the periods
indicated, (3) the Borrower's annual report on Form 10-K for such year, (4)
only if the Borrower does not file annual reports on Form 10-K with the
Commission, a narrative report describing the operations of the Borrower
and its Subsidiaries (in the form of management's discussion and analysis
of such operations which would comply with the disclosure requirements of
the Exchange Act and rules and regulations promulgated thereunder with
respect to management's discussion and analysis set forth in annual reports
on Form 10-K) prepared for such fiscal year, and (5) in the case of such
consolidated financial statements, a report thereon of independent
certified public accountants of recognized national standing, which report
shall be unqualified as to scope of audit, shall express no doubts about
the ability of the Borrower and its Subsidiaries to continue as a going
concern, and shall state that such consolidated financial statements fairly
present in all material respects the consolidated financial position of the
Borrower and its Subsidiaries as at the dates indicated and the results of
their operations and their cash flows for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years (except
as otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards;
(iv) together with each delivery of financial statements pursuant to
Sections 5.1(ii) and (iii) above, (a) an Officers' Certificate of the
Borrower stating that the signers have reviewed the terms of this Agreement
and the Bridge Notes and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and
condition of the Borrower and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not disclosed
the existence during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as of the date of the
Officers' Certificate, of any condition or event which constitutes an Event
of Default or Potential Event of Default, or, if any such condition or
event existed or exists, specifying the nature and period of existence
thereof and what action the Borrower has taken, is taking and proposes to
take with respect thereto and (b) a Compliance Certificate demonstrating in
reasonable detail compliance (as determined in accordance with GAAP) during
and at the end of such accounting periods with the restrictions contained
in Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.7, 6.8, 6.9 and 6.13;
(v) together with each delivery of consolidated financial
statements pursuant to Section 5.1(iii) above, a written statement by the
independent certified public accountants giving the report thereon (a)
stating whether, in connection with their audit examination, any condition
or event that constitutes an Event of Default or Potential
51
<PAGE>
Event of Default that relates to accounting matters has come to their
attention and, if any such condition or event has come to their attention,
specifying the nature and period of existence thereof; provided that such
--------
accountants shall not be liable by reason of any failure to obtain
knowledge of any such Event of Default or Potential Event of Default that
would not be disclosed in the course of their audit examination, and (b)
stating that based on their audit examination nothing has come to their
attention that causes them to believe that the information contained in the
Compliance Certificates delivered therewith is not correct;
(vi) promptly upon receipt thereof, copies of all reports in final
form (other than reports of a routine or ministerial nature which are not
material) submitted to the Borrower by independent certified public
accountants in connection with each annual, interim or special audit of the
financial statements of the Borrower and its Subsidiaries made by such
accountants, including, without limitation, any comment letter submitted by
such accountants to management in connection with their annual audit;
(vii) promptly upon the sending or filing thereof, copies of (a) all
financial statements, reports, notices and proxy statements sent or made
available generally by the Borrower to their public security holders or by
any Subsidiary of the Borrower to its public security holders other than
the Borrower or another Subsidiary of the Borrower, (b) all regular and
periodic reports and all registration statements (other than on Form S-8 or
a similar form) and prospectuses, if any, filed by the Borrower or any of
its Subsidiaries with any securities exchange or with the Commission or any
governmental authority (other than reports of a routine or ministerial
nature which are not material), and (c) all press releases and other
statements made available generally by the Borrower or any of its
Subsidiaries to the public concerning material developments in the business
of the Borrower or any of its Subsidiaries;
(viii) promptly upon any executive officer of the Borrower obtaining
knowledge (a) of any condition or event which constitutes an Event of
Default or Potential Event of Default, or becoming aware that any Lender or
Agent has given any notice or taken any other action with respect to a
claimed Event of Default or Potential Event of Default under this
Agreement, (b) that any Person has given any notice to the Borrower or any
Subsidiary of the Borrower or taken any other action with respect to a
claimed default or event or condition which might result in an Event of
Default referred to in Section 7.2, (c) of any condition or event which
would be required to be disclosed in a current report filed with the
Commission on Form 8-K whether or not the Borrower is required to file such
reports under the Exchange Act, or (d) of the occurrence of any event or
change that has caused or evidences, either in any case or in the
aggregate, a Material Adverse Effect, an Officers' Certificate specifying
the nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such Person and the nature
of such claimed default, Event of Default, Potential Event of Default,
event or condition, and what action the Borrower has taken, is taking and
proposes to take with respect thereto;
52
<PAGE>
(ix) promptly upon any executive officer of the Borrower obtaining
knowledge of (X) the institution of, or non-frivolous threat of, any
action, suit, proceeding (whether administrative, judicial or otherwise),
Environmental Claim, governmental investigation or arbitration against or
affecting the Borrower or any of its Subsidiaries or any property of the
Borrower or any of its Subsidiaries not previously disclosed in writing by
the Borrower to the Lenders or (Y) any material development in any
proceeding that, in any case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the JV
Transactions;
written notice thereof together with such other information as may be
reasonably available to the Borrower or any of its Subsidiaries to enable
the Lenders and their counsel to evaluate such matters;
(x) as soon as practicable but in any event no later than 45 days
following the first day of each fiscal year a forecast for each of the next
succeeding twelve months of the consolidated balance sheet and the
consolidated statements of income, cash flow and cash position of the
Borrower and its Subsidiaries, together with an outline of the major
assumptions upon which the forecast is based. Together with each delivery
of financial statements pursuant to Sections 5.1(ii) and (iii) above, the
Borrower shall deliver a comparison of the current year to date financial
results against the budget required to be submitted pursuant to this
Section 5.1(x);
(xi) in writing, promptly upon any Officer of the Borrower obtaining
knowledge that the Borrower or any of its Subsidiaries has received notice
or otherwise learned of any Environmental Claim or other claim, demand,
action, event, condition, report or investigation indicating any potential
or actual liability arising in connection with (x) the non-compliance with
or violation of the requirements of any Environmental Law which could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, (y) the release, threatened release or presence of
any Hazardous Material in the environment which could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect or which the Borrower or any of its Subsidiaries would have a duty
to report to a Tribunal under an Environmental Law, or (z) the existence of
any Environmental Lien on any properties or assets of the Borrower or any
of its Subsidiaries;
(xii) promptly after the availability thereof, copies of all material
amendments to the certificate of incorporation or by-laws of the Borrower
or any of its Subsidiaries;
(xiii) promptly upon any Person becoming a Subsidiary of the Borrower,
a written notice setting forth with respect to such Person (a) the date on
which such Person
53
<PAGE>
became a Subsidiary of the Borrower and (b) the ownership structure and
jurisdiction of incorporation of such Subsidiary; and
(xiv) with reasonable promptness such other information and data with
respect to the Borrower or any of its Subsidiaries or any of their
respective properties, businesses or assets as from time to time may be
reasonably requested by any Lender; provided that no information or data
--------
shall be required to be delivered hereunder or under any other provision of
this Agreement if it would violate any applicable attorney-client or
accountant-client privilege.
5.2 Corporate Existence, Etc.
-------------------------
The Borrower will at all times preserve and keep in full force and effect
its corporate existence and rights and franchises to its business and those of
each of its Subsidiaries, except as permitted by Section 6.7 or where the
failure to so preserve or keep could not, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
5.3 Payment of Taxes and Claims; Tax Consolidation
----------------------------------------------
A. The Borrower will, and will cause each of its Subsidiaries to, pay all
material Taxes, assessments and other governmental charges imposed upon it or
any of its Subsidiaries or any of its or their material properties or assets or
in respect of any of its or their franchises, business, income or property
before any material penalty accrues thereon, and all claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
have become due and payable and which by law have or may become a Lien upon any
of its or their properties or assets prior to the time when any material penalty
or fine shall be incurred with respect thereto; provided that no such charge or
--------
claim need be paid if the validity or amount of such charge or claim is being
diligently contested in good faith and if such reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor. The Borrower will, promptly upon any of its officers obtaining
knowledge that a charge or claim described in the previous sentence has not been
paid, other than as permitted by the proviso in the previous sentence, deliver
notice to the Agent (which will provide a copy of such notice to each Lender) of
such failure to pay.
B. The Borrower will not, nor will it permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income Tax Return with any
Person (other than Glass Holdings or the Borrower or any of its Subsidiaries so
long as the filing of such consolidated income Tax Return is permitted by
applicable law)
5.4 Maintenance of Properties; Insurance
------------------------------------
The Borrower will maintain or cause to be maintained in good repair,
working order and condition, ordinary wear and tear excepted, all material
properties used or useful in the business of the Borrower and its Subsidiaries
and from time to time promptly will make or cause to be made all necessary
repairs, renewals and replacements thereof; provided that nothing in this
--------
Section 5.4 shall prevent the Borrower or any of its Subsidiaries from
discontinuing the use,
54
<PAGE>
operation or maintenance of any such properties, or disposing of any of them, if
such action is in the ordinary course of business or, in the reasonable good
faith judgment of the Board of Directors of the Borrower, necessary or desirable
in the conduct of its business or otherwise permitted by this Agreement. The
Borrower will maintain or cause to be maintained, with financially sound and
reputable insurers to the extent consistent with prudent business practices and
customary in its industry, insurance with respect to its properties and business
and the properties and businesses of its Subsidiaries against loss or damage of
the kinds (including, in any event, business interruption insurance) and in the
amounts customarily carried or maintained under similar circumstances by
corporations of established reputation engaged in similar businesses and owning
similar properties in the same general respective areas in which the Borrower
and its Subsidiaries operate.
5.5 Inspection
----------
The Borrower shall permit any authorized representatives designated by the
Agent to visit and inspect any of the properties of the Borrower or its
Subsidiaries, including, without limitation, its and their financial and
accounting records, and to receive copies and extracts therefrom, and to discuss
its and their affairs, finances and accounts with its and their officers and
independent public accountants (provided that representatives of the Borrower or
any of its Subsidiaries may, if it so chooses, be present at or participate in
any such discussion), all upon reasonable notice and at such reasonable times
during normal business hours and as often as may be reasonably requested.
5.6 Equal Security for Bridge Loan
------------------------------
If the Borrower or any of its Subsidiaries shall create, assume or suffer
to exist any Lien upon any of their respective properties or assets, whether now
owned or hereafter acquired, other than Liens permitted by the provisions of
Section 6.2, the Borrower shall make or cause to be made effective provision
whereby (i) the Obligations under this Agreement, in the case of the Borrower
and (ii) the Guarantee Obligations of the Guarantors if any, will be secured by
such Lien equally and ratably with any and all other Indebtedness thereby
secured as long as any such Indebtedness shall be secured; provided that this
--------
covenant shall not be construed as or deemed to be a consent by the Agent to any
violation of the provisions of Section 6.2; and provided, further, that the
-------- -------
Borrower shall under no circumstances be required to make or cause to be made
effective provision whereby the Obligations under this Agreement will be
secured, directly or indirectly, by Margin Stock.
5.7 Compliance with Laws, Etc.
--------------------------
The Borrower shall and shall cause each of its Subsidiaries to comply with
the requirements of all Laws, to the extent noncompliance, singly or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
55
<PAGE>
5.8 Maintenance of Accurate Records, Etc.
-------------------------------------
The Borrower shall, and shall cause each of its Subsidiaries to, keep true
books and records and accounts in which full and correct entries will be made of
all of its and their respective business transactions, and will reflect, and
cause each of its Subsidiaries to reflect, in its or their respective financial
statements adequate accruals and appropriations to reserves all in accordance
with GAAP and consistent with prior business practices.
5.9 Take-Out Financing
------------------
The Borrower agrees that upon request (a "Take-Out Request") from the Take-
Out Bank, the Borrower will take all actions necessary or desirable, to the
extent within its power, so that the Take-Out Bank can, as soon as practicable
after such Take-Out Request, publicly sell or privately place the Demand Take-
Out Notes (the "Initial Request Date"). The Borrower further agrees that upon
notice by the Take-Out Bank, at any time and from time to time following the
Initial Request Date, the Borrower will issue and sell Demand Take-Out Notes
upon such terms and conditions as specified in such notice; provided that (i)
--------
the interest rate thereon (whether fixed or floating) shall be determined by the
Take-Out Bank in light of the then prevailing market conditions but in no event
shall the Borrower be required to accept either (a) a stated interest rate on
the Demand Take-Out Notes in excess of 13.0% per annum or (b) an issue price
--- -----
(after deducting the Take-Out Bank's selling or placement discount but before
deducting expenses) of less than 97.25% of par value; (ii) the Borrower, in its
reasonable discretion after consultation with the Take-Out Bank, shall determine
whether the Demand Take-Out Notes shall be issued through a public offering or a
private placement and, if issued in a private placement, the Demand Take-Out
Notes will be accompanied by registration rights customary for the type of
transaction consummated; (iii) the maturity of any Demand Take-Out Notes shall
not be earlier than the tenth anniversary of the Closing Date; and (iv) all
other arrangements with respect to the Demand Take-Out Notes shall be reasonably
satisfactory in all respects to the Take-Out Bank and the Borrower in light of
the then prevailing market conditions. The foregoing shall not limit the
Borrower's right to refinance the Bridge Loan by any other means.
5.10 Exchange of Bridge Notes
------------------------
(a) The Borrower will, at any time after the Exchange Date, on or prior to
the tenth Business Day following the written request of First Union (the
"Initial Exchange Request"):
(i) Execute and deliver, cause each Guarantor, if any, to execute
and deliver, and cause a bank or trust company acting as trustee thereunder
to execute and deliver, the Senior Subordinated Indenture;
(ii) Notify each Lender that the Bridge Notes may be exchanged for
Exchange Notes (as defined below) and provide each Lender with a copy of
the Senior Subordinated Indenture.
(b) At any time after the receipt of the Initial Exchange Request, upon
receipt of a written request from any Lender to exchange an amount of Bridge
Notes permitted by clause (c)
56
<PAGE>
below (a "Subsequent Exchange Request"), the Borrower shall, within 5 Business
Days following any such receipt:
(i) Execute and deliver in accordance with the Senior Subordinated
Indenture to each Lender that delivered the Initial Exchange Request or a
Subsequent Exchange Request a note in the form attached to the Senior
Subordinated Indenture (the "Exchange Notes") in exchange for such Bridge
Notes dated the date of the issuance of such Exchange Note, payable to such
Lender in the same principal amount as such Bridge Notes (or portions
thereof) being exchanged, and cause each Guarantor to endorse its guarantee
thereon; and
(ii) Execute and deliver, and cause each Guarantor, if any, to
execute and deliver, to each holder or beneficial owner of Exchange Notes,
a Registration Rights Agreement containing terms as are generally set forth
in Exhibit IV hereto, if such Registration Rights Agreement has not
----------
previously been executed and delivered or, if such Registration Rights
Agreement has previously been executed and delivered and such holder or
owner is not already a party thereto, permit such holder or owner to become
a party thereto.
(c) A Subsequent Exchange Request shall specify the principal amount of
the Bridge Notes to be exchanged pursuant to this Section 5.10 which shall be at
least $5,000,000 and integral multiples of $10,000 in excess thereof. Bridge
Notes delivered to the Borrower under this Section 5.10 in exchange for Exchange
Notes shall be canceled by the Borrower and the corresponding amount of the
Bridge Loan deemed repaid and the Exchange Notes shall be governed by and
construed in accordance with the terms of the Senior Subordinated Indenture.
(d) The Exchange Notes shall (unless the Agent otherwise elects by
providing the Borrower with notice prior to the Exchange Date) bear interest at
a fixed rate per annum equal to the rate of interest borne by the Bridge Notes
on the Exchange Date and shall be subject to the PIK Interest Amount, if
otherwise available to the Borrower. The Exchange Notes will not be redeemable
by the Borrower for a period of 5 years from the Closing Date and, subject to
Section 6.17, will be redeemable thereafter, in whole or in part, at a
redemption price equal to the principal amount thereof plus accrued and unpaid
interest thereon to the date of such redemption plus the Applicable Redemption
Premium; provided, however, that if the Agent provides the notice described in
------- -------
the first sentence of this paragraph, but subject to Section 6.17, the Exchange
Notes will be redeemable at any time, in whole or in part, by the Borrower upon
not less than 10 days written notice to the holders of such Exchange Notes at a
redemption price equal to the principal amount thereof plus accrued and unpaid
interest thereon to the date of such redemption.
(e) The bank or trust company acting as trustee under the Senior
Subordinated Indenture shall at all times be a corporation organized and doing
business under the laws of the United States of America or the State of New
York, in good standing and having its principal offices in the Borough of
Manhattan, in The City of New York, which is authorized under such laws to
exercise corporate trust powers and is subject to supervision or examination by
Federal or State authority and which has a combined capital and surplus of not
less than $50,000,000.
57
<PAGE>
5.11 ERISA Compliance
----------------
The Borrower and each of its Subsidiaries will notify the Lenders promptly
upon becoming aware of any fact arising in connection with any of the Pension
Plans or any Multiemployer Plans which have resulted in or could be reasonably
expected to constitute or result in an ERISA Event, together with a statement as
to the action, if any, proposed to be taken with respect thereto.
5.12 Payments in U.S. Dollars
------------------------
All payments of any Obligations to be made hereunder or under the Bridge
Notes by the Borrower or any other obligor with respect thereto shall be made
solely in U.S. Dollars or such other currency as is then legal tender for public
and private debts in the United States of America.
5.13 Register
--------
The Borrower hereby designates the Agent to serve as the Borrower's agent,
solely for purposes of this Section 5.13, to maintain a register (the
"Register") on which it will record the Bridge Loan made by each of the Lenders
and each repayment in respect of the principal amount of the Bridge Loan of each
Lender. Failure to make any such recordation, or any error in such recordation
shall not affect the Borrower's obligations in respect of such Bridge Loan.
With respect to any Lender, the transfer of the Bridge Loan Commitment of such
Lender and the rights to the principal of, and interest on, any Bridge Loan made
pursuant to such Bridge Loan Commitment shall not be effective until such
transfer is recorded on the Register maintained by the Agent with respect to
ownership of such Bridge Loan Commitment and Bridge Loan and prior to such
recordation all amounts owing to the transferor with respect to such Bridge Loan
Commitment and Bridge Loan shall remain owing to the transferor. The
registration of assignment or transfer of all or part of any Bridge Loan
Commitment and Bridge Loan shall be recorded by the Agent on the Register only
upon the receipt by the Agent of a properly executed and delivered assignment
and assumption agreement pursuant to Section 12.2A. Coincident with the
delivery of such an assignment and assumption agreement to the Agent for
acceptance and registration of assignment or transfer of all or part of a Bridge
Loan, or as soon thereafter as practicable, the assigning or transferor Lender
shall surrender the Bridge Note evidencing such Bridge Loan, and thereupon one
or more new Bridge Notes of the same type and in the same aggregate principal
amount shall be issued to the assigning or transferor Lender and/or the new
Lender
5.14 Lenders Meeting
---------------
The Borrower will participate in a meeting with the Lenders once during
each fiscal year during which any Obligations are outstanding hereunder to be
held at a location and a time selected by the Borrower and reasonably
satisfactory to the Lenders.
58
<PAGE>
5.15 Guarantors
----------
The Borrower will cause any Person that becomes a Wholly-Owned Subsidiary
of the Borrower that is organized under the laws of the United States or any
state or commonwealth thereof or under the laws of the District of Columbia
(whether by creation, acquisition or otherwise) to execute and deliver a
notation of Guarantee substantially in the form of Exhibit VII (and with such
-----------
documentation relating thereto as the Agent shall require, including, without
limitation, a supplement or amendment to this Agreement and opinions of counsel
as to the enforceability of such guarantee) pursuant to which such Wholly-Owned
Subsidiary shall become a Guarantor under the Bridge Notes and this Agreement in
accordance with Section 10 with the same effect and to the same extent as if
such Person had been named herein as a Guarantor.
5.16 Marketing Bridge Notes and Take-Out Securities
----------------------------------------------
(a) If requested from time to time by First Union, the Borrower will make
appropriate officers of the Borrower and its Subsidiaries available to First
Union for meetings with prospective purchasers of the Bridge Notes and preparing
and presenting to such prospective purchasers material in connection with such
meetings.
(b) If requested by FUCM, the Borrower will make appropriate officers of
the Borrower and its Subsidiaries available to FUCM for road show meetings with
prospective purchasers of the Take-Out Securities and preparing and presenting
to potential investors road show material in a manner consistent with other new
issuances of high yield debt securities.
5.17 Environmental Matters
---------------------
(i) The Borrower shall and shall cause each of its Subsidiaries
(including, without limitation, all operations and conditions at or in the
Facilities) to comply materially with all applicable Environmental Laws and
to maintain and comply materially with the terms of all Permits under
applicable Environmental Laws necessary to their respective operations.
(ii) The Borrower shall and shall cause each of its Subsidiaries
(including, without limitation, all operations and conditions at or in the
Facilities) promptly to conduct and complete all notifications,
investigations, studies, sampling and testing, and all remedial, cleanup,
removal and other actions, required under applicable Environmental Laws.
(iii) The Borrower shall and shall cause each of its Subsidiaries
(including, without limitation, all operations and conditions at or in the
Facilities) to limit the presence of Hazardous Materials to those Hazardous
Materials that are necessary to the normal operation of their respective
businesses.
59
<PAGE>
SECTION 6 NEGATIVE COVENANTS
The Borrower covenants and agrees that until the satisfaction in full of
the Bridge Loan and the Bridge Notes and all other amounts due under this
Agreement have been paid in full, it shall, and shall cause its Subsidiaries to,
fully and timely perform all covenants in this Section 6:
6.1 Indebtedness
------------
The Borrower shall not, and shall not cause or permit any of its
Subsidiaries, directly or indirectly, to Incur any Indebtedness, except for the
following ("Permitted Indebtedness"):
(i) Indebtedness under the Bridge Notes, the Exchange Notes and the
Guarantees;
(ii) Indebtedness of up to $125,000,000 in the aggregate at any one
time outstanding under the Senior Credit Facility, reduced by any required
permanent repayments (which are accompanied by a corresponding permanent
commitment reduction) thereunder (it being understood that the Senior
Subordinated Indenture shall provide that any borrowings under the Senior
Credit Facility in excess of $125,000,000, or such lesser amount resulting
from any permanent commitment reductions, must be made in accordance with
the last paragraph of this Section 6.1);
(iii) other Indebtedness of the Borrower and its Subsidiaries existing
on the Closing Date (as set forth in Schedule C) reduced by the amount of
----------
any scheduled amortization payments or mandatory prepayments when actually
paid or permanent reductions thereon;
(iv) Hedging Obligations of the Borrower and its Subsidiaries entered
into in the ordinary course of business and not for speculative purposes;
(v) Contingent Obligations permitted by Section 6.5 and, upon any
matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(vi) Indebtedness of a Subsidiary of the Borrower to the Borrower or
to a Subsidiary of the Borrower for so long as such Indebtedness is held by
the Borrower or a Subsidiary of the Borrower, in each case subject to no
Lien held by a Person other than the Borrower or a Subsidiary of the
Borrower; provided that if as of any date any Person other than the
--------
Borrower or a Subsidiary of the Borrower owns or holds any such
Indebtedness or holds a Lien (other than Permitted Liens) in respect of
such Indebtedness, such date shall be deemed the Incurrence of Indebtedness
not constituting Permitted Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of the Borrower to a Wholly-Owned Subsidiary of the
Borrower for so long as such Indebtedness is held by a Wholly-Owned
Subsidiary of the Borrower and subject to no Lien; provided that (a) any
--------
Indebtedness of the Borrower to
60
<PAGE>
any Wholly-Owned Subsidiary of the Borrower is unsecured and subordinated,
pursuant to a written agreement, to the Borrower's obligations under any
Senior Indebtedness and under this Agreement and the Bridge Notes and (b)
if as of any date any Person other than a Wholly-Owned Subsidiary of the
Borrower owns or holds any such Indebtedness or any Person holds a Lien
(other than Permitted Liens) in respect of such Indebtedness, such date
shall be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of day-light overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
-------- -------
Indebtedness is extinguished within two Business Days of Incurrence;
(ix) Indebtedness of the Borrower or any of its Subsidiaries
represented by letters of credit for the account of the Borrower or such
Subsidiary, as the case may be, in order to provide security for workers'
compensation claims, payment obligations in connection with self-insurance
or similar requirements in the ordinary course of business;
(x) Permitted Refinancing Indebtedness; and
(xi) Additional Indebtedness of the Borrower and its Subsidiaries in
an aggregate principal amount not to exceed $2,000,000 at any one time
outstanding for Capital Lease Obligations or for purposes of financing the
purchase price or construction cost of equipment, fixtures or similar
property.
In addition to the foregoing, the Senior Subordinated Indenture shall
provide that the Borrower and any Guarantors may Incur additional Indebtedness;
provided, that (a) no Potential Event of Default with respect to payment of
- --------
principal of, or interest on, the Exchange Notes or Event of Default shall have
occurred and be continuing at the time of or as a consequence of the Incurrence
of any such Indebtedness and (b) immediately before and immediately after giving
effect to the Incurrence of such Indebtedness, the Consolidated Fixed Charge
Coverage Ratio of the Borrower would be greater than 3.0 to 1.0.
6.2 Liens
-----
The Borrower shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset (including any
document or instrument in respect of goods or accounts receivable) of the
Borrower or of any of its Subsidiaries, whether now owned or hereafter acquired,
or assign or otherwise convey any right to receive any income or profits
therefrom, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any Lien with respect to any such
property, asset, income or profits under the Uniform Commercial Code of any
State or under any similar recording or notice statute, other than the following
(collectively, the "Permitted Liens"):
61
<PAGE>
(i) Liens for Taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Borrower or any of its Subsidiaries shall
have set aside on its or their books such reserves as may be required
pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business in connection therewith,
or to secure the performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, government performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default and Liens
securing appeal or similar surety bonds therefor; provided, that (a) no
--------
Event of Default exists with respect thereto and (b) the aggregate amount
secured by such Lien does not exceed $10,000,000 (exclusive of Liens
securing judgments covered by insurance in respect of which the carrier has
not contested coverage);
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Borrower
or any of its Subsidiaries;
(vi) any interest or title of a lessor under any Capital Lease;
provided that such Liens do not extend to any property or assets which is
--------
not leased property subject to such Capital Lease;
(vii) purchase money Liens to finance property or assets of the
Borrower or a Subsidiary of the Borrower acquired in the ordinary course of
business; provided, however, that (A) the related purchase money
-------- -------
Indebtedness (x) is Incurred in accordance with Section 6.1, (y) shall not
exceed the cost of such property or assets and (z) shall not be secured by
any property or assets of the Borrower or any Subsidiary of the Borrower
other than the property and assets so acquired and (B) the Lien securing
such Indebtedness shall be created within 30 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of the Borrower or any of its Subsidiaries securing such
obligations of the Borrower or any of its Subsidiaries in respect of
bankers' acceptances issued or created for the account of the Borrower or
any of its Subsidiaries to facilitate the purchase, shipment or storage of
such inventory or other goods;
62
<PAGE>
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Borrower or any of its Subsidiaries, including rights of offset and set-
off;
(xi) Liens securing Hedging Obligations which Hedging Obligations
relate to Indebtedness that is Incurred under this Agreement or the Senior
Credit Facility;
(xii) Liens upon all or substantially all of the assets of the
Borrower and its Subsidiaries, whether now owned or hereafter acquired,
granted to secure the Senior Credit Facility; and
(xiii) Liens existing on the Closing Date as set forth on Schedule A
----------
to the extent and in the manner such Liens are in effect on the Closing
Date and Liens to secure any Permitted Refinancing Indebtedness which is
Incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under this Section 6.2 and which Indebtedness has been Incurred
in accordance with Section 6.1; provided that such new Lien shall not
--------
extend to any property or assets other than the property or assets securing
the Indebtedness being Refinanced by such Permitted Refinancing
Indebtedness.
6.3 Restricted Payments
-------------------
The Borrower shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly (i) declare or pay any dividend or make
any distribution, on any Capital Stock of the Borrower or its Subsidiaries
(other than dividends or distributions payable solely in Qualified Capital Stock
of the Borrower or dividends or distributions payable to the Borrower or any
Wholly-Owned Subsidiary of the Borrower), (ii) purchase, redeem or otherwise
acquire or retire for value any of the Capital Stock of the Borrower or any of
its Subsidiaries, or any warrants, rights or options to acquire shares of any
class of such Capital Stock, (iii) make any principal payment on, purchase,
defease, redeem, prepay, or otherwise acquire or retire for value, other than
any scheduled final maturity payment, scheduled repayment or scheduled sinking
fund payment, any Subordinated Indebtedness or Senior Subordinated Indebtedness
of the Borrower or any of its Subsidiaries or (iv) make any Investments other
than Permitted Investments (any such dividend, distribution, purchase,
redemption, acquisition, retirement, defeasance, prepayment or Investment set
forth in clauses (i), (ii), (iii) and (iv) above a "Restricted Payment").
Notwithstanding the foregoing paragraph, (i) the Borrower and its
Subsidiaries may make Restricted Payments not to exceed $2,000,000 in the
aggregate; provided, that the Senior Subordinated Indenture shall omit this
--------
clause (i) and (ii) the Borrower may make book-entry dividends to Glass Holdings
to make payments of interest on the Glass Holdings Loan so long as (A) Glass
Holdings makes a book-entry contribution to AGY Holdings to enable AGY Holdings
to pay interest on the Purchase Price Loan, (B) AGY Holdings uses such
contribution to pay
63
<PAGE>
interest on the Purchase Price Loan, (C) Glass Holdings applies such interest
payment to the payment of interest on the Glass Holdings Loan and (D) after
giving effect to such dividend and the application of the interest payment on
the Glass Holdings Loan, there is no change to the retained earnings of the
Borrower or Consolidated Net Income solely as a result of the making of such
dividend and the payment of such interest.
Notwithstanding the first paragraph of this Section 6.3, the Senior
Subordinated Indenture shall provide that the Borrower and its Subsidiaries may
make Restricted Payments if, at the time of making any such Restricted Payment
or immediately after giving effect thereto, (i) no Potential Event of Default or
Event of Default shall have occurred and be continuing, (ii) the Borrower is
able to incur at least $1.00 of additional Indebtedness pursuant to the last
paragraph of Section 6.1 and (iii) the aggregate amount of Restricted Payments
(including such proposed Restricted Payment) made subsequent to the Closing Date
(the amount expended for such purposes, if other than cash, being the fair
market value of such property) does not exceed: (A) 50% of cumulative
Consolidated Net Income (or if cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss) accrued during the period (treated as one
accounting period) beginning on the first full fiscal quarter after the Closing
Date to the end of the most recent fiscal quarter for which consolidated
financial information of the Borrower is available; less (B) the amount of
----
Restricted Payments permitted to be made pursuant to clause (i) of the second
paragraph of this Section 6.3 (it being understood that clause (i) of the second
paragraph of this Section 6.3 will be omitted from the Senior Subordinated
Indenture); plus (C) without duplication of any amounts included in clause (A)
----
above, in the case of the disposition or repayment of, or the receipt by the
Borrower or any Subsidiary of the Borrower of any dividends or distributions
from, any Restricted Payment made pursuant to clause (i) of the second paragraph
of this Section 6.3 that constituted an Investment, an amount equal to the
lesser of the amount of such Investment and the amount received by the Borrower
or any Subsidiary of the Borrower upon such disposition, repayment, dividend or
distribution.
6.4 Contingent Obligations
----------------------
The Borrower shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create or become or remain liable with
respect to any Contingent Obligation, except:
(i) the Borrower and its Subsidiaries may become and remain liable
with respect to Contingent Obligations outstanding on the Closing Date
described in Schedule C.
----------
(ii) any Guarantors may become and remain liable with respect to
Contingent Obligations under the Guarantees;
(iii) the Borrower and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with additional acquisitions of assets or stock, Asset Sales or
other sales of assets; provided that the maximum assumable liability in
--------
respect of all such obligations shall at no time exceed the gross proceeds
64
<PAGE>
actually received by the Borrower and its Subsidiaries in connection with
such Asset Sales and other sales;
(iv) the Borrower and its Subsidiaries may become and remain liable
with respect to Contingent Obligations under guarantees made under the
Senior Credit Facility; and
(v) Hedging Obligations of the Borrower and its Subsidiaries entered
into in the ordinary course of business and not for speculative purposes.
6.5 Layering of Indebtedness
------------------------
Neither the Borrower nor any of its Subsidiaries shall, directly or
indirectly, Incur any Indebtedness that is by its terms (or by the terms of any
agreement governing such Indebtedness) subordinated in right of payment to any
other Indebtedness of the Borrower or of such Subsidiary unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such Indebtedness) made expressly subordinate to the Bridge Notes and the
Guarantees to the same extent and in the same manner as the Bridge Notes and the
Guarantees are subordinated to the Senior Credit Facility, except for Senior
Subordinated Indebtedness that is subordinate to the Senior Credit Facility to
the same extent and in the same manner as the Bridge Loan and the Guarantees.
6.6 Restriction on Fundamental Changes
----------------------------------
Subject to Section 5.2 and other than the sale of 100% of a Subsidiary of
the Borrower in accordance with Section 6.13 and Section 6.14, the Borrower
shall not, and shall not cause or permit any of its Subsidiaries to, directly or
indirectly, enter into any transaction, or series of related transactions, of
merger, amalgamation, consolidation or combination, or consolidate, or
liquidate, windup or dissolve itself (or suffer any liquidation or dissolution),
or convey, sell, lease, sublease, transfer or otherwise dispose of, in one
transaction or in a series of transactions, all or substantially all of its
business, property or assets, whether now owned or hereafter acquired, except
that any Subsidiary of the Borrower may be merged, amalgamated, consolidated or
combined with or into the Borrower or any Guarantor or be liquidated, wound up
or dissolved, or all or substantially all of its business, property or assets
may be conveyed, sold, leased, transferred or otherwise disposed of, in one
transaction or in a series of related transactions, to the Borrower, any
Guarantor or any Person which as a result thereof shall (i) become a Wholly-
Owned Subsidiary of the Borrower and (ii) become a Guarantor in accordance with
Section 10; provided that (A) no Potential Event of Default or Event of Default
--------
shall have occurred and be continuing or would result therefrom, (B) in the case
of such a merger, amalgamation, consolidation or combination of the Borrower and
a Subsidiary of the Borrower, the Borrower shall be the continuing or surviving
corporation, (C) the surviving entity (I) continues to be bound as such under
this Agreement or the Guarantee of such Guarantor, as the case may be, and (II)
executes and delivers to the Agent immediately upon consummation of such
transaction a written confirmation or acknowledgment to such effect, in form and
substance satisfactory to the Agent, together with evidence of appropriate
corporate power, authority and action and a written legal opinion in form and
substance satisfactory to the Agent to the effect that this Agreement
65
<PAGE>
and such Guarantee continue to be a legal, valid and binding obligation of such
entity, enforceable against such entity in accordance with its terms (subject to
customary exceptions in respect of bankruptcy, insolvency and other equitable
remedies) and with respect to such other matters as the Agent may reasonably
request and (D) immediately after giving effect to any transaction contemplated
by this Section 6.6, the Borrower shall have a Consolidated Net Worth in an
amount that is not less than the Consolidated Net Worth of the Borrower prior to
such transaction.
6.7 Limitation on Dividend and Other Payment Restrictions Affecting
---------------------------------------------------------------
Subsidiaries
------------
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or permit or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary of the Company to (a) pay dividends or make any other
distributions on its Capital Stock or any other interest or participation in, or
measured by, such Subsidiary's profits; (b) make loans or advances or pay any
Indebtedness or other obligation owed to the Company or to any Subsidiary of the
Company; or (c) transfer any of its property or assets to the Company or to any
Subsidiary of the Company (any such restriction or encumbrance a "Payment
Restriction"), except for such encumbrances or restrictions existing under or by
reason of: (1) any restrictions contained in (i) the Loan Documents and any
instrument governing Take-Out Securities or Exchange Notes to the extent
Incurred in accordance with this Agreement; (ii) the Senior Credit Facility as
in effect on the Closing Date and any amendment or restatement thereof;
provided, however, that any such amendment or restatement is not materially more
- -------- -------
restrictive with respect to such encumbrance or restriction than those in
existence on the Closing Date; (iii) any instrument governing Acquired
Indebtedness which encumbrances or restrictions do not apply to any Person, or
the properties of assets of any Person, other than the Subsidiary acquired and
such Acquired Indebtedness is otherwise permitted to be incurred pursuant to
Section 6.1; or (iv) secured Indebtedness otherwise permitted to be incurred
pursuant to Sections 6.1 and 6.2 that limits the right of the debtor to dispose
of the assets securing such Indebtedness; (2) customary non-assignment
provisions of any contract and customary provisions restricting assignment or
subletting in any lease governing a leasehold interest of any Subsidiary of the
Borrower, or any customary restriction on the ability of a Subsidiary of the
Borrower to dividend, distribute or otherwise transfer any asset which secures
Indebtedness Incurred by such Subsidiary pursuant to Section 6.1(ix); (3)
restrictions with respect to a Subsidiary of the Borrower imposed pursuant to a
binding agreement which has been entered into for the sale or disposition of
Capital Stock or assets of such Subsidiary; provided, however, that such
-------- -------
restrictions apply solely to the Capital Stock or assets of such Subsidiary
which are being sold; (4) customary restrictions imposed on the transfer of
copyrighted or patented materials; (5) applicable law; and (6) any instrument
that Refinances any Indebtedness effecting any such encumbrance or restriction
pursuant to clause (1) above; provided that the provisions relating to any such
--------
encumbrance or restriction in any such instrument are not more restrictive than
those contained in the agreements referred to in clause (1).
66
<PAGE>
6.8 Transactions with Shareholders and Affiliates
---------------------------------------------
(a) The Borrower will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), unless: (i)
the terms of such Affiliate Transaction are no less favorable than those that
could reasonably be expected to be obtained in a comparable transaction at such
time on an arm's-length basis from a Person that is not an Affiliate of the
Borrower; (ii) in the event that such Affiliate Transaction involves aggregate
payments, or transfers of property or services with a fair market value in
excess of $1.0 million, the terms of such Affiliate Transaction shall be
approved by a majority of the members of the Board of Directors of the Borrower,
such approval to be evidenced by a resolution of the Board of Directors of the
Borrower stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions and (iii) in the event that
such Affiliate Transaction involves aggregate payments or transfers or services
with a fair market value in excess of $10.0 million, the Borrower shall, prior
to the consummation thereof, obtain the written approval of First Union with
respect to the terms thereof.
(b) Notwithstanding the foregoing, the restrictions set forth in paragraph
(a) shall not apply to (i) transactions with or among the Borrower and any
Wholly-Owned Subsidiary of the Borrower or between or among Wholly-Owned
Subsidiaries of the Borrower; (ii) reasonable fees and compensation paid to, and
any indemnity provided on behalf of, officers, directors, employees, consultants
or agents of the Borrower or any Subsidiary of the Borrower as determined in
good faith by the Borrower's Board of Directors; (iii) any transactions
undertaken pursuant to any Contractual Obligations or rights set forth in
Schedule D (as in effect on the Closing Date) and any renewals thereof or
amendments thereto; provided, that such renewals or amendments do not materially
--------
change the rights and obligations of the Borrower and its Subsidiaries; (iv) any
Investments made in compliance with clause (iv) of the definition of Permitted
Investments; (v) loans and advances to officers, directors and employees of the
Borrower or any Subsidiary for travel, entertainment, moving and other
relocation expenses, in each case made in the ordinary course of business, (vi)
the entering into by the Borrower and any of its consolidated Subsidiaries of a
tax sharing or similar arrangement with Glass Holdings and its Affiliates other
than AGY Holdings; provided, that any such tax sharing agreement shall, prior to
the consummation thereof, be approved by First Union and (vii) any Restricted
Payments permitted to be made pursuant to Section 6.3.
6.9 Subsidiary Stock; Borrower Restrictions
---------------------------------------
(a) Except for any sale of 100% of the Capital Stock or other equity
securities of any of the Borrower's Subsidiaries in compliance with the
provisions of Section 6.6, the Borrower will not and will not permit any of the
Subsidiaries to directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of Capital Stock or other equity securities of
any of the Borrower's Subsidiaries, except (i) to qualify directors if required
by applicable law, (ii) to the Borrower or to a Wholly-Owned Subsidiary of the
Borrower, and (iii) Liens in favor of the lenders under the Senior Credit
Facility.
67
<PAGE>
6.10 Business Activities
-------------------
The Borrower will not, nor will it permit any Subsidiary to engage in any
business other than a Permitted Business.
6.11 Amendment or Waivers of Certain Documents
-----------------------------------------
The Borrower shall not, and shall not cause or permit any of the
Subsidiaries to, directly or indirectly, enter into any amendment, modification
supplement or waiver with respect to the Senior Credit Facility or the Glass
Holdings Loan Agreement as in effect on the date hereof or that would modify any
of the provisions thereof or any of the definitions relating thereto in a manner
adverse to the Lenders.
6.12 Amendment to Charter Documents
------------------------------
The Borrower shall not, and shall not cause or permit any of its
Subsidiaries to, amend their respective certificates of incorporation or bylaws
in any respect which could be materially adverse to the interests of the
Lenders.
6.13 Asset Sales
-----------
The Borrower shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, consummate any Asset Sale unless (1)
the Borrower or such Subsidiary, as the case may be, receives consideration
therefor at the time thereof at least equal to the fair market value (determined
at the time of such Asset Sale) of the property, assets or stock that is the
subject of such Asset Sale, (2) at least 85% of the consideration received
therefor by the Borrower or such Subsidiary is in the form of cash or Cash
Equivalents and (3) all of the Net Cash Proceeds in respect thereof are applied
by the Borrower or a Subsidiary of the Borrower in accordance with Section
2.4A(ii)(a); provided, that the Borrower shall not, and shall not cause or
--------
permit any of its Subsidiaries to, directly or indirectly, consummate any Asset
Sale or series of related Asset Sales involving, in either case, assets, stock
or property with an aggregate fair market value exceeding $5.0 million without
the approval of the Agent.
Nothing in this covenant shall be deemed to prevent the exercise of
remedies by secured creditors of the Borrower or any Subsidiary of the Borrower.
6.14 Transfer of Assets to Subsidiaries
----------------------------------
The Borrower shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, transfer (other than in the ordinary
course of business and other than pursuant to a Permitted Investment) any assets
or property to any Subsidiary of the Borrower that is not a Guarantor.
68
<PAGE>
6.15 Sale and Leaseback Transactions
-------------------------------
The Borrower will not, nor will it permit any Subsidiary to, directly or
indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any Sale and Leaseback Transaction.
6.16 Refinancing of the Bridge Loan in Part
--------------------------------------
The Borrower shall not, and shall not cause or permit any of its
Subsidiaries to, Incur any Indebtedness to Refinance the Bridge Loan in part
other than the Demand Take-Out Notes or the Exchange Notes, unless the terms,
conditions, covenants, events of default and other provisions in respect of the
instruments evidencing the Indebtedness Incurred to Refinance the Loans in part
shall have been approved in writing by the Agent prior to the Incurrence of any
such Indebtedness.
SECTION 7 EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default") shall
occur and be continuing:
7.1 Failure to Make Payments When Due
---------------------------------
Failure to pay any installment of principal of the Bridge Loan when due,
whether at stated maturity, by acceleration, by notice of prepayment or
otherwise (whether or not such payment is prohibited by Section 8); or failure
to pay any interest on the Bridge Loan or any other amount due under this
Agreement within five days or more after the date due (whether or not such
payment is prohibited by Section 8); or
7.2 Default in Other Agreements
---------------------------
Failure of the Borrower or any of its Subsidiaries to pay at final maturity
principal on one or more issues of Indebtedness or Contingent Obligations of the
Borrower or of any of its Subsidiaries (other than Indebtedness referred to in
Section 7.1) or (B) breach or default by the Borrower or any of its Subsidiaries
with respect to any other term of any one or more issues of Indebtedness or
Contingent Obligations of the Borrower or of any of its Subsidiaries or any
agreement or instrument evidencing or securing such Indebtedness or Contingent
Obligations and such breach or default results in the acceleration of that
Indebtedness or Contingent Obligation prior to its stated maturity and, in any
case of (A) or (B), the principal amount of such Indebtedness or Contingent
Obligation and all other such Indebtedness or Contingent Obligations of the
Borrower and its Subsidiaries in respect of which there is such a failure to pay
principal or which has been so accelerated equals $5,000,000 or more; or
69
<PAGE>
7.3 Breach of Certain Covenants
---------------------------
Failure of the Borrower or any Subsidiary of the Borrower to perform or
comply with any covenant, term or condition contained in (x) Section 2.4A(ii),
2.4A(iv), 5.2 or Section 6 or (y) in the Amended and Restated Commitment Letter;
or
7.4 Breach of Warranty
------------------
Any representation, warranty or certification made by the Borrower or any
Subsidiary of the Borrower in any Loan Document or in any statement or
certificate at any time given by the Borrower or any Subsidiary of the Borrower
in writing pursuant hereto or thereto or in connection herewith or therewith
shall be false or incorrect in any material respect on the date as of which made
or deemed made; or
7.5 Other Defaults Under Agreement or Loan Documents
------------------------------------------------
The Borrower or any Subsidiary of the Borrower shall default in the
performance of or compliance with any covenant, term or condition contained in
this Agreement or the other Loan Documents (other than those covered by Section
7.1, 7.3, 7.4, 7.10, 7.11, 7.12, 7.13 or 7.14) and such default shall not have
been remedied or waived in accordance with this Agreement within 30 days after
the date of written notice from the holder or holders of not less than 25% in
aggregate principal amount of the Bridge Loan then outstanding of such default;
or
7.6 Involuntary Bankruptcy; Appointment of Custodian, Etc.
------------------------------------------------------
A court of competent jurisdiction enters a Bankruptcy Order under any
Bankruptcy Law that:
(A) is for relief against the Borrower or any Subsidiary of the
Borrower in an involuntary case or proceeding, or
(B) appoints a Custodian of the Borrower or any Subsidiary of the
Borrower for all or substantially all of its properties, or
(C) orders the liquidation of the Borrower or any Subsidiary of the
Borrower,
and in each case the order or decree remains unstayed and in effect
for 60 days.
7.7 Voluntary Bankruptcy; Appointment of Custodian, Etc.
----------------------------------------------------
The Borrower or any Subsidiary of the Borrower pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding, or
(B) consents to the entry of a Bankruptcy Order for relief against it
in an involuntary case or proceeding, or
70
<PAGE>
(C) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors or
files a proposal or scheme of arrangement involving the rescheduling or
composition of its indebtedness, or
(E) consents to the filing of a petition in bankruptcy against it, or
(F) shall generally not pay its debts when such debts become due or
shall admit in writing its inability to pay its debts generally.
7.8 Judgments and Attachments
-------------------------
Any money judgment, writ or warrant of attachment, or similar process
involving in any individual case or in the aggregate at any time an amount in
excess of $5,000,000 (to the extent not covered by third-party insurance as to
which the insurance company has acknowledged coverage) shall be entered or filed
against the Borrower or any Subsidiary of the Borrower or any of its or their
respective properties or assets and shall remain undischarged, unvacated,
unbonded or unstayed for a period of 60 days or in any event later than five
days prior to the date of any proposed sale thereunder; or
7.9 Dissolution
-----------
Any order, judgment or decree shall be entered against the Borrower or any
Subsidiary of the Borrower decreeing the dissolution or split-up of the Borrower
or that Subsidiary and such order shall remain undischarged or unstayed for a
period in excess of 30 days; or
7.10 Guarantee
---------
(i) Any Guarantee or any provision thereof shall cease to be in full
force and effect (other than in accordance with its express terms or the terms
of this Agreement), or (ii) any Guarantor or any Person acting by or on behalf
of such Guarantor shall deny or disaffirm such Guarantor's obligations under its
Guarantee, or (iii) any Guarantor shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed, after giving effect to any applicable grace periods, pursuant to its
Guarantee; or
7.11 ERISA
-----
Any ERISA Event shall have occurred with respect to any Pension Plan or
Multiemployer Plan of the Borrower, its Subsidiaries or their respective ERISA
Affiliates; the Amount of Unfunded Benefit Liabilities, which, when added to the
aggregate Amount of Unfunded Benefit Liabilities with respect to all other
Pension Plans, exceeds the aggregate Amount of Unfunded Benefit Liabilities that
existed on the Closing Date; or any event shall have occurred with respect to
any Foreign Plan which results in a liability to the Borrower or any of its
Subsidiaries; and there shall result from any such event, events or underfunding
described above
71
<PAGE>
the imposition of a Lien or a liability or a material risk of incurring a
liability which Lien or liability in the opinion of the Agent or the Required
Lenders has had or could reasonably be expected to have a Material Adverse
Effect; or
7.12 Foreclosure
-----------
The agent under the Senior Credit Facility or any other party entitled to
act thereunder commences judicial proceedings to foreclose on the collateral
securing the Senior Credit Facility or exercises any right under applicable law
or any instrument evidencing a security interest or other encumbrance in respect
of such collateral to take ownership or effect the transfer of such collateral
in lieu of foreclosure; or
7.13 Security for Glass Holdings Loan
--------------------------------
The Glass Holdings Pledge is, at any time prior to the repayment in full of
the Glass Holdings Loan by Glass Holdings, declared to be unenforceable or
invalid in a judicial proceeding or ceases for any reason to be in full force
and effect; or
7.14 Failure to Make Tax Payments When Due
-------------------------------------
Failure of the Borrower, Glass Holdings or any other Affiliate of the
Borrower to pay any material Taxes, assessments or other governmental charges
imposed upon the Borrower, Glass Holdings or any other Affiliate of the Borrower
or any of their respective material properties or assets or in respect of any of
their respective franchises, business, income or property before any material
penalty accrues thereon, or any claims (including, without limitation, claims
for labor, services, materials and supplies) for sums which have become due and
payable and which by law have or may become a Lien upon any of its or their
properties or assets prior to the time when any material penalty or fine shall
be incurred with respect thereto; provided that no such charge or claim need be
--------
paid if the validity or amount of such charge or claim is being diligently
contested in good faith and if such reserve or other appropriate provision, if
any, as shall be required in conformity with GAAP shall have been made therefor;
or
7.15 Failure to Perform Under Environmental Indemnity Agreement
----------------------------------------------------------
The failure by Pocher Industries, Inc. to perform any of its obligations or
comply with any covenants under the Environmental Indemnity Agreement.
THEN (i) upon the occurrence of any Event of Default described in the
foregoing Sections 7.6 or 7.7, all of the unpaid principal amount of and accrued
interest on the Bridge Loan and all other outstanding Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by the Borrower, and the commitments of the Lenders hereunder shall,
thereupon terminate, and (ii) upon the occurrence of any other Event of Default,
the Agent shall upon written notice of the holder or holders of a majority in
aggregate principal amount of the Bridge Loan then outstanding, by written
notice to the Borrower and the agent under the Senior Credit Facility, declare
all of the unpaid principal amount of and accrued interest on the Bridge
72
<PAGE>
Loan and all other outstanding Obligations to be, and the same shall forthwith
become, due and payable, and the obligations of the Lenders hereunder shall
thereupon terminate; provided that if any declaration of acceleration under this
---------
Agreement occurs solely because an Event of Default set forth in Section 7.2 has
occurred and is continuing, such declaration of acceleration shall be
automatically annulled if the holders of the Indebtedness which is the subject
of such Event of Default have rescinded their declaration of acceleration in
respect of such Indebtedness within thirty days of such acceleration of such
Indebtedness and the Agent has received written notice thereof within such time
and if no other Event of Default has occurred during such thirty-day period
which has not been cured or waived in accordance with this Agreement.
Nevertheless, if at any time after acceleration of the maturity of the Bridge
Loan, the Borrower shall pay all arrears of interest and all payments on account
of the principal thereof which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement or the Bridge Notes)
and all Events of Default and Potential Events of Default (other than non-
payment of principal of and accrued interest on the Bridge Notes due and payable
solely by virtue of such acceleration) shall be remedied or waived pursuant to
Section 12.6, then the Agent shall, upon written notice of the holders of a
majority in aggregate principal amount of the Bridge Loan then outstanding, by
written notice to the Borrower rescind and annul the acceleration and its
consequences; but such action shall not affect any subsequent Event of Default
or Potential Event of Default or impair any right consequent thereon.
SECTION 8 SUBORDINATION
8.1 Obligations Subordinated to Senior Indebtedness of the Borrower
---------------------------------------------------------------
The Lenders covenant and agree that payments in respect of the Obligations
by the Borrower shall be subordinated in accordance with the provisions of this
Section 8 to the prior payment in full, in cash or Cash Equivalents, of all
amounts payable in respect of Senior Indebtedness of the Borrower, whether now
outstanding or hereafter created (including any interest accruing subsequent to
an event specified in Section 7.6 or 7.7 whether or not such interest is an
allowed claim enforceable against the Borrower), that the subordination is for
the benefit of the holders of Senior Indebtedness of the Borrower, and that each
holder of Senior Indebtedness of the Borrower whether now outstanding or
hereafter Incurred, shall be deemed to have acquired Senior Indebtedness of the
Borrower in reliance upon the covenants and provisions contained in this
Agreement.
8.2 Priority and Payment Over of Proceeds in Certain Events
-------------------------------------------------------
(a) Subordination on Dissolution, Liquidation or Reorganization of the
------------------------------------------------------------------
Borrower.
--------
Upon any payment or distribution of assets or securities of the Borrower of any
kind or character, whether in cash, property or securities, upon any dissolution
or winding up or total or partial liquidation or reorganization of the Borrower,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all Senior Indebtedness of the Borrower (including any
interest accruing subsequent to an event specified in Section 7.6 or 7.7 whether
or not such interest is an allowed claim enforceable against the Borrower) shall
first be paid in full in cash or
73
<PAGE>
Cash Equivalents, before the Lenders shall be entitled to receive any payment by
the Borrower in respect of any Obligations and upon any such dissolution or
winding up or liquidation or reorganization, any payment or distribution of
assets or securities of the Borrower of any kind or character, whether in cash,
property or securities, to which the Lenders would be entitled except for the
provisions of this Section 8 shall be made by the Borrower or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, directly to the holders of the Senior Indebtedness of
the Borrower or their representatives to the extent necessary to pay all of the
Senior Indebtedness of the Borrower to the holders of such Senior Indebtedness
of the Borrower.
(b) Subordination on Default on Senior Indebtedness. Upon the maturity of
-----------------------------------------------
any Senior Indebtedness of the Borrower by lapse of time, acceleration or
otherwise, all Senior Indebtedness of the Borrower then due and payable shall
first be paid in full in cash or Cash Equivalents, before any payment is made by
the Borrower or any Person acting on behalf of the Borrower with respect to the
Obligations. No direct or indirect payment by the Borrower or any Person acting
on behalf of the Borrower of any Obligations whether pursuant to the terms of
the Bridge Loan or upon acceleration or otherwise shall be made, if at the time
of such payment, there exists a default (as defined in the document governing
any Senior Indebtedness of the Borrower) in the payment of all or any portion of
any principal, interest, fees, letter of credit reimbursement obligations or
other amounts payable in respect of any Senior Indebtedness of the Borrower and
such default shall not have been cured or waived or the benefits of this
sentence waived by or on behalf of the holders of such Senior Indebtedness. In
addition, during the continuation of any other Non-Payment Default with respect
to the Senior Indebtedness of the Borrower, upon the (i) receipt by the Agent of
written notice from the agent or representative of the holders of such Senior
Indebtedness of such default or (ii) if such Non-Payment Default results from
the acceleration of the Bridge Loan, the date of the acceleration of the Bridge
Loan, no such payment may be made by the Borrower upon or in respect of the
Obligations, for a period ("Payment Blockage Period") commencing on the date of
receipt of such notice or the date of such acceleration and ending 179 days
after receipt of such notice (unless such Payment Blockage Period shall be
terminated by written notice to the Agent from such agent or representative) or
179 days after the date of such acceleration, whichever is the earlier to occur
(provided such Senior Indebtedness shall theretofore not have been accelerated).
Notwithstanding anything herein to the contrary, (x) in no event will a Payment
Blockage Period or successive Payment Blockage Periods with respect to the same
payment on the Obligations extend beyond 179 days from the date the payment on
the Obligations was due and (y) there must be 180 consecutive days in any 365-
day period during which no Payment Blockage Period is in effect. For all
purposes of this Section 8.2(b), no event of default which existed or was
continuing on the date of the commencement of any Payment Blockage Period with
respect to the Senior Indebtedness of the Borrower initiating such Payment
Blockage Period shall be, or be made, the basis for the commencement of a second
Payment Blockage Period by the holders or by the agent or other representative
of such Senior Indebtedness whether or not within a period of 365 consecutive
days, unless such event of default shall have been cured or waived for a period
of not less than 90 consecutive days.
74
<PAGE>
(c) Rights and Obligations of the Lenders. In the event that,
-------------------------------------
notwithstanding the foregoing provisions prohibiting such payment or
distribution, the Agent or any Lender shall have received any payment in respect
of any Obligation (other than as permitted by Sections (a) and (b) of this
Section 8.2) at a time when such payment is prohibited by this Section 8.2, then
and in such event such payment or distribution shall be received and held in
trust for the holders of the Senior Indebtedness of the Borrower and shall be
paid over or delivered to the holders of the Senior Indebtedness of the Borrower
remaining unpaid to the extent necessary to pay in full in cash or Cash
Equivalents all Senior Indebtedness of the Borrower in accordance with the terms
thereof after giving effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness of the Borrower.
If payment in respect of the Obligations is accelerated because of an Event
of Default, the Borrower shall promptly notify the agent or other
representatives for Senior Indebtedness of the Borrower of such acceleration.
Upon any payment or distribution of assets or securities referred to in
this Section 8, the Lenders (notwithstanding any other provision of this
Agreement) shall be entitled to rely upon any order or decree of a court of
competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, and upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making any
such payment or distribution, delivered to the Lenders for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of Senior Indebtedness of the Borrower, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 8.
The Borrower shall promptly give written notice to each of the Lenders of
any default or event of default under any Senior Indebtedness of the Borrower or
under any agreement pursuant to which Senior Indebtedness of the Borrower may
have been issued, and, in the event of any such event of default, shall provide
to the Agent the names and addresses of the trustees or other representatives of
holders of such Senior Indebtedness of the Borrower.
With respect to the holders and owners of Senior Indebtedness of the
Borrower, each Lender undertakes to perform only such obligations on the part of
such Lender as are specifically set forth in this Section 8, and no implied
covenants or obligations with respect to the holders or owners of Senior
Indebtedness of the Borrower shall be read into this Agreement against the
Lenders. The Lenders shall not be deemed to owe any fiduciary duty to the
holders or owners of Senior Indebtedness of the Borrower or to any agent under
the Senior Credit Facility or any other representative of the holders of the
Senior Indebtedness of the Borrower.
8.3 Payments May Be Paid Prior to Dissolution
-----------------------------------------
Nothing contained in this Section 8 or elsewhere in this Agreement shall
prevent or delay (i) the Borrower, except under the conditions described in
Section 8.2, from making payments at any time for the purpose of making payments
in respect of its Obligations, or from depositing with the Agent any moneys for
such payments, or (ii) subject to Section 8.2, the application by
75
<PAGE>
the Agent of any moneys deposited with it for the purpose of making payments in
respect of Obligations.
8.4 Rights of Holders of Senior Indebtedness of the Borrower Not To Be
------------------------------------------------------------------
Impaired
--------
No right of any present or future holder of any Senior Indebtedness of the
Borrower to enforce subordination as provided in this Section 8 shall at any
time in any way be prejudiced or impaired by any act or failure to act by any
such holder, or by any noncompliance by the Borrower with the terms and
provisions and covenants herein, regardless of any knowledge thereof any such
holder may have or otherwise be charged with. Without in any way limiting the
generality of the foregoing Section, such holders of Senior Indebtedness of the
Borrower may, at any time and from time to time without impairing or releasing
the subordination provided in this Section 8 or the obligations of the Lenders
hereunder to the holders of Senior Indebtedness of the Borrower, do any one or
more of the following: (i) change the manner, place, terms or time of payment
of, or renew or alter, Senior Indebtedness of the Borrower or otherwise amend or
supplement in any manner Senior Indebtedness of the Borrower or any instrument
evidencing the same or any agreement under which any Senior Indebtedness of the
Borrower is outstanding; (ii) sell, exchange, release, or otherwise deal with
any property pledged, mortgaged, or otherwise securing Senior Indebtedness of
the Borrower or fail to perfect or delay in the perfection of the security
interest in such property; (iii) release any Person liable in any manner for the
collection of Senior Indebtedness of the Borrower; and (iv) exercise or refrain
from exercising any rights against the Borrower and any other Person. Each
Lender by purchasing or accepting a Bridge Note waives any and all notice of the
creation, modification, renewal, extension or accrual of any Senior Indebtedness
of the Borrower and notice of or proof of reliance by any holder or owner of
Senior Indebtedness of the Borrower upon this Section 8 and the Senior
Indebtedness of the Borrower shall conclusively be deemed to have been Incurred
in reliance upon this Section 8, and all dealings between the Borrower and the
holders and owners of the Senior Indebtedness of the Borrower shall be deemed to
have been consummated in reliance upon this Section 8.
The provisions of this Section 8 are intended to be for the benefit of, and
shall be enforceable directly by, the holders of the Senior Indebtedness of the
Borrower.
8.5 Subrogation
-----------
Upon the payment in full in accordance with the terms of Section 8.2 of all
amounts payable under or in respect of the Senior Indebtedness of the Borrower,
the Lenders shall be subrogated to the rights of the holders of such Senior
Indebtedness of the Borrower to receive payments or distributions of assets of
the Borrower made on such Senior Indebtedness of the Borrower until the
Obligations shall be paid in full in cash or Cash Equivalents; and for purposes
of such subrogation no payments or distributions to holders of such Senior
Indebtedness of the Borrower of any cash, property or securities to which the
Lenders would be entitled except for the provisions of this Section 8, and no
payment over pursuant to the provisions of this Section 8 to holders of such
Senior Indebtedness of the Borrower by the Lenders, shall, as between the
Borrower, its creditors other than holders of such Senior Indebtedness of the
Borrower and the Lenders, be deemed to be a payment by the Borrower to or on
account of such Senior
76
<PAGE>
Indebtedness of the Borrower, it being understood that the provisions of this
Section 8 are solely for the purpose of defining the relative rights of the
holders of such Senior Indebtedness of the Borrower, on the one hand, and the
Lenders, on the other hand. A release of any claim by any holder of Senior
Indebtedness of the Borrower shall not limit the Lenders' rights of subrogation
under this Section 8.5.
If any payment or distribution to which the Lenders would otherwise have
been entitled but for the provisions of this Section 8 shall have been applied,
pursuant to the provisions of this Section 8, to the payment of all amounts
payable under the Senior Indebtedness of the Borrower, then and in such case,
the Lenders shall be entitled to receive from the holders of such Senior
Indebtedness of the Borrower at the time outstanding the full amount of any such
payments or distributions received by such holders of Senior Indebtedness of the
Borrower in excess of the amount sufficient to pay all Senior Indebtedness of
the Borrower payable under or in respect of the Senior Indebtedness of the
Borrower in full in cash or Cash Equivalents in accordance with the terms of
Section 8.2.
8.6 Obligations of the Borrower Unconditional
-----------------------------------------
Nothing contained in this Section 8 or elsewhere in this Agreement is
intended to or shall impair as between the Borrower and the Lenders the
obligations of the Borrower, which are absolute and unconditional, to pay to the
Lenders the Obligations as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Lenders and creditors of the Borrower other than the holders of
the Senior Indebtedness of the Borrower, nor shall anything herein or therein
prevent the Lenders from exercising all remedies otherwise permitted by
applicable law upon default under this Agreement, subject to the rights, if any,
under this Section 8 of the holders of such Senior Indebtedness of the Borrower
in respect of cash, property or securities of the Borrower received upon the
exercise of any such remedy.
The failure to make a payment in respect of Obligations by reason of any
provision of this Section 8 shall not prevent the occurrence of an Event of
Default under Section 7.
8.7 Lenders Authorize Agent to Effectuate Subordination
---------------------------------------------------
Each Lender hereby authorizes and expressly directs the Agent on its behalf
to take such action as may be necessary or appropriate to effectuate the
subordination provided in this Section 8 and appoints the Agent its attorney in
fact for such purpose, including, without limitation, in the event of any
dissolution, winding up, liquidation or reorganization of the Borrower (whether
in bankruptcy, insolvency, receivership, reorganization or similar proceedings
or upon an assignment for the benefit of creditors or any other similar remedy
or otherwise) tending towards liquidation of the business and assets of the
Borrower, the immediate filing of a claim for the unpaid balance of the
Obligations in the form required in said proceedings and causing said claim to
be approved. If the Agent does not file proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Senior Indebtedness
of the Borrower are hereby authorized to have the right to file and are hereby
authorized to file an appropriate claim
77
<PAGE>
for and on behalf of the Lenders. In the event of any such proceeding, until the
Senior Indebtedness of the Borrower is paid in full in cash or Cash Equivalents,
without the consent of the holders of a majority in principal amount outstanding
of Senior Indebtedness of the Borrower, no Lender shall waive, settle or
compromise any such claim or claims relating to the Obligations that such Lender
now or hereafter may have against the Borrower.
SECTION 9 THE AGENT
9.1 Appointment
-----------
Each Lender hereby irrevocably designates and appoints First Union as Agent
of such Lender to act as specified herein and in the other Loan Documents, and
each Lender hereby irrevocably authorizes First Union as the Agent to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
The Agent agrees to act as such upon the express conditions contained in this
Section 9. Notwithstanding any provision to the contrary elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein or in the other Loan
Documents, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or otherwise exist against the Agent. The
provisions of this Section 9 are solely for the benefit of the Agent and the
Lenders, and neither the Borrower nor any of its Subsidiaries shall have any
rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Lenders and the Agent does not assume and shall not be
deemed to have assumed any obligation or relationship of agent or trust with or
for the Borrower or any of its Subsidiaries.
9.2 Delegation of Duties
--------------------
The Agent may execute any of its duties under this Agreement or any other
Loan Document by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care except to the extent
otherwise required by Section 9.3.
9.3 Exculpatory Provisions
----------------------
Neither the Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement or the other Loan Documents (except for its or such Person's own
gross negligence or willful misconduct) or (ii) responsible in any manner to any
of the Lenders for any recitals, statements, representations or warranties made
by the Borrower, any of its Subsidiaries or any of their respective officers
contained in this Agreement, any other Loan Documents, or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Agent under or in connection with, this Agreement or any
78
<PAGE>
other Loan Document or for any failure of the Borrower, any of its Subsidiaries
or any of their respective officers to perform its or their obligations
hereunder or thereunder. The Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or the other Loan
Documents, or to inspect the properties, books or records of the Borrower or any
of its Subsidiaries. The Agent shall not be responsible to any Lender for the
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Agreement or any other Loan Document or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection herewith
or therewith furnished or made by the Agent to the Lenders or by or on behalf of
the Borrower or any of its Subsidiaries to the Agent or any Lender or be
required to ascertain or inquire as to the performance or observance of any of
the terms, conditions, provisions, covenants or agreements contained herein or
therein or as to the use of the proceeds of the Bridge Loan or of the existence
or possible existence of any Potential Event of Default or Event of Default.
9.4 Reliance by Agent
-----------------
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, facsimile, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons, and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower or any of its Subsidiaries), 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 or any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate or it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
As between the Agent and the Lenders, the Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Loan Documents in accordance with a request of the Required Lenders, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders.
9.5 Notice of Default
-----------------
The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Potential Event of Default or Event of Default hereunder unless the Agent
has actually received notice from a Lender or the Borrower referring to this
Agreement, describing such Potential Event of Default or Event of Default and
stating that such notice is a "notice of default." In the event that the Agent
receives such a notice, the Agent shall give prompt notice thereof to the
Lenders. The Agent shall take such action with respect to such Potential Event
of Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided that, as between the Agent and the Lenders unless and until
--------
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking
79
<PAGE>
such action, with respect to such Potential Event of Default or Event of Default
as it shall deem advisable in the best interests of the Lenders.
9.6 Non-Reliance on Agent and Other Lenders
---------------------------------------
Each Lender expressly acknowledges that neither the Agent nor any of its
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates have made any representations or warranties to it and that no act by
the Agent hereinafter taken, including any review of the affairs of the Borrower
or any of its Subsidiaries, shall be deemed to constitute any representation or
warranty by the Agent to any Lender. Each Lender represents to the Agent that
it has, independently and without reliance upon the Agent or any other Lender,
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, assets, operations,
property, financial and other condition, prospects and creditworthiness of the
Borrower and its Subsidiaries and made its own decision to make its Bridge Loan
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon 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 analysis, appraisals and decisions in
taking or not taking action under this Agreement, and to make such investigation
as it deems necessary to inform itself as to the business, assets, operations,
property, financial and other condition, prospects and creditworthiness of the
Borrower and its Subsidiaries. The Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, assets, property, financial and other
condition, prospects or creditworthiness of the Borrower or any of its
Subsidiaries which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
9.7 Indemnification
---------------
The Lenders agree to indemnify the Agent in its capacity as such ratably
according to their respective "percentages" as used in determining the Required
Lenders at such time, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, reasonable
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment in full of the
Obligations) be imposed on, incurred by or asserted against the Agent in its
capacity as such in any way relating to or arising out of this Agreement or any
other Loan Document, or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted to be taken
by the Agent under or in connection with any of the foregoing, but only to the
extent that any of the foregoing is not paid by the Borrower or any of its
Subsidiaries; provided that no Lender shall be liable to the Agent for the
--------
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely from the gross negligence or willful misconduct of the Agent. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent be insufficient or become impaired, the Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until
such additional indemnity is furnished. The agreements in this Section 9.7
shall survive the payment in full of all Obligations.
80
<PAGE>
9.8 Agent in Its Individual Capacity
--------------------------------
The Agent and its affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower and its Subsidiaries
as though the Agent were not the Agent hereunder. With respect to the Bridge
Loan made by it and all Obligations owing to it, the Agent shall have the same
rights and powers under this Agreement as any Lender and may exercise the same
as though it were not the Agent and the terms "Lender" and "Lenders" shall
include the Agent in its individual capacity.
9.9 Resignation of the Agent; Successor Agent
-----------------------------------------
The Agent may resign as the Agent upon 20 days' notice to the Lenders and
the Borrower. Upon the resignation of the Agent, the Required Lenders shall
appoint from among the Lenders a successor Agent which is a bank or a trust
company for the Lenders subject to prior approval by the Borrower (such approval
not to be unreasonably withheld or delayed), whereupon such successor agent
shall succeed to the rights, powers and duties of the Agent, and the term
"Agent" shall include such successor agent effective upon its appointment, and
the resigning Agent's rights, powers and duties as the Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to this Agreement. After the resignation of the
Agent hereunder, the provisions of this Section 9 shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent under this
Agreement.
SECTION 10 GUARANTEE
10.1 Unconditional Guarantee
-----------------------
Each Guarantor hereby unconditionally, jointly and severally, guarantees
(such guarantee to be referred to herein as the "Guarantee"), subject to Section
11, to each of the Lenders and to the Agent and their respective successors and
assigns that (i) the principal of and interest on the Bridge Loan will be
promptly paid in full when due, subject to any applicable grace period, whether
at the Maturity Date, by acceleration or otherwise and interest on the overdue
principal, if any, and interest on any interest, to the extent lawful, of the
Bridge Loan and all other obligations of the Borrower to the Lenders or the
Agent 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 of the Bridge Loan or of any such other
obligations, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, subject to any applicable
grace period, whether at stated maturity, by acceleration or otherwise, subject,
however, in the case of clauses (i) and (ii) above, to the limitations set forth
in Section 10.5. Each Guarantor hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Bridge Loan or this Agreement, the absence of any action
to enforce the same, any waiver or consent by any of the Lenders with respect to
any provisions hereof or thereof, the recovery of any judgment against the
Borrower, 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
81
<PAGE>
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Borrower, any right to require a proceeding first against the Borrower,
protest, notice and all demands whatsoever and covenants that this Guarantee
will not be discharged except by complete performance of the obligations
contained in the Bridge Loan, this Agreement and in this Guarantee. If any
Lender or the Agent is required by any court or otherwise to return to the
Borrower, any Guarantor, or any custodian, trustee, liquidator or other similar
official acting in relation to the Borrower or any Guarantor, any amount paid by
the Borrower or any Guarantor to the Agent or such Lender, this Guarantee, to
the extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor further agrees that, as between each Guarantor, on the one hand,
and the Lenders and the Agent, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Section 7 for
the purposes of this 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 acceleration of such obligations
as provided in Section 7, such obligations (whether or not due and payable)
shall forthwith become due and payable by each Guarantor for the purpose of this
Guarantee.
In the event of a disposition of all of the assets or all of the Capital
Stock of any Guarantor, by way of sale, merger, consolidation or otherwise, such
Guarantor in the event of a disposition of all of the Capital Stock or all of
the assets of such Guarantor or the surviving entity (whether or not such
Guarantor) in the event of a merger or consolidation will be deemed released and
relieved of its obligations under its Guarantee and this Agreement and the
Person acquiring or owning the assets or Capital Stock of such Guarantor (if not
otherwise required to be a Guarantor pursuant to the provisions of this Section
10.1) will not be required to enter into a Guarantee; provided, in each case,
--------
that such transaction is carried out pursuant to and in accordance with Section
6.6, 6.9, 6.13 and 6.14.
10.2 Subordination of Guarantee
--------------------------
The obligations of each Guarantor to the Lenders and to the Agent pursuant
to the Guarantee of such Guarantor and this Agreement are expressly subordinate
and subject in right of payment to the prior payment in full of all Guarantor
Senior Indebtedness of such Guarantor, to the extent and in the manner provided
in Section 11.
10.3 Severability
------------
In case any provision of this Guarantee 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.
10.4 Limitation of Guarantor's Liability
-----------------------------------
Each Guarantor and by its acceptance hereof each of the Lenders hereby
confirms that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or
conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law.
To effectuate the foregoing intention, the Lenders and such Guarantor
82
<PAGE>
hereby irrevocably agree that the obligations of such Guarantor under its
Guarantee shall be limited to the maximum amount as will, after giving effect to
all other contingent and fixed liabilities of such Guarantor (including, but not
limited to, the Guarantor Senior Indebtedness of such Guarantor) and after
giving effect to any collections from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under its
Guarantee or pursuant to Section 10.6, result in the obligations of such
Guarantor under its Guarantee not constituting such fraudulent transfer or
conveyance.
10.5 Guarantors May Consolidate, etc., on Certain Terms
--------------------------------------------------
(a) Nothing contained in this Agreement or in the Bridge Loan shall
prevent any consolidation or merger of a Guarantor with or into the Borrower or
another Guarantor or shall prevent any sale or conveyance of the property of a
Guarantor as an entirety or substantially as an entirety, to the Borrower or
another Guarantor. Upon any such consolidation, merger, sale or conveyance, the
Guarantee given by such Guarantor shall no longer have any force or effect.
(b) Except as set forth in Section 6.6, nothing contained in this
Agreement or in the Bridge Loan shall prevent any consolidation or merger of a
Guarantor with or into a corporation or corporations other than the Borrower or
another Guarantor (whether or not affiliated with the Guarantor); provided that,
--------
subject to Section 10.5(a), (i) immediately after such transaction, and giving
effect thereto, no Potential Event of Default or Event of Default shall have
occurred as a result of such transaction and be continuing, and (ii) upon any
such consolidation, merger, sale or conveyance, the Guarantee of such Guarantor
set forth in this Section 10, and the due and punctual performance and
observance of all of the covenants and conditions of this Agreement to be
performed by such Guarantor, shall be expressly assumed (in the event that the
Guarantor is not the surviving corporation in the merger), by supplemental
indenture satisfactory in form and substance to the Agent, executed and
delivered to the Agent, by the corporation formed by such consolidation, or into
which the Guarantor shall have merged, or by the corporation that shall have
acquired such property. In the case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor corporation, of the due and
punctual performance of all of the covenants and conditions of this Agreement to
be performed by the Guarantor, such successor corporation shall succeed to and
be substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor.
10.6 Contribution
------------
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
----- --
distribution is made by any Guarantor (a "Funding Guarantor") under its
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount based on the Adjusted Net Assets (as
defined below) of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Borrower's obligations with respect to the Obligations. "Adjusted Net
Assets" of such Guarantor at any date shall mean the lesser of (x) the amount by
which the fair value of the property of such Guarantor exceeds the total amount
of liabilities, including, without limitation, contingent liabilities (after
83
<PAGE>
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date (other than liabilities of such Guarantor under Subordinated
Indebtedness)), but excluding liabilities under the Guarantee, of such Guarantor
at such date and (y) the amount by which the present fair salable value of the
assets of such Guarantor at such date exceeds the amount that will be required
to pay the probable liabilities of such Guarantor on its debts including,
without limitation, Guarantor Senior Indebtedness (after giving effect to all
other fixed and contingent liabilities incurred or assumed on such date and
after giving effect to any collection from any Subsidiary of such Guarantor in
respect of the obligations of such Subsidiary under the Guarantee), excluding
debt in respect of the Guarantee of such Guarantor, as they become absolute and
matured.
10.7 Waiver of Subrogation
---------------------
Each Guarantor hereby irrevocably waives any claim or other rights which it
may now or hereafter acquire against the Borrower that arise from the existence,
payment, performance or enforcement of such Guarantor's obligations under its
Guarantee and this Agreement, including, without limitation, any right of
subrogation, reimbursement, exoneration, indemnification, and any right to
participate in any claim or remedy of any Lender against the Borrower, whether
or not such claim, remedy or right arises in equity, or under contract, statute
or common law, including, without limitation, the right to take or receive from
the Borrower, directly or indirectly, in cash or other property or by set-off or
in any other manner, payment or security on account of such claim or other
rights. If any amount shall be paid to any Guarantor in violation of the
preceding sentence and the Bridge Loan shall not have been paid in full, such
amount shall be deemed to have been paid to such Guarantor for the benefit of,
and held in trust for the benefit of, the Lenders, and shall, subject to the
provisions of Section 8, Section 10.2 and Section 11, forthwith be paid to the
Agent for the benefit of such Lenders to be credited and applied upon the Bridge
Loan, whether matured or unmatured, in accordance with the terms of this
Agreement. Each Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this Agreement and that
the waiver set forth in this Section 10.7 is knowingly made in contemplation of
such benefits.
10.8 Evidence Guarantee
------------------
To evidence their guarantees to the Lenders set forth in this Section 10,
each of the Guarantors hereby agrees to execute the notation of Guarantee in
substantially the form included in Exhibit VII. Each such notation of Guarantee
-----------
shall be signed on behalf of each Guarantor by two Officers, or an Officer and
an assistant Secretary or one Officer shall sign and one Officer or an assistant
Secretary (each of who shall, in each case, have been duly authorized by all
requisite corporate actions) shall attest to such notation of Guarantee.
10.9 Waiver of Stay, Extension or Usury Laws
---------------------------------------
Each Guarantor covenants that it will not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law or any usury law or other law that would prohibit or forgive
such Guarantor from performing its Guarantee as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may
84
<PAGE>
affect the covenants or the performance of this Agreement; and each Guarantor
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Agent, but will suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 11 SUBORDINATION OF GUARANTEE OBLIGATIONS
11.1 Guarantee Obligations Subordinated to Guarantor Senior Indebtedness
-------------------------------------------------------------------
The Lenders covenant and agree that payments in respect of the obligations
by a Guarantor in respect of its Guarantee (collectively, as to any Guarantor,
its "Guarantee Obligations") shall be subordinated in accordance with the
provisions of this Section 11 to the prior payment in full, in cash or Cash
Equivalents, of all amounts payable in respect of Guarantor Senior Indebtedness
of such Guarantor whether now outstanding or hereafter created (including any
interest accruing subsequent to an event specified in Section 7.6 or 7.7 whether
or not such interest is an allowed claim enforceable against such Guarantor),
that the subordination is for the benefit of the holders of Guarantor Senior
Indebtedness, and that each holder of Guarantor Senior Indebtedness whether now
outstanding or hereafter Incurred, shall be deemed to have acquired Guarantor
Senior Indebtedness in reliance upon the covenants and provisions contained in
this Agreement.
11.2 Priority and Payment Over of Proceeds in Certain Events
-------------------------------------------------------
(a) Subordination of Guarantee Obligations on Dissolution, Liquidation or
---------------------------------------------------------------------
Reorganization of Such Guarantor. Upon any payment or distribution of assets or
- --------------------------------
securities of any Guarantor of any kind or character, whether in cash, property
or securities, upon any dissolution or winding up or total or partial
liquidation or reorganization of such Guarantor, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings
(other than a liquidation or dissolution of such Guarantor into the Borrower or
another Guarantor), all Guarantor Senior Indebtedness of such Guarantor
(including. any interest accruing subsequent to an event specified in Section
7.6 or 7.7 whether or not such interest is an allowed claim enforceable against
such Guarantor) shall first be paid in full in cash or Cash Equivalents, before
the Lenders shall be entitled to receive any payment with respect to any
Guarantee Obligations of such Guarantor and upon any such dissolution or winding
up or liquidation or reorganization, any payment or distribution of assets or
securities of such Guarantor of any kind or character, whether in cash, property
or securities, to which the Lenders would be entitled except for the provisions
of this Section 11 shall be made by such Guarantor or by any receiver, trustee
in bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, directly to the holders of the Guarantor Senior Indebtedness of
such Guarantor or their representatives to the extent necessary to pay all of
the Guarantor Senior Indebtedness of such Guarantor to the holders of such
Guarantor Senior Indebtedness.
(b) Subordination of Guarantee Obligations on Default on Senior
-----------------------------------------------------------
Indebtedness.
------------
Upon the maturity of any Guarantor Senior Indebtedness by lapse of time,
acceleration or otherwise, all such Guarantor Senior Indebtedness then due and
payable shall first be paid in full in cash or Cash Equivalents, before any
payment is made by such Guarantor or any Person acting
85
<PAGE>
on behalf of such Guarantor with respect to the Guarantee Obligations of such
Guarantor. No direct or indirect payment by any Guarantor or any Person acting
on behalf of such Guarantor of any Guarantee obligations of such Guarantor
whether pursuant to the terms of the Bridge Loan or upon acceleration or
otherwise shall be made, if at the time of such payment, there exists a default
(as defined in the document governing any such Guarantor Senior Indebtedness) in
the payment of all or any portion of any principal, interest, fees, letter of
credit reimbursement obligations or other amounts payable in respect of any such
Guarantor Senior Indebtedness and such default shall not have been cured or
waived or the benefits of this sentence waived by or on behalf of the holders of
such Guarantor Senior Indebtedness. In addition, during the continuation of any
other Non-Payment Default with respect to any such Guarantor Senior Indebtedness
of such Guarantor, upon the earlier of (i) receipt by the Agent of written
notice from the agent or representative of the holders of such Senior
Indebtedness or (ii) if such non-payment default results from the acceleration
of the Bridge Loan, the date of acceleration of the Bridge Loan, no such payment
may be made by such Guarantor under its Guarantee for a period ("Guarantor
Payment Blockage Period") commencing on the date of receipt of such notice or
the date of the acceleration referred to in clause (ii) above, as the case may
be, and ending on the earlier to occur of 179 days after receipt of such written
notice by the Agent (unless such Guarantor Payment Blockage Period shall be
terminated by written notice to the Agent from such agent) or 179 days after the
date of such acceleration, whichever is the earlier to occur (provided such
Guarantor Senior Indebtedness shall theretofore not have been accelerated).
Notwithstanding anything herein to the contrary, (x) in no event will a
Guarantor Payment Blockage Period or successive Guarantor Payment Blockage
Periods with respect to the same payment on such Guarantee extend beyond 179
days from the date the payment on such Guarantee was due and (y) there must be
180 consecutive days in any 365-day period during which no Guarantor Payment
Blockage Period is in effect. For all purposes of this Section 11.2(b), no event
of default which existed or was continuing on the date of the commencement of
any Guarantor Payment Blockage Period with respect to the Senior Indebtedness
initiating such Guarantor Payment Blockage Period shall be, or be made, the
basis for the commencement of a second Guarantor Payment Blockage Period by the
holders or by the agent or other representative of such Guarantor Senior
Indebtedness whether or not within a period of 365 consecutive days, unless such
event of default shall have been cured or waived for a period of not less than
90 consecutive days.
(c) Rights and Obligations of the Lenders. In the event that,
-------------------------------------
notwithstanding the foregoing provisions prohibiting such payment or
distribution, the Agent or any Lender shall have received any payment in respect
of any Guarantee Obligation with respect to the Bridge Loan (other than
permitted by Sections (a) and (b) of this Section 11.2) at a time when such
payment is prohibited by this Section 11.2, then and in such event such payment
or distribution shall be received and held in trust for the holders of the
Guarantor Senior Indebtedness and shall be paid over or delivered to the holders
of the Guarantor Senior Indebtedness remaining unpaid to the extent necessary to
pay in full in cash or Cash Equivalents all Guarantor Senior Indebtedness in
accordance with the terms thereof after giving effect to any concurrent payment
or distribution to the holders of such Guarantor Senior Indebtedness.
86
<PAGE>
Nothing contained in this Section 11 will limit the right of the Lenders to
take any action to accelerate the maturity of the Bridge Loan pursuant to
Section 7 or to pursue any rights or remedies hereunder or otherwise.
Upon any payment or distribution of assets or securities referred to in
this Section 11, the Lenders (notwithstanding any other provision of this
Agreement) shall be entitled to rely upon any order or decree of a court of
competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, and upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making any
such payment or distribution, delivered to the Lender for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of Guarantor Senior Indebtedness, the amount thereof or payable thereon,
the amount or amounts paid or distributed hereon and all other facts pertinent
thereto or to this Section 11.
The Guarantors shall promptly give written notice to each of the Lenders of
any default or event of default under any Guarantor Senior Indebtedness or under
any agreement pursuant to which Guarantor Senior Indebtedness may have been
issued, and, in the event of any such event of default, shall provide to the
Agent the names and addresses of the trustees or other representatives of
holders of such Guarantor Senior Indebtedness.
With respect to the holders and owners of Guarantor Senior Indebtedness,
each Lender undertakes to perform only such obligations on the part of such
Lender as are specifically set forth in this Section 11, and no implied
covenants or obligations with respect to the holders or owners of Guarantor
Senior Indebtedness shall be read into this Agreement against the Lenders. The
Lenders shall not be deemed to owe any fiduciary duty to the holders or owners
of Guarantor Senior Indebtedness or to the agent under the Senior Credit
Facility or any other representative of the holders of the Guarantor Senior
Indebtedness.
11.3 Payments May Be Paid Prior to Dissolution
-----------------------------------------
Nothing contained in this Section 11 or elsewhere in this Agreement shall
prevent or delay (i) Guarantors, except under the conditions described in
Section 11.2, from making payments at any time for the purpose of making
payments in respect of their respective Guarantee Obligations, or from
depositing with the Agent any moneys for such payments, or (ii) subject to
Section 11.2, the application by the Agent of any moneys deposited with it for
the purpose of making payments in respect of Guarantee Obligations.
11.4 Rights of Holders of Guarantor Senior Indebtedness Not To Be Impaired
---------------------------------------------------------------------
No right of any present or future holder of any Guarantor Senior
Indebtedness to enforce subordination as provided in this Section 11 shall at
any time in any way be prejudiced or impaired by any act or failure to act by
any such holder, or by any noncompliance by the Guarantors with the terms and
provisions and covenants herein, regardless of any knowledge thereof any such
holder may have or otherwise be charged with. Without in any way limiting the
generality of the foregoing Section, such holders of Guarantor Senior
Indebtedness may, at any time and from time to time without impairing or
releasing the subordination provided in this
87
<PAGE>
Section 11 or the obligations of the Lenders hereunder to the holders of
Guarantor Senior Indebtedness, do any one or more of the following: (i) change
the manner, place, terms or time of payment of, or renew or alter, Guarantor
Senior Indebtedness or otherwise amend or supplement in any manner Guarantor
Senior Indebtedness or any instrument evidencing the same or any agreement under
which any Guarantor Senior Indebtedness is outstanding; (ii) sell, exchange,
release, or otherwise deal with any property pledged, mortgaged, or otherwise
securing Guarantor Senior Indebtedness or fail to perfect or delay in the
perfection of the security interest in such property; (iii) release any Person
liable in any manner for the collection of Guarantor Senior Indebtedness; and
(iv) exercise or refrain from exercising any rights against the Guarantors and
any other Person. Each Lender by purchasing or accepting a Bridge Note waives
any and all notice of the creation, modification, renewal, extension or accrual
of any Guarantor Senior Indebtedness and notice of or proof of reliance by any
holder or owner of Guarantor Senior Indebtedness upon this Section 11 and the
Guarantor Senior Indebtedness shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this Section 11, and all dealings
between the Guarantors and the holders and owners of the Guarantor Senior
Indebtedness shall be deemed to have been consummated in reliance upon this
Section 11.
The provisions of this Section 11 are intended to be for the benefit of,
and shall be enforceable directly by, the holders of the Guarantor Senior
Indebtedness.
11.5 Subrogation
-----------
Upon the payment in full in accordance with the terms of Section 11.2 of
all amounts payable under or in respect of Guarantor Senior Indebtedness, the
Lenders shall be subrogated to the rights of the holders of such Guarantor
Senior Indebtedness to receive payments or distributions of assets of the
Guarantors made on such Guarantor Senior Indebtedness until the Guarantee
Obligations shall be paid in full in cash or Cash Equivalents and for purposes
of such subrogation no payments or distributions to holders of such Guarantor
Senior Indebtedness of any cash, property or securities to which the Lenders
would be entitled except for the provisions of this Section 11, and no payment
over pursuant to the provisions of this Section 11 to holders of such Guarantor
Senior Indebtedness by the Lenders, shall, as between such Guarantor, its
creditors other than holders of such Guarantor Senior Indebtedness and the
Lenders, be deemed to be a payment by such Guarantor to or on account of such
Guarantor Senior Indebtedness, it being understood that the provisions of this
Section 11 are solely for the purpose of defining the relative rights of the
holders of such Guarantor Senior Indebtedness, on the one hand, and the Lenders,
on the other hand. A release of any claim by any holder of Guarantor Senior
Indebtedness shall not limit the Lenders' rights of subrogation under this
Section 11.5.
If any payment or distribution to which the Lenders would otherwise have
been entitled but for the provisions of this Section 11 shall have been applied,
pursuant to the provisions of this Section 11, to the payment of all amounts
payable under the Guarantor Senior Indebtedness, then and in such case, the
Lenders shall be entitled to receive from the holders of such Guarantor Senior
Indebtedness at the time outstanding the full amount of any payments or
distributions received by such holders of Guarantor Senior Indebtedness in
excess of the amount sufficient to
88
<PAGE>
pay all Guarantor Senior Indebtedness payable under or in respect of the
Guarantor Senior Indebtedness in full in cash or Cash Equivalents in accordance
with the terms of Section 11.2.
11.6 Obligations of the Guarantors Unconditional
-------------------------------------------
Nothing contained in this Section 11 or elsewhere in this Agreement or in
the Guarantees is intended to or shall impair as between the Guarantors and the
Lenders the obligations of the Guarantors, which are absolute and unconditional,
to pay to the Lenders the Guarantee Obligations as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Lenders and creditors of the Guarantors
other than the holders of the Guarantor Senior Indebtedness, nor shall anything
herein or therein prevent the Lenders from exercising all remedies otherwise
permitted by applicable law upon default under this Agreement, subject to the
rights, if any, under this Section 11 of the holders of such Guarantor Senior
Indebtedness in respect of cash, property or securities of the Guarantors
received upon the exercise of any such remedy.
The failure to make a payment in respect of Guarantee Obligations by reason
of any provision of this Section 11 shall not prevent the occurrence of an Event
of Default under Section 7.
11.7 Lenders Authorize Agent to Effectuate Subordination
---------------------------------------------------
Each Lender hereby authorizes and expressly directs the Agent on its behalf
to take such action as may be necessary or appropriate to effectuate the
subordination provided in this Section 11 and appoints the Agent its attorney in
fact for such purpose including, without limitation, in the event of any
dissolution, winding up, liquidation or reorganization of any Guarantor (whether
in bankruptcy, insolvency, receivership, reorganization or similar proceedings
or upon an assignment for the benefit of creditors or any other similar remedy
or otherwise) tending towards liquidation of the business and assets of any
Guarantor, the immediate filing of a claim for the unpaid balance of the
Guarantee Obligations in the form required in said proceedings and causing said
claim to be approved. If the Agent does not file a proper claim or proof of
debt in the form required in such proceeding prior to 30 days before the
expiration of the time to file such claim or claims, then the holders of the
Guarantor Senior Indebtedness are hereby authorized to have the right to file
and are hereby authorized to file an appropriate claim for and on behalf of the
Lenders In the event of any such proceeding, until the Guarantor Senior
Indebtedness is paid in full in cash or Cash Equivalents, without the consent of
the holders of a majority in principal amount outstanding of Guarantor Senior
Indebtedness, no Lender shall waive, settle or compromise any such claim or
claims relating to the Guarantee Obligations that such Lender now or hereafter
may have against the Guarantors.
89
<PAGE>
SECTION 12 MISCELLANEOUS
12.1 Representation of the Lenders
-----------------------------
Each Lender hereby represents that it is a commercial lender which makes
loans in the ordinary course of its business and that it will make the Bridge
Loan hereunder for its own account or the account of its affiliates in the
ordinary course of such business.
12.2 Participations in and Assignments of Bridge Loan
------------------------------------------------
A. Each Lender shall have the right at any time to sell, assign, transfer
or negotiate all or any portion of its Bridge Notes or its Bridge Loan
Commitment in an aggregate amount of not less than $1,000,000 to any Eligible
Assignee. In the case of any sale, transfer or negotiation of all or part of the
Bridge Loan or any Bridge Loan Commitment authorized under this Section 12.2A,
the assignee, transferee or recipient shall become a party to this Agreement as
a Lender by execution of an assignment and assumption agreement substantially in
the form of Exhibit VIII hereto; provided that (i) at such time Section 2.1A
------------ --------
shall be deemed modified to reflect the Bridge Loan Commitment of such new
Lender and of the existing Lenders, (ii) upon surrender of the Bridge Notes, new
Bridge Notes will be issued, at the Borrower's expense to such new Lender and to
the assigning Lender, such new Bridge Notes to be in conformity with the
requirements of Section 2.1D (with appropriate modifications) to the extent
needed to reflect the revised Bridge Loan Commitment, and (iii) the Agent shall
receive at the time of each such assignment, from the assigning or assignee
Lender, the payment of a non-refundable assignment fee of $3,500; and provided,
--------
further, that such transfer or assignment will not be effective until recorded
- -------
by the Agent on the Register pursuant to Section 5.12. To the extent of any
assignment pursuant to this Section 12.2A, the assigning Lender shall be
relieved of its obligations hereunder with respect to its assigned Bridge Loan
Commitment, and the assignee, transferee or recipient shall have, to the extent
of such sale, assignment, transfer or negotiation, the same rights, benefits and
obligations as it would if it were a Lender with respect to such Bridge Notes or
Bridge Loan Commitment, including, without limitation, the right to approve or
disapprove actions which, in accordance with the terms hereof, require the
approval of a Lender. At the time of each assignment pursuant to this Section
12.2A to an Eligible Assignee which is not already a Lender hereunder and which
is not a United States Person (as such term is defined in Section 7701 (a) (30)
of the Internal Revenue Code) for Federal income tax purposes, the respective
Eligible Assignee shall provide to the Borrower and the Agent the appropriate
Internal Revenue Service Forms (and, if applicable a Section 12.2E(ii)
Certificate) described in Section 12.2E.
B. Each Lender may grant participations in all or any part of its Bridge
Notes or its Bridge Loan Commitment in an aggregate amount of not less than
$1,000,000 to any Eligible Assignee.
C. The Borrower shall, at its own cost and expense, provide such
certificates, acknowledgments and further assurances in respect of this
Agreement and the Bridge Loan as any Lender may reasonably require in connection
with any participation, transfer or assignment pursuant to this Section 12.2.
90
<PAGE>
D. Nothing in this Agreement shall prevent or prohibit any Lender from
pledging its Bridge Notes hereunder to a Federal Reserve Bank in support of
borrowings made by such Lender from such Federal Reserve Bank.
E. Each Lender that is an assignee or transferee of an interest under
this Agreement pursuant to Section 12.2A (unless the respective Lender was
already a Lender hereunder immediately prior to such assignment or transfer)
and that is not a United States Person (as such term is defined in Section
7701 (a) (30) of the Internal Revenue Code) agrees to deliver to the Borrower
and the Agent, on the date of such assignment or transfer to such Lender, (i)
two accurate and complete original signed copies of Internal Revenue Service
Form 4224 or 1001 (or successor forms) certifying to such Lender's entitlement
to a complete exemption from United States withholding tax with respect to
payments to be made under this Agreement and under any Bridge Note, or (ii) if
the Lender is not a "bank" within the meaning of Section 881(c) (3) (A) of the
Internal Revenue Code and cannot deliver either Internal Revenue Service Form
1001 or 4224 (or successor forms) pursuant to clause (i) above, (X) a
certificate substantially in the form of Exhibit IX hereto (a "Section 12.2E(ii)
Certificate") and (Y) two accurate and complete original signed copies of
Internal Revenue Service Form W-8 (or successor form) certifying to such
Lender's entitlement to a complete exemption from United States withholding tax
with respect to payments of interest to be made under this Agreement and under
any Bridge Note. In addition, each Lender agrees that, when a lapse in time or
change in circumstances renders the previous certification obsolete or
inaccurate in any material respect, it will deliver to the Borrower and the
Agent two new accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 (or successor forms), or a Section 12.2E(ii)
Certificate and Form W-8 (or successor form), as the case may be, and such other
forms as may be required in order to confirm or establish the entitlement of
such Lender to a continued exemption from or reduction in United States
withholding tax with respect to payments under this Agreement and any Bridge
Note, or it shall immediately notify the Borrower and the Agent of its inability
to deliver any such form or certificate; provided, however, that the Lender
-------- -------
shall not be obligated to complete and deliver any form requiring disclosure of
information or statements that it considers to be confidential or otherwise
disadvantageous to disclose. Subject to the immediately succeeding sentence, and
notwithstanding Section 12.19, the Borrower shall be entitled, to the extent it
is required to do so by law, to deduct or withhold income or similar taxes
imposed by the United States (or any political subdivision or taxing authority
thereof or therein) from interest, fees or other amounts payable hereunder or
made on any other Loan Document for the account of any Lender which is not a
United States Person (as such term is defined in Section 7701 (a) (30) of the
Internal Revenue Code) for U.S. Federal income tax purposes to the extent that
such Lender has not provided to the Borrower U.S. Internal Revenue Service Forms
that establish a complete exemption from such deduction or withholding.
Notwithstanding anything to the contrary contained in the preceding sentence or
elsewhere in this Section 12.2E, the Borrower agrees to pay additional amounts
and to indemnify and hold harmless each Lender (without regard to the identity
of the jurisdiction requiring the deduction or withholding), and reimburse such
Lender upon its written request, in respect of any amounts deducted or withheld
by it as described in the immediately preceding sentence as a result of any
changes after the date of any assignment or transfer in any applicable law,
treaty, governmental rule, regulation,
91
<PAGE>
guideline or order, or in the interpretation thereof, relating to the deducting
or withholding of income or similar Taxes.
12.3 Expenses
--------
Whether or not the transactions contemplated hereby shall be consummated,
the Borrower agrees to pay promptly (i) all the actual and reasonable costs and
expenses of preparation of the Loan Documents and all the costs of furnishing
all opinions by counsel for the Borrower (including without limitation any
opinions requested by the Lenders as to any legal matters arising hereunder),
and of the Borrower's performance of and compliance with all agreements and
conditions contained herein on its part to be performed or complied with; (ii)
the actual and reasonable fees, expenses and disbursements of Cleary, Gottlieb,
Steen & Hamilton in connection with the negotiation, preparation, execution and
administration of the Loan Documents and the Bridge Loan hereunder, and any
amendments, modifications and waivers hereto or thereto and consents to
departures from the terms hereof and thereof; and (iii) after the occurrence of
an Event of Default, all actual and reasonable costs and expenses (including
actual and reasonable attorneys fees, including allocated costs of internal
counsel, and costs of settlement) incurred by the Lenders or the Agent in
enforcing any Obligations of or in collecting any payments due from the Borrower
or the Guarantors hereunder or under the Bridge Notes by reason of such Event of
Default or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or of
any insolvency or bankruptcy proceedings.
12.4 Indemnitee
----------
In addition to the payment of expenses pursuant to Section 12.3, whether or
not the transactions contemplated hereby shall be consummated, the Borrower
agrees to indemnify, pay and hold each of the Lenders and the Agent and each of
their respective officers, directors, employees, agents, representatives and
affiliates (collectively called the "Indemnitees"), harmless from and against
any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, the actual and reasonable fees
and disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated as a party thereto), which
may be suffered by, imposed on, incurred by, or asserted against that
Indemnitee, in any manner resulting from, connected with, in respect of,
relating to or arising out of this Agreement, the other Loan Documents, the
Amended and Restated Commitment Letter, the Lenders' agreements to make the
Bridge Loan or the use or intended use of any of the proceeds of the Bridge Loan
hereunder, the issuance of the Exchange Notes or the Take-Out Securities or the
making of the Glass Holdings Loan including, without limitation, any
Environmental Liabilities and Costs or the breach of any representation,
warranty or covenant in this Agreement (the "Indemnified Liabilities");
provided, that the Borrower shall have no obligation to an Indemnitee hereunder
- --------
with respect to Indemnified Liabilities (i) to the extent such liabilities are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted primarily from (A) the gross negligence or willful
misconduct of that Indemnitee or (B) the
92
<PAGE>
failure of such Indemnitee to perform its obligations under any Loan Document or
(C) such Indemnitee's violation of law or (ii) in connection with the
obligations of any Indemnitee under any Loan Document or for any transfer fees.
To the extent that the undertaking to indemnify, pay and hold harmless set forth
in the preceding sentence may be unenforceable because it is violative of any
law or public policy, the Borrower shall contribute the maximum portion which it
is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
12.5 Setoff
------
Subject to Section 8, in addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default, each Lender, the
Agent and each subsequent holder of any Bridge Note is hereby authorized by the
Borrower at any time or from time to time, without notice to the Borrower, or to
any other Person, any such notice being hereby expressly waived, to set off and
to appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured but not including trust accounts or any other accounts held
for the benefit of another Person) and any other Indebtedness at any time held
or owing by such Person or any such subsequent holder to or for the credit or
the account of the Borrower or the Borrower against and on account of the
obligations and liabilities of the Borrower to such Person or such subsequent
holder under this Agreement and the Bridge Notes, including, but not limited to,
all claims of any nature or description arising out of or connected with this
Agreement or the Bridge Notes, irrespective of whether or not (a) such Person or
such subsequent holder shall have made any demand hereunder or (b) such Person
or such subsequent holder shall have declared the principal of or the interest
on its portion of the Bridge Loan and its Bridge Notes and other amounts due
hereunder to be due and payable as permitted by Section 7 and although said
obligations and liabilities, or any of them, may be contingent or unmatured.
12.6 Amendments and Waivers
----------------------
No amendment, modification, termination or waiver of any term or provision
of this Agreement, of the Bridge Notes, any Guarantee or, prior to the execution
and delivery thereof, of the form of Registration Rights Agreement, or the form
of the Senior Subordinated Indenture or consent to any departure by the Borrower
or any Guarantor therefrom, shall in any event be effective without the prior
written concurrence of the Borrower or such Guarantor, as the case may be, and
the Agent and the Required Lenders, and, upon the request of any Lender, the
receipt of a written opinion of counsel of the Borrower addressed to the Lenders
to the effect that such amendment, modification, termination, waiver or consent
does not violate or conflict with any of the terms and provisions of the Senior
Credit Facility or any other Contractual Obligation of the Borrower in respect
of Indebtedness for money borrowed or other material agreement of the Borrower
known to such counsel after reasonable inquiry; provided that, notwithstanding
--------
the third sentence of Section 12.15, without the prior written consent of each
Lender affected, an amendment, modification, termination or waiver of this
Agreement, any Bridge Notes, any Guarantee or, prior to the execution and
delivery thereof, of the form of Registration Rights
93
<PAGE>
Agreement, or the form of the Senior Subordinated Indenture or consent to
departure from a term or provision hereof or thereof may not: (i) reduce the
principal amount of Bridge Notes whose holders must consent to any such
amendment, modification, termination, waiver or consent; (ii) reduce the rate of
or extend the time for payment of principal or interest on any Bridge Note;
(iii) reduce the principal amount of any Bridge Note; (iv) make any Bridge Note
payable in money other than that stated in the Bridge Note; (v) make any change
in Section 2.4A(iv) or in the definition of Change of Control (it being
understood that this clause (v), as it shall appear in the Senior Subordinated
Indenture, shall omit references to Section 2.4A(iv) hereto, as such Section
shall appear in the Senior Subordinated Indenture and references to the
definition of Change of Control), in the last paragraph of Section 7 or in
Section 8.5, 11.5 or 12.6; (vi) reduce the rate or extend the time of payment of
fees or other compensation payable to the Lenders hereunder; (vii) modify the
provisions of Section 8 or any of the defined terms related thereto in any
manner adverse to the Lenders; or (viii) waive performance by the Borrower of
its obligations under, or consent to any departure from any of the terms and
provisions of, Section 2.4A(iv) (it being understood that this clause (viii)
shall be omitted from the Senior Subordinated Indenture); and provided, further,
-------- -------
that without the consent of the Agent, no such amendment, modification,
termination or waiver may amend, modify, terminate or waive any provision of
Section 9 as the same applies to the Agent or any other provision of this
Agreement as it relates to the rights or obligations of the Agent. No amendment,
modification or waiver of any provision of this Agreement, the Bridge Notes, any
Guarantee or the form of the Senior Subordinated Indenture shall adversely
affect the rights of the holders of Senior Indebtedness or the holders of
Guarantor Senior Indebtedness without their consent. Any waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which it was given. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this Section 12.6 shall be binding upon each holder
of the Bridge Notes at the time outstanding, each further holder of the Bridge
Notes, and, if signed by the Borrower or a Guarantor, on the Borrower and such
Guarantor.
12.7 Independence of Covenants
-------------------------
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or be otherwise within the
limitation of, another covenant shall not avoid the occurrence of an Event of
Default or Potential Event of Default if such action is taken or condition
exists.
12.8 Entirety
--------
The Loan Documents and the Amended and Restated Commitment Letter embody
the entire agreement of the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof.
94
<PAGE>
12.9 Notices
-------
Unless otherwise provided herein, any notice or other communications herein
required or permitted to be given shall be in writing and may be personally
served, telecopied, telexed or sent by mail and shall be deemed to have been
given when delivered in person, upon receipt of telecopy or telex against
receipt of answer back or four Business Days after depositing it in the mail,
registered or certified, with postage prepaid and properly addressed; provided
--------
that notices shall not be effective until received. For the purposes hereof,
the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 12.9) shall be set forth under each
party's name on the signature pages hereto.
12.10 Survival of Warranties and Certain Agreements
---------------------------------------------
A. All agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement and the Amended and
Restated Commitment Letter, the making of the Bridge Loan hereunder and the
execution and delivery of the Bridge Notes and, notwithstanding the making of
the Bridge Loan, the execution and delivery of the Bridge Notes or any
investigation made by or on behalf of any party, shall continue in full force
and effect. The closing of the transactions herein contemplated shall not
prejudice any right of one party against any other party in respect of anything
done or omitted hereunder or in respect of any right to damages or other
remedies.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of the Borrower set forth in Sections 12.3, 12.4,
12.14, 12.15, 12.17, 12.19, 12.20, 12.22 and 12.23 shall survive the payment of
the Bridge Loan and the Bridge Notes and the termination of this Agreement.
12.11 Failure or Indulgence Not Waiver; Remedies Cumulative
-----------------------------------------------------
No failure or delay on the part of the Agent or any Lender or any holder of
any Bridge Note in the exercise of any power, right or privilege hereunder,
under a Guarantee or under the Bridge Notes shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under this Agreement, under a
Guarantee or the Bridge Notes are cumulative to and not exclusive of any rights
or remedies otherwise available.
12.12 Severability
------------
In case any provision in or obligation under this Agreement, under a
Guarantee or the Bridge Notes shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
95
<PAGE>
12.13 Headings
--------
Section and Sub-section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
12.14 Applicable Law
--------------
THIS AGREEMENT, EACH GUARANTEE AND THE NOTES SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.
12.15 Successors and Assigns; Subsequent Holders of Bridge Notes
----------------------------------------------------------
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of the Lenders. The terms and provisions
of this Agreement and each Guarantee shall inure to the benefit of any assignee
or transferee of the Bridge Notes pursuant to Section 12.2A, and in the event of
such transfer or assignment, the rights and privileges herein conferred upon the
Lenders shall automatically extend to and be vested in such transferee or
assignee which becomes a Lender pursuant to Section 12.2A, all subject to the
terms and conditions hereof. Except as provided in Section 12.6, in determining
whether the holders of a sufficient aggregate principal amount of the Bridge
Loan shall have consented to any action under this Agreement, any amount of the
Bridge Loan owned or held by the Borrower, any Guarantor or any of their
respective Affiliates shall be disregarded. The Borrower's rights or any
interest therein hereunder may not be assigned without the prior express written
consent of each of the Lenders.
12.16 Counterparts; Effectiveness
---------------------------
This Agreement and any amendments, waivers, consents or supplements may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto, and delivery
thereof to the Agent or, in the case of the Lenders, written telex or facsimile
notice or telephonic notification (confirmed in writing) of such execution and
delivery. The Agent will give the Borrower and each Lender prompt notice of the
effectiveness of this Agreement.
12.17 Consent to Jurisdiction; Venue; Waiver of Jury Trial
----------------------------------------------------
A. Any legal action or proceeding with respect to this Agreement, any
Bridge Note or any Guarantee may be brought in the courts of the State of New
York or of the United States for the Southern District of New York, and, by
execution and delivery of this Agreement, each of the parties to this Agreement
hereby irrevocably accepts for itself and in respect of its respective property,
generally and unconditionally, the jurisdiction of the aforesaid courts. Each of
the
96
<PAGE>
parties to this Agreement hereby further irrevocably waives any claim that any
such courts lack jurisdiction over such party, and agrees not to plead or claim,
in any legal action or proceeding with respect to this Agreement, the Bridge
Notes or the Guarantees brought in any of the aforesaid courts, that any such
court lacks jurisdiction over such party. Each of the parties to this Agreement
irrevocably consents to the service of process in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party, at its respective address for notices pursuant to
Section 12.9, such service to become effective 30 days after such mailing To the
extent permitted by law, each of the parties to this Agreement hereby
irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any action or proceeding
commenced hereunder or under any Bridge Note or any Guarantee that service of
process was in any way invalid or ineffective. Nothing herein shall affect the
right of any party to this Agreement to serve process in any other manner
permitted by law or to commerce legal proceedings or otherwise proceed against
any party in any other jurisdiction.
B. Each of the parties to this Agreement hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection with this
Agreement, the Bridge Notes or the Guarantees brought in the courts referred to
in clause A above and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
C. Each of the parties to this Agreement hereby irrevocably waives all
right to a trial by jury in any action, proceeding or counterclaim arising out
of or relating to this Agreement, the Bridge Notes or the Guarantees or the
transactions contemplated hereby or thereby.
12.18 Payments Pro Rata
-----------------
A. The Agent agrees that promptly after its receipt of each payment of
any interest or premium on or principal of the Bridge Notes from or on behalf of
the Borrower or any Guarantor, it shall, except as otherwise provided in this
Agreement, distribute such payment to the Lenders (other than any Lender that
has consented in writing to waive its pro rata share of such payment) pro rata
based upon their respective pro rata shares, if any, of such payment.
B. Each of the Lenders agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of set-off or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Loan Documents, or otherwise)
which is applicable to the payment of the principal of, or interest on, the
Bridge Loan of a sum which with respect to the related sum or sums received by
other Lenders is in a greater proportion than the total of such Obligation then
owed and due to such Lender bears to the total of such Obligation then owed and
due to all of the Lenders immediately prior to such receipt, then such Lender
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an interest in the Obligations of the Borrower
to such Lenders in such amount as shall result in a proportional participation
by all of the Lenders in such amount; provided that, if all or any portion of
--------
such excess amount is
97
<PAGE>
thereafter recovered from such Lender, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
12.19 Taxes
-----
A. Each payment by the Borrower or a Guarantor under this Agreement or
under any of the other Loan Documents shall, except as required by law, be made
without withholding or deduction for or on account of any and all present or
future Taxes. If any Taxes are required to be withheld or deducted from any such
payment, the Borrower (or, if the payment is made by a Guarantor, such
Guarantor) shall give notice to the Agent (which shall promptly provide a copy
to each Lender) and shall pay such additional amounts as may be necessary to
ensure that the net amount actually received by each Lender and the Agent after
such withholding or deduction is equal to the amount that each Lender and the
Agent would have received had no such withholding or deduction been required,
provided, however, that no such additional amounts shall be payable in respect
- -------- -------
of (i) in the case of each Lender and the Agent, any Taxes imposed on its net
income and franchise taxes imposed on it by the jurisdiction under the laws of
which such Person is organized (unless such Taxes are imposed solely because the
payment was made by a Guarantor and would not have been imposed had such payment
instead been made by the Borrower) or (ii) any Taxes imposed on a payee by
reason of such payee's failure or inability to comply with the provisions of
Section 12.2E of this Agreement.
B. The Borrower shall pay all Taxes referred to in Section 12.19A before
penalties are payable or interest accrues thereon, but if any such penalties are
payable or interest accrues, the Borrower shall make payment thereof when due to
the appropriate governmental authority.
C. The Borrower shall pay any present or future stamp, transfer or
documentary taxes or any other excise or property taxes, charges or similar
levies, and any penalties, additions to tax or interest due with respect
thereto, that may be imposed by any jurisdiction (or any political subdivision
or taxing authority thereof or therein) which arise from any payment made by the
Borrower hereunder or under any of the other Loan Documents or in connection
with the execution, delivery or registration of this Agreement or any of the
other Loan Documents.
D. If any Lender or the Agent pays any Taxes or other amounts that the
Borrower or a Guarantor is required to pay pursuant to this Section 12.19, the
Borrower shall indemnify it on demand in full in the currency in which such
Taxes or other amounts are paid, whether or not such Taxes were correctly or
legally asserted, on an after-tax basis together with interest thereon from and
including the date of payment to but excluding the date of reimbursement at a
rate per annum determined in accordance with Section 2.2.
E. The Borrower shall furnish to the Agent and each of the Lenders the
original or a certified copy of a receipt evidencing any payment of Taxes made
by the Borrower within 30 days after each such payment of Taxes.
F. The provisions of this Section 12.19 shall survive the termination of
the Agreement and repayment of all Obligations.
98
<PAGE>
12.20 Waiver of Stay, Extension or Usury Laws
---------------------------------------
The Borrower covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Borrower from paying all or any
portion of the principal of or interest on the Bridge Loan as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Agreement; and (to the extent
that it may lawfully do so) the Borrower hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Agent, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
12.21 Requirements of Law
-------------------
(a) The Borrower shall pay to each Lender on demand the amount such
Lender reasonably determines to be necessary to compensate it fully for all
costs incurred and reductions in amounts received or receivable that are
attributable to the Bridge Loans made by such Lender hereunder or the
performance by such Lender of its obligations under this Agreement and that
occur by reason of the adoption of, or any change in, any law, regulation or
treaty or in the application or interpretation thereof or compliance by such
Lender with any direction, requirement or request of any governmental authority,
including, without limitation, any such cost or reduction resulting from (a) the
imposition, amendment or change in the application or basis of any Taxes other
than (i) any Taxes referred to in Section 12.19A required to be withheld or
deducted from payments by the Borrower or any Guarantor or (ii) any Taxes
imposed on or measured by the net income of the Lender and imposed by the
jurisdiction in which such Lender's principal office is situated, (b) the
imposition or amendment of any reserve, special deposit or similar requirement
against assets of, liabilities of, deposits with or for the account of, or loans
by, such Lender or (c) the imposition or amendment of any capital requirements
that have the effect of reducing the rate of return on such Lender's capital as
a consequence of the Bridge Loans made by such Lender hereunder to a level below
that which it could have achieved but for such adoption, change or compliance.
(b) The Borrower shall not be required to make any payments to any Lender
for any additional amounts pursuant to this Section 12.21 unless such Lender has
given written notice to the Borrower, through the Agent, of its intent to
request such payments prior to or within 60 days after the date on which such
Lender became entitled to claim such amounts. If any Lender requests
compensation from the Borrower under this Section 12.21, the Borrower may, by
notice to such Lender (with a copy to the Agent), suspend the obligation of such
Lender thereafter to make or continue Bridge Loans, until the requirement of law
giving rise to such request ceases to be in effect; provided that such
--------
suspension shall not affect the right of such Lender to receive the compensation
so requested.
99
<PAGE>
12.22 Confidentiality
---------------
Each Lender shall hold all non-public information obtained pursuant to the
requirements of or in connection with this Agreement which has been identified
as confidential by the Borrower in accordance with such Lender's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices, it being understood and agreed
by the Borrower that (i) in any event a Lender may make disclosures reasonably
required by any bona fide assignee, transferee or participant in connection with
the contemplated assignment or transfer by such Lender of any Bridge Loan or any
participation therein or as required or requested by any governmental agency or
representative thereof or pursuant to legal process; provided, that unless
--------
specifically prohibited by applicable law or court order, each Lender shall
notify the Borrower of any request by any governmental agency or representative
thereof (other than any such request in connection with any examination of the
financial condition of such Lender by such governmental agency) for disclosure
of any such non-public information prior to disclosure of such information and
(ii) a Lender may share with any of its Affiliates, and such Affiliates may
share with any Lender, any information related to the Borrower or any of its
Affiliates (including information relating to creditworthiness), the JV
Transactions or the financing therefor; and provided, further, that in no event
-------- -------
shall any Lender be obligated or required to return any materials furnished by
the Borrower or any of its Subsidiaries. In connection with any sales,
assignments or transfers referred to in Section 12.2A, a Lender shall obtain
agreements from the purchasers, assignees or transferees, as the case may be,
reasonably satisfactory to the Borrower, that such parties will comply with this
Section 12.22.
12.23 Compensation
------------
The Borrower shall compensate each Lender, upon its written request (which
request shall set forth the basis for requesting such compensation), for all
reasonable losses, expenses and liabilities (including, without limitation, any
loss, expense or liability incurred by reason of the liquidation or reemployment
of deposits or other funds required by such Lender to fund its Bridge Loan but
excluding loss of anticipated profit with respect to any Bridge Loan) which such
Lender may sustain: (i) if for any reason (other than a default by such Lender
or the Agent) a borrowing of the Bridge Loan does not occur on a date specified
therefor in a Notice of Borrowing (whether or not withdrawn by the Borrower);
(ii) if any repayment of the Bridge Loan occurs on a date which is not the last
day of an Interest Period applicable thereto; (iii) if any prepayment of any
Bridge Loan is not made on any date specified in a notice of prepayment given by
the Borrower; or (iv) as a consequence of any other default by the Borrower to
repay its Bridge Loan when required by the terms of this Agreement. Calculation
of all amounts payable to a Lender under this Section 12.23 shall be made as
though that Lender had actually funded the Bridge Loan utilizing the Applicable
LIBOR Based Rate, through the purchase of a LIBOR rate deposit bearing interest
at the Applicable LIBOR Based Rate in an amount equal to the amount of that
Loan, having a maturity comparable to the relevant Interest Period.
100
<PAGE>
WITNESS the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
BORROWER:
BGF INDUSTRIES, INC.
By: /s/ Philippe Dorier
---------------------------------
Name: Phillipe Dorier
Title: Senior Vice President, Chief
Financial Officer
Notice Address:
3802 Robert Porcher Way
Greensboro, NC 27410
Attention: Phillipe Dorier
Telephone: (336) 545-0011
Telecopy: (336) 545-7715
<PAGE>
AGENT:
FIRST UNION INVESTORS, INC.
as agent
By: /s/ Rick Fogg
-----------------------------------
Name:Rick Fogg
Title: Director
Notice Address:
301 South College Street TW-10
Charlotte, NC 28288-0604
Attention: Scott Chappell
Telephone: (704) 383-0648
Telecopy: (704) 383-9527
LENDERS:
Commitment: $ 65,000,000 FIRST UNION INVESTORS, INC.
By: /s/ Rick Fogg
-----------------------------------
Name: Rick Fogg
Title: Director
Notice Address:
301 South College Street TW-10
Charlotte, NC 28288-0604
Attention: Scott Chappell
Telephone: (704) 383-0648
Telecopy: (704) 383-9527
<PAGE>
EXHIBIT 10.12
PROMISSORY NOTE
$135,043,844.62 September 30, 1998
FOR VALUE RECEIVED, the undersigned, GLASS HOLDINGS CORP., a Delaware
corporation, promises to pay to the order of BGF INDUSTRIES, INC., a Delaware
corporation ("BGF") (hereafter, together with any holder hereof, called
"Holder") at the offices of the Holder located at 3802 Robert Porcher Way,
Greensboro, North Carolina 27410, or at such other place as the Holder may
designate in writing to the undersigned, in lawful money of the United States of
America, and in immediately available funds, the principal sum of ONE HUNDRED
THIRTY-FIVE MILLION FORTY THREE THOUSAND EIGHT HUNDRED FORTY FOUR AND 62/100
DOLLARS ($135,043,844.62) together with interest on the principal balance from
time to time outstanding hereunder from the date hereof until paid in full at a
per annum rate equal to the Cost Of Funds Rate (as defined below) for BGF for
the calendar year immediately preceding the date on which any interest payment
is due.
For the purposes hereof, the term "Cost Of Funds Rate" means, with respect
to BGF for any period of determination, a rate per annum equal to the blended
interest rate (as reasonably calculated by BGF) applicable to borrowings of BGF
during such period in respect of indebtedness incurred by BGF to fund the loan
evidenced hereby. The undersigned acknowledges and agrees that the Cost of
Funds Rate will initially be determined by BGF based upon the interest expense
of BGF incurred under and pursuant to (i) that certain Senior Subordinated
Credit Agreement dated as of September 30, 1998 among BGF, as Borrower, certain
subsidiaries from time to time a party thereto, as guarantors, the Lenders a
party thereto and First Union Investors, Inc., as Agent and (ii) that certain
Credit Agreement dated as of September 30, 1998 by and among BGF, certain
subsidiaries of BGF from time to time a party thereto as guarantors, the Lenders
a party thereto and First Union National Bank, as Agent, as each such Agreement
may be amended, modified, exchanged, supplemented, restated, replaced or
refinanced from time to time.
Within twenty (20) days following January 1 of each year, BGF will provide
the undersigned with its determination of the Cost Of Funds Rate for the
immediately preceding year, including a calculation of the interest due
hereunder for the next interest payment date.
The principal balance shall be payable in full on October 31, 2008 or such
later date as the undersigned and BGF may mutually agree in writing. Accrued
interest shall be due and payable annually on the first business day of February
of each year commencing on February 1, 1999. Accrued interest shall also be due
and payable on any date on which any principal is due hereunder (whether at
maturity, by acceleration, prepayment or otherwise).
<PAGE>
In no event shall the amount of interest due or payable under this Note
exceed the maximum rate of interest allowed by applicable law and, in the event
any such payment is inadvertently paid by the undersigned or inadvertently
received by the Holder, then such excess sum shall be credited as a payment of
principal, unless the undersigned shall notify the Holder in writing that the
undersigned elects to have such excess sum returned to it forthwith. It is the
express intent of the parties hereto that the undersigned not pay and the Holder
not receive, directly or indirectly, in any manner whatsoever, interest in
excess of that which may be lawfully paid by the undersigned under applicable
law.
THE UNDERSIGNED, AND THE HOLDER BY ACCEPTING THIS NOTE, EACH AGREE AND
STIPULATE THAT THE ONLY CHARGE IMPOSED UPON THE UNDERSIGNED FOR THE USE OF MONEY
IN CONNECTION WITH THIS NOTE IS AND SHALL BE THE INTEREST DESCRIBED IN THE FIRST
PARAGRAPH HEREOF, AND FURTHER AGREE AND STIPULATE THAT ALL OTHER CHARGES IMPOSED
BY THE HOLDER ON THE UNDERSIGNED IN CONNECTION WITH THIS NOTE, INCLUDING WITHOUT
LIMITATION, ATTORNEYS' FEES, ARE CHARGES MADE TO COMPENSATE THE HOLDER FOR
UNDERWRITING OR ADMINISTRATIVE SERVICES AND COSTS OR LOSSES PERFORMED OR
INCURRED, AND TO BE PERFORMED OR INCURRED, BY THE HOLDER IN CONNECTION WITH THIS
NOTE AND SHALL UNDER NO CIRCUMSTANCES BE DEEMED TO BE CHARGES FOR THE USE OF
MONEY. ALL CHARGES OTHER THAN CHARGES FOR THE USE OF MONEY SHALL BE FULLY EARNED
AND NONREFUNDABLE WHEN DUE.
Each of the following events shall constitute an "Event of Default" under
this Note: (i) failure of the undersigned to pay any principal or interest due
hereunder within thirty (30) days of the date such payment is due or (ii) the
undersigned shall (a) commence a voluntary case under the Bankruptcy Code of
1978, as amended or other federal bankruptcy law (as now or hereafter in
effect); (b) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding
up or composition for adjustment of debts; (c) consent to or fail to contest in
a timely and appropriate manner any petition filed against it in an involuntary
case under such bankruptcy laws or other laws; (d) apply for or consent to, or
fail to contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee, or liquidator of itself
or of a substantial part of its property, domestic or foreign; or (e) make a
general assignment for the benefit of creditors.
Upon the occurrence of an Event of Default described in clause (i) of the
definition thereof, any and all of the loans and the undersigned's other
obligations hereunder, at the option of the Holder, and without demand or notice
of any kind, may be immediately declared, and thereupon shall immediately become
in default and due and payable and the Holder may exercise any and all rights
and remedies available to it at law, in equity or otherwise. Upon the
occurrence of an Event of Default described in clause (ii) of the definition
thereof, any and all of the loans and the undersigned's other obligations
hereunder, without demand or notice of any kind, shall immediately become in
default and
-2-
<PAGE>
due and payable and the Holder may exercise any and all rights and remedies
available to it at law, in equity or otherwise.
Time is of the essence of this Note.
No delay or failure on the part of the Holder in the exercise of any right
or remedy shall operate as a waiver thereof, and no single or partial exercise
by the Holder of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy.
All amendments to this Note, and any waiver or consent of the Holder, must
be in writing and signed by the Holder and the undersigned.
The undersigned hereby waives presentment, demand, notice of dishonor,
protests and all other notices whatever.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NORTH CAROLINA.
This Note shall be binding upon the successors and assigns of the
undersigned. A Holder of this Note may assign or transfer this Note to any
person or entity without notice to, or the consent of, the undersigned.
Any notice to be given hereunder shall be in writing, shall be sent to the
Holder's address as specified in the first paragraph hereof or the undersigned's
addresses set forth below its signature hereto, as the case may be, and shall be
deemed received (i) on the earlier of the date of receipt or the date three
business days after deposit of such notice in the United States mail, if sent
postage prepaid, certified mail, return receipt requested or (ii) when actually
received, if personally delivered.
[Signatures on Next Page]
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Promissory Note under seal as of the date and year first written above.
GLASS HOLDINGS CORP.
By: /s/ Philippe R. Dorier
----------------------
Name: Philippe R. Dorier
--------------------
Title: VP & Treasurer
-------------------
Address for Notices:
3802 Robert Porcher Way
Greensboro, North Carolina 27410
-4-
<PAGE>
EXHIBIT 10.13
PROMISSORY NOTE
$2,681,000 December 23, 1998
FOR VALUE RECEIVED, the undersigned, GLASS HOLDINGS CORP., a Delaware
corporation, promises to pay to the order of BGF INDUSTRIES, INC., a Delaware
corporation ("BGF") (hereafter, together with any holder hereof, called
"Holder") at the offices of the Holder located at 3802 Robert Porcher Way,
Greensboro, North Carolina 27410, or at such other place as the Holder may
designate in writing to the undersigned, in lawful money of the United States of
America, and in immediately available funds, the principal sum of TWO MILLION
SIX HUNDRED EIGHTY-ONE THOUSAND AND 00/100 DOLLARS ($2,681,000) together with
interest on the principal balance from time to time outstanding hereunder from
the date hereof until paid in full at a per annum rate equal to the Cost Of
Funds Rate (as defined below) for BGF for the calendar year immediately
preceding the date on which any interest payment is due.
For the purposes hereof, the term "Cost Of Funds Rate" means, with
respect to BGF for any period of determination, a rate per annum equal to the
blended interest rate (as reasonably calculated by BGF) applicable to borrowings
of BGF during such period in respect of indebtedness incurred by BGF to fund the
loan evidenced hereby. The undersigned acknowledges and agrees that the Cost of
Funds Rate will initially be determined by BGF based upon the interest expense
of BGF incurred under and pursuant to that certain Credit Agreement dated as of
September 30, 1998 by and among BGF, certain subsidiaries of BGF from time to
time a party thereto as guarantors, the Lenders a party thereto and First Union
National Bank, as Agent, as each such Agreement may be amended, modified,
exchanged, supplemented, restated, replaced or refinanced from time to time.
Within twenty (20) days following January 1 of each year, BGF will
provide the undersigned with its determination of the Cost of Funds Rate for the
immediately preceding year, including a calculation of the interest due
hereunder for the next interest payment date.
The principal balance shall be payable in full on October 31, 2008 or
such later date as the undersigned and BGF may mutually agree in writing.
Accrued interest shall be due and payable annually on the first business day of
February of each year commencing on February 1, 1999. Accrued interest shall
also be due and payable on any date on which any principal is due hereunder
(whether at maturity, by acceleration, prepayment or otherwise).
In no event shall the amount of interest due or payable under this
Note exceed the maximum rate of interest allowed by applicable law and, in the
event any such payment is inadvertently paid by the undersigned or inadvertently
received by the Holder, then such excess sum shall be credited as a payment of
principal, unless the undersigned shall notify the Holder in writing that the
undersigned elects to have such excess sum returned to it forthwith. It is the
express intent of the parties hereto that the undersigned not pay and the Holder
not receive, directly or indirectly, in any manner whatsoever, interest in
excess of that which may be lawfully paid by the undersigned under applicable
law.
<PAGE>
THE UNDERSIGNED, AND THE HOLDER BY ACCEPTING THIS NOTE, EACH AGREE AND
STIPULATE THAT THE ONLY CHARGE IMPOSED UPON THE UNDERSIGNED FOR THE USE OF MONEY
IN CONNECTION WITH THIS NOTE IS AND SHALL BE THE INTEREST DESCRIBED IN THE FIRST
PARAGRAPH HEREOF, AND FURTHER AGREE AND STIPULATE THAT ALL OTHER CHARGES IMPOSED
BY THE HOLDER ON THE UNDERSIGNED IN CONNECTION WITH THIS NOTE, INCLUDING WITHOUT
LIMITATION, ATTORNEYS' FEES, ARE CHARGES MADE TO COMPENSATE THE HOLDER FOR
UNDERWRITING OR ADMINISTRATIVE SERVICES AND COSTS OR LOSSES PERFORMED OR
INCURRED, AND TO BE PERFORMED OR INCURRED, BY THE HOLDER IN CONNECTION WITH THIS
NOTE AND SHALL UNDER NO CIRCUMSTANCES BE DEEMED TO BE CHARGES FOR THE USE OF
MONEY. ALL CHARGES OTHER THAN CHARGES FOR THE USE OF MONEY SHALL BE FULLY
EARNED AND NONREFUNDABLE WHEN DUE.
Each of the following events shall constitute an "Event of Default"
under this Note: (i) failure of the undersigned to pay any principal or interest
due hereunder within thirty (30) days of the date such payment is due or (ii)
the undersigned shall (a) commence a voluntary case under the Bankruptcy Code of
1978, as amended or other federal bankruptcy law (as now or hereafter in
effect); (b) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding
up or composition for adjustment of debts; (c) consent to or fail to contest in
a timely and appropriate manner any petition filed against it in an involuntary
case under such bankruptcy laws or other laws; (d) apply for or consent to, or
fail to contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee, or liquidator of itself
or of a substantial part of its property, domestic or foreign; or (e) make a
general assignment for the benefit of creditors.
Upon the occurrence of an Event of Default described in clause (i) of
the definition thereof, any and all of the loans and the undersigned's other
obligations hereunder, at the option of the Holder, and without demand or notice
of any kind, may be immediately declared, and thereupon shall immediately become
in default and due and payable and the Holder may exercise any and all rights
and remedies available to it at law, in equity or otherwise. Upon the
occurrence of an Event of Default described in clause (ii) of the definition
thereof, any and all of the loans and the undersigned's other obligations
hereunder, without demand or notice of any kind, shall immediately become in
default and due and payable and the Holder may exercise any and all rights and
remedies available to it at law, in equity or otherwise.
Time is of the essence of this Note.
No delay or failure on the part of the Holder in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Holder of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy.
All amendments to this Note, and any waiver or consent of the Holder,
must be in writing and signed by the Holder and the undersigned.
2
<PAGE>
The undersigned hereby waives presentment, demand, notice of dishonor,
protests and all other notices whatever.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NORTH CAROLINA.
This Note shall be binding upon the successors and assigns of the
undersigned. A Holder of this Note may assign or transfer this Note to any
person or entity without notice to, or the consent of, the undersigned.
Any notice to be given hereunder shall be in writing, shall be sent to
the Holder's address as specified in the first paragraph hereof or the
undersigned's addresses set forth below its signature hereto, as the case may
be, and shall be deemed received (i) on the earlier of the date of receipt or
the date three business days after deposit of such notice in the United States
mail, if sent postage prepaid, certified mail, return receipt requested or (ii)
when actually received, if personally delivered.
[Signatures on Next Page)
3
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Promissory Note under seal as of the date and year first written above.
GLASS HOLDINGS CORP.
By: /s/ Philippe Dorier
-------------------------------
Name: Philippe Dorier
--------------------------
Title: VP, Secretary & Treasurer
-------------------------
Address for Notices:
3802 Robert Porcher Way
Greensboro, North Carolina 27410
4
<PAGE>
EXHIBIT 12
BGF INDUSTRIES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------------------
January 1, December 31, December 31, December 31, December 31, December 31,
1994 1994 1995 1996 1997 1997
---------- ------------ ------------ ------------ ------------ ------------
Actual As Adjusted
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Net income....... $2,796 $6,787 $12,584 $24,030 $21,730 $12,613
Add:
Taxes........... 1,824 4,478 7,093 15,996 13,652 7,945
Fixed charges... 5,037 4,629 3,392 2,430 2,619 17,443
Capitalized
interest....... -- -- (100) (206) (32) (32)
------ ------ ------- ------- ------- -------
9,657 15,894 22,969 42,250 37,969 37,969
Fixed Charges:
Interest
expense(a)...... 4,728 4,311 2,979 1,993 2,355 17,179
Capitalized
interest........ -- -- 100 206 32 32
Portion of rents
Representative
of interest
factor.......... 309 316 313 231 232 232
------ ------ ------- ------- ------- -------
$5,037 $4,629 $ 3,392 $ 2,430 $ 2,619 $17,443
Ratio of earnings
to fixed
<CAPTION>charges.......... 1.9 3.4 6.8 17.4 14.5 2.2
Nine Months Ended
-----------------------------------------
September 30, September 30, September 30,
1997 1998 1998
------------- ------------- -------------
Actual As Adjusted
<S> <C> <C> <C>
Earnings:
Net income....... $15,544 $12,114 $ 5,276
Add:
Taxes........... 9,730 7,584 3,303
Fixed charges... 2,084 1,974 13,093
Capitalized
interest....... (32) (96) (96)
------------- ------------- -------------
27,326 21,576 21,576
Fixed Charges:
Interest
expense(a)...... 1,949 1,751 12,870
Capitalized
interest........ 32 96 96
Portion of rents
Representative
of interest
factor.......... 103 127 127
------------- ------------- -------------
$ 2,084 $ 1,974 $13,093
Ratio of earnings
to fixed
charges.......... 13.1 10.9 1.7
</TABLE>
- -------
(a) Includes amortization of debt issuance costs and original issue discount
and excludes capitalized interest.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF BGF
BGF Overseas, Inc.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
BGF Industries, Inc.
We consent to the inclusion in this registration statement on Form S-4
(Registration No. _______) of our report dated February 27, 1998, on our audits
of the financial statements and financial statement schedules of BGF Industries,
Inc. We also consent to the references to our firm under the captions "Experts"
and "Selected Financial and Operating Information."
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Greensboro, North Carolina
February 12, 1999
<PAGE>
EXHIBIT 25
================================================================================
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 13-5160382
(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)
______________________
BGF INDUSTRIES, INC.
(Exact name of obligor as specified in its charter)
Delaware 56-1600845
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
BGF Industries, Inc.
3802 Robert Porcher Way
Greensboro, North Carolina 27410
(Address of principal executive offices) (Zip code)
______________________
10-1/4% Senior Subordinated Notes due 2009
(Title of the indenture securities)
================================================================================
<PAGE>
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
- ------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
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
(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
commence 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.
-2-
<PAGE>
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 3rd day of February, 1999.
THE BANK OF NEW YORK
By: /s/ VAN K. BROWN
-------------------------------
Name: VAN K. BROWN
Title: ASSISTANT VICE PRESIDENT
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 7
---------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business June 30, 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>
ASSETS Dollar Amounts
in Thousands
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin............................................ $ 7,301,241
Interest-bearing balances..................................................................... 1,385,944
Securities:
Held-to-maturity securities................................................................... 1,000,737
Available-for-sale securities................................................................. 4,240,655
Federal funds sold and Securities purchased under agreements to resell........................ 971,453
Loans and lease financing receivables:
Loans and leases, net of unearned income...................................................... 38,788,269
LESS: Allowance for loan and lease losses..................................................... 632,875
LESS: Allocated transfer risk reserve......................................................... 0
Loans and leases, net of unearned income, allowance, and reserve.............................. 38,155,394
Assets held in trading accounts................................................................ 1,307,562
Premises and fixed assets (including capitalized leases)....................................... 670,445
Other real estate owned........................................................................ 13,598
Investments in unconsolidated subsidiaries and associated companies............................ 215,024
Customers' liability to this bank on acceptances outstanding................................... 974,237
Intangible assets.............................................................................. 1,102,625
Other assets................................................................................... 1,944,777
Total assets................................................................................... $59,283,692
LIABILITIES
Deposits:
In domestic offices........................................................................... $26,930,258
Noninterest-bearing........................................................................... 11,579,390
Interest-bearing.............................................................................. 15,350,868
In foreign offices, Edge and Agreement subsidiaries, and IBFs................................. 16,117,854
Noninterest-bearing........................................................................... 187,464
Interest-bearing.............................................................................. 15,930,390
Federal funds purchased and Securities sold under agreements to repurchase..................... 2,170,238
Demand notes issued to the U.S.Treasury........................................................ 300,000
Trading liabilities............................................................................ 1,310,867
Other borrowed money:
With remaining maturity of one year or less................................................... 2,549,479
With remaining maturity of more than one year through three years............................. 0
With remaining maturity of more than three years.............................................. 46,654
Bank's liability on acceptances executed and outstanding....................................... 983,398
Subordinated notes and debentures.............................................................. 1,314,000
Other liabilities.............................................................................. 2,295,520
Total liabilities.............................................................................. 54,018,268
EQUITY CAPITAL
Common stock................................................................................... 1,135,284
Surplus........................................................................................ 731,319
Undivided profits and capital reserves......................................................... 3,385,227
Net unrealized holding gains (losses) on available-for-sale securities........................ 51,233
Cumulative foreign currency translation adjustments............................................ (37,639)
Total equity capital........................................................................... 5,265,424
Total liabilities and equity capital........................................................... $59,283,692
</TABLE>
I, Robert E. Keilman, 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.
Robert E. Keilman
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.
J. Carter Bacot
Thomas A. Renyi Directors
Alan R. Griffith
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF BGF INDUSTRIES, INC. AS OF DECEMBER 31,1996
AND 1997 AND SEPTEMBER 30, 1998 (UNAUDITED) AND FOR THE YEARS ENDED DECEMBER 31,
1995, 1996 AND 1997 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED).
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1995 DEC-31-1996 DEC-31-1997 SEP-30-1998
<CASH> 0 165 29 16
<SECURITIES> 0 0 0 0
<RECEIVABLES> 0 26,938 33,409 26,495
<ALLOWANCES> 0 (1,071) (723) (1,011)
<INVENTORY> 0 36,872 40,866 41,893
<CURRENT-ASSETS> 0 64,601 76,947 71,764
<PP&E> 0 112,114 117,654 126,785
<DEPRECIATION> 0 (58,359) (63,870) (69,423)
<TOTAL-ASSETS> 0 123,784 136,476 139,191
<CURRENT-LIABILITIES> 0 24,899 25,148 18,979
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 0 1 1 1
<OTHER-SE> 0 66,479 83,296 (39,892)
<TOTAL-LIABILITY-AND-EQUITY> 0 123,784 136,476 139,191
<SALES> 176,792 195,196 217,889 150,711
<TOTAL-REVENUES> 176,792 195,196 217,889 150,711
<CGS> 144,323 144,825 170,486 122,002
<TOTAL-COSTS> 144,323 144,825 170,486 122,002
<OTHER-EXPENSES> 9,813 8,352 9,666 7,260
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 2,979 1,993 2,355 1,751
<INCOME-PRETAX> 19,677 40,026 35,382 19,698
<INCOME-TAX> 7,093 15,996 13,652 7,584
<INCOME-CONTINUING> 12,584 24,030 21,730 12,114
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 12,584 24,030 21,730 12,114
<EPS-PRIMARY> 0 0 0 0
<EPS-DILUTED> 0 0 0 0
</TABLE>
<PAGE>
EXHIBIT 99
BGF INDUSTRIES, INC.
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10 1/4% SENIOR SUBORDINATED NOTES DUE 2009
FOR 10 1/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2009
PURSUANT TO THE PROSPECTUS DATED ___________, 1999
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________,
1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
- --------------------------------------------------------------------------------
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal should be
completed, signed and submitted timely to The Bank of New York (the "Exchange
Agent") as follows:
By Mail or Hand Delivery: The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Reorganization Section 7-E
Facsimile Transmission: (212) 815-6339
Confirm by Telephone: (212) 815-
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT (212)
815-____.
The Exchange Offer is not being mailed to, nor will tenders be accepted
from or on behalf of, holders of Old Notes in any jurisdiction in which the
making or acceptance of the Exchange Offer would not be in compliance with the
laws of such jurisdiction.
<PAGE>
PRELIMINARY INSTRUCTIONS
The undersigned hereby acknowledges receipt of the Prospectus dated
_________, 1999 (the "Prospectus") of BGF Industries, Inc., a Delaware
corporation (the "Company"), and this Letter of Transmittal (this "Letter of
Transmittal"), which together constitute the Company's offer to exchange (the
"Exchange Offer") its 10 1/4% Series B Senior Subordinated Notes due 2009 (the
"Exchange Notes"), the issuance of which has been registered under the
Securities Act of 1933, as amended (the "Securities Act"), for any and all of
its outstanding 10 1/4% Senior Subordinated Notes due 2009 (the "Old Notes").
For each Old Note accepted for exchange, the holder of such Old Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Old Note. Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
The form and terms of the Exchange Notes will be identical in all material
respects to the form and terms of the Old Notes, except that (i) the Exchange
Notes will bear a different CUSIP Number from the Old Notes, (ii) the issuance
of the Exchange Notes has been registered under the Securities Act and,
therefore, the Exchange Notes will not bear legends restricting the transfer
thereof and (iii) holders of the Exchange Notes will not be entitled to certain
rights under the Registration Rights Agreement dated as of January 21, 1999 (the
"Registration Rights Agreement") among the Company and First Union Capital
Markets, the initial purchaser of the Old Notes. Holders whose Old Notes are
accepted for exchange will be deemed to have waived the right to receive any
interest accrued on the Old Notes. See "Exchange Offer" in the Prospectus.
Notwithstanding the foregoing, valid acceptance of the terms of the
Exchange Offer may be effected by a participant in The Depository Trust Company
("DTC") tendering Notes through the DTC's Automated Tender Office Program
("ATOP") where the Exchange Agent receives an Agent's Message prior to the
Expiration Date. Accordingly, such participant must electronically transmit its
acceptance to the DTC through ATOP, and then the DTC will edit and verify the
acceptance, execute a book-entry delivery to the Exchange Agent's account at the
DTC and send an Agent's Message to the Exchange Agent for its acceptance. By
tendering through ATOP, participants in the DTC will expressly acknowledge
receipt of this Letter of Transmittal and agree to be bound by its terms and the
Company will be able to enforce such agreement against DTC participants.
The Company reserves the right, at any time and from time to time, to
extend the Exchange Offer, in which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer is extended. In order to
extend the Exchange Offer, the Company will notify the Exchange Agent thereof by
written notice and will make a public announcement of such extension, each prior
to 9:00 a.m., New York City time, on the next business day after the previously
scheduled expiration date. The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes being tendered or accepted for
exchange. However, the Exchange Offer is subject to certain conditions. See
"The Exchange Offer -- Conditions" in the Prospectus.
This Letter of Transmittal is to be completed by a holder of Old Notes if
(i) certificates are to be forwarded herewith or (ii) a tender of certificates
for Old Notes is to be made by book-entry transfer to the account maintained by
the Exchange Agent at The Depository Trust Company ("DTC") pursuant to the book-
entry transfer procedures set forth under "The Exchange Offer -- Procedures
for Tendering Old Notes" in the Prospectus.
Holders who wish to tender their Old Notes but who cannot, prior to 5:00
p.m., New York City time, on the Expiration Date (a) deliver their Old Notes,
this Letter of Transmittal or any other required documents to the Exchange Agent
or (b) deliver a confirmation of the book-entry tender of their Old Notes into
the Exchange Agent's account at DTC (a "Book-Entry Confirmation") and otherwise
complete the procedures for book-entry transfer, may effect a tender of Old
Notes by complying with the guaranteed delivery procedures set forth under "The
Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus. Delivery
of documents to DTC or the Company does not constitute delivery to the Exchange
Agent. See Instruction 1.
HOLDERS OF OLD NOTES SHOULD COMPLETE THE APPROPRIATE BOXES BELOW AND SIGN
THIS LETTER OF TRANSMITTAL TO INDICATE THE ACTION THE HOLDERS ELECT TO TAKE WITH
RESPECT TO THE EXCHANGE OFFER.
-2-
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the Old Notes described in Box I
(Description of Tendered Notes) (the "Tendered Notes"). The undersigned is the
registered owner of all the Tendered Notes, and the undersigned represents that
it has received from each beneficial owner of the Tendered Notes (a "Beneficial
Owner") a duly completed and executed form of "Instructions to Registered Holder
and/or Book-Entry Transfer Facility Participant from Beneficial Owner"
accompanying this Letter of Transmittal, instructing the undersigned to take the
action described in this Letter of Transmittal. Subject to, and effective upon,
the acceptance for exchange of the Tendered Notes, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Company all right, title and
interest in and to the Tendered Notes.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent its agent and attorney-in-fact (with full knowledge that the Exchange
Agent also acts as the agent of the Company) with respect to the Tendered Notes
with the full power of substitution to (i) deliver certificates for the Tendered
Notes to the Company and deliver all accompanying evidences of transfer and
authenticity to, or upon the order of, the Company, (ii) present the Tendered
Notes for transfer on the books of the Company and (iii) receive for the account
of the Company all benefits and otherwise exercise all rights of beneficial
ownership of the Tendered Notes, all in accordance with the terms of the
Exchange Offer. The power of attorney granted in this paragraph shall be an
irrevocable power coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Tendered Notes
and that the Company will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim when the same are accepted by the Company. The undersigned
further represents and warrants to the Company that (i) the information set
forth in Box II (Beneficial Owner(s)) is correct, (ii) any Exchange Notes to be
received by the undersigned and any Beneficial Owner in exchange for the
Tendered Notes will be acquired in the ordinary course of business of the
undersigned and such Beneficial Owner, (iii) neither the undersigned nor any
Beneficial Owner is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act and (iv) neither the undersigned nor any Beneficial
Owner has any arrangement with any person to participate in the distribution
(within the meaning of the Securities Act) of the Exchange Notes.
The undersigned agrees that acceptance of any Tendered Notes by the Company
and the issuance of Exchange Notes in exchange therefor will constitute
performance in full by the Company of its obligations under the Registration
Rights Agreement and that the Company will have no further obligations or
liabilities thereunder (except as expressly provided therein).
The undersigned and each Beneficial Owner also acknowledge as follows: The
Exchange Offer is being made in reliance on existing interpretations of the
Securities Act by the staff of the Securities and Exchange Commission (the
"Commission") set forth in several "no-action" letters to third parties and
unrelated to the Company and the Exchange Offer and, based on such
interpretations, the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by the holders thereof (other than any such holder
which is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without further 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 or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of such Exchange Notes.
Any holder which is an affiliate of the Company or which intends to participate
in the Exchange Offer for the purpose of distributing the Exchange Notes (i)
will not be able to rely on the interpretation by the staff of the Commission
set forth in the above-mentioned "no action" letters, (ii) will not be able to
tender its Old Notes in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer transaction unless such sale or transfer is
made pursuant to an
-3-
<PAGE>
exemption from such requirements. Failure to comply with such requirements may
result in such holder incurring liability under the Securities Act for which the
holder is not indemnified by the Company. The undersigned and each Beneficial
Owner acknowledge that the Company has not sought or received its own "no
action" letter with respect to the Exchange Offer and the related transactions,
and that there can be no assurance that the staff of the Commission will make a
determination in the case of the Exchange Offer and such transactions that is
similar to its determinations in the above-mentioned "no action" letters.
If the undersigned or any Beneficial Owner is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making or other trading activities, the
undersigned acknowledges that it and each such Beneficial Owner will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. However, by so acknowledging and so delivering a
prospectus, neither the undersigned nor any such Beneficial Owner will be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The above-referenced prospectus may be the Prospectus (as it may be amended or
supplemented from time to time) only if it contains a plan of distribution with
respect to such resale transactions (but need not name the undersigned or
disclose the amount of Exchange Notes held by the undersigned or any such
Beneficial Owner).
The undersigned and each Beneficial Owner will, upon request, execute and
deliver any additional documents deemed by the Company or the Exchange Agent to
be necessary or desirable to complete the sale, assignment and transfer of the
Tendered Notes. All authority conferred or agreed to be conferred in this
Letter of Transmittal and every obligation of the undersigned and each
Beneficial Owner hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and such Beneficial Owner, and shall not be affected by, and
shall survive the death or incapacity of, the undersigned and such Beneficial
Owner.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Tendered Notes when, as and if the Company has given
written notice thereof to the Exchange Agent.
The undersigned understands that tenders of the Tendered Notes pursuant to
the procedures described in the Prospectus under "The Exchange Offer --
Procedures for Tendering" and in the Instructions hereto will constitute a
binding agreement between the undersigned and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Prospectus.
The undersigned recognizes that (i) under certain circumstances set forth
in the Prospectus under "The Exchange Offer -- Conditions," the Company will
not be required to accept the Tendered Notes for exchange and (ii) the
undersigned may withdraw its tender of Tendered Notes only as set forth in the
Prospectus under "The Exchange Offer -- Withdrawal of Tenders." Tendered Notes
not accepted for exchange or which have been withdrawn will be returned, without
expense, to the undersigned as promptly as practicable after the Expiration
Date, in the manner set forth in the next succeeding paragraph.
Unless otherwise indicated in Box V (Special Issuance Instructions), please
issue certificates for the Exchange Notes (and, if applicable, substitute
certificates representing any Old Notes not exchanged) in the name of the
undersigned. Similarly, unless otherwise indicated in Box VI (Special Delivery
Instructions), please (i) send certificates for the Exchange Notes (and, if
applicable, substitute certificates representing Old Notes not exchanged) to the
undersigned at the address indicated in Box I (Description of Tendered Notes) or
(ii) in the case of a book-entry tender of Old Notes, please credit the Exchange
Notes (and, if applicable, Old Notes not exchanged) to the account at DTC
indicated in Box III (Method of Delivery).
-4-
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING
ANY BOX BELOW.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
BOX I
DESCRIPTION OF TENDERED NOTES*
- ---------------------------------------------------------------------------------------------------------------
Aggregate
Principal Aggregate
Name(s) and Address(es) of Registered Note Certificate Amount Principal
Holder(s), exactly as name(s) appear(s) Number(s) Represented Amount
on Old Note Certificate(s) of Old by Tendered***
Notes** Certificate(s)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Total
- ---------------------------------------------------------------------------------------------------------------
* List the Old Notes to which this Letter of Transmittal relates. If the space provided is inadequate,
the Certificate numbers and principal amount of Old Notes should be listed on a separate signed schedule
attached hereto.
** Need not be completed by persons tendering by book-entry transfer.
*** Tenders of Old Notes must be in a minimum principal amount of $1,000 or an integral multiple of $1,000
in excess thereof. Unless otherwise indicated in this column, a holder will be deemed to have tendered
ALL of the Old Notes represented by the Certificate(s) set forth above. See Instruction 2.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
BOX II
BENEFICIAL OWNER(S)
- ---------------------------------------------------------------------------------------------------------------
State of Principal Residence of Principal Amount of Tendered Notes
Each Beneficial Owner of Tendered Notes Held for Account of Beneficial Owner
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
-5-
<PAGE>
- --------------------------------------------------------------------------------
BOX III
METHOD OF DELIVERY
(SEE INSTRUCTION 1)
- --------------------------------------------------------------------------------
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT AT DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution________________________________________
Account Number____________ Transaction Code Number__________
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s)______________________________________
Window Ticket Number (if any)________________________________________
Date of Execution of Notice of Guaranteed Delivery___________________
Name of Institution which guaranteed delivery________________________
If Delivered by Book-Entry Transfer, Complete the Following:
Name of Tendering Institution________________________________
Account Number and Transaction Code Number___________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX IV
ATTENTION BROKER-DEALERS
- --------------------------------------------------------------------------------
CHECK HERE IF THE UNDERSIGNED OR ANY BENEFICIAL OWNER OF TENDERED NOTES IS
A BROKER-DEALER AND WISHES TO RECEIVE 10 ADDITIONAL COPIES OF THE
PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO:
Name__________________________________________________________________
Address________________________________________________________
- --------------------------------------------------------------------------------
-6-
<PAGE>
- --------------------------------------------------------------------------------
BOX V
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
- --------------------------------------------------------------------------------
To be completed ONLY if certificates for Exchange Notes and/or
certificates for Old Notes not exchanged are to be issued in the name of someone
other than the person(s) whose signature(s) appear(s) on this Letter of
Transmittal in Box VII (Signature).
Issue: Exchange Notes issued and/or Old Notes not exchanged to:
Name(s) ___________________________________________________________________
(Please Type or Print)
___________________________________________________________________
(Please Type or Print)
Address(es)________________________________________________________________
(Zip Code)
Taxpayer Identification Number or Social Security Number___________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX VI
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
- --------------------------------------------------------------------------------
To be completed ONLY if (1) certificates for Exchange Notes and/or
certificates for Old Notes not exchanged are to be sent to someone other than
the person(s) whose signature(s) appear(s) on this Letter of Transmittal in Box
VII (Signature) at the address(es) indicated in Box I (Description of Tendered
Notes) or (2) Exchange Notes and/or Old Notes not exchanged are to be issued or
returned, respectively, to an account maintained at DTC other than the account
indicated in Box III (Method of Delivery).
Send: Exchange Notes and/or Old Notes not exchanged to:
Name(s) ___________________________________________________________________
(Please Type or Print)
___________________________________________________________________
(Please Type or Print)
Address(es)________________________________________________________________
________________________________________________________________
(Zip Code)
Credit: Exchange Notes and/or Old Notes not exchanged to DTC account as follows:
Name(s) ___________________________________________________________________
(Please Type or Print)
___________________________________________________________________
(Please Type or Print)
Address(es)________________________________________________________________
________________________________________________________________
(Zip Code)
Credit: Exchange Notes and/or Old Notes not exchanged to DTC account as follows:
Name(s) ___________________________________________________________________
(Please Type or Print)
___________________________________________________________________
(Please Type or Print)
Crediting Instructions_____________________________________________________
Account Number_____________________________________________________________
- -------------------------------------------------------------------------------
-7-
<PAGE>
- --------------------------------------------------------------------------------
BOX VII
SIGNATURE: TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTIONS 1 AND 3)
IN ADDITION, SUBSTITUTE FORM W-9 ON THE FOLLOWING PAGE MUST BE
COMPLETED AND SIGNED.
- --------------------------------------------------------------------------------
--------------------------------------- -----------------------, 1998
--------------------------------------- -----------------------, 1998
--------------------------------------- -----------------------, 1998
Signature(s) by Tendering Holder(s) Date
Area Code and Telephone Number_______________________________________________
For any Tendered Notes, this Letter of Transmittal must be signed by the
registered holder(s) as the name(s) appear(s) on the certificate(s) for the
Tendered Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents submitted 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
full title and the other information indicated below and, unless waived by the
Company, submit herewith evidence satisfactory to the Company of authority to so
act. See Instruction 3.
Name(s)______________________________________________________________________
______________________________________________________________________
(Please Type or Print)
Capacity_____________________________________________________________________
Address(es)__________________________________________________________________
__________________________________________________________________
(Including Zip Code)
Area Code and Telephone Number_______________________________________________
Tax Identification Number or Social Security Number__________________________
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution _____________________________________________
(Authorized Signature)
_____________________________________________
(Print Name)
_____________________________________________
(Title)
_____________________________________________
(Name of Firm 3/4 Must be an Eligible
Institution as defined in Instruction 3)
_____________________________________________
(Address)
____________________________________________
(Area Code and Telephone Number)
- -------------------------------------------------------------------------------
-8-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAMES: BGF INDUSTRIES, INC.*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Name (if joint names, list first and circle the name of the person or entity whose
number you enter in Part 1 below. See instructions if your name has changed).
----------------------------------------------------------------------------------------
Address
----------------------------------------------------------------------------------------
SUBSTITUTE City, State and ZIP Code
----------------------------------------------------------------------------------------
FORM W-9 List account number(s) here (optional)
----------------------------------------------------------------------------------------
Department of the Treasury PART 1--PLEASE PROVIDE YOUR TAXPAYER Social Security Number
Internal Revenue Service IDENTIFICATION NUMBER ("TIN") IN THE or TIN
BOX AT RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW.
----------------------------------------------------------------------------------------
PART 2--Check the box if you are NOT subject to backup withholding under the
provisions of section 3406(a)(I)(C) of the Internal Revenue Code because (1) you have
not been notified that you are subject to backup withholding as a result of failure to
report all interest or dividends or (2) the Internal Revenue Service has notified you
that you are no longer subject to backup witholding. [_]
- ------------------------------------------------------------------------------------------------------------------------------------
PART 3--CERTIFICATION--UNDER THE PENALTIES OR PERJURY, I CERTIFY THAT THE INFORMATION
PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE. Awaiting TIN [_]
SIGNATURE__________________________ DATE___________
- ------------------------------------------------------------------------------------------------------------------------------------
*See Instruction 5.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9 ABOVE.
- --------------------------------------------------------------------------------
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 (i) 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 (ii) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number to the payor, 31% of all payments made
to me pursuant to the Exchange Offer shall be retained until I provide a
taxpayer identification number to the payor and that, if I do not provide my
taxpayer identification number within sixty (60) days, such retained amounts
shall be remitted to the Internal Revenue Service as a backup withholding and
31% of all reportable payments made to me thereafter will be withheld and
remitted to the Internal Revenue Service until I provide a number.
SIGNATURE__________________________ DATE______________
- -------------------------------------------------------------------------------
-9-
<PAGE>
BGF INDUSTRIES, INC.
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND TENDERED NOTES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by holders of
Old Notes if (i) certificates are to be forwarded herewith or (ii) a tender of
certificates for Old Notes is to be made by book-entry transfer to the account
maintained by the Exchange Agent at DTC pursuant to the book-entry transfer
procedures set forth under "The Exchange Offer 3/4 Procedures for Tendering Old
Notes" in the Prospectus. Certificates for all physically tendered Old Notes, or
a Book-Entry Confirmation, as the case may be, as well as a properly completed
and duly executed Letter of Transmittal (or manually signed facsimile hereof)
and all other documents required by this Letter of Transmittal, must be received
by the Exchange Agent at the address set forth on the front cover and back cover
hereof prior to 5:00 p.m., New York City time, on the Expiration Date, or the
tendering holder must comply with the guaranteed delivery procedures set forth
below.
Holders who wish to tender their Old Notes but who cannot, prior to 5:00
p.m., New York City time, on the Expiration Date (i) deliver their Old Notes,
this Letter of Transmittal or any other documents required by this Letter of
Transmittal to the Exchange Agent or (ii) deliver a Book-Entry Confirmation and
otherwise complete the procedures for book-entry transfer, may effect a tender
of Old Notes by complying with the guaranteed delivery procedures set forth
under "The Exchange Offer 3/4 Guaranteed Delivery Procedures" in the Prospectus.
Pursuant to such procedures, (a) the tender must be made through an Eligible
Institution (as defined in Instruction 3); (b) prior to 5:00 p.m., New York City
time, on the Expiration Date, the Exchange Agent must have received from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, registered or certified mail or hand
delivery) setting forth the name and address of the tendering holder, the
certificate number(s) of the Tendered Notes and the principal amount of the
Tendered Notes, stating that the tender is being made thereby and guaranteeing
that, within three New York Stock Exchange trading days after the Expiration
Date, this Letter of Transmittal (or facsimile thereof) together with the
certificates(s) representing the Tendered Notes (or a Book-Entry Confirmation)
and any other documents required by this Letter of Transmittal will be deposited
by the Eligible Institution with the Exchange Agent; and (c) this Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, as
well as the certificates(s) representing the Tendered Notes in proper form for
transfer (or a Book-Entry Confirmation), and all other documents required by
this Letter of Transmittal are received by the Exchange Agent within three New
York Stock Exchange trading days after the Expiration Date.
The method of delivery of this Letter of Transmittal, the Tendered Notes
and all other required documents is at the election and risk of the tendering
holders. The delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. As an alternative to delivery by mail, holders
may wish to consider overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure delivery to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date.
See the discussion set forth under "The Exchange Offer" in the Prospectus.
2. TENDER BY REGISTERED HOLDER; INSTRUCTIONS TO BENEFICIAL HOLDERS;
PARTIAL TENDERS. Only a holder in whose name Old Notes are registered may
execute and deliver this Letter of Transmittal and tender Old Notes in the
Exchange Offer. Any beneficial owner whose Old Notes are registered in the name
of a broker, dealer, commercial bank, trust, company or other nominee and who
wishes to tender such Old Notes should (i) contact such registered holder
promptly and instruct such registered holder to tender such Old Notes on such
beneficial owner's behalf, (ii) properly complete and duly execute the form of
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant From Beneficial
-10-
<PAGE>
Owner" accompanying this Letter of Transmittal and (iii) timely deliver such
form to such registered holder. The Company, the Exchange Agent and the transfer
and registrar for the Old Notes shall be entitled to rely upon all
representations, warranties, covenants and instructions given or made by such
registered holder and/or such beneficial owner. If such beneficial owner wishes
to tender Old Notes on its own behalf, such beneficial owner must, prior to
completing and executing this Letter of Transmittal and delivering its Old
Notes, either make appropriate arrangements to register ownership of the Old
Notes in such beneficial owner's name or obtain a properly completed bond power
from the registered holder. Any such transfer of registered ownership may take
considerable time.
Tendered Notes must be in a minimum principal amount of $1,000 or an
integral multiple of $1,000 in excess thereof. If less than the entire principal
amount of the Old Notes evidenced by a submitted certificate are to be tendered,
the tendering holder(s) should indicate the aggregate principal amount of Old
Notes to be tendered in Box I (Description of Tendered Notes) under the caption
"Aggregate Principal Amount Tendered." The entire principal amount of Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of Old Notes held by the
tendering holder is not tendered for exchange, then (i) unless otherwise
indicated in Box V (Special Issuance Instructions), certificates evidencing
untendered Old Notes and Exchange Notes issued pursuant to the Exchange Offer
will be issued in the name of the person signing this Letter of Transmittal and
(ii) unless otherwise indicated in Box VI (Special Delivery Instructions), such
certificates will be sent to the person signing this Letter of Transmittal at
the address indicated in Box I (Description of Tendered Notes) (or, in the case
of a book-entry tender of Old Notes, credited to the account at DTC indicated in
Box III (Method of Delivery)).
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder of the Tendered Notes, the signature must correspond exactly
with the name(s) as written on the face of the certificates for the Tendered
Notes without any change whatsoever. If any tendered Old Notes are owned of
record by two or more joint owners, all such owners must sign this Letter of
Transmittal. If any Tendered Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
certificates.
When this Letter of Transmittal is signed by the registered holder(s) of
the Tendered Notes specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If, however, the Exchange
Notes are to be issued, or any untendered Old Notes are to be reissued, to a
person other than the registered holder, then endorsements of any certificates
transmitted hereby or separate bond powers are required. Signatures on such
certificate(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any certificate(s) specified herein, such certificate(s)
must be endorsed or accompanied by appropriate bond powers, in either case
signed exactly as the name(s) of the registered holder(s) appear(s) on the
certificate(s) and signatures on each such endorsement or bond power must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with this Letter of Transmittal.
Endorsements on certificates for Tendered Notes or signatures on bond
powers required by this Instruction 3 must be guaranteed by a firm which is a
member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., or is a savings institution, commercial
bank or trust company having an office or correspondent in the United States, or
is otherwise an "eligible
-11-
<PAGE>
guarantor institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, and which is, in each case, a member of a
recognized signature guarantee program (i.e., Securities Transfer Agents
Medallion Program, Stock Exchange Medallion Program or New York Stock Exchange
Medallion Signature Program) (an "Eligible Institution").
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Tendered Notes are tendered by: (i) the
registered holder thereof (which term for purposes of the exchange offer
includes any participant of DTC whose name appears on a security position
listing as the holder of such Tendered Notes) who has not completed Box V
(Special Issuance Instructions) or Box VI (Special Delivery Instructions) on
this Letter of Transmittal or (ii) an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate in the applicable boxes the name and address to which Exchange Notes
issued pursuant to the Exchange Offer and/or substitute certificates evidencing
Old Notes not exchanged are to be issued or sent if different from the name or
address of the holder signing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification number or social
security number of the person named must also be indicated. If no such
instructions are given, certificates evidencing such Old Notes not exchanged and
Exchange Notes issued pursuant to the Exchange Offer will be returned to the
person signing this Letter of Transmittal at the address indicated in Box I
(Description of Tendered Notes) (or, in the case of a book-entry tender of Old
Notes, credited to the account at DTC indicated in Box III (Method of
Delivery)).
5. TAX IDENTIFICATION NUMBER. Federal income tax law generally requires
that a tendering holder whose Tendered Notes are accepted for exchange must
provide the Company (as payor) with such holder's correct Taxpayer
Identification Number ("TIN") on Substitute Form W-9, which in the case of a
tendering holder who is an individual, is his or her social security number. If
the Company is not provided with the current TIN or an adequate basis for an
exemption, such tendering holder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, delivery to such tendering holder of
Exchange Notes may be subject to backup withholding in an amount equal to 31% of
all reportable payments made after the exchange. If withholding results in an
overpayment of taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines of Certification of
Taxpayer Identification Number on Substitute Form W-9" (the "W-9 Guidelines")
for additional instructions.
To prevent backup withholding, each holder of Tendered Notes must provide
its correct TIN by completing the Substitute Form W-9 set forth above,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder
has not been notified by the Internal Revenue Service that such holder is
subject to backup withholding as a result of a failure to report all interest or
dividends or (iii) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the holder of
Tendered Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must give the Company a completed Form W-8, Certificate
of Foreign Status. This form may be obtained from the Exchange Agent. If the
Tendered Notes are in more than one name or are not in the name of the
Beneficial Owner, the tendering holder should consult the W-9 Guidelines for
information on which TIN to report. If such holder does not have a TIN, such
holders should consult the W-9 Guidelines for instructions on applying for a
TIN, check the box in Part 3 of the Substitute Form W-9 and write "applied for"
in lieu of its TIN. Note: Checking this box and writing "applied for" on the
form means that such holder has already applied for a TIN or that such holder
intends to apply for one in the near future. If such holder does not provide its
TIN to the Company within 60 days, backup withholding will begin and continue
until such holder furnishes its TIN to the Company.
-12-
<PAGE>
6. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the transfer of Tendered Notes to it or its order pursuant to the
Exchange Offer. If, however, Exchange Notes and/or substitute Old Notes not
exchanged are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered holder of the Tendered Notes, or if the
Tendered Notes are registered in the name of any person other than the person
signing this Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the transfer of Tendered 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 persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE TENDERED NOTES SPECIFIED IN THIS LETTER
OF TRANSMITTAL.
7. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive or modify any or all conditions relating to the Exchange Offer set forth
in the Prospectus.
8. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All holders of Tendered Notes, by execution
of this Letter of Transmittal, shall waive any right to receive notice of the
acceptance of their Tendered Notes for exchange.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address set forth on the front cover and back cover hereof for
further instructions.
10. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of Tendered
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Tendered Notes not properly tendered or any Tendered Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right in its sole discretion
to waive any defects, irregularities or conditions of tender as to any Tendered
Notes. The Company's interpretation of the terms and conditions of the Exchange
Offer (including the Instructions in this Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with Tendered Notes must be cured within such time as the Company
shall determine. Although the Company intends to notify holders of defects or
irregularities with respect to tenders of Tendered Notes, neither the Company,
the Exchange Agent nor any other person shall incur any liability for failure to
give such notification. Tenders of Tendered Notes will not be deemed to have
been made until such defects or irregularities have been cured or waived. Any
Tendered Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in this Letter of Transmittal, as promptly as practicable following the
Expiration Date.
11. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF NOTES; RETURN OF NOTES.
Subject to the terms and conditions of the Exchange Offer, the Company will
accept for exchange all validly tendered Old Notes as promptly as practicable
after the Expiration Date and will issue Exchange Notes therefor as promptly as
practicable thereafter. For purposes of the Exchange Offer, the Company shall be
deemed to have accepted validly tendered Old Notes when, as and if the Company
has given written notice thereof to the Exchange Agent. If any Tendered Notes
are not exchanged pursuant to the Exchange Offer for any reason, such
unexchanged Tendered Notes will be returned, without expense, to the person
signing this Letter of Transmittal at the address indicated in Box I
(Description of Tendered Notes), except as may otherwise be specified in Box V
(Special Issuance Instructions) or Box VI (Special Delivery Instructions).
-13-
<PAGE>
12. WITHDRAWAL. Tendered Notes may be withdrawn only pursuant to the
procedures set forth in the Prospectus under "The Exchange Offer 3/4 Withdrawal
of Tenders."
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the procedures for tendering, as well as requests for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery,
may be directed to the Exchange Agent at the address and telephone number set
forth on the front cover and back cover hereof.
-14-
<PAGE>
THE BANK OF NEW YORK, AS EXCHANGE AGENT
By Mail or Hand Delivery: The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Reorganization Section 7-E
Facsimile Transmission: (212) 815-6339
Confirm by Telephone: (212) 815-
<PAGE>
BGF Industries, Inc.
NOTICE OF GUARANTEED DELIVERY
With Respect to the Tender for Exchange of
10 1/4% Senior Subordinated Notes due 2009
for 10 1/4% Senior Subordinated Notes due 2009
Pursuant to the Prospectus Dated ________, 1999
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________,
1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
As set forth in the Prospectus dated _________, 1999 (the "Prospectus") of BGF
Industries, Inc., a Delaware corporation (the "Company"), under the caption "The
Exchange Offer--Guaranteed Delivery Procedures," and in the accompanying Letter
of Transmittal (the "Letter of Transmittal"), this Notice of Guaranteed Delivery
or a form substantially equivalent hereto must be used to accept the Company's
offer to exchange (the "Exchange Offer") a new series of its 10 1/4% Senior
Subordinated Notes due 2009, the issuance of which has been registered under the
Securities Act of 1933, as amended, for any and all of its outstanding 10 1/4%
Senior Subordinated Notes due 2009 (the "Old Notes") if the tendering holder of
Old Notes cannot, prior to 5:00 p.m., New York City time, on the Expiration Date
(i) deliver its Old Notes, the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the Exchange Agent (as defined below)
or (ii) deliver a confirmation of the book-entry tender of its Old Notes into
the Exchange Agent's account at The Depository Trust Company ("DTC") and
otherwise complete the procedures for book-entry transfer. If required, this
Notice of Guaranteed Delivery, properly completed and duly executed, must be
delivered to The Bank of New York (the "Exchange Agent") as set forth below.
By Mail or Hand Delivery: The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Reorganization Section 7-E
Facsimile Transmission: (212) 815-6339
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 NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
For any questions regarding this Notice of Guaranteed Delivery or for any
additional information, please contact the Exchange Agent by telephone at (212)
815-____.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the Letter of Transmittal,
receipt of which is hereby acknowledged, the principal amount of Old Notes set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under "The Exchange Offer -- Guaranteed Delivery Procedures."
All authority herein conferred or agreed to be conferred in this Notice of
Guaranteed Delivery and every obligation of the undersigned hereunder shall be
binding upon the successors, assigns, heirs, executors, administrators, trustees
in bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive the death or incapacity of, the undersigned.
PLEASE SIGN AND COMPLETE
Signatures of Registered Holder(s)
or Authorized Signatory ___________________________
___________________________
___________________________
Name(s) of Registered Holder(s) ___________________________
___________________________
___________________________
Principal Amount of Old Notes Tendered_________________________________________
Date____________________________________________________________________________
Address_________________________________________________________________________
Area Code and Telephone_________________________________________________________
Number_______________________________________________________
If Old Notes will be delivered by book-entry transfer, provide the account
number at The Depository Trust Company below:
Depository Account No.__________________________________________________________
This Notice of Guaranteed Delivery must be signed by the registered holder(s) of
the Old Notes tendered hereby exactly as their name(s) appear on the
certificates for such Old Notes or on a security position listing such holder(s)
as the owner(s) of such Old Notes, or by person(s) authorized to become
registered holder(s) of such Old Notes by endorsements and documents submitted
with this Notice of Guaranteed Delivery. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person must
provide the following information and, unless waived by the Company, submit with
the Letter of Transmittal evidence satisfactory to the Company of such person's
authority to so act. See Instruction 2.
-2-
<PAGE>
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s) __________________________________________________________________
__________________________________________________________________
Capacity __________________________________________________________________
Address(es) __________________________________________________________________
__________________________________________________________________
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or is a
savings institution, commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended, and which is, in each case, a member of a recognized
signature guarantee program (i.e., Securities Transfer Agents Medallion Program,
Stock Exchange Medallion Program or New York Stock Exchange Medallion Signature
Program), guarantees deposit with the Exchange Agent of the Letter of
Transmittal (or facsimile thereof), the Old Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Old Notes into
the Exchange Agent's account at DTC as described in the Prospectus under the
caption "The Exchange Offer -- Guaranteed Delivery Procedures" and in the Letter
of Transmittal) and any other required documents, all by 5:00 p.m., New York
City time, within three New York Stock Exchange trading days after the
Expiration Date.
Name of Firm____________________ Authorized Signature_______________________
Address_________________________ Name_______________________________________
_________________________
Area Code and
Telephone Number________________ Title______________________________________
Date_______________________________________
DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
-3-
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. The method of delivery of this Notice of
Guaranteed Delivery and all other required documents is at the election and risk
of the tendering holders. The delivery will be deemed made only when actually
received or confirmed by the Exchange Agent. As an alternative to delivery by
mail, holders may wish to consider overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure delivery to the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature(s) must correspond exactly with the name(s) as
written on the face of the certificates for such Old Notes without any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
DTC whose name appears on a security position listing as the holder of such Old
Notes, the signature must correspond exactly with the name shown on the security
position listing as the holder of such Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Old Notes listed or a participant of DTC, this
Notice of Guaranteed Delivery must be accompanied by appropriate bond powers,
signed as the name(s) of the registered holder(s) appear(s) on the certificates
for the Old Notes or signed as the name of the participant is shown on DTC's
security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and unless waived by the Company, submit with the Letter
of Transmittal evidence satisfactory to the Company of such person's authority
to so act.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the procedures for tendering, as well as requests for additional copies of the
Prospectus, the Letter of Transmittal and this Notice of Guaranteed Delivery,
may be directed to the Exchange Agent at the address and telephone number set
forth on the front cover and back cover hereof.
-4-
<PAGE>
THE BANK OF NEW YORK, AS EXCHANGE AGENT
By Mail or Hand Delivery: The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Reorganization Section 7-E
Facsimile Transmission: (212) 815-6339
Confirm by Telephone: (212) 815-
<PAGE>
BGF INDUSTRIES, INC.
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
WITH RESPECT TO THE TENDER FOR EXCHANGE OF
10 1/4% SENIOR SUBORDINATED NOTES DUE 2009
FOR 10 1/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2009
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________,
1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
________, 1999 (the "Prospectus") of BGF Industries, Inc., a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), which together constitute the Company's offer to
exchange (the "Exchange Offer") a new series of its 10 1/4% Senior Subordinated
Notes due 2009 (the "Exchange Notes"), the issuance of which has been registered
under the Securities Act of 1933, as amended (the "Securities Act"), for any and
all of its outstanding 10 1/4% Senior Subordinated Notes due 2009 (the "Old
Notes"). For each Old Note accepted for exchange, the holder of such Old Note
will receive an Exchange Note having a principal amount equal to that of the
surrendered Old Note.
This will instruct you, the registered holder and/or participant in the
book-entry transfer facility, which is The Depository Trust Company, as to the
action to be taken by you relating to the Exchange Offer with respect to the Old
Notes held by you for the account of the undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (insert amount): $________________ of the Company's 10 1/4%
Senior Subordinated Notes due 2009.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] TO TENDER the following Old Notes held by you for the account of the
undersigned (insert principal amount of Old Notes to be tendered, if
any, in integral multiples of $1,000): $________________ of the
Company's 10 1/4% Senior Subordinated Notes due 2009.
[_] NOT TO TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner of Old Notes, including, but not limited to, the
representations that (i) the information set forth in Box II (Beneficial Owners)
of the Letter of Transmittal with respect to the undersigned is correct, (ii)
any Exchange Notes to be received by the undersigned in exchange for Old Notes
tendered in the Exchange Offer will be acquired in the ordinary course of
business of the undersigned, (iii) the undersigned is not an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act and (iv) the
<PAGE>
undersigned has no arrangement with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes.
If the undersigned is a broker-dealer that will receive Exchange Notes for its
own account in exchange for Old Notes that were acquired as a result of market-
making or other trading activities, it acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. However, by so acknowledging and so delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The undersigned acknowledges as follows: The Exchange Offer is being made
in reliance on existing interpretations of the Securities Act by the staff of
the Securities and Exchange Commission (the "Commission") set forth in several
"no-action" letters to third parties and unrelated to the Company and the
Exchange Offer and, based on such interpretations, the Company believes that the
Exchange Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by the holders
thereof (other than any such holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without further
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 or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of such Exchange Notes. Any holder which is an
affiliate of the Company or which intends to participate in the Exchange Offer
for the purpose of distributing the Exchange Notes (i) will not be able to rely
on the interpretation by the staff of the Commission set forth in the above-
mentioned "no-action" letters, (ii) will not be able to tender its Old Notes in
the Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer transaction unless such sale or transfer is made pursuant to an
exemption from such requirements. Failure to comply with such requirements may
result in such holder incurring liability under the Securities Act for which the
holder is not indemnified by the Company. The undersigned acknowledges that the
Company has not sought or received its own "no-action" letter with respect to
the Exchange Offer and the related transactions, and that there can be no
assurance that the staff of the Commission will make a determination in the case
of the Exchange Offer and such transactions that is similar to its
determinations in the above-mentioned "no-action" letters.
- --------------------------------------------------------------------------------
SIGN HERE
Name of Beneficial Owner(s):_____________________________________________
Signature(s):____________________________________________________________
Name(s) (please print):__________________________________________________
Address:_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Area Code and Telephone Number:__________________________________________
Taxpayer Identification Number or Social Security Number:________________
Date:____________________________________________________________________
- --------------------------------------------------------------------------------
-2-
