<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 12, 1999
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
TRUE TEMPER SPORTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3949 52-2112620
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
8275 TOURNAMENT DRIVE
SUITE 200
MEMPHIS, TENNESSEE 38125
TELEPHONE: (901) 746-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------
FRED H. GEYER
8275 TOURNAMENT DRIVE
SUITE 200
MEMPHIS, TENNESSEE 38125
TELEPHONE: (901) 746-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
FREDERICK TANNE, ESQ.
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022-4675
TELEPHONE: (212) 446-4800
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(2)
- ----------------------------------------------------------------------------------------------------------------------------
True Temper Sports, Inc.'s 10 7/8% Senior
Subordinated Notes due 2008.............. $100,000,000 $1,000 $100,000,000 $27,800
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</TABLE>
* Not Applicable.
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid.
------------------
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.
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- --------------------------------------------------------------------------------
<PAGE> 2
SUBJECT TO COMPLETION, DATED FEBRUARY 12, 1999
PROSPECTUS
FEBRUARY , 1999
[TRUE TEMPER LOGO]
TRUE TEMPER SPORTS, INC.
OFFER FOR ALL OUTSTANDING 10 7/8% SERIES A
SENIOR SUBORDINATED NOTES DUE 2008 IN EXCHANGE
FOR 10 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999,
UNLESS EXTENDED.
We will not receive any proceeds from the exchange of these notes.
THE COMPANY:
- - We design, manufacture and market steel and graphite golf club shafts.
- - True Temper Sports, Inc.
8275 Tournament Drive, Suite 200
Memphis, Tennessee 38125
(901) 746-2000
PROPOSED TRADING FORMAT:
- - The PORTAL market or directly with qualified buyers.
THE EXCHANGE OFFER:
- - Offer for $100,000,000 in principal amount of outstanding 10 7/8% Series A
Senior Subordinated Notes due 2008 in exchange for $100,000,000 in principal
amount of 10 7/8% Series B Senior Subordinated Notes due 2008.
- - The terms of the exchange notes are identical in all material respects to the
terms of the outstanding old notes, except for certain transfer restrictions
and registration rights pertaining to the old notes.
- - This exchange offer will expire at 5 p.m. New York time on , 1999
unless extended.
TERMS OF THE EXCHANGE NOTES:
MATURITY:
December 1, 2008
REDEMPTION:
- - We may redeem the exchange notes at any time on or after December 1, 2003.
- - Before December 1, 2001, we may, subject to certain requirements, redeem up to
35% of the exchange notes so long as 65% remain outstanding immediately after
the redemption. Before December 1, 2003, we may, subject to certain
requirements, redeem all of the exchange notes in the event of a change of
control.
MANDATORY OFFER TO REPURCHASE:
- - If we sell all or substantially all of our assets, or experience specific
kinds of changes in control of our company, we may be required to offer to
repurchase the exchange notes.
SECURITY:
- - The exchange notes are unsecured.
RANKING:
- - These exchange notes rank:
1. behind all of our current and future senior indebtedness, including all
indebtedness under the senior bank facilities;
2. behind any other indebtedness that we are permitted to incur under the
terms of the indenture with the United States Trust Company of New York, as
trustee, unless such indebtedness expressly provides that it is not senior
to the exchange notes; and
3. equal with all of our other current and future senior subordinated
indebtedness.
INTEREST:
- - Fixed annual rate of 10 7/8%.
- - Paid every six months on June 1 and December 1.
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 10.
Neither the Securities and Exchange Commission 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.
[RED HERRING INFORMATION]
<PAGE> 3
PROSPECTUS SUMMARY
On the cover page and in this summary, the words "True Temper," "Company,"
"we," "our," "ours," and "us" refers only to True Temper Sports, Inc. The
following summary contains basic information about this exchange offer. It
probably does not contain all the information that is important to you. For a
more complete understanding of this exchange offer, we encourage you to read
this entire document and the documents we have referred you to.
THE COMPANY
We are the world's leading designer, manufacturer and marketer of golf club
shafts, with a worldwide market share of over 35%. Since the 1930s, we have
manufactured golf club shafts under the widely recognized True Temper brand. In
1997, over 80% of our revenues were generated through the sale of steel golf
club shafts, a market in which we have a worldwide share of over 60%, more than
three times the share of the next largest steel shaft competitor. We are a major
supplier of steel shafts to each of the top 20 golf club designers, including
Callaway, PING, Titleist, Mizuno, Cobra, Wilson and TaylorMade. In addition, we
are one of the leading manufacturers in the highly fragmented graphite golf club
shaft market. We believe that we have become the market leader in the golf club
shaft industry by: (i) capitalizing on our technological leadership and
leveraging the True Temper brand to successfully introduce new products; (ii)
differentiating our products on the basis of quality and performance; (iii)
maintaining long-standing relationships with a highly diverse customer base; and
(iv) continuously improving the manufacturing process to reduce costs. For the
twelve months ended September 29, 1998, we generated revenues and pro forma
EBITDA (as defined) of $91.3 million and $23.4 million, respectively. For the
same period, Adjusted EBITDA (as defined), which includes EBITDA from our
acquisition of Grafalloy as well as certain anticipated cost savings, was $26.0
million.
Our products include over 1,800 custom and 1,600 standard models of golf
club shafts, including a full range of commercial and premium grade steel shafts
and a full line of premium graphite shafts. We offer approximately 275 lines of
steel shafts, including: (i) Dynamic Gold, the leading steel shaft on the
Professional Golf Association ("PGA") Tour for the last 20 years; (ii)
Sensicore, which utilizes the most innovative steel shaft technology introduced
in the last 20 years; and (iii) co-branded products, including Callaway's
Memphis 10, PING's JZ and ZZ Lite, and Wilson's Fat Shaft. From 1987 to 1997,
our steel shafts were played by 40 of the PGA's 44 major championship winners,
including each of the last 11 Masters champions. We also design, manufacture and
market approximately 75 lines of premium graphite shafts, including EI-70,
Dynamic Gold Graphite, Sensicore Graphite, Assailant, Regency, Release, Truelite
and TT Lite. Our graphite shafts have a strong presence on the PGA Tour, where
they are used by players such as Davis Love III, David Duval and Justin Leonard,
each of whom won a PGA Tour event in 1997 using True Temper's graphite shafts.
Since 1995, under the direction of a new senior management team led by
Scott C. Hennessy, we have implemented a new business strategy to: (i) develop a
customer-driven product segmentation strategy; (ii) increase research and
development spending to design new, higher margin products with significant
performance-enhancing characteristics; (iii) increase advertising and
promotional spending to market our new products and support the True Temper
brand; (iv) re-engineer the manufacturing process to improve product quality and
reduce costs; and (v) increase our market share in under-penetrated
international markets. We believe that as a result of such strategy, we have
increased revenues and EBITDA, improved operating margins and gained market
share. From 1995 to 1997, our revenues and EBITDA grew at compound annual growth
rates ("CAGR") of 10.6% and 28.6%, respectively, and EBITDA margin increased
from 16.2% to 21.9%. During the same period, our share of the steel shaft market
grew from approximately 55% to over 60%. For the nine months ended September 29,
1998, our revenues and EBITDA increased 13.8% and 31.4%, respectively, over the
comparable period in 1997, and EBITDA margin grew from 21.5% to 24.8%.
1
<PAGE> 4
GOLF INDUSTRY GROWTH
Golf participation in the United States reached record levels in 1997, with
an estimated 547 million rounds of golf played, representing an approximately
15% increase over 1996. We believe that this increase reflects current trends
that are driving the overall golf industry in general, and increased golf
equipment sales in particular. Such trends include: (i) increased consumer
spending since 1990 on recreational activities in general, and on golf equipment
in particular; (ii) growth in the number of golf courses from 12,846 in 1990 to
14,602 in 1997, with projected record golf course openings in 1998; (iii)
increased interest in golf by women, junior and minority golfers; (iv) projected
population growth of golfers who are 40 to 60 years old, the segment of the
population that generally plays the most rounds and spends the most on golf
equipment; (v) projected population growth of individuals entering their 20s,
the age when golfers generally begin playing golf; (vi) significant increases in
consumer advertising by the golf equipment industry, from approximately $71
million in 1991 to approximately $175 million in 1997; and (vii) the rapid
evolution of golf club designs and technology. From 1991 to 1997, the worldwide
golf equipment market grew from $2.0 billion to $4.7 billion, representing a 15%
CAGR. We believe that such industry trends will continue to increase the demand
for golf clubs and True Temper's steel and graphite shafts.
THE GOLF CLUB SHAFT INDUSTRY
The golf club shaft market is comprised primarily of steel and graphite
shafts. The worldwide steel shaft market is highly concentrated, with the three
largest competitors comprising an aggregate market share of approximately 96%.
We believe that this concentration is due in part to the significant capital
investment and customized manufacturing process required for the production of
steel shafts. We have invested significant capital in its manufacturing
facilities and estimate the replacement cost of machinery and equipment at our
steel shaft manufacturing facility to be $50 million to $60 million. In
addition, over the last 60 years, we have continually improved our manufacturing
process to reduce costs and meet the stringent product specifications of our
customers. We believe that our over 60% market share in steel golf club shafts,
and our significant investment in equipment, product design and manufacturing
innovation provide us with a significant advantage as a low cost producer in the
steel shaft market. From 1995 to 1997, unit sales and dollar sales of our steel
shafts increased at CAGRs of 12% and 17%, respectively.
The production of graphite shafts is less capital intensive and requires a
less customized manufacturing process than the production of steel shafts. The
graphite shaft industry is highly fragmented and includes over 80 participants,
with the top eight representing approximately 55% of the worldwide market. We
compete primarily in the premium graphite shaft market by leveraging our brand,
design expertise and manufacturing capabilities, including flag-wrapping and
filament-winding. We are one of the few graphite shaft manufacturers that
utilizes a filament-winding manufacturing process, which is more capital
intensive and standardized than the flag-wrapping process used by most graphite
shaft manufacturers. By employing the filament-winding process and proprietary
advanced molding techniques, we can offer more consistent, higher-end graphite
shafts primarily for use in woods.
We believe that from 1991 to 1995, graphite shafts gained share of the
overall shaft market due to the lightweight, vibration damping characteristics
of graphite shafts, particularly for longer-shafted, larger-headed woods. Since
1995, however, the development of lower weight, higher performance steel shafts
with greater consistency and durability has led to a renewed preference for
steel shafts in the market for irons. We estimate that from 1995 to 1997,
industry-wide unit sales of steel shafts increased approximately 18%, while unit
sales of graphite shafts decreased approximately 3%. We expect that the shift in
golfers' preferences for steel shafted irons will continue as we continue to
develop (i) innovative, high performance steel shafts such as Sensicore, and
(ii) lightweight, high performance alternatives to graphite such as metal matrix
composite shafts.
2
<PAGE> 5
THE GRAFALLOY ACQUISITION
On October 26, 1998, we acquired substantially all of the assets and
assumed certain specified liabilities of Grafalloy Corporation ("Grafalloy"), a
designer, manufacturer and distributor of composite golf club shafts located in
El Cajon, California for approximately $6.2 million in cash. Since 1973,
Grafalloy has designed, manufactured and marketed premium golf shafts,
specializing in proprietary, performance enhancing designs, including its
AttackLite, ProLite and SoLite lines of ultra-lightweight graphite shafts. We
believe that our acquisition of Grafalloy will enhance our presence in the
highly fragmented graphite shaft market. Since acquiring Grafalloy (the
"Grafalloy Acquisition"), we have begun integrating its assets and operations
into our own Company.
------------------------
3
<PAGE> 6
THE OLD NOTE OFFERING
OLD NOTES..................... We sold the old notes on November 18, 1998
pursuant to a purchase agreement. The initial
purchasers subsequently resold the old notes to
qualified institutional buyers pursuant to Rule
144A under the Securities and Exchange Act and
to a limited number of institutional accredited
investors that agreed to comply with certain
transfer restrictions and other conditions.
EXCHANGE AND REGISTRATION
RIGHTS AGREEMENT.............. As required in the purchase agreement, we and
the initial purchasers entered into a
registration rights agreement on November 23,
1998, which grants the holder of the notes
certain exchange and registration rights. The
exchange offer is intended to satisfy such
exchange rights which terminate upon the
consummation of the exchange offer.
THE EXCHANGE OFFER
SECURITIES OFFERED............ Up to $100,000,000 of Series B 10 7/8% Senior
Notes due 2008. The terms of the exchange notes
and old notes are identical in all material
respects, except for certain transfer
restrictions and registration rights relating
to the old notes.
THE EXCHANGE OFFER............ We are offering to exchange the old notes for
exchange notes that are equal in principal
amount. Old notes may be exchanged only in
integral principal multiples of $1000. The
issuance of the exchange notes is intended to
satisfy our obligations under the registration
rights agreement.
EXPIRATION DATE; WITHDRAWAL OF
TENDER...................... Our exchange offer will expire on 5:00 p.m.,
New York City time, on , 1999, or
such later date and time as we may extend. Your
tender of old notes in accordance with our
exchange offer may be withdrawn at any time
prior to the expiration date. Any old notes not
accepted by us for exchange for any reason will
be returned to you without expense as promptly
as possible after the expiration or termination
of our exchange offer.
CERTAIN CONDITIONS TO THE
EXCHANGE OFFER................ Based on an interpretation by the staff of the
Securities and Exchange Commission set forth in
no-action letters issued to third parties, we
believe that the exchange notes issued by us
pursuant to the exchange offer in exchange for
the old notes may be offered for resale, resold
and otherwise transferred by any holder thereof
(other than any such holder which is our
"affiliate" within the meaning of Rule 405
under the Securities and Exchange Act as
amended) by you without compliance with the
registration and prospectus delivery provisions
of the Securities and Exchange Act, provided
that such exchange notes are acquired in the
ordinary course of your business and that you
do not intend to participate and have no
arrangement or understanding with any person to
participate in the distribution of such
exchange notes. Our obligation to accept for
exchange, or to issue the exchange notes in
exchange for, any old notes is subject to
certain customary condi-
4
<PAGE> 7
tions relating to compliance with any
applicable law, or any applicable
interpretation by any Staff of the Securities
and Exchange Commission, or any order of any
governmental agency or court of law. We
currently expect that each of the conditions
will be satisfied and that no waivers will be
necessary.
PROCEDURES FOR TENDERING
NOTES......................... Each holder of old notes 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, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
the old notes and any other required
documentation to the exchange agent at the
following addresses:
<TABLE>
<S> <C> <C>
By Overnight Courier: By Hand: By Registered or Certified Mail:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
770 Broadway, 13th Floor 111 Broadway P.O. Box 844
New York, New York 10003 Lower Level Cooper Station
Attn: Corporate Trust Services New York, New York 10006 New York, New York 10276-0844
Attn: Corporate Trust Services Attn: Corporate Trust Services
By Facsimile:
212-780-0592
Attn: Corporate Trust Services
</TABLE>
ACCEPTANCE OF NOTES AND
DELIVERY OF
EXCHANGE NOTES.............. The Company will accept for exchange any and
all notes which are properly tendered in the
exchange offer prior to 5:00 p.m., New York
City time, on the expiration date. The exchange
notes issued pursuant to the exchange offer
will be delivered promptly following the
expiration date. See "The Exchange
Offer -- Terms of the Exchange Offer."
USE OF PROCEEDS............... We will not receive any cash proceeds from the
exchange of notes pursuant to our exchange
offer.
EXCHANGE AGENT................ United States Trust Company of New York is
serving as the exchange agent in connection
with our exchange offer.
FEDERAL INCOME TAX
CONSEQUENCES.................. The exchange of old notes pursuant to the
exchange offer should not be a taxable event to
you for federal income tax purposes.
5
<PAGE> 8
THE OFFERING
The terms of the exchange notes are identical in all material respects to the
terms of the old notes, except that the old notes differed with respect to
certain transfer restrictions and certain registration rights.
ISSUER........................ True Temper Sports, Inc.
TOTAL AMOUNT OF NOTES
OFFERED....................... $100 million in principal amount of 10 7/8%
Series B Senior Subordinated Notes due 2008.
MATURITY...................... December 1, 2008.
INTEREST...................... Annual rate: 10 7/8%.
Payment frequency: every six months on June 1
and December 1.
First payment: June 1, 1999.
OPTIONAL REDEMPTION........... On or after December 1, 2003, we may redeem
some or all of the exchange notes (and any
outstanding old notes) at any time at the
redemption prices listed in the section
"Description of Notes" under the heading
"Optional Redemption."
Before December 1, 2001, we may, subject to
certain requirements, redeem up to 35% of the
exchange notes and old notes with the proceeds
of certain public offerings of equity in our
Company at the price listed in the section
"Description of Notes" under the heading
"Optional Redemption." If less than 65% of
exchange notes and old notes will remain
outstanding immediately after any such
redemption, we cannot effect such redemption.
CHANGE OF CONTROL............. Before December 1, 2003, we may, upon the
occurrence of a change of control event, redeem
all of the exchange notes (and any outstanding
old notes) at a price listed in the section
"Description of Notes" under the heading
"Change of Control."
We may be required to offer to repurchase the
exchange notes (and such old notes) at a price
listed in the section "Description of Notes"
under the heading "Change of Control" if:
- Prior to December 1, 2003, we do not exercise
our option upon the occurrence of a change of
control event to redeem the exchange notes
(and any outstanding old notes), or
- After December 1, 2003, a change of control
event occurs.
RANKING OF THE EXCHANGE
NOTES......................... These exchange notes will be (as are the old
notes) senior subordinated debts.
They rank behind all of our current and future
senior indebtedness, including all indebtedness
under the senior bank facilities;
behind any other indebtedness that we are
permitted to incur under the terms of the
indenture with the United States Trust Company
of New York, as trustee, unless such
indebtedness expressly provides that it is not
senior to the exchange notes; and
equal with all of our other senior subordinated
indebtedness.
Assuming we had completed this exchange offer
on September 29, 1998 and applied the proceeds
as intended, the exchange notes would have been
subordinated to $30.0 million of senior debt
6
<PAGE> 9
(excluding $7.5 million of senior debt that was
borrowed primarily to finance our acquisition
of Grafalloy.)
BASIC COVENANTS OF THE
INDENTURE................... We will issue the exchange notes under an
indenture with United States Trust Company of
New York, as trustee. The indenture will, among
other things, place certain limitations on our
ability, and the ability of some of our
subsidiaries, to:
- borrow money or make certain restricted
payments,
- change the nature of the business,
- pay dividends on stock or repurchase
stock and certain subordinated
obligations,
- enter into sale and leaseback
transactions,
- make investments,
- enter into transactions with affiliates,
- use assets as security in other
transactions,
- create liens, and
- sell certain assets or merge with or
into other companies.
For more details, see the section "Description
of Notes" under the heading, "Certain
Covenants" and "Merger, Consolidation or Sale
of Assets."
TRANSFER RESTRICTIONS......... The exchange notes are new securities, and
there is currently no established market for
them. We do not intend to list the exchange
notes on any securities exchange.
The address for our Company is 8275 Tournament Drive, Suite 200, Memphis,
Tennessee 38125 and the telephone number is (901) 746-2000.
RISK FACTORS
Holders of old notes should carefully consider all of the information set
forth in this prospectus.
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF FACTORS THAT YOU
SHOULD CONSIDER IN CONNECTION WITH YOUR INVESTMENT IN THE EXCHANGE NOTES.
7
<PAGE> 10
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
Set forth below are summary historical and pro forma financial data of the
Company. The historical financial data for the three fiscal years ended December
31, 1997 have been derived from, and should be read in conjunction with, the
audited financial statements of the Company and related notes thereto included
elsewhere in this prospectus. The historical financial data for the periods
ended September 28, 1997 and September 29, 1998 have been derived from the
unaudited financial statements of the Company. The unaudited pro forma financial
data have been derived from the Unaudited Pro Forma Financial Information and
the related notes thereto included elsewhere herein. The pro forma statement of
operations data as of and for the periods presented give effect to the
Transactions as if they were consummated at the beginning of the period
indicated. See "The Transactions," "Selected Historical Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Financial Statements and the related notes thereto, and the
Unaudited Pro Forma Financial Information and the related notes thereto included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
TWELVE
NINE MONTHS ENDED MONTHS
YEAR ENDED DECEMBER 31, ----------------------------- ENDED
----------------------------- SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 29,
1995 1996 1997 1997 1998 1998
------- ------- ------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................. $67,531 $71,603 $82,597 $63,166 $71,892 $91,323
Gross profit............. 18,303 21,975 28,711 21,405 26,584 33,890
Selling, general and
administrative
expenses.............. 9,668 11,145 13,324 9,771 10,446 13,999
Allocated corporate
expenses(1)........... 1,282 668 927 764 763 926
Amortization of
goodwill.............. 3,775 3,746 3,746 2,811 1,848 2,783
Goodwill writeoff(2)..... -- -- -- -- 40,000 40,000
Restructuring
charges(3)............ 421 492 520 520 -- --
Operating income
(loss)................ 3,157 5,924 10,194 7,539 (26,473) (23,818)
Net income (loss)........ 486 2,205 4,863 3,577 (32,362) (31,076)
OTHER FINANCIAL DATA:
EBITDA(4)................ $10,922 $13,725 $18,063 $13,591 $17,859 $22,331
Cash from operating
activities............ 7,383 9,582 12,999 7,036 8,236 14,199
Cash from (used in)
investing
activities............ 699 (2,784) (2,439) (1,686) (1,844) (2,597)
Cash from (used in)
financing
activities............ (8,154) (6,462) (10,054) (6,134) (6,607) (10,527)
EBITDA margin............ 16.2% 19.2% 21.9% 21.5% 24.8% 24.5%
Capital expenditures..... $ 4,123 $ 2,784 $ 2,452 $ 1,686 $ 1,844 $ 2,610
PRO FORMA DATA:
EBITDA(5)................ -- -- $18,569 $13,809 $18,688 $23,448
EBITDA margin............ -- -- 22.5% 21.9% 26.0% 25.7%
Cash interest
expense(6)............ -- -- $13,166 $ 9,874 $ 9,874 $13,166
Adjusted EBITDA (7)...... -- -- -- -- -- 26,001
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
AS OF SEPTEMBER 29, 1998
-------------------------
HISTORICAL PRO FORMA
----------- ----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital(8)........................................ $ 10,046 $ 14,953
Total assets.............................................. 118,460 176,003
Total debt(9)............................................. 176 130,176
Total stockholders' equity................................ 107,747 34,879
</TABLE>
- ------------------------------
(1) The Company received certain services provided by Black & Decker that
included cash management, tax reporting, risk management and internal
audits. Charges for these corporate services were based upon a general
allocation methodology determined by Black & Decker (used to allocate all
corporate overhead expenses to Black & Decker's operating divisions), and
have not necessarily been allocated on a basis which approximates the
Company's estimated usage of such services.
(2) In connection with Black & Decker's change in accounting policy with
respect to the measurement of goodwill impairment, $40,000 of goodwill
related to the Company was written off effective January 1, 1998, as a
change in accounting estimate inseparable from a change in principle. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 11 to the Financial Statements included elsewhere in
this prospectus.
(3) Reflects severance and other costs related to the consolidation of
manufacturing and administrative facilities.
(4) EBITDA represents operating income plus depreciation, amortization,
restructuring charges and goodwill write-off. EBITDA is presented because
it is a widely accepted financial indicator used by certain investors and
analysts to analyze and compare companies on the basis of operating
performance. EBITDA is not intended to represent cash flows for the period,
nor has it been presented as an alternative to operating income as an
indicator of operating performance and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles ("GAAP") in the
United States and is not indicative of operating income or cash flow from
operations as determined under GAAP.
(5) Pro forma EBITDA represents EBITDA plus: (i) corporate expenses and charges
that historically have been allocated to the Company by Black & Decker;
less (ii) the Company's estimate of its costs as a stand alone entity for
the same services corresponding to such corporate expenses and charges. Pro
forma EBITDA has not been reduced by the management fee payable under the
Management Services Agreement (as defined), which is an obligation of the
Company and is contractually subordinated to all obligations under the
Notes and the Senior Credit Facilities.
(6) Cash interest expense excludes amortization of deferred financing fees and
other non-cash interest expenses.
(7) Adjusted EBITDA represents pro forma EBITDA, as described in note (5),
plus: (i) $1,193 of Grafalloy EBITDA for the latest twelve month period
ended September 26, 1998 (unaudited); and (ii) $1,360 of anticipated net
annual cost savings that the Company's management believes will occur as a
result of the integration of Grafalloy operations into the Company. Such
cost savings (i) include costs associated with the consolidation of
redundant sales and manufacturing facilities, headcount reductions and
materials purchasing savings, net of anticipated incremental on-going costs
of integrating Grafalloy; and (ii) exclude the impact of anticipated
one-time restructuring costs.
(8) Working capital excludes cash and cash equivalents.
(9) Total debt includes long-term debt, the current portion of long-term debt
and capital lease obligations.
9
<PAGE> 12
RISK FACTORS
This prospectus includes "forward looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act including,
in particular, the statements about the Company's plans, strategies, and
prospects under the headings "Prospectus Summary," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and "Business".
Although we believe that our plans, intentions and expectations reflected in or
suggested by such forward-looking statements are reasonable, we can give no
assurance that such plans, intentions or expectations will be achieved.
Important factors that could cause actual results to differ materially from the
forward looking statements we make in this prospectus are set forth below and
elsewhere in this prospectus. All forward-looking statements attributable to the
Company or persons acting on our behalf are expressly qualified in their
entirety by the following cautionary statements. As used in this section, unless
the context otherwise requires, the terms "Company," "we," "our," "ours," and
"us" refer to True Temper Sports, Inc.
SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT THE
FINANCIAL HEALTH OF OUR COMPANY AND PREVENT US FROM FULFILLING OUR OBLIGATIONS
UNDER THESE EXCHANGE NOTES. We have now and, after the exchange offer, will
continue to have a significant amount of indebtedness. The following chart
presents our total indebtedness and our indebtedness senior to the exchange
notes on a pro forma basis as of September 29, 1998, both of which include the
debt ($7.5 million of term loans) incurred in connection with our acquisition of
Grafalloy.
<TABLE>
<CAPTION>
AT SEPTEMBER 29, 1998
---------------------
<S> <C>
Total indebtedness.......................................... $137.7 million
Indebtedness senior to the exchange notes................... $ 37.5 million
</TABLE>
Our substantial indebtedness could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations with respect to
these exchange notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- increase our vulnerability to increases in interest rates;
- limit our ability to fund future working capital, capital expenditures,
research and development costs, acquisitions and other general corporate
requirements;
- require a substantial portion of our cash flow from operations for debt
payments, thereby reducing the availability of our cash flow to fund
working capital, capital expenditures, research and development efforts,
acquisitions and other general corporate purposes;
- limit our flexibility to plan for, or react to, changes in our business
and the industry in which we operate;
- place us at a competitive disadvantage compared to our competitors that
have less debt; and
- limit our ability to borrow additional funds.
Any of the above listed factors could materially adversely affect us. See
"Description of the Senior Credit Facilities" and "Description of Exchange
Notes."
ABILITY TO SERVICE DEBT -- TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A
SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS
BEYOND OUR CONTROL. Our ability to make payments on and to refinance our
indebtedness, including these exchange notes, and to fund planned capital
expenditures and research and development efforts will depend on our ability to
generate cash in the future. This, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond our control. Based on our current level of operations, we believe our
cash flow from operations, available cash and available borrowings under our
senior bank facilities will be adequate to meet our future liquidity needs.
10
<PAGE> 13
We cannot assure you, however, that our business will generate sufficient cash
flow from operations, or that future borrowings will be available to us under
our senior bank facilities in an amount sufficient to enable us to pay our
indebtedness, including these exchange notes, or to fund our other liquidity
needs. We may need to refinance all or a portion of our indebtedness, including
these exchange notes on or before maturity. We might not be able to refinance
any of our indebtedness, including our senior bank facilities and these exchange
notes, on commercially reasonable terms or at all.
SUBORDINATION -- YOUR RIGHT TO RECEIVE PAYMENTS ON THESE EXCHANGE NOTES IS
JUNIOR TO ALL OF OUR EXISTING AND FUTURE SENIOR INDEBTEDNESS. These exchange
notes rank behind all of our existing and future senior indebtedness, including
all indebtedness under the senior bank facilities, and any other indebtedness
that we are permitted to incur under the terms of the indenture unless such
future indebtedness expressly provides that it ranks equal with, or subordinated
in right of payment to, the exchange notes. As a result, upon any distribution
to our creditors in a bankruptcy or similar proceeding relating to us, the
holders of senior indebtedness of our company will be entitled to be paid in
full in cash before any payment may be made with respect to these exchange
notes. See "Description of Notes" under the heading "Subordination."
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to our Company, holders of the exchange notes will
participate with all other holders of subordinated indebtedness of our Company
in the assets remaining after we have paid all of the senior debt. Because our
senior debt must be paid first, you may receive less than holders of senior debt
in any such proceeding. In any of these cases, we may not have sufficient funds
to pay all of our creditors, therefore, holders of exchange notes may receive
ratably less than the holders of senior debt.
DEPENDENCE ON DISCRETIONARY CONSUMER SPENDING -- SALES OF GOLF CLUBS ARE
DEPENDENT ON DISCRETIONARY CONSUMER SPENDING WHICH MAY BE AFFECTED BY GENERAL
ECONOMIC CONDITIONS SUCH AS A DECREASE IN CONSUMER SPENDING ON GOLF EQUIPMENT.
In addition, our future results of operations could be affected adversely by a
number of other factors that influence discretionary consumer spending
including, unseasonal weather patterns, demand for our existing and future
products, new product introductions by our competitors, an overall decline in
participation in golf activities, shifting consumer preferences for graphite,
steel golf club shafts or other materials that we currently do not produce, and
competitive pressures that otherwise result in lower than expected average
selling prices. Any one or more of these factors could result in our failure to
achieve our expectations as to future sales or earnings. Because most operating
expenses are relatively fixed in the short-term, we may be unable to adjust
spending to compensate for any unexpected sales shortfall, which could adversely
affect our results of operations.
NEW PRODUCT INTRODUCTION -- BECAUSE THE INTRODUCTION OF NEW GOLF CLUB SHAFTS
USING STEEL, GRAPHITE OR OTHER COMPOSITE MATERIALS IS CRITICAL TO OUR FUTURE
SUCCESS, OUR CONTINUED GROWTH WILL DEPEND, IN LARGE PART, ON OUR ABILITY TO
SUCCESSFULLY DEVELOP AND INTRODUCE NEW PRODUCTS IN THE MARKETPLACE. There can be
no assurance that we will continue to develop competitive products, develop or
use technology on a timely or competitive basis or otherwise respond to emerging
market trends. Should golf consumers prefer to use golf clubs made from
materials other than steel or graphite, there could be a material adverse effect
on the results of our operations. In addition, the design of new golf clubs is
also greatly influenced by the rules and interpretations of the U.S. Golf
Association ("USGA"). Although the golf equipment standards established by the
USGA generally apply mainly to competitive events sanctioned by that
organization, we believe that it is critical for our future success that our new
shafts comply with USGA standards. No assurance can be given that any new
products will receive USGA approval or that existing USGA standards will not be
altered in ways that adversely affect the sales of our products.
LABOR RELATIONS -- IF ANY LABOR DISRUPTION OR WORK STOPPAGES AFFECT OUR
EMPLOYEES, THE RESULTS OF OUR OPERATION COULD BE ADVERSELY AFFECTED. At
September 29, 1998, we employed approximately 612 full-time individuals. Of
these, approximately 430 hourly employees at our Amory, Mississippi facility are
represented by the United Steel Workers of America. Although we believe that
relations with our employees and the union are generally good, there can be no
assurance that we will not be subject to work stoppages or other labor
disruption and, if such events were to occur, that there would not be a material
adverse effect on our results of our operations. See "Business -- Employees."
11
<PAGE> 14
NO INDEPENDENT OPERATING HISTORY -- WHEREAS IN THE PAST WE HAVE BENEFITED FROM
BLACK & DECKER'S PROVISION OF GENERAL AND ADMINISTRATIVE SERVICES, THERE IS NO
ASSURANCE, IN THE ABSENCE OF A LONG-TERM AGREEMENT BETWEEN US AND BLACK & DECKER
FOR THE SUPPLY OF SUCH SERVICES SUBSEQUENT TO THE OFFERING, THAT SUCH SERVICES
WILL BE OBTAINED AT FAVORABLE PRICES. These services include treasury, tax, risk
management, employee benefits administration, certain legal services, internal
audit and other administrative functions. Our company and Black & Decker are
entering into a transition services agreement pursuant to which Black & Decker
will continue to provide us with some of these services for up to 12 months
after the closing of the offering. See "Certain Relationships and Related
Transactions -- Transition Services Agreement."
COMPETITION -- THE COMPANY OPERATES IN A HIGHLY COMPETITIVE ENVIRONMENT AND
COMPETES AGAINST A NUMBER OF ESTABLISHED COMPANIES. In addition, we also compete
indirectly with golf club manufacturers that produce shafts internally and face
potential competition from golf club manufacturers that currently purchase golf
club shaft components from third parties but which may have, develop or acquire
the ability to manufacture shafts internally. See "Business -- Competition."
FLUCTUATIONS IN COST AND AVAILABILITY OF RAW MATERIAL -- WE ARE SUBJECT TO PRICE
INCREASES IN RAW MATERIALS USED IN THE MANUFACTURE OF GOLF CLUB SHAFTS AND TO
DELAYS IN RECEIVING SUPPLIES OF SUCH MATERIALS. Golf club shaft raw materials,
principally steel and a graphite fiber composite known as "prepreg", represent a
significant portion of the manufacturing cost of a golf club shaft. Since our
company is dependent upon certain domestic suppliers for steel and graphite
prepreg, we are subject to price increases and delays in receiving supplies
which could have a material adverse effect on our results of operations.
Materials needed to produce our MMC products, which are expected to be
introduced in 1999, are currently obtained from one supplier. There can be no
assurance that we will continue to obtain such materials on favorable terms or
at all. The failure to obtain such materials could have a material adverse
effect on our results of operations. See "Business -- Manufacturing -- Raw
Materials."
INTEGRATION OF ACQUISITIONS -- THE INTEGRATION AND CONSOLIDATION OF ANY FUTURE
ACQUISITIONS OF COMPLEMENTARY SERVICES, TECHNOLOGIES, PRODUCT DESIGNS OR
BUSINESSES MAY REQUIRE SUBSTANTIAL MANAGEMENT, FINANCIAL AND OTHER RESOURCES.
THE DIVERSION OF THESE RESOURCES AND THE INCREASED SIZE OF OUR COMPANY MAY
SUBJECT US TO OPERATIONAL RISKS. Acquisitions involve numerous risks, including,
among others, loss of key personnel of the acquired company, the difficulty
associated with assimilating the personnel and operations of the acquired
company, the potential disruption of our ongoing business, the maintenance of
uniform standards, controls, procedures and policies, and the impairment of our
reputation and relationships with employees and customers. In addition, any
future acquisitions could increase our indebtedness or contingent liabilities,
any of which could have a material adverse effect on our results of operations.
PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY -- OUR ABILITY TO COMPETE
DEPENDS ON OUR ABILITY TO MAINTAIN THE PROPRIETARY NATURE OF OUR TECHNOLOGIES
AND PRODUCTS. THERE CAN BE NO ASSURANCE THAT THE PATENTS WE HOLD RELATING TO
CERTAIN OF OUR PRODUCTS AND PROPRIETARY TECHNOLOGIES OFFER COMPLETE PROTECTION.
We currently hold 12 U.S. patents relating to various products and proprietary
technologies, including the Sensicore technology, and have ten patent
applications pending. There can be no assurance, however, as to the degree of
protection afforded by these patents or as to the likelihood that patents will
be issued from the pending patent applications. Moreover, these patents may have
limited commercial value or may not protect our products. Additionally, the U.S.
patents that we hold do not preclude competitors from developing or marketing
products similar to our products in international markets.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS -- WE ARE SUBJECT TO FEDERAL, STATE,
AND LOCAL ENVIRONMENTAL AND WORKPLACE HEALTH AND SAFETY LAWS, REGULATIONS AND
REQUIREMENTS WHICH, IF CONTRAVENED, COULD RESULT IN SIGNIFICANT COSTS TO OUR
COMPANY. Although we believe we are in material compliance with all such laws,
regulations and requirements, instances of noncompliance could occur or be
identified in the future. The penalties or corrective action costs associated
with noncompliance could be material. In addition, we may receive notices of
potential liability pursuant to federal or state laws for cleanup costs
associated with waste recycling or disposal facilities at which wastes
associated with our operations have allegedly come to be located. See
"Business -- Environmental, Health and Safety Matters."
12
<PAGE> 15
RESTRICTIONS IMPOSED BY THE SENIOR CREDIT FACILITIES AND THE INDENTURE -- WE ARE
SUBJECT TO RESTRICTIONS CONTAINED IN OUR SENIOR BANK FACILITIES AND IN THE
INDENTURE. FAILURE TO COMPLY WITH ANY OF THE RESTRICTIONS COULD RESULT IN
ACCELERATION OF OUR DEBT. Our senior bank facilities and the indenture restrict
our ability to:
- incur additional indebtedness,
- pay dividends and make distributions,
- make certain investments, loans, or advances,
FINANCING CHANGE OF CONTROL OFFER -- WE MAY NOT HAVE THE ABILITY TO RAISE THE
FUNDS NECESSARY TO FINANCE THE REPURCHASE OPTION CONTAINED IN THE
INDENTURE. Upon the occurrence of certain specific kinds of change of control
events, you will have the right to require us to repurchase all or a portion of
your exchange notes. The repurchase price will be 101% of the face value of the
exchange note, plus any accrued and unpaid interest. However, it is possible
that we will not have sufficient funds at the time of the change of control
event to make the repurchases or that restrictions in our senior bank facilities
will not allow us to make such repurchases. In addition, certain important
corporate events, such as leveraged recapitalizations that would increase the
level of our indebtedness, would not constitute a "change of control" under the
indenture. See "Description of the Senior Credit Facilities" and "Description of
Notes -- Change of Control."
DEPENDENCE ON KEY PERSONNEL -- THE RESULTS OF OUR OPERATIONS DEPEND UPON OUR
ABILITY TO MAINTAIN CERTAIN KEY PERSONNEL AND TO RECRUIT AND RETAIN OTHER HIGHLY
QUALIFIED EMPLOYEES. OUR ABILITY TO MAINTAIN OUR COMPETITIVE POSITION IN THE
FUTURE DEPENDS UPON OUR SUCCESS IN MAINTAINING CERTAIN KEY SENIOR MANAGEMENT AND
ATTRACTING AND RETAINING OTHER HIGHLY QUALIFIED MANAGERIAL AND MANUFACTURING
PERSONNEL. LOSS OF KEY PERSONNEL AND/OR OUR FAILURE TO IDENTITY AND RECRUIT
HIGHLY QUALIFIED PERSONNEL COULD MATERIALLY ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS. SEE "MANAGEMENT."
CONTROL BY PRINCIPAL STOCKHOLDERS -- FOLLOWING THE OFFERING, CORNERSTONE EQUITY
INVESTORS AND EII WILL BENEFICIALLY OWN APPROXIMATELY 89% AND 6%, RESPECTIVELY,
OF THE VOTING POWER OF THE COMMON STOCK OF TRUE TEMPER CORPORATION, THE COMPANY
THAT HOLDS ALL OF OUR COMPANY'S CAPITAL STOCK. ACTING COLLECTIVELY, THESE
INVESTORS WILL INDIRECTLY HAVE THE ABILITY TO ELECT THE ENTIRE BOARD OF
DIRECTORS AND CONTROL OUR AFFAIRS AND POLICIES. Circumstances may occur in which
the interests of these stockholders could be in conflict with the interests of
the holders of the exchange notes. In addition, Cornerstone Equity Investors and
these certain other investors may have an interest in pursuing acquisitions,
divestitures or other transactions that, in their judgment, could enhance their
equity investment, even though such transactions might involve risks to the
holders of the exchange notes. See "Management," "Security Ownership of Certain
Beneficial Owners and Management," and "Certain Relationships and Related
Transactions."
DEPENDENCE ON MANUFACTURING CAPABILITIES -- WE OPERATE TWO MANUFACTURING
FACILITIES WHICH WE BELIEVE ARE MORE THAN ADEQUATE TO MEET OUR CURRENT
PRODUCTION DEMANDS. THE LOSS OF ANY ONE OF THESE FACILITIES OR THE INABILITY TO
MEET FUTURE DEMAND, HOWEVER, COULD HAVE AN ADVERSE EFFECT ON OUR RESULTS OF
OPERATIONS. See "Business -- Manufacturing."
FRAUDULENT TRANSFER -- FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC
CIRCUMSTANCES, TO VOID SUBORDINATE CLAIMS IN RESPECT OF THE NOTES AND REQUIRE
NOTEHOLDERS TO RETURN PAYMENTS RECEIVED. Under the federal bankruptcy law and
comparable provisions of state fraudulent transfer laws, claims in respect of
the exchange notes could be subordinated to all of our other debts if, among
other things:
- We incurred such indebtedness with the intent of hindering, delaying or
defrauding then-existing or future creditors;
- We received less than reasonably equivalent value or fair consideration
for incurring such indebtedness and, at the time of the incurrence of
such indebtedness, we:
1. were insolvent or rendered insolvent by reason of such incurrence;
13
<PAGE> 16
2. were engaged in a business or transaction for which the assets
remaining with our company constituted unreasonably small capital;
or
3. intended to incur, or believed that we would incur, debts beyond
our ability to pay as they mature; or
The measures of insolvency for purposes of these fraudulent transfer laws will
vary depending upon the law applied in any proceeding to determine whether a
fraudulent transfer has occurred. Generally, however, we would be considered
insolvent if:
- the sum of our debts, including contingent liabilities, was greater than
the fair saleable value of all of our assets; or
- if the present fair saleable value of our assets were 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 mature; or
- we could not pay our debts as they become due.
On the basis of historical financial information, recent operating history and
other factors, we believe that we, will not be insolvent, will not have
unreasonably small capital for the business in which we are engaged and will not
have incurred debts beyond our ability to pay such debts as they mature. There
can be no assurance, however, as to what standard a court would apply in making
such determinations or that a court would agree with our conclusions in this
regard.
NO PRIOR MARKET FOR EXCHANGE NOTES -- YOU CANNOT BE SURE THAT AN ACTIVE TRADING
MARKET WILL DEVELOP FOR THESE EXCHANGE NOTES. Prior to this offering, there was
no public market for these exchange notes. We have been informed by the
underwriter that it intends to make a market in these exchange notes after this
offering is completed. However, the underwriter may cease its market-making at
any time. In addition, the liquidity of the trading market in these exchange
notes, and the market price quoted for these exchange notes, may be adversely
affected by changes in the overall 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 these exchange notes.
YEAR 2000 ISSUE. The "Year 2000 Issue" refers generally to the problems that
some software may have in determining the correct century for the year. For
example, software with date-sensitive functions that is not Year 2000 compliant
may not be able to distinguish whether "00" means 1900 or 2000, which may result
in failures or the creation of erroneous results. Currently, many computer
\systems and software products are coded to accept only two-digit entries in the
date code field. These date code fields will need to accept four digit entries
to distinguish 21st century dates from 20th century dates. As a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements. If we, or third parties with
which we do business, fail to comply with Year 2000 requirements our company
could be materially adversely impacted.
14
<PAGE> 17
THE TRANSACTIONS
THE RECAPITALIZATION
Pursuant to the Recapitalization Agreement, True Temper Corporation ("TTC")
was recapitalized in a transaction in which: (i) prior to the closing of the
transactions (the "Closing") contemplated by the Recapitalization (the
"Recapitalization"), Black & Decker caused its wholly-owned subsidiaries, Emhart
Industries, Inc. ("EII") and Emhart Inc. ("EI"), to contribute to TTC certain
assets used exclusively in or relating exclusively to the business of the
Company as conducted by Black & Decker and its subsidiaries prior to the
Recapitalization in exchange for shares of TTC's common stock, $0.01 par value
per share ("TTC Common Stock"), and shares of TTC's senior preferred stock,
$0.01 par value per share (the "Preferred Stock"); (ii) prior to the Closing,
Black & Decker caused certain of its other subsidiaries to contribute to TTC
certain assets used exclusively in the Company's business in exchange for
promissory notes of TTC payable at Closing and the assumption by the Company of
certain liabilities (the assets described in clause (i) and (ii), collectively,
the "Assets"); (iii) TTC contributed the Assets to the Company as a capital
contribution; (iv) TTC used the net proceeds of the Bridge Note and the Seller
Note and borrowings under the Senior Credit Facilities to redeem a portion of
the equity interests held by EI and EII and to repay the promissory notes; and
(v) TTS LLC, an investment vehicle affiliated with Cornerstone Equity Investors,
L.L.C. and Goldman Sachs & Co. (the "Equity Investor"), purchased a portion of
the equity interests held by EI and EII (the "Equity Investor Contribution"). As
a result of the Recapitalization and the Offering, the Equity Investor and EII
own indirectly securities representing approximately 89% and 6%, respectively,
of the voting power of TTC's outstanding capital stock. In addition, in
connection with the Recapitalization, the Company's management (the "Management
Investors") acquired common stock representing approximately 5% of the voting
power of TTC's outstanding capital stock (the "Management Contribution"). The
transactions contemplated by the Recapitalization Agreement were funded by: (i)
the net proceeds from the Bridge Note (as defined) and the Seller Note (as
defined); (ii) $30.0 million of borrowings by the Company under the term loan
facilities of the Senior Credit Facilities; (iii) a $58.7 million equity
investment by the Equity Investor in TTC; (iv) a management equity investment of
$0.4 million; and (v) equity of TTC held by EII having an imputed value of $3.7
million (the "Retained Equity"). The Recapitalization and the transactions
described above are collectively referred to herein as the "Transactions."
THE BRIDGE NOTE AND THE SELLER NOTE
In order to fund a portion of the Recapitalization (i) the Company issued
$100.0 million of Senior Subordinated Increasing Rate Notes (the "Bridge Note")
to True Temper Funding, Inc., an affiliate of the Initial Purchaser, and (ii)
TTC issued Senior Increasing Rate Discount Notes (the "Seller Note") to EI.
The Bridge Note was cancelled on November 23, 1998 upon payment of $100.0
million plus accrued interest by the Company to True Temper Funding Inc. The
Seller Note bears interest equal to the greater of The Bank of New York's prime
rate as in effect from time to time plus 2.00% (which rate would be subject to
increase beginning March 31, 1999) or 9.75% per annum as of November 18, 1998.
Interest on the Seller Note accrues and is not payable in cash until its
maturity date, September 30, 2009.
SENIOR CREDIT FACILITIES
As part of the Transactions, the Company entered into a credit agreement
(the "Senior Credit Facilities") with a syndicate of financial institutions (the
"Lenders") for which Donaldson, Lufkin & Jenrette Securities Corporation acted
as arranger (the "Arranger") and DLJ Capital Funding, Inc. acted as
documentation and syndication agent (the "Syndication Agent"). The Senior Credit
Facilities are comprised of a non-amortizing Revolving Credit Facility of up to
$20.0 million (the "Revolving Credit Facility") and Term Loans in an aggregate
principal amount of $37.5 million, consisting of a $10.0 million Term A Loan
Facility due 2004 (the "Term A Loan") and a $27.5 million Term B Loan Facility
due 2005 (the "Term B Loan" and together with the Term A Loan, the "Term
Loans"). The borrowings under the Senior Credit Facilities together with the
aggregate gross proceeds from the Bridge Note and the Seller Note, the Equity
Investor Contribution, the Management Contribution and the Retained Equity were
used to consummate the Recapitalization and the Grafalloy Acquisition and to pay
fees and expenses related to the Transactions and the Grafalloy Acquisition. In
addition, the Senior Credit Facilities will provide financing for future working
capital, capital expenditures and other general corporate purposes. See
"Management's Discussion and
15
<PAGE> 18
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Description of Senior Credit Facilities."
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. We will not receive any
cash proceeds from the issuance of the Exchange Notes in the Exchange Offer.
The net proceeds from the sale of the old Notes on November 18, 1998, after
deducting expenses of the Offering, including discounts to the Initial
Purchaser, were approximately $96.2 million. The net proceeds, together with
borrowings under the Senior Credit Facilities, were used to repay all amounts
outstanding under the Bridge Note. Gross proceeds from the Bridge Note, the
Seller Note and borrowings under the Senior Credit Facilities were distributed
to TTC as a cash dividend, and together with the Equity Investor Contribution,
the Management Contribution and the Retained Equity, were used to consummate the
Recapitalization, to fund the acquisition of Grafalloy by the Company and to pay
fees and expenses in connection with the Transactions and the Grafalloy
Acquisition. See "The Transactions."
The Seller Note bears interest equal to the greater of The Bank of New
York's prime rate as in effect from time to time plus 2.00% (which rate would be
subject to increase beginning March 31, 1999) or 9.75% per annum as of November
18, 1998. Interest on the Seller Note accrues and is not payable in cash until
its maturity date, September 30, 2009. The Seller Note is held by Emhart, Inc.,
an affiliate of Black & Decker.
The following table sets forth estimated sources and uses of funds in
connection with the Recapitalization.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 29, 1998
------------------------
(DOLLARS IN MILLIONS)
<S> <C>
SOURCES OF FUNDS(1):
Senior Credit Facilities:
Revolving Credit Facility(2).............................. $ --
Term Loans(3)............................................. 30.0
Notes....................................................... 100.0
Seller Note................................................. 25.0
Equity Investment(4)........................................ 62.8
-------
Total sources..................................... $ 217.8
=======
USES OF FUNDS(1):
Recapitalization............................................ $ 204.5
Transaction expenses(5)..................................... 13.3
-------
Total uses........................................ $ 217.8
=======
</TABLE>
- ---------------
(1) Assumes that the Notes were issued and borrowings under the Senior Credit
Facilities were made on September 29, 1998 and, accordingly, does not
reflect the issuance of the Bridge Note as a source of funds or the
repayment of the Bridge Note as a use of funds.
(2) Following the Transactions, the Revolving Credit Facility had total
availability of $20.0 million, subject to satisfaction of certain
conditions. See "Description of Senior Credit Facilities."
(3) Borrowings under the Term Loans were distributed to TTC in the form of a
cash dividend. Additionally, $7.5 million was borrowed by us under the Term
Loans on September 30, 1998 primarily to fund the Grafalloy Acquisition.
(4) Comprised of gross proceeds from the Equity Investor Contribution of $58.7
million, the Management Contribution of $0.4 million and Retained Equity
having an imputed value of $3.7 million.
(5) Reflects fees and expenses related to the Transactions and the Offering.
16
<PAGE> 19
CAPITALIZATION
The following table sets forth the historical capitalization of the Company
as of September 29, 1998 and pro forma capitalization as adjusted to give effect
to the Transactions and the Offering, but not the acquisition of Grafalloy, as
if they had occurred on September 29, 1998. This table should be read in
conjunction with the "Selected Historical Financial Data," the Financial
Statements of the Company and notes related thereto and the Unaudited Pro Forma
Financial Information of the Company and notes related thereto included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 29, 1998
-------------------------
ACTUAL PRO FORMA
------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Total debt:
Senior Credit Facilities:
Revolving Credit Facility(1)(2)........................... $ -- $ --
Term Loans(2)............................................. -- 30.0
Notes offered hereby........................................ -- 100.0
Other(3).................................................... 0.2 0.2
------ -------
Total debt........................................ 0.2 130.2
Stockholders' equity(4)..................................... 107.7 34.9
------ -------
Total capitalization.............................. $107.9 $ 165.1
====== =======
</TABLE>
- ------------------------------
(1) The Revolving Credit Facility, which provides for revolving loans in the
aggregate principal amount of $20.0 million, was undrawn at the closing of
the Transactions.
(2) Borrowings under the Term Loans were distributed to TTC in the form of a
cash dividend. Additionally, $7.5 million was borrowed under the Term Loans
on September 30, 1998 primarily to fund the acquisition of Grafalloy.
(3) Represents capital lease obligations.
(4) For the pro forma effect to stockholders' equity, see Note (e) to the
Unaudited Pro Forma Condensed Balance Sheet included in the Unaudited Pro
Forma Financial Information included elsewhere in this Prospectus.
17
<PAGE> 20
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
Set forth below are selected historical financial and other financial data
of the Company for the five fiscal years ended December 31, 1997 and for the
nine-month periods ended September 28, 1997 and September 29, 1998. The
historical financial data for the three years ended December 31, 1997 have been
derived from, and should be read in conjunction with, the audited financial
statements of the Company and related notes thereto included elsewhere in this
prospectus. The historical financial data at and for the two fiscal years ended
December 31, 1994, and the periods ended September 28, 1997 and September 29,
1998 are derived from unaudited financial statements. See "The Transactions,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and the related notes thereto included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, -----------------------------
---------------------------------------------------- SEPTEMBER 28, SEPTEMBER 29,
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................. $ 78,980 $ 76,505 $ 67,531 $ 71,603 $ 82,597 $63,166 $ 71,892
Gross profit.............. 17,988 20,986 18,303 21,975 28,711 21,405 26,584
Selling, general and
administrative
expenses................ 10,935 9,998 9,668 11,145 13,324 9,771 10,446
Allocated corporate
expenses(1)............. 1,132 1,445 1,282 668 927 764 763
Amortization of
goodwill................ 3,775 3,775 3,775 3,746 3,746 2,811 1,848
Goodwill writeoff(2)...... -- -- -- -- -- -- 40,000
Restructuring
charges(3).............. 13,000 2,579 421 492 520 520 --
Operating income (loss)... (10,854) 3,189 3,157 5,924 10,194 7,539 (26,473)
Net income (loss)......... (8,194) 491 486 2,205 4,863 3,577 (32,362)
OTHER FINANCIAL DATA:
EBITDA(4)................. $ 9,710 $ 12,944 $ 10,922 $ 13,725 $ 18,063 $13,591 $ 17,859
Cash from operating
activities(5)............. -- -- 7,383 9,582 12,999 7,036 8,236
Cash from (used in)
investing activities(5)... -- -- 699 (2,784) (2,439) (1,686) (1,844)
Cash from (used in)
financing activities(5)... -- -- (8,154) (6,462) (10,054) (6,134) (6,607)
EBITDA margin(4).......... 12.3% 16.9% 16.2% 19.2% 21.9% 21.5% 24.8%
Depreciation and
amortization............ $ 7,564 $ 7,176 $ 7,344 $ 7,309 $ 7,349 $ 5,532 $ 4,332
Capital expenditures...... 5,737 3,370 4,123 2,784 2,452 1,686 1,844
Ratio of earnings to fixed
charges(6).............. -- 26.0x 29.0x 52.0x 85.0x 85.0x --
BALANCE SHEET DATA (AT END
OF PERIOD):
Working capital (deficit)(7)... $ (3,669) $ 616 $ 6,604 $ 6,627 $ 6,418 $ 7,607 $ 10,046
Total assets.............. 194,650 188,292 168,533 163,186 160,341 159,031 118,460
Total debt(8)............. -- -- -- 362 349 398 176
Total stockholders'
equity.................. 186,374 169,552 158,164 151,907 146,716 147,691 107,747
</TABLE>
- ------------------------------
(1) True Temper received certain services provided by Black & Decker that
included cash management, tax reporting, risk management and internal audit.
Charges for these corporate services were based upon a general allocation
methodology determined by Black & Decker (used to allocate all corporate
overhead expenses to Black & Decker's operating divisions), and have not
necessarily been allocated on a basis which approximates True Temper's
estimated usage of such services.
18
<PAGE> 21
(2) In connection with Black & Decker's change in accounting policy with respect
to the measurement of goodwill impairment, $40,000 of goodwill related to
True Temper was written off, effective January 1, 1998, as a change in
accounting estimate inseparable from a change in principle. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 11 to the Financial Statements included elsewhere in
this prospectus.
(3) Reflects severance and other costs related to the consolidation of
manufacturing and administrative facilities.
(4) EBITDA represents operating income plus depreciation, amortization,
restructuring charges and goodwill write-off. EBITDA is presented because it
is a widely accepted financial indicator used by certain investors and
analysts to analyze and compare companies on the basis of operating
performance. EBITDA is not intended to represent cash flows for the period,
nor has it been presented as an alternative to operating income as an
indicator of operating performance and should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with
GAAP in the United States and is not indicative of operating income or cash
flow from operations as determined under GAAP.
(5) Financial information relating to cash from operating, investing and
financing activities for 1993 and 1994 is not readily available and thus has
not been included.
(6) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes plus fixed charges. Fixed charges
consist of interest expense and the portion of rental expense that the
Company believes is representative of the interest component of rental
expense. Earnings were not sufficient to cover fixed charges by $10.9
million and $26.3 million for 1993 and for the nine months ended September
29, 1998, respectively. The insufficiency for the nine months ended
September 29, 1998 was due to a $40.0 million goodwill write-off taken by
Black & Decker effective January 1, 1998.
(7) Working capital excludes cash and cash equivalents.
(8) Total debt includes long-term debt, the current portion of long-term debt
and capital lease obligations.
19
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the more
detailed information in the Financial Statements and the Unaudited Pro Forma
Financial Information, including notes thereto, appearing elsewhere in this
prospectus.
GENERAL
True Temper is the world's leading designer, manufacturer and marketer of
golf club shafts with a worldwide market share of over 35%. Since the 1930s, the
Company has manufactured golf club shafts under the widely recognized True
Temper brand. In 1997, over 80% of the Company's revenues were generated through
the sale of steel golf club shafts, a market in which the Company has a
worldwide share of over 60%, more than three times the share of the next largest
steel shaft competitor. The Company is a major supplier of steel shafts to each
of the top 20 golf club designers, including Callaway, PING, Titleist, Mizuno,
Cobra, Wilson and TaylorMade. In addition, the Company is one of the leading
manufacturers in the highly fragmented graphite shaft market. The Company
believes that it has become the market leader in the golf club shaft industry
by: (i) capitalizing on its technological leadership and leveraging the True
Temper brand to successfully introduce new products; (ii) differentiating its
products on the basis of quality and performance; (iii) maintaining
long-standing relationships with a highly diverse customer base; and (iv)
continuously improving the manufacturing process to reduce costs. For the twelve
months ended September 29, 1998, the Company generated revenues and pro forma
EBITDA (as defined) of $91.3 million and $23.4 million, respectively. For the
same period, Adjusted EBITDA which includes EBITDA from the Grafalloy
Acquisition as well as certain anticipated cost savings, was $26.0 million.
Change in Accounting for Goodwill. Effective January 1, 1998, Black &
Decker elected to change its method of measuring goodwill impairment from an
undiscounted cash flow approach to a discounted cash flow approach. In
connection with Black & Decker's change in accounting policy, $40.0 million of
goodwill related to the Company was written off through a charge to operations
during the first quarter of 1998 as a change in accounting estimate inseparable
from a change in principle. That write-down represented the amount necessary to
write-down the carrying value of goodwill for the Company, to Black & Decker's
best estimate, as of January 1, 1998, of the Company's future discounted cash
flows.
Allocated Corporate Expense. Prior to the Recapitalization, Black & Decker
provided the Company with certain corporate services, including cash management,
tax reporting, risk management and internal audit. Allocated expenses for such
services, amounting to $1.3 million, $0.7 million and $0.9 million for 1995,
1996 and 1997, respectively, have been included in the Company's statements of
operating income. Charges for these corporate services were based upon a general
allocation methodology determined by Black & Decker (used to allocate all
corporate overhead expenses to Black & Decker's operating divisions), and have
not necessarily been allocated on a basis which approximates True Temper's
estimated usage of such services. The corporate expense allocation also includes
the allocation of $0.4 million and $0.1 million in 1995 and 1996, respectively,
which primarily consisted of salaries for additional management personnel.
Management has reviewed the costs it expects to incur as a stand alone entity
that previously had been allocated to it by Black & Decker. Management estimates
the corporate expenses on a stand alone basis to be $0.5 million on an
annualized basis.
Restructuring Charges. In 1993 and 1994, the Company recorded
restructuring provisions of $13.0 million and $2.6 million, respectively, to
cover severance and other costs associated with the shutdown of its steel
manufacturing plant in Seneca, South Carolina. In 1995, 1996 and 1997, True
Temper incurred restructuring provisions of $0.4 million, $0.5 million and $0.5
million, respectively, primarily consisting of severance and other costs related
to another consolidation of manufacturing and administrative facilities.
Income Taxes. For 1995, 1996 and 1997 and the nine months ended September
28, 1997 and September 29, 1998, income taxes were $2.6 million, $3.6 million,
$5.3 million, $3.9 million and $5.8 million, respectively. The effective tax
rate differs from a federal statutory rate of 35% primarily due to goodwill
write-off, goodwill amortization and state income taxes.
20
<PAGE> 23
RESULTS OF OPERATIONS
The following table sets forth the components of net income and EBITDA as a
percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, ------------------------------
----------------------- SEPTEMBER 28, SEPTEMBER 29,
1995 1996 1997 1997 1998
----- ----- ----- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit..................... 27.1 30.7 34.8 33.9 37.0
Selling, general and
administrative expenses........ 14.3 15.6 16.1 15.5 14.5
Allocated corporate expenses..... 1.9 0.9 1.1 1.2 1.1
Amortization of goodwill......... 5.6 5.2 4.5 4.5 2.6
Goodwill write-off............... 0.0 0.0 0.0 0.0 55.6
Restructuring charges............ 0.6 0.7 0.6 0.8 0.0
Operating income (loss).......... 4.7 8.3 12.3 11.9 (36.8)
Net income (loss)................ 0.7 3.1 5.9 5.7 (45.0)
EBITDA........................... 16.2 19.2 21.9 21.5 24.8
</TABLE>
NINE MONTHS ENDED SEPTEMBER 29, 1998 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 28, 1997
Revenues. Revenues for the nine months ended September 29, 1998 increased
13.8% to $71.9 million from $63.2 million for the nine months ended September
28, 1997. The increase in revenues during this period was driven primarily by
increased unit volume sales of premium steel golf club shafts which the Company
believes was generated by growth in the premium steel market and taking share
from both graphite and steel competitors. In addition, commercial steel shaft
revenues increased during this period, partially reflecting increased
participation by women, minority and junior golfers.
Gross Profit. Gross profit for the nine months ended September 29, 1998
increased 24.2% to $26.6 million from $21.4 million for the nine months ended
September 28, 1997. Gross profit as a percentage of revenues increased to 37.0%
in the 1998 period from 33.9% in the 1997 period, primarily due to an improved
product sales mix and the benefits of operating leverage from increased volume.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses ("SG&A") for the nine months ended September 29, 1998
increased 6.9% to $10.4 million from $9.8 million for the nine months ended
September 28, 1997. The increase in SG&A was due primarily to increased spending
on advertising and promotion and expansion of international distribution
channels. SG&A as a percentage of revenues decreased to 14.5% in the 1998 period
from 15.5% in the 1997 period. The decrease in SG&A as a percentage of revenues
was due primarily to the benefits of operating leverage from increased volume.
Operating Income (Loss). Operating income for the nine months ended
September 29, 1998 decreased to a loss of $26.5 million from $7.5 million of
operating income for the nine months ended September 29, 1997. The operating
loss was due to a $40.0 million goodwill write-off taken by Black & Decker
effective January 1, 1998 partially offset by increased revenues and gross
profit. Excluding the impact of the goodwill write-off, operating income
increased to $13.5 million for the nine months ended September 29, 1998 from
$7.5 million for the nine months ended September 28, 1997.
EBITDA. EBITDA for the nine months ended September 29, 1998 increased to
$17.9 million from $13.6 million for the same period in 1997. EBITDA margin
increased to 24.8% in the 1998 period from 21.5% in the 1997 period. The
increase in EBITDA and EBITDA margin was due primarily to the factors described
above.
21
<PAGE> 24
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996
Revenues. Revenues for 1997 increased 15.4% to $82.6 million from $71.6
million in 1996. The increase in revenues was due primarily to the Company's
increased sales of commercial steel shafts as well as its 1996 introduction of
Sensicore, which accounted for a significant portion of the Company's increased
sales of premium golf club shafts in this period. During 1997, sales of
commercial steel shafts increased 54.0%, primarily as a result of increased
demand for lower priced products, which appeal to many young golfers.
International revenues increased 29.6% primarily due to increased marketing and
promotion in the Company's international markets.
Gross Profit. Gross profit for 1997 increased 30.7% to $28.7 million from
$22.0 million for 1996. Gross profit as a percentage of revenues increased to
34.9% in 1997 from 30.7% in 1996. Gross profit increased primarily due to: (i)
an improved sales mix due to the recent introduction of premium products such as
Sensicore; (ii) improved labor productivity at the Company's manufacturing
facilities; and (iii) the realization of the benefits of operating leverage as a
result of increased volume.
Selling, General and Administrative Expenses. SG&A for 1997 increased
19.6% to $13.3 million from $11.1 million in 1996. As a percentage of revenues,
SG&A increased to 16.1% in 1997 from 15.6% in 1996. The increase in SG&A was
primarily a result of increased promotional costs and increased investment in
research and development.
Operating Income (Loss). Operating income for 1997 increased 72.1% to
$10.2 million from $5.9 million for 1996. The increase in operating income was
primarily due to the factors described above partially offset by an increase in
allocated corporate expenses to $0.9 million in 1997 from $0.7 million in 1996.
EBITDA. EBITDA for 1997 increased 32.1% to $18.1 million from $13.7
million for 1996, and EBITDA margin increased to 21.9% in 1997 from 19.2% in
1996. The increases in EBITDA and EBITDA margin were due to the factors
described above, partially offset by an increase in allocated corporate expenses
to $0.9 million in 1997 from $0.7 million in 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995
Revenues. Revenues for 1996 increased 6.1% to $71.6 million from $67.5
million for 1995. The increase in revenues primarily resulted from (i) an
improved sales mix which included an increased proportion of higher-priced,
premium products such as Sensicore steel golf club shafts, and (ii) an increase
of 8.9% in sales of commercial steel shafts.
Gross Profit. Gross profit for 1996 increased 20.1% to $22.0 million from
$18.3 million for 1995. Gross profit as a percentage of revenues increased to
30.7% in 1996 from 27.1% in 1995. The increase in gross profit was due primarily
to the improved sales mix, described above, and labor productivity improvements.
Selling, General and Administrative Expenses. SG&A for 1996 increased
15.3% to $11.1 million from $9.7 million for 1995. As a percentage of revenues,
SG&A increased to 15.6% in 1996 from 14.3% in 1995. The increase in SG&A was
primarily as a result of the development of a larger infrastructure for the
implementation of new sales initiatives and product development.
Operating Income (Loss). Operating income for 1996 increased 87.6% to $5.9
million from $3.2 million for 1995. The increase in operating income was
primarily due to the factors described above, and a decrease in allocated
corporate expenses to $0.7 million in 1996 from $1.3 million in 1995 partially
offset by an increase in restructuring charges to $0.5 million in 1996 from $0.4
million in 1995.
EBITDA. EBITDA for 1996 increased 25.7% to $13.7 million from $10.9
million for 1995, and EBITDA margin increased to 19.2% in 1996 from 16.2% in
1995. The increases in EBITDA and EBITDA margin were primarily due to the
factors described above and a decrease in allocated corporate expenses to $0.7
million in 1996 from $1.3 million in 1995.
22
<PAGE> 25
LIQUIDITY AND CAPITAL RESOURCES
HISTORICAL
Historically, Black & Decker financed the Company's operations primarily
from retained earnings attributable to the Company's operations. The Company's
operating activities provided $13.0 million in operating cash flow in 1997 as
compared to $9.6 million in 1996. For the nine months ended September 29, 1998,
cash provided from operating activities totaled $8.2 million compared to $7.0
million for the nine months ended September 28, 1997. The increase in cash flow
from operations was primarily the result of improved operating income, excluding
the impact of the goodwill write-off. In addition, the Company experienced a
timing difference in its payment to suppliers between December 1997 and
September 1998 resulting in an unusually high payables balance in December 1997.
Cash used for investing activities totaled $2.4 million in 1997 as compared to
$2.8 million in 1996. Cash used for investing activities for the nine months
ended September 29, 1998 was $1.8 million as compared to $1.7 million for the
nine months ended September 28, 1997. The Company's capital expenditures have
remained relatively stable, with capital expenditures of $2.8 million, $2.5
million and $2.6 million in 1996, 1997 and the twelve months ended September 29,
1998, respectively.
FOLLOWING THE RECAPITALIZATION
In connection with the Transactions, the Grafalloy Acquisition and the
Offering, the Company has incurred significant amounts of scheduled debt
payments, including interest and principal repayments on the Notes and under the
Senior Credit Facilities. The Company's liquidity needs largely relate to
working capital needs and capital expenditures. The Company intends to fund its
future working capital, capital expenditures and debt service requirements
through cash flow generated from operations and borrowings under the Senior
Credit Facilities. For 1998, the Company estimates that capital expenditures
will total approximately $2.5 million.
As part of the Transactions, the Company entered into the Senior Credit
Facilities, which include a $20.0 million non-amortizing Revolving Credit
Facility, none of which was drawn at Closing, a $10.0 million Term A Loan due
2004, and a $27.5 million Term B Loan due 2005. Amounts under the Revolving
Credit Facility are available on a revolving basis during the period commencing
at Closing and ending on the sixth anniversary of such date. The Senior Credit
Facilities contain customary covenants and events of default, including
substantial restrictions on the Company's ability to declare dividends or
distributions. The Term Loans are subject to mandatory prepayments including
from the net cash proceeds of certain asset sales and a portion of the Company's
excess cash flow (as defined therein). See "Description of Senior Credit
Facilities."
The Senior Credit Facilities contain and the Notes will contain certain
covenants that limit, among other things, the ability of the Company to: (i) pay
dividends, make distributions or make certain other restricted payments or
investments other than distributions to pay taxes; (ii) incur additional
indebtedness or issue preferred equity interests; (iii) merge, consolidate or
sell all or substantially all of its assets; (iv) create liens on assets; and
(v) enter into certain transactions with affiliates or related persons. In
addition, the Senior Credit Facilities require the Company to maintain specified
financial ratios and tests, among other obligations, including a minimum
interest coverage ratio.
Management believes that cash flow from operations and availability under
the Senior Credit Facilities will provide adequate funds for the Company's
foreseeable working capital needs, planned capital expenditures and debt service
obligations. Any future acquisitions, joint ventures or similar transactions
will likely require additional capital and there can be no assurance that any
such capital will be available to the Company on terms acceptable to it or at
all. The Company's ability to fund its working capital needs, planned capital
expenditures and debt service obligations, to refinance indebtedness and to
comply with all of the financial covenants under its debt agreements, depends on
its future operating performance and cash flow, which in turn are subject to
prevailing economic conditions and to financial, business and other factors,
some of which are beyond the Company's control.
23
<PAGE> 26
MANAGEMENT INFORMATION SYSTEMS AND THE IMPACT OF THE YEAR 2000
Certain computer software applications and systems use two digits rather
than four to define the applicable year. Any of the Company's computer software
application and systems that have date-sensitive software and microprocessors
may recognize a date using "00" as the year 1900 rather than the year 2000. This
phenomenon (the "Year 2000 Issue") could cause a disruption of operations,
including, among other things, a temporary inability to engage in normal
business activities.
The Company is in the process of modifying, upgrading or replacing its
computer software applications and systems to accommodate the changes required
for correct recording of dates in the year 2000 and beyond. The Company is
upgrading its manufacturing, general accounting and desktop software to be Year
2000 compliant; and, the other systems of the Company, its vendors and its
customers, are being evaluated to determine what action is necessary, if any.
The Company has some information concerning the compliance status of its
suppliers or customers. In the event that the Company or any of the Company's
significant suppliers or customers do not successfully achieve Year 2000 Issue
compliance, the Company's business or operations could be adversely affected.
The Company does not expect that the cost of its "Year 2000 Issue" compliance
program will be material to its business, financial condition or results of
operations and does not currently anticipate any material disruption in its
operations.
SEASONALITY
Historically, the Company's sales and operating results have reflected
minimal seasonal variations. Approximately 55% of Company's revenues are
generated in the first half of the year, with the remaining 45% of revenues
generated in the second half.
INFLATION
Although the Company cannot accurately anticipate the effect of inflation
on its operations, it does not believe that inflation has had, or is likely in
the foreseeable future to have, a material impact on its results of operations.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," which establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and related disclosures about products and services,
geographic areas and major customers. SFAS No. 131 is effective for fiscal years
beginning after December 15, 1997. Accordingly, the Company is not required to
adopt this standard until the fiscal year ending December 31, 1998. Management
is currently evaluating the impact of this standard on the Company's Financial
Statements.
DEFERRED TAX ASSETS
In conjunction with the Transactions and the Offering, the Company will
realize an increase in its deferred tax assets, because for federal and state
income tax purposes the Recapitalization is expected to be treated as a taxable
business combination, which results in a step-up in the Company's tax basis.
This step-up in tax basis will provide approximately $185.6 million in future
tax deductions and a reduction of approximately $52.9 million in future tax
payments over the next 15 years (net of valuation allowance of approximately
$17.6 million). The Company has elected to make a Section 338(h)(10) election
under the Code (as defined) resulting in an anticipated annualized cash tax
benefit of approximately $4.7 million, if fully utilized. See Note (b) to
Unaudited Pro Forma Condensed Balance Sheet included in the Unaudited Pro Forma
Financial Information.
24
<PAGE> 27
BUSINESS
GENERAL
True Temper is the world's leading designer, manufacturer and marketer of
golf club shafts, with a worldwide market share of over 35%. Since the 1930s,
the Company has manufactured golf club shafts under the widely recognized True
Temper brand. In 1997, over 80% of the Company's revenues were generated through
the sale of steel golf club shafts, a market in which the Company has a
worldwide share of over 60%, more than three times the share of the next largest
steel shaft competitor. The Company is a major supplier of steel shafts to each
of the top 20 golf club designers, including Callaway, PING, Titleist, Mizuno,
Cobra, Wilson and TaylorMade. In addition, the Company is one of the leading
manufacturers in the highly fragmented graphite golf club shaft market. The
Company believes that it has become the market leader in the golf club shaft
industry by: (i) capitalizing on its technological leadership and leveraging the
True Temper brand to successfully introduce new products; (ii) differentiating
its products on the basis of quality and performance; (iii) maintaining
long-standing relationships with a highly diverse customer base; and (iv)
continuously improving the manufacturing process to reduce costs. For the twelve
months ended September 29, 1998, the Company generated revenues and pro forma
EBITDA (as defined) of $91.3 million and $23.4 million, respectively. For the
same period, Adjusted EBITDA, which includes EBITDA from the Grafalloy
Acquisition as well as certain anticipated cost savings, was $26.0 million.
The Company's products include over 1,800 custom and 1,600 standard models
of golf club shafts, including a full range of commercial and premium grade
steel shafts and a full line of premium graphite shafts. True Temper offers
approximately 275 lines of steel shafts, including: (i) Dynamic Gold, the
leading steel shaft on the Professional Golf Association ("PGA") Tour for the
last 20 years; (ii) Sensicore, which utilizes the most innovative steel shaft
technology introduced in the last 20 years; and (iii) co-branded products,
including Callaway's Memphis 10, PING's JZ and ZZ Lite, and Wilson's Fat Shaft.
From 1987 to 1997, True Temper's steel shafts were played by 40 of the PGA's 44
major championship winners, including each of the last 11 Masters champions. The
Company also designs, manufactures and markets approximately 75 lines of premium
graphite shafts, including EI-70, Dynamic Gold Graphite, Sensicore Graphite,
Assailant, Regency, Release, Truelite and TT Lite. The Company's graphite shafts
have a strong presence on the PGA Tour, where they are used by players such as
Davis Love III, David Duval and Justin Leonard, each of whom won a PGA Tour
event in 1997 using True Temper's graphite shafts.
Since 1995, under the direction of a new senior management team led by
Scott Hennessy, the Company has implemented a new business strategy to: (i)
develop a customer-driven product segmentation strategy; (ii) increase research
and development spending to design new, higher margin products with significant
performance-enhancing characteristics; (iii) increase advertising and
promotional spending to market the Company's new products and support the True
Temper brand; (iv) re-engineer the manufacturing process to improve product
quality and reduce costs; and (v) increase the Company's market share in
under-penetrated international markets. The Company believes that as a result of
such strategy, the Company has increased revenues and EBITDA, improved operating
margins and gained market share. From 1995 to 1997, the Company's revenues and
EBITDA grew at CAGRs of 10.6% and 28.6%, respectively, and EBITDA margin
increased from 16.2% to 21.9%. During the same period, True Temper's share of
the steel shaft market grew from approximately 55% to over 60%. For the nine
months ended September 29, 1998, the Company's revenues and EBITDA increased
13.8% and 31.4%, respectively, over the comparable period in 1997, and EBITDA
margin grew from 21.5% to 24.8%.
COMPETITIVE STRENGTHS
The Company benefits from a number of significant competitive strengths,
including:
- Leading Market Share and Preeminent Brand. The Company is the leading
designer, manufacturer and marketer of golf club shafts in the world,
with over 60% of the market share for steel shafts, or more than three
times that of its largest steel shaft competitor, True Temper is the only
recognized brand across both the steel and graphite shaft markets.
Through its marketing and promotional
25
<PAGE> 28
programs and the superior performance characteristics of its products,
True Temper has become the preeminent brand in the golf club shaft
industry. True Temper shafts are the overwhelming choice of both
professional and amateur golfers, and in 1998, have been used by more
professional tournament champions than all other golf club shafts
combined. From 1987 to 1997, True Temper steel shafts were played by 40
of the PGA's 44 major championship winners, including each of the last 11
Masters champions. In 1997, more than 65% of 1997 PGA Tour winners used
True Temper shafts. The Company's product brands include: (i) Dynamic
Gold, the leading steel shaft on the PGA Tour for the last 20 years; (ii)
Sensicore steel and graphite shafts; and (iii) EI-70, Assailant, Regency,
Dynamic Gold Graphite, Release, Truelite and TT Lite graphite shafts. The
Company believes that the Company's reputation for product quality and
performance has established True Temper as the leading brand in the
worldwide golf club shaft market.
- Superior Technological Leadership. The Company believes that it is a
technological leader in the golf club shaft industry, and that it
invested more in research and development than any of its competitors in
1997. From 1995 to 1997, the Company increased its research and
development expenditures by approximately 55%, to $2.3 million, or
approximately 3% of revenues. Furthermore, since 1995, True Temper has
increased its engineering staff to approximately 40 professionals
dedicated to the research, development and manufacturing of new products
and enhancements. The Company believes its emphasis on research and
development has enabled it to: (i) successfully design new products and
enhancements of existing products; (ii) offer customized products to meet
the specific performance requirements of its customers; and (iii) develop
the next generation of golf club shaft designs and composite materials.
In 1997, approximately 31% of the Company's revenues were derived from
products introduced since 1995.
- Long-Standing Relationships with a Highly Diversified Customer Base. The
Company maintains long-standing relationships with a highly diversified
customer base consisting of the premier golf equipment companies in the
world. The Company has supplied golf club shafts to each of its top 10
customers since their respective inception. The Company is a major
supplier of steel shafts to each of the top 20 golf club designers in the
world, including Callaway, PING, Titleist, Mizuno, Cobra, Wilson and
TaylorMade. In 1997, True Temper had approximately 860 customers,
including more than 575 golf club manufacturers, more than 90
distributors and various custom club assemblers. In 1997, no single
customer accounted for more than 7% of revenues, and the top 20 customers
accounted for approximately 54% of revenues. Consequently, the Company
believes that it is not dependent on any one customer.
- Low Cost Producer. The Company continuously develops manufacturing
techniques and process improvements to meet the demanding product
specifications of its customers. Since 1994, the Company has
significantly improved its cost position by consolidating manufacturing
facilities, reducing production cycle times, lowering headcount and
decreasing scrap levels. As a result of its manufacturing efficiencies
and operating leverage achieved by high volumes, the Company believes its
cost structure is lower than any of its steel shaft competitors.
Consequently, the Company offers its customers high performance products
at competitive prices.
- Strong Operating Performance and Significant Cash Flow. Under the
leadership of its new management team, from 1995 to 1997, the Company's
revenues and EBITDA grew at a CAGR of 10.6% and 28.6%, respectively, and
EBITDA margin increased from 16.2% to 21.9%. For the nine months ended
September 29, 1998, the Company's revenues and EBITDA increased 13.8% and
31.4%, respectively, over the comparable period in 1997, and EBITDA
margin grew from 21.5% to 24.8%. The strong improvements in operating
results and margins were primarily due to the Company's introduction of
new, higher margin premium shafts and manufacturing cost reduction
initiatives. The Company expects to continue to generate significant free
cash flow as a result of its strong operating results, low capital
expenditures and minimal future cash tax requirements.
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BUSINESS STRATEGY
The Company's objective is to increase revenues and EBITDA by capitalizing
on its position as the leading worldwide designer, manufacturer and marketer of
technologically innovative, performance-oriented golf club shafts. The Company's
business strategy to achieve this objective consists of the following elements:
- Continue to Increase Share of the Steel and Graphite Shaft Markets. The
Company intends to continue to increase its share of each of the steel
and graphite shaft markets by leveraging the True Temper brand and
continuing to introduce products and technologies tailored to the
specific needs of golfers. The Company intends to continue to develop
innovative premium steel shafts with higher than average selling prices
and gross margins. The Company also expects its lower-priced commercial
golf club shaft business to grow due to increased consumer interest in
golf, particularly by women, junior and minority golfers. The Company
expects to increase its share of the highly fragmented graphite shaft
market by capitalizing on its technological leadership to introduce new,
higher performance premium products. In addition, the Company expects to
leverage its brand and international distribution capabilities to
increase its share of the growing international market, which represents
approximately one-third of the worldwide golf club shaft market. From
1995 to 1997, True Temper's international sales increased approximately
50%, and in 1997 accounted for approximately 17% of revenues.
- Leverage Technological Leadership to Introduce New Products. The Company
intends to continue to capitalize on its design expertise and leverage
the True Temper brand to introduce new products through its established
distribution channels. In 1997, approximately 31% of the Company's
revenues were derived from products introduced since 1995. The Company
employs several new shaft technologies, including filament-winding for
the manufacturing of graphite shafts, advanced molding processes,
performance-enhancing designs and the development of metal matrix
composites ("MMCs"), a hybrid of metal alloy and ceramic materials that
are manufactured with a process similar to that of a steel shaft. In
1996, True Temper developed and introduced Sensicore, a highly successful
line of premium steel shafts that incorporate the Company's patented
vibration damping technology. The Company believes the Sensicore
technology incorporates the performance characteristics and consistency
of steel with the feel of graphite, while offering the lowest vibration
levels of any steel or graphite shaft on the market. In 1998, True Temper
successfully introduced a Sensicore graphite shaft. In addition, True
Temper expects to introduce a line of MMC shafts in 1999, which it
believes will offer golfers the consistency and performance of steel with
the lightweight and feel characteristics of graphite. The Company
believes that due to its unique manufacturing and materials fabrication
capabilities, it is currently the only major shaft manufacturer in the
world capable of developing and manufacturing shafts from these new
materials.
- Capitalize on the Favorable Trends Affecting the Golf Equipment
Industry. The Company expects to continue to benefit from the positive
trends affecting the golf equipment industry. These trends include: (i)
increased consumer spending since 1990 on recreational activities in
general, and on golf equipment in particular; (ii) growth in the number
of golf courses; (iii) increased interest in golf by women, junior and
minority golfers; (iv) projected population growth of golfers who are 40
to 60 years old, the segment of the population which generally plays the
most rounds and spends the most on golf equipment; (v) projected
population growth of individuals entering their 20s, the age when golfers
generally begin playing golf; (vi) significant increases in consumer
advertising by the golf equipment industry; and (vii) the rapid evolution
of golf club designs and technology.
- Enhance Long-Term Customer Relationships. The Company is a major
supplier to each of the top 20 golf club manufacturers. The Company
intends to continue to play a critical role in designing new shaft
technologies to meet the specific performance requirements of its
customers' new products. The Company utilizes a computer-aided design
program that evaluates a new shaft's design with respect to weight,
torque, flex point, tip and butt flexibility, swing weight and other
critical shaft design criteria. In addition, the Company further enhances
its customer relationships by developing co-branded products,
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<PAGE> 30
such as the Memphis 10 for Callaway, the Fat Shaft for Wilson and the JZ
and ZZ Lite for PING, among others.
- Continue to Build the True Temper Brand. The Company intends to continue
to increase awareness of the True Temper brand and to support its new
product introductions with targeted consumer advertising campaigns. From
1995 to 1997, the Company increased advertising expenditures by
approximately 27% to $4.2 million, or approximately 5% of the Company's
1997 revenues. The Company is currently the only golf club shaft
manufacturer that consistently advertises on television. The Company's
marketing programs also include: (i) advertising in major industry
publications and other media channels both independently and in
cooperation with certain of the leading golf club manufacturers; (ii)
hiring Davis Love III as the official spokesperson for its Sensicore
technology; (iii) promoting its products among tour and teaching
professionals, college players, coaches and other leaders in the golf
community; and (iv) maintaining promotional vans to provide technical
support to professional golfers at the major events on each of golf's
professional tours. The Company also promotes its brands in international
markets through its sales and distribution offices in Australia, Japan,
and the United Kingdom.
- Continue to Improve Productivity and Operating Margins. Since 1994, the
Company has significantly lowered its manufacturing costs by closing two
manufacturing facilities, reducing headcount and decreasing scrap levels.
From 1995 to the twelve months ended September 29, 1998, the Company
increased its gross profit margins from 27.1% to 37.1% and its EBITDA
margins from 16.2% to 24.5%, primarily as a result of reducing its cost
structure and introducing higher margin products. Management believes
there are significant opportunities to reduce manufacturing costs
through: (i) process and productivity improvements; (ii) further scrap
and waste reduction; and (iii) additional materials cost reductions.
GOLF INDUSTRY GROWTH
The Company believes that the following industry trends will continue to
increase the demand for golf clubs, in general, and True Temper steel and
graphite shafts, in particular, for the foreseeable future:
Increase in Consumer Spending on Recreational Activities. The Company
believes that the golf club industry has benefited from an overall increase in
disposable income and recreational spending by American consumers. Recreational
spending increased by approximately 35% from 1990 to 1995 after adjustment for
inflation. The Company believes this general increase in recreational spending
coupled with a rising interest in golf has and will continue to result in
increased spending on golf-related equipment. From 1991 to 1997, the worldwide
golf equipment market grew from $2.0 billion to $4.7 billion, representing a 15%
CAGR.
Increasing Availability of Golf Facilities. According to the National Golf
Foundation (the "NGF"), approximately 900 new golf courses are expected to open
in the United States by the year 2000, the vast majority of which will be
available for public use. From 1992 to 1997, the number of public golf course
openings (expressed in terms of 18-hole equivalents) has grown at a CAGR of
8.2%, with 245 golf courses opened in 1997. The growth in golf course
development is in response to increased consumer demand for golf courses in the
United States. From 1996 to 1997, the total number of golfers in the United
States grew 7.0% to 26.4 million. For the same period, the total rounds of golf
played increased approximately 15% to an estimated 547 million rounds in 1997.
The Company believes that the increase in the number of golf courses in the
United States will make golf more accessible and will fuel further growth of
golf participation rates and related sales of golf equipment.
Increasing Interest from Non-Traditional Golfers. Segments of the
population that historically have not been well-represented among golfers are
being increasingly drawn to the sport. The Company believes that the appeal of
young players on the PGA and Ladies Professional Golf Association ("LPGA")
Tours, such as Tiger Woods and Se Ri Pak, has contributed to record growth in
golf participation among women, minorities and younger individuals. In 1997, the
number of first-time players reached a record high of nearly three million, a
51.2% increase over the nearly two million beginners in 1996. Rounds played by
junior golfers
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increased approximately 22.0% between 1996 and 1997. The Company believes that
the increased interest by non-traditional golfers will continue to have a
positive effect on industry-wide sales of golf equipment.
Favorable Population & Participation Trends. Currently, there are
approximately 78 million "baby boomers" in the United States. According to the
NGF, the average golfer in his 40s or 50s plays 32.8% and 93.6% more rounds
annually than the average golfer in his 30s, respectively. In addition, the
average golfer in his 60s plays 217.6% more rounds than the average golfer in
his 30s. As a result, the Company believes that as the "baby boom" population
reaches its "peak" golf-playing age, sales of golf-related equipment will
continue to increase. Similarly, "echo boomers," or the children of the baby
boom generation, who now constitute a large portion of new golfers, will have a
similar impact on the golf equipment industry as they continue to age. The graph
below demonstrates the participation trends for both baby boomers and echo
boomers.
Participation Table in Age Groups
Increased Golf Industry Advertising. Advertising by the golf equipment
industry has grown from approximately $71 million in 1991 to approximately $175
million in 1997. The Company believes that this advertising trend has led to
greater consumer awareness of golf equipment brands and will lead to increased
sales of golf clubs and True Temper steel and graphite shafts.
New Product Innovations. In recent years, the golf equipment industry has
made significant advances in product designs and technologies to enhance
golfers' performance and overall enjoyment of the game. The Company believes
that the evolution of golf clubs with enhanced performance characteristics has
accelerated the rate at which golfers purchase new or additional clubs.
THE GOLF CLUB SHAFT INDUSTRY
The golf club shaft market is comprised primarily of steel and graphite
shafts. The worldwide steel shaft market is highly concentrated, with the three
largest competitors comprising an aggregate market share of approximately 96%.
The Company believes that this concentration is due in part to the significant
capital investment and customized manufacturing process required for the
production of steel shafts. The Company has invested significant capital in its
manufacturing facilities and estimates the replacement cost of machinery and
equipment at its steel shaft manufacturing facility to be $50 million to $60
million. In addition, over the last 60 years, the Company has continually
improved its manufacturing process to reduce costs and meet the stringent
product specifications of its customers. The Company believes that its over 60%
market share in steel golf club shafts, and its significant investment in
equipment, product design and manufacturing innovation provide it with a
significant advantage as a low cost producer in the steel shaft market.
The production of graphite shafts is less capital intensive and requires a
less customized manufacturing process than the production of steel shafts. The
graphite shaft industry is highly fragmented and includes over 80 participants,
with the top eight representing approximately 55% of the worldwide market. True
Temper competes primarily in the premium graphite shaft market by leveraging its
brand, design expertise and manufacturing capabilities, including flag-wrapping
and filament-winding. The Company is one of the few
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<PAGE> 32
graphite shaft manufacturers that utilizes a filament-winding manufacturing
process, which is more capital intensive and standardized than the flag-wrapping
process used by most graphite shaft manufacturers. By employing the
filament-winding process and proprietary advanced molding techniques, True
Temper can offer more consistent, higher-end graphite shafts primarily for use
in woods.
The Company believes that from 1991 to 1995, graphite shafts gained share
of the overall shaft market due to the lightweight, vibration damping
characteristics of graphite shafts, particularly for longer-shafted,
larger-headed woods. Since 1995, however, the development of lower weight,
higher performance steel shafts with greater consistency and durability has led
to a renewed preference for steel shafts in the market for irons. In addition,
steel shafts generally cost less than graphite shafts, thereby making steel
shafted clubs more attractive to entry level golfers. The Company estimates that
from 1995 to 1997, industry-wide unit sales of steel shafts increased
approximately 18%, while unit sales of graphite shafts decreased approximately
3%. The Company expects that the shift in golfers' preferences for steel shafted
irons will continue as the Company continues to develop (i) innovative, high
performance steel shafts such as True Temper's Sensicore, and (ii) lightweight,
high performance alternatives to graphite such as metal matrix composite shafts.
PRODUCTS
The Company designs, manufactures and markets steel and composite golf club
shafts, as well as a variety of high strength, high tolerance tubular components
for the bicycle, automotive and recreational sports markets. The Company
manufactures over 1,800 custom and 1,600 standard golf club shafts featuring
different combinations of performance characteristics, including weight, flex,
torque and bend profile. The Company's custom shafts, which accounted for
approximately 31% of revenues in 1997, are designed, and frequently co-branded
in partnership with its customers, to accommodate specific golf club designs.
For example, the Company recently teamed with Wilson to create the new Fat Shaft
line of golf clubs. The Company's standard shafts are typically sold to golf
club manufacturers, distributors and various custom club assemblers, and are
used to either assemble new clubs or to replace the shafts in older clubs. Based
on units sold in 1997, approximately 14% of the Company's shafts are used in
woods, 78% in irons and 8% in putters. The Company's golf club shafts are
included in the woods and irons of club manufacturers, such as PING, Callaway,
Golfsmith, Cobra, Armour Ram, Knight, Mizuno, Wilson, Dunlop, Cleveland and
Adams Golf.
Steel Golf Club Shafts. The Company manufactures approximately 275 lines
of steel golf club shafts, including, Sensicore, which is well-recognized as a
leading shaft which combines the performance advantages of steel with the
vibration damping characteristics of graphite, and the Dynamic Gold shaft, which
has been the shaft of choice of the PGA Tour for the last 20 years. The Company
has also introduced two new golf club shafts specifically designed for junior
golfers, the Truelite 500 and the Dynamic Gold J-300, which offer the feel and
performance features of standard length shafts in flexes and lengths which are
better suited for junior players. The Company has also developed the Scoring
Series with Sensicore, a series of shafts uniquely designed for chipping and
putting. The Company's steel golf club shafts can be divided into the following
two primary product lines (i) premium steel shafts, and (ii) commercial steel
shafts. Premium steel shafts, such as the Company's Sensicore and Dynamic Gold
product lines, are high performance products and generally generate higher
margins than commercial steel shafts. The Company's commercial steel shafts,
however, are more attractively priced for entry level golfers, resulting in
lower per unit margins coupled with higher production volume and sales.
Graphite Golf Club Shafts. The Company manufactures approximately 75 lines
of graphite club shafts, which are offered in a variety of weights, torques and
flexes. The Company's graphite golf club shafts include the EI-70, which was
used in 1997 by Justin Leonard to win the British Open and by Davis Love III to
win the PGA Championship; and the recently introduced Sensicore Graphite shaft,
which utilizes the Company's patented vibration damping technology. The
Company's graphite shafts are also sold under the True Temper brand and product
brands such as Assailant, Regency, Dynamic Gold Graphite, Release, Truelite, and
TT Lite.
Specialty Tubing Products. The Company also manufactures and sells a wide
variety of high performance tubular components for the bicycle, automotive and
recreational sports markets. In 1997, the Company
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sold its specialty tubing products to a broad range of OEMs, including Trek
Bicycle, Dana Corporation, Autodyne Manufacturing, Starline Baton, Daisy and
Crossman Air Guns.
CUSTOMERS
The Company maintains long-standing relationships with a highly diversified
customer base consisting of the premier golf equipment companies in the world.
The Company is a major supplier of shafts to each of the top 20 golf club
designers in the world, including Callaway, PING, Titleist, Mizuno, Cobra,
Wilson and TaylorMade. In 1997, True Temper had approximately 860 customers,
including more than 575 golf club manufacturers and more than 90 distributors.
In 1997, no single customer accounted for more than 7% of revenues, and the top
20 customers accounted for approximately 54% of revenues. Consequently, the
Company believes that it is not dependent on any one customer.
The Company believes that its close customer relationships and responsive
service have been significant elements to its success and that its engineering
and manufacturing expertise provide it with a strong competitive advantage. The
Company recently opened its West Coast Technical Center in Carlsbad, California,
in proximity to some of the largest golf club manufacturers in order to
facilitate partnerships with its OEM customers. The Company has developed and
co-branded several proprietary shafts with its customers, which include
customized steel shafts for Callaway, under the Memphis 10 brand, and for PING,
under the JZ and ZZ Lite brands. More recently, the Company has partnered with
Wilson to produce the Fat Shaft line of clubs.
DESIGN AND DEVELOPMENT
The larger golf club manufacturers require exclusively designed steel and
graphite golf club shafts for their club systems, which require golf club
shafts, heads and grips engineered to work together. The Company is committed to
serving this market by maintaining its role as a leader in innovative shaft
design and steel and graphite materials technology. Shaft designs and
modifications are frequently the direct result of the combined expertise and
efforts of the Company and its customers, to develop an exclusive shaft
specifically designed for that customer's clubs. The Company uses a CAD golf
club shaft analysis program to evaluate a new shaft's design with respect to
weight, torque, flex point, tip and butt flexibility, swing weight and other
critical shaft design criteria. The Company's design research also focuses on
improvements in graphite shaft aesthetics since cosmetic appearance has become
increasingly important to customers.
The materials typically used in production of the Company's designs include
several different high strength steel alloys and advanced composite systems of
graphite and glass fibers with thermosetting epoxy resin systems. Other
materials such as MMCs, which combine the durability and consistency of steel
with the lightweight, vibration damping quality of graphite, are being developed
to supplement existing conventional materials. The Company's design process
attempts to combine a design (geometry, weight, stiffness and feel) with a
corresponding material (steel, graphite and glass) and process (induction-welded
strip, taper press forming, flag wrapping and filament winding). Using CAD, the
Company generates a design which is then analyzed for stiffness and strength
properties using advanced computerized finite element analysis techniques. The
Company's research and development efforts focus on technology development as an
essential precursor to successful new product development. In addition, the
Company's pursuit of strategic customer alliances complement its abilities and
needs, an approach which allows the Company to exploit technical capabilities
beyond its own while minimizing the risk and investment required to enter the
market with new products.
MARKETING AND PROMOTION
The Company's marketing strategy is designed around new product development
and targeted advertising and promotion programs. Through its ability to
anticipate and address consumer trends in the golf equipment market, as well as
the performance demands of professional golfers, the Company is able to
successfully market its products to golf club manufacturers while strengthening
brand awareness. Since 1995, the Company's marketing efforts through the
utilization of a wide variety of promotional channels, including mass media
advertising (print and television), sponsorship of golf-related events,
equipment endorsements and product demonstrations, have increased the Company's
overall exposure in the golf industry.
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For example, the Company has maintained a strong presence among PGA Tour
players, particularly since 1981, when the Company began sending its PGA Tour
van to all major PGA events. The Company has recently added a van to follow the
Senior PGA Tour, the LPGA Tour and the NIKE Tour. The Tour van functions as a
golf club repair shop on wheels, visiting over 50 professional tour events
during 1997. Typically, the van is located on the practice tee and lends
technical support to the tour professionals while simultaneously promoting the
True Temper brand with OEM representatives.
The Company does not pay any professional golfer to play with its shafts in
competition. The Company believes that the use of the Company's products by
professional golfers enhances its reputation for quality and performance while
also promoting the use of its shafts. Recognizing the influence professional
product choices have on consumer preferences, the Company also engages in
special promotional efforts to encourage professional golfers to use clubs with
True Temper shafts. Similarly, the Company contributes shafts to college
athletic programs and teaching professionals in order to expose those who may
influence future club purchases to the advantages of True Temper shafts.
Much of the Company's advertising and promotional spending is dedicated to
print and television advertising, including cooperative advertising with its
customers. The Company believes it is currently the only golf club shaft
manufacturer that consistently advertises on television. Additional advertising
and promotional spending is allocated to promotional events such as trade shows,
consumer golf shows, PGA Tour activities and celebrity endorsements. In a 1995
New York Times research poll, True Temper was ranked as the top golf shaft
company in terms of brand awareness and preference. Of those surveyed, 76%
recognized the True Temper brand, while only 13% recognized the brands of two of
the Company's largest competitors.
DISTRIBUTION AND SALES
The Company primarily sells its shafts to golf club manufacturers and
distributors. Typically, distributors resell the Company's products to custom
club assemblers, pro shops and individuals. Sales to golf club manufacturers
accounted for approximately 73% of revenues in 1997.
The Company has one of the most experienced and respected sales staffs in
the industry. The Company's sales and marketing department includes domestic
sales managers, international sales managers, a customer service group and a
team of over 40 design professionals who provide field support to the Company's
sales representatives. The Company believes that its international market
presence, which comprised approximately 17% of the Company's total 1997
revenues, provides an opportunity for future growth. The Company markets its
products in Europe, Australia and Japan and maintains a sales office and a sales
manager in each region.
MANUFACTURING
The Company believes that its manufacturing expertise and production
capabilities enable it to respond quickly to customers' orders and provide
sufficient quantities on a timely basis. The Company believes that its
investment in capital equipment and personnel training has enabled it to
establish a reputation as one of the leading manufacturers of steel and graphite
shafts. In the graphite market, the Company utilizes advanced manufacturing
capabilities, including filament winding, which it believes distinguishes it
from the majority of its competitors that rely on flag wrapping, the industry's
standard practice, for the manufacture of graphite shafts. The filament-winding
process allows for a more precise placement of graphite material which yields a
more consistent design within the shaft and from shaft to shaft.
Steel Shaft Manufacturing Process. The process of manufacturing a steel
shaft has many distinct phases. Generally, a large steel coil is unrolled and
then formed lengthwise, welded and cut into cylinders. The tubing is then
treated and fitted over a metal rod or "mandrel" that is used to determine the
precise inside diameter of the cylinder as it is drawn. The tubing is stretched,
cut into blanks, and then weighed and balanced. Later, through a process
pioneered by the Company, the blanks are then step-tapered to give each shaft
model a particular flex and frequency. The shafts are cleaned, straightened,
heat-treated and tempered. The shafts are straightened by machines designed and
built by the Company. The shafts are plated with two layers of nickel to prevent
corrosion and then covered with a fine layer of chrome. Finally, shafts are
dried, polished and inspected for cosmetic flaws before the Company's name and
logo is affixed to the shaft. It takes an average of 15 days to manufacture a
True Temper steel shaft.
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Graphite Shaft Manufacturing Process. There are two dominant processes,
both used by the Company, which are used to manufacture a graphite
shaft--flag-wrapping and filament-winding. The flag-wrapping process uses
graphite fiber materials (also known as prepreg) in sheet form which require
refrigeration until use. Each new roll of prepreg is allowed to reach room
temperature before being fed into a machine for cutting. The material is then
cut into pennant-shaped patterns called flags for each particular shaft design.
Layer by layer, various combinations of prepreg flags are wrapped around
mandrels specified for each particular shaft design. The layered materials are
then encased in thin layers of clear tape for compaction and heated at high
temperatures to harden the material. At the end of the process, the shafts are
painted and stylized using a variety of colors, patterns and designs. The
filament-winding process, on the other hand, begins with a spool, rather than a
sheet, of graphite fiber, which is fed onto the reel of a machine which then
wraps the fiber around a mandrel by turning the mandrel and simultaneously
moving the graphite fiber from one of the mandrels to the other. Once the
mandrel is wrapped, the process uses the same encasing and heating techniques as
the flag wrapping process.
Raw Materials. The primary materials used in the Company's golf club
shafts are steel and graphite. Graphite is combined with epoxy resin to produce
sheets or spools of graphite prepreg. The Company is dependent upon certain
domestic suppliers for steel and graphite prepeg. The Company believes that
there are adequate alternative suppliers of these materials, and, therefore, the
Company does not feel dependent on any one supplier. See "Risk Factors--Risk
Associated with Fluctuations in Raw Material Cost and Availability."
COMPETITION
The Company operates in a highly competitive environment. The Company
believes that it competes principally on the basis of: its ability to provide a
broad range of high quality steel and graphite shafts; its ability to deliver
customized products in large quantities on a timely basis; and the acceptance of
steel and graphite shafts in general, and the Company's shafts in particular, by
professional and other golfers. The Company's competitors include a number of
established companies. In addition, the Company also competes indirectly with
golf club manufacturers that produce shafts internally and faces potential
competition from golf club manufacturers that currently purchase golf club shaft
components from third parties but which may have, develop or acquire the ability
to manufacture shafts internally. See "Risk Factors--Competition."
EMPLOYEES
As of September 29, 1998, the Company had 612 full-time employees,
including 21 in sales and marketing, 36 in research, development and
manufacturing engineering, 528 in production and the balance in administrative
and support roles. The hourly employees at the Company's steel plant in Amory,
Mississippi are represented by the United Steel Workers of America, and the
plant is covered by a labor agreement that expires in July 2000. The Company
believes that its relationships with the Union and its employees are good. See
"Risk Factors--Labor Relations."
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PROPERTIES
The Company's administrative offices and manufacturing facilities currently
occupy approximately 400,000 square feet. The Company's shafts are manufactured
at two separate facilities, one located in Amory, Mississippi (steel shafts) and
the other located in Olive Branch, Mississippi (composite shafts). The Company
believes that its present facilities are adequate to meet its current and
projected production demands. The Company's executive offices are located in a
leased facility in Memphis, Tennessee. The following table sets forth certain
information regarding significant facilities operated by the Company as of
September 29, 1998:
<TABLE>
<CAPTION>
APPROXIMATE OWNED/ LEASE EXPIRATION
FACILITY LOCATION SQ. FT. LEASED DATE
- --------------------- ------------------------- ----------- ------ ----------------
<S> <C> <C> <C> <C>
Corporate Office Memphis, Tennessee 13,500 Leased December 2000
Steel Shafts Amory, Mississippi 335,000 Leased January 2063
Graphite Shafts Olive Branch, Mississippi 45,000 Owned --
Technical Center Carlsbad, California 3,500 Leased May 1999
</TABLE>
In addition, the Company promotes its products in international markets
through sales offices in Australia, Japan and the United Kingdom.
To the extent that any such properties are leased, the Company expects to
be able to renew such leases or to lease comparable facilities on terms
commercially acceptable to the Company.
LEGAL PROCEEDINGS
Various claims and legal proceedings generally incidental to the normal
course of business are pending or threatened against the Company. While the
Company cannot predict the outcome of these matters, in the opinion of
management, any liability arising thereunder will not have a material adverse
effect on the Company's business, financial condition or results of operations.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
The Company is subject to federal, state and local environmental and
workplace health and safety Requirements, including Requirements governing
discharges to the air and water, the handling and disposal of solid and
hazardous wastes, and the remediation of contamination associated with releases
of hazardous substances. Based on a recent review conducted by independent
environmental consultants, the Company believes that it is currently in material
compliance with environmental and workplace health and safety Requirements.
Nevertheless, the Company's manufacturing operations involve the use of
hazardous substances and, as is the case with manufacturers in general, if a
release of hazardous substances occurs or has occurred on or from the Company's
facilities, the Company may be held liable and may be required to pay the cost
of remedying the condition. The amount of any such liability could be material.
The Company devotes significant resources to maintaining compliance with,
and believes it is in material compliance with, environmental Requirements.
Despite such efforts, the possibility exists that instances of noncompliance
could occur or be identified in the future, the penalties or corrective action
costs associated with which could be material.
Like any manufacturer, the Company is subject to the possibility that it
may receive notices of potential liability, pursuant to CERCLA or analogous
state laws, for cleanup costs associated with onsite or offsite waste recycling
or disposal facilities at which waste associated with its operations have
allegedly come to be located. Liability under CERCLA is strict, retroactive, and
joint and several. No such notices are currently pending.
The Company has made, and will continue to make, capital expenditures to
comply with current and future environmental Requirements. Because environmental
Requirements are becoming increasingly stringent, the Company's expenditures for
environmental compliance may increase in the future.
34
<PAGE> 37
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- ---- -----------------------------------------
<S> <C> <C>
Chief Executive Officer, President and
Scott C. Hennessy........................ 40 Director
Fred H. Geyer............................ 38 Chief Financial Officer
David N. Hallford........................ 46 Vice President--Sales
Howard A. Lindsay........................ 40 Vice President--Engineering
Stephen M. Brown......................... 33 Director--Human Resources
Bill R. Beatty........................... 38 Director--Marketing and Tour Operations
Adrian H. McCall......................... 40 Director--International Sales and Marketing
James T. Davidson III.................... 34 Plant Manager--Steel Operations
Mark Rossi............................... 42 Director
Tyler J. Wolfram......................... 32 Director
Robert A. Knox........................... 46 Director
Raymond A. DeVita........................ 62 Director
</TABLE>
Scott C. Hennessy has been President of the Company since 1996. Mr.
Hennessy joined the Company in 1994 as Vice President-Sales and Marketing. From
1980 to 1994, Mr. Hennessy held various management positions at Black & Decker
in sales, marketing and product development. Mr. Hennessy sits on the Board of
Governors of the National Golf Foundation. Mr. Hennessy graduated magna cum
laude with a B.S. from the University of Delaware.
Fred H. Geyer has been Chief Financial Officer of the Company since
February 1998. From 1986 to 1998, Mr. Geyer held various positions at Emerson
Electric Company, including Vice President-Finance in the Air Moving Motor
Division. Prior to that, Mr. Geyer worked at Arthur Andersen LLP as a Senior
Auditor. Mr. Geyer is a Certified Public Accountant in the State of Missouri and
is a member of the American Institute of Certified Public Accountants. Mr. Geyer
graduated magna cum laude with a B.S. from the University of Missouri.
David N. Hallford has been Vice President/Sales and National Sales Manager
of the Company since 1989. From August 1985 to January 1989, Mr. Hallford held
various positions in sales and customer service at Plough Corporation. Hr.
Hallford worked as an on-course golf professional responsible for management and
retail sales. Mr. Hallford graduated magna cum laude with a B.S. from the
University of Memphis.
Howard A. Lindsay has been Vice President-Engineering of the Company since
1996. From 1993 to 1996, Mr. Lindsay was General Manager of Viatech, Inc. (a
subsidiary of Simula, Inc.). Prior to that, from January 1991 to October 1993,
he was Product Manager, Composites for Simula, Inc. Mr. Lindsay received a B.S.
from Arizona State University.
Bill R. Beatty has been Director-Marketing and Tour Operations and Sales
Service since 1996. From December 1993 to March 1996, Mr. Beatty was Group
Product Manager and Manager of International Sales and Marketing for Rubbermaid.
Mr. Beatty received a B.S. from Ohio State University and an M.B.A. from
Pepperdine University.
Adrian H. McCall has been Director-International Sales and Marketing of the
Company since 1995. From May 1992 to September 1995, Mr. McCall served as
Director of International Operations of The Upper Deck Company. Mr. McCall
graduated cum laude with a B.S. from the University of Hartford.
Stephen R. Brown has been the Director-Human Resources since 1997. From
September 1996 to December 1997, Mr. Brown served as Manager-Human Resources.
Prior to that, since 1992, Mr. Brown served as Division Human Resource Manager
for the U.S. Electrical Motors Division of Emerson Electric. Mr. Brown received
a B.A. from the University of South Carolina.
James T. Davidson III has been Plant Manager-Steel Operations since January
1998. From April 1996 to December 1997, Mr. Davidson served as Manufacturing
Manager and Materials Manager. Prior to that from
35
<PAGE> 38
April 1993 to April 1996, Mr. Davidson served as Materials Manager and as
Planning Manager from October 1991 to April 1993 for Hoke Incorporated. Mr.
Davidson received a B.A. from Ohio State University.
Mark Rossi became a director of the Company in connection with the
Recapitalization. Mr. Rossi has served as Senior Managing Director of
Cornerstone since December 1996. From 1983 to 1996, Mr. Rossi was affiliated
with the general partners of various private equity funds managed by Prudential.
Mr. Rossi is also a director of Maxwell Technologies, Inc., StorMedia Inc.,
International Manufacturing Services, Inc. and several private companies. Mr.
Rossi received a B.A. from Saint Vincent College and an M.B.A. from Northwestern
University.
Tyler J. Wolfram became a director of the Company in connection with the
Recapitalization. Mr. Wolfram has served as a Managing Director of Cornerstone
since March 1998. From 1993 to March 1998, Mr. Wolfram held various positions in
the High Yield Group of Donaldson, Lufkin & Jenrette Securities Corporation. Mr.
Wolfram received an A.B. from Brown University and an M.B.A. from The Wharton
School of the University of Pennsylvania.
Robert A. Knox became a director of the Company in connection with the
Recapitalization. Mr. Knox has served as Senior Managing Director of Cornerstone
since December 1996. From 1983 to 1996, Mr. Knox was affiliated with the general
partners of various private equity funds managed by Prudential. Mr. Knox is also
a director of Health Management Associates, Lechters, Inc. and several private
companies. Mr. Knox received a B.A. and an M.B.A. from Boston University.
Raymond A. DeVita became a director of the Company in connection with the
Recapitalization. Mr. DeVita served as President of True Temper from 1994 to
1996 and Executive Vice President of Black & Decker from 1989 to 1996. Mr.
DeVita retired in 1996. Prior to 1989, Mr. DeVita was Executive Vice President
of Emhart.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for 1997 of
those persons who served as (i) the chief executive officer during 1997 and (ii)
the other four most highly compensated executive officers of the Company or its
predecessor for 1997 (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------------------
OTHER TOTAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) COMPENSATION
--------------------------- ---- -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Scott C. Hennessy................ 1997 $225,000 $319,668 $28,964 $573,632
Chief Executive Officer,
President and Director
Howard A. Lindsay................ 1997 117,479 44,437 12,767 174,683
Vice President--Engineering
Adrian H. McCall................. 1997 116,708 46,800 3,501 167,009
Director--International Sales
and Marketing
David N. Hallford................ 1997 107,833 42,000 12,920 162,753
Vice President--Sales
Cynthia Sorenson(2).............. 1997 113,000 42,375 4,470 159,845
Vice President--Finance
Administration
Mark Lang(2)..................... 1997 123,500 31,250 4,800 159,550
Vice President--Operations
Bill R. Beatty................... 1997 103,206 32,100 1,471 136,779
Director--Marketing and Tour
Operations
</TABLE>
- ------------------------------
(1) Includes country club dues, matching contributions under the Company's
401(k) plan, and use of a company car.
(2) Ms. Sorenson and Mr. Lang resigned from the Company in February 1998.
36
<PAGE> 39
PENSION PLANS
The Company maintains tax-qualified and nonqualified defined benefit
pension plans that provide monthly annuities payable at age 65, or after age 55
at actuarially reduced levels. Under these plans, the amount of the annuity
which would be payable if a participant were to retire at age 65 is the sum of:
(i) one percent of a participant's final average earnings multiplied by years of
benefit service on and after January 1, 1992; (ii) .425% of a participant's
final average earnings in excess of social security covered compensation
multiplied by years of benefit service on and after January 1, 1992; and (iii)
the participant's adjusted accrued benefit for service prior to 1992 under prior
plans, if applicable. In addition, to the extent that any benefit under the
tax-qualified plan is limited because of restrictions imposed by under the Code,
the non-qualified plan will provide the additional benefit which would have been
provided under the qualified plan if such limitations did not exist. The table
below presents the aggregate pension benefit which would be payable under both
plans:
TRUE TEMPER
ANNUAL PENSION BENEFITS AT NORMAL RETIREMENT DATE
<TABLE>
<CAPTION>
YEARS OF SERVICE
ANNUAL ------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35
- ------------ ------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$125,000 $ 7,400 $15,100 $ 22,900 $ 30,700 $ 38,500 $ 46,300 $ 54,100
$150,000 $ 9,100 $18,500 $ 28,100 $ 37,700 $ 47,300 $ 56,900 $ 66,600
$175,000 $10,700 $21,800 $ 33,200 $ 44,700 $ 56,100 $ 67,600 $ 79,000
$200,000 $12,300 $25,200 $ 38,400 $ 51,700 $ 64,900 $ 78,200 $ 91,500
$225,000 $13,900 $28,500 $ 43,600 $ 58,700 $ 73,800 $ 88,800 $103,900
$250,000 $15,500 $31,900 $ 48,800 $ 65,700 $ 82,600 $ 99,500 $116,400
$300,000 $18,800 $38,600 $ 59,100 $ 79,700 $100,200 $120,700 $141,300
$350,000 $22,000 $45,300 $ 69,500 $ 93,700 $117,800 $142,000 $166,200
$400,000 $25,300 $52,000 $ 79,800 $107,600 $135,500 $163,300 $191,100
$500,000 $31,700 $65,500 $100,500 $135,600 $170,700 $205,800 $240,900
$600,000 $38,200 $78,900 $121,300 $163,600 $206,000 $248,300 $290,700
$700,000 $44,700 $92,300 $142,000 $191,600 $241,200 $290,800 $340,500
</TABLE>
<TABLE>
<CAPTION>
NAME HIRE DATE CREDITED SERVICE
---- --------- ----------------
<S> <C> <C>
Beatty, William................................... June 10, 1996 2 years
Hallford, David................................... February 1, 1989 9 years
Hennessy, Scott................................... June 9, 1980 18 years
Lang, Mark........................................ February 28, 1994 4 years
Lindsay, Howard................................... February 12, 1996 2 years
McCall, Adrian.................................... December 11, 1995 3 years
Sorenson, Cynthia................................. November 9, 1987 11 years
</TABLE>
STOCK OPTION PLAN
The Board of Directors has adopted a stock option plan (the "Stock Plan"),
which provides for the grant to certain key employees and/or directors of the
Company of stock options that are non-qualified options for federal income tax
purposes. The Stock Plan will be administered by the Compensation Committee of
the Board of Directors. The Compensation Committee will have broad powers under
the Stock Plan, including exclusive authority (except as otherwise provided in
the Stock Plan) to determine: (i) who will receive awards; (ii) the type, size
and terms of awards; (iii) the time when awards will be granted; and (iv)
vesting criteria, if any, of the awards.
COMPENSATION OF DIRECTORS
The Company will reimburse directors for any out-of-pocket expenses
incurred by them in connection with services provided in such capacity. In
addition, the Company may compensate directors for services provided in such
capacity.
37
<PAGE> 40
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
All of the Company's capital stock is owned by True Temper Corporation. The
following table sets forth information with respect to the beneficial ownership
of TTC's capital stock as of September 30, 1998 by: (i) all stockholders of TTC
that own more than 5% of any class of such voting securities, (ii) each director
and named executive officer, and (iii) all directors and executive officers as a
group.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF NUMBER OF PERCENTAGE OF OUTSTANDING PERCENTAGE OF
PREFERRED COMMON OUTSTANDING COMMON VOTING CAPITAL
NAME OF BENEFICIAL OWNER SHARES SHARES PREFERRED STOCK STOCK STOCK
------------------------ --------- --------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
TTS LLC(1)................... 11,750,000 8,192,163 94.0% 89.2% 89.2%
c/o Cornerstone Equity
Investors, L.L.C.
717 Fifth Avenue,
Suite 1100 New York, New
York 10022
EII(2)....................... -- 534,632 6.0% 5.8% 5.8%
c/o The Black & Decker
Corporation
701 East Joppa Road
Towson, Maryland 21286
Scott C. Hennessy............ -- 367,444 -- 4% 4%
Howard A. Lindsay............ -- 22,965 -- * *
Adrian H. McCall............. -- 21,933 -- * *
David N. Hallford............ -- 12,902 -- * *
William R. Beatty............ -- 6,193 -- * *
All directors and executive
officers as a group
(8 persons)(3)............. 0 459,305 0 5.0% 5.0%
</TABLE>
- ------------------------------
* Less than 1%.
(1) Membership interests in TTS LLC are held by Cornerstone Equity Investors IV,
L.P. (73.9%), GS Private Equity Partners, L.P. (17.2%), GS Private Equity
Partners Offshore, L.P. (8.3%) and certain other investors (0.5%).
(2) Emhart Industries, Inc., a wholly-owned subsidiary of Black & Decker. See
"The Transactions."
(3) Includes issuance of management incentive shares. Excludes stock held by TTS
LLC, an affiliate of Cornerstone Equity Investors, L.L.C. ("Cornerstone"),
for which the individual directors who are affiliates of Cornerstone
disclaim beneficial ownership.
38
<PAGE> 41
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RECAPITALIZATION AGREEMENT
Pursuant to the Recapitalization Agreement, Black & Decker has indemnified
the Equity Investor against any and all damages resulting from any
misrepresentation or breach of warranty of Black & Decker or TTC contained in
the Recapitalization Agreement, a claim for which is made (in most cases) the
earlier of 18 months following the Closing Date (as defined) or the date on
which audited financial statements for the 1999 calender year are delivered. The
indemnification obligations of Black & Decker under the Recapitalization
Agreement are generally subject to a $5.0 million basket amount and limited to
an aggregate payment of no more than 25% of the Adjusted Purchase Price (as
defined therein) received by Black & Decker pursuant to the Recapitalization.
Black & Decker will indemnify the Company for 50% of all Environmental Liability
(as defined therein) up to an aggregate amount of $10.0 million and 80% of any
Environmental Liability in excess of $10.0 million.
In addition, Black & Decker has agreed for a period of five years after the
Closing Date not to compete with the Company in the business of the Company as
conducted as of the Closing Date. Black & Decker has also agreed for a period of
up to 12 months after the Closing Date of the Recapitalization not to hire or
solicit the employment of certain employees of the Company.
Pursuant to the Recapitalization Agreement, TTC may pay certain contingent
amounts to Black & Decker. The amount of such payments, if any, will be equal to
25% of the EBIT Contribution derived from TTC's sales to Thiokol pursuant to the
Thiokol Contract (each such term as defined in the Recapitalization Agreement).
Such payments will be made annually during the initial term of the Thiokol
Contract based on the EBIT Contribution derived in each such year.
STOCKHOLDERS AGREEMENT
Upon the consummation of the Recapitalization, TTC and all of its
stockholders, including the Equity Investor and Black & Decker (collectively,
the "Stockholders"), entered into a stockholders agreement (the "Stockholders
Agreement"). The Stockholders Agreement: (i) requires that each of the parties
thereto vote all of its voting securities of TTC and take all other necessary or
desirable actions to cause the size of the Board of Directors of TTC to be
established at the number of members determined by the Equity Investor and to
cause designees of the Equity Investor representing a majority of the Board of
Directors to be elected to the Board of Directors of TTC; (ii) grants TTC and
the Equity Investor a right of first refusal on any proposed transfer of shares
of capital stock of TTC held by Black & Decker and any of the other
Stockholders; (iii) grants tag-along rights on certain transfers of shares of
capital stock of TTC; (iv) requires the Stockholders to consent to a sale of TTC
to an independent third party if such sale is approved by certain holders of the
then outstanding shares of voting common stock of TTC; and (v) except in certain
instances, prohibits Black & Decker from transferring any shares of capital
stock of TTC for certain periods following the consummation of the
Recapitalization. Certain of the foregoing provisions of the Stockholders
Agreement will terminate upon the consummation of an Initial Public Offering, a
Qualified Public Offering or an Approved Sale (as each is defined in the
Stockholders Agreement).
EQUITY REGISTRATION RIGHTS AGREEMENT
Upon the consummation of the Recapitalization, TTC and all of its
stockholders, including the Equity Investor and Black & Decker, entered into the
Equity Registration Rights Agreement. Under the Equity Registration Rights
Agreement, the holders of a majority of the TTC Registrable Securities (as
defined in the Equity Registration Rights Agreement) and/or its affiliates have
the right, subject to certain conditions, to require TTC to register any or all
of their shares of common stock of TTC under the Securities Act at TTC's
expense. In addition, all holders of Registrable Securities are entitled to
request the inclusion of any shares of common stock of TTC subject to the Equity
Registration Rights Agreement in any registration statement filed by TTC at
TTC's expense whenever TTC proposes to register any of its common stock under
the Securities
39
<PAGE> 42
Act. In connection with all such registrations, TTC has agreed to indemnify all
holders of Registrable Securities against certain liabilities, including
liabilities under the Securities Act.
TRANSITION SERVICES AGREEMENT
In connection with the Recapitalization, the Company entered into the
Transition Services Agreement with Black & Decker. Pursuant to the Transition
Services Agreement, Black & Decker has agreed to provide a variety of services
(including payroll and financial accounting, among others) at prices set forth
in the Transition Services Agreement for a period of up to 12 months after the
Closing Date.
CORPORATE EXPENSE ALLOCATION
True Temper received certain services provided by Black & Decker that
include cash management, tax reporting, risk management and internal audit.
Allocated expenses for such services, amounting to $1.3 million, $0.7 million
and $0.9 million for 1995, 1996 and 1997, respectively, have been included in
the accompanying statements of operating income. Charges for these corporate
services were based upon a general allocation methodology determined by Black &
Decker (used to allocate all corporate overhead expenses to Black & Decker's
operating divisions), and have not necessarily been allocated on a basis which
approximates True Temper's estimated usage of such services. The corporate
expense allocation also includes the allocation of $0.4 million and $0.1 million
in 1995 and 1996, respectively, which primarily consisted of salaries for
additional management personnel. Group management was disbanded in early 1996.
CORPORATE PASS-THROUGH CHARGES
Black & Decker provided certain common services for True Temper and other
Black & Decker affiliates, including group self-insurance programs and blanket
insurance coverage. Many of these services represent services provided by third
parties whereby Black & Decker incurred the cost of the service on behalf of
True Temper. Black & Decker charged True Temper for the estimated cost of these
services. The costs for these services and/or expenses have been allocated to
True Temper by Black & Decker based upon certain allocation methodologies
determined by Black & Decker. Accordingly, there is no assurance that the
amounts allocated for such items provided by Black & Decker would be indicative
of the actual amounts that True Temper would have incurred on a stand alone
basis.
MANAGEMENT SERVICES AGREEMENT
In connection with the Recapitalization, the Company entered into a
Management Services Agreement with Cornerstone pursuant to which Cornerstone has
agreed to provide: (i) general management services; (ii) assistance with the
identification, negotiation and analysis of acquisitions and dispositions; (iii)
assistance with the negotiation and analysis of financial alternatives; and (iv)
other services agreed upon by the Company and Cornerstone. In exchange for such
services, Cornerstone or its nominee receives: (i) an annual advisory fee of
$0.5 million, plus reasonable out-of-pocket expenses (payable quarterly); (ii) a
transaction fee in an amount equal to 1.0% of the aggregate transaction value in
connection with the consummation of any material acquisition, divestiture,
financing or refinancing by the Company or any of its subsidiaries; and (iii) a
one-time transaction fee of $3.0 million upon the consummation of the
Recapitalization. The Management Services Agreement has an initial term of five
years, subject to automatic one-year extensions unless the Company or
Cornerstone provides written notice of termination. The annual advisory fee of
$0.5 million is an obligation of the Company and is also contractually
subordinated to the Notes and the Senior Credit Facilities.
40
<PAGE> 43
DESCRIPTION OF SENIOR CREDIT FACILITIES
As part of the Transactions, the Company entered into the Senior Credit
Facilities with a syndicate of financial institutions for which Donaldson,
Lufkin & Jenrette Securities Corporation acted as the Arranger and DLJ Capital
Funding, Inc. acted as the Syndication Agent. The following is a summary of the
material terms and conditions of the Senior Credit Facilities and is subject to
the detailed provisions of the Senior Credit Facilities and the various related
documents entered into in connection therewith.
Loans; Interest Rates. The Senior Credit Facilities consist of up to a
$20.0 million six-year non-amortizing Revolving Credit Facility and Term Loans
in an aggregate principal amount of $37.5 million, consisting of a $10.0 million
Term A Loan due 2004 and a $27.5 million Term B Loan due 2005. The borrowings
under the Senior Credit Facilities, together with the aggregate gross proceeds
from the Bridge Note and the Seller Note, the Equity Investor Contribution and
the Retained Equity were used to consummate the Recapitalization and the
Grafalloy Acquisition and to pay fees and expenses related to the Transactions,
the Offering and the Grafalloy Acquisition. In addition, the Senior Credit
Facilities provide financing for future working capital, capital expenditures
and other general corporate purposes.
The Revolving Bank Facility is available on a revolving basis during the
period commencing on the date of the Closing and ending on the date that is six
years after the date of the Closing, subject to a borrowing base. The Company
borrowed $7.5 million under the Term Loans primarily to fund the Grafalloy
Acquisition. At the Company's option, loans made under the Revolving Bank
Facility bear interest at either (i) the Alternate Base Rate (as defined in the
Senior Credit Facilities) plus a margin of 1.00%, or (ii) the reserve-adjusted
LIBO rate plus a margin of 2.25%. The entire amount of the Term Loans was drawn
in connection with the Transactions and the Grafalloy Acquisition; and, at the
Company's option, the Term Loans bear interest at either (i) the Alternate Base
Rate plus a margin of 1.00% in the case of the Term A Loan and 1.25% in the case
of the Term B Loan, (ii) or the reserve-adjusted LIBO rate plus a margin of
2.25% in the case of the Term A Loan and 2.50% in the case of the Term B Loan;
provided that, commencing six months after the closing of the Senior Credit
Facilities), the applicable margins for the Revolving Credit Facility and the
Term A Loan will be subject to a performance-based grid and may be adjusted
pursuant thereto.
Repayment. Revolving loans may be borrowed, repaid and reborrowed from
time to time until six years after the closing of the Senior Credit Facilities.
The Term Loan may be repaid at any time but must be repaid in full eight years
after the closing of the Senior Credit Facilities.
Security. The Revolving Credit Facility is secured by a first-priority
lien and the Term Loan is secured by a second-priority lien on all capital stock
of the Company and substantially all property and assets (tangible and
intangible) of the Company and each of its U.S. Subsidiaries, including, without
limitation, all intercompany indebtedness, and all capital stock (or similar
equity interests) of each of the Company's direct and indirect subsidiaries,
whenever acquired and wherever located; provided, however, that no more than 65%
of the capital stock or similar equity interests of non-U.S. subsidiaries is
required to be pledged as security in the event that a pledge of a greater
percentage results in material increased tax or similar liabilities for the
Company and its Subsidiaries on a consolidated basis or violate applicable law.
Prepayments. In addition, the Senior Credit Facilities provide for
mandatory repayments, subject to certain exceptions, of the Term Loan, and
reductions in the Revolving Credit Facility, based on certain net asset sales
outside the ordinary course of business of the Issuer and its subsidiaries, the
net proceeds of certain debt and equity issuances, and excess cash flow.
Outstanding loans under the Senior Credit Facilities are voluntarily
pre-payable without penalty; provided, however, that LIBO rate breakage costs,
if any, are borne by the Company.
Conditions and Covenants. The obligations of the lenders under the Senior
Credit Facilities are subject to the satisfaction of certain conditions
precedent customary for similar bank facilities or otherwise appropriate under
the circumstances. The Company and each of its Subsidiaries are subject to
certain negative covenants contained in the Senior Credit Facilities, including
without limitation covenants that restrict: (i) the incurrence of additional
indebtedness and other obligations and the granting of additional liens; (ii)
mergers, consolidations, amalgamations, liquidations, dissolutions and
dispositions of assets; (iii) investments, loans
41
<PAGE> 44
and advances; (iv) dividends, stock repurchases and redemptions; (v) prepayment
or repurchase of subordinated indebtedness and amendments to certain agreements
governing indebtedness, including the Indenture and the Notes; (vi) engaging in
transactions with affiliates; and (vii) sales and leasebacks. The Senior Credit
Facilities also contain customary affirmative covenants, including compliance
with environmental laws, maintenance of corporate existence and rights,
maintenance of insurance, property and interest rate protection, financial
reporting, inspection of property, books and records, and the pledge of
additional collateral and guarantees from new subsidiaries. In addition, the
Senior Credit Facilities require the Company to maintain a minimum interest
coverage ratio, a minimum fixed charge coverage ratio, minimum EBITDA (as
defined therein) and a maximum leverage ratio. Certain of these financial,
negative and affirmative covenants are more restrictive than those set forth in
the Indenture.
Events of Default. The Senior Credit Facilities also include events of
default that are typical for senior bank facilities and appropriate in the
context of the Transactions, including, without limitation, nonpayment of
principal, interest, fees or reimbursement obligations with respect to letters
of credit, violation of covenants, inaccuracy of representations and warranties
in any material respect, cross default to certain other indebtedness and
agreements, bankruptcy and insolvency events, material judgments and
liabilities, defaults or judgements under ERISA and change of control. The
occurrence of any of such events of default could result in acceleration of the
Company's obligations under the Senior Credit Facilities and foreclosure on the
collateral securing such obligations, which could have material adverse results
to holders of the Notes.
42
<PAGE> 45
DESCRIPTION OF EXCHANGE NOTES
GENERAL
The Exchange Notes (the "Notes") will be issued pursuant to the terms of
the indenture (the "Indenture"), dated as of November 23, 1998 between the
Company and United States Trust Company of New York, as trustee (the "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. A copy of the Indenture may be obtained
from the Company. The definitions of certain capitalized terms used in the
following summary are set forth below under "-- Certain Definitions."
The Exchange Notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
the Trustee will act as Paying Agent and Registrar for the Exchange Notes. The
Exchange Notes may be presented for registration or transfer and exchange at the
offices of the Registrar, which initially will be the Trustee's corporate trust
office. The Company may change any Paying Agent and Registrar without notice to
holders of the Exchange Notes (the "Holders"). The Company will pay principal
(and premium, if any) on the Exchange Notes at the Trustee's corporate office in
New York, New York. At the Company's option, interest may be paid at the
Trustee's corporate trust office or by check mailed to the registered address of
Holders. Any Notes that remain outstanding after the completion of the Exchange
Offer, together with the Exchange Notes issued in connection with the Exchange
Offer, will be treated as a single class of securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $150.0 million, of
which $100.0 million have been issued on the date of original issuance, and will
mature on December 1, 2008. Interest on the Notes accrues at the rate of 10.875%
per annum and will be payable semi-annually in arrears on June 1 and December 1
of each year, commencing on June 1, 1999, to Holders of record on the
immediately preceding May 15 and November 15. Interest on the Notes accrues from
the most recent date to which interest has been paid or, if no interest has been
paid, from the date of original issuance. Additional Notes may be issued from
time to time after the Offering, subject to the provisions of the Indenture
described below under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock." The Notes offered hereby and any
additional Notes subsequently issued under the Indenture would be treated as a
single class for all purposes under the Indenture, including, without
limitation, waivers, amendments, redemptions and offers to purchase. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months. Principal, premium and Liquidated Damages, if any, and interest on the
Notes will be payable at the office or agency of the Company maintained for such
purpose within the City and State of New York or, at the option of the Company,
payment of interest and Liquidated Damages, if any, may be made by check mailed
to the Holders of the Notes at their respective addresses set forth in the
register of Holders of Notes; provided that all payments of principal, premium
and Liquidated Damages, if any, and interest with respect to Notes represented
by one or more permanent global Notes will be paid by wire transfer of
immediately available funds to the account of The Depository Trust Company or
any successor thereto. Until otherwise designated by the Company, the Company's
office or agency in New York will be the office of the Trustee maintained for
such purpose. The Notes have been issued in denominations of $1,000 and integral
multiples thereof.
SUBORDINATION
The payment of principal of, premium and Liquidated Damages, if any, and
interest on the Notes will be subordinated in right of payment, as set forth in
the Indenture, to the prior payment in full of all Senior Debt, whether
outstanding on the date of the Indenture or thereafter created, incurred or
assumed and all permissible renewals, extensions, refundings or refinancings
thereof.
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<PAGE> 46
The Indenture provides that, upon any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to creditors in any Insolvency or Liquidation Proceeding with respect to the
Company all amounts due or to become due under or with respect to all Senior
Debt will first be paid in full in cash before any payment is made on account of
the Notes, except that the Holders of Notes may receive Reorganization
Securities. Upon any such Insolvency or Liquidation Proceeding, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (other than Reorganization Securities), to which the
Holders of the Notes or the Trustee would be entitled will be paid by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other person making such payment or distribution, or by the Holders of the Notes
or by the Trustee if received by them, directly to the holders of Senior Debt
(pro rata to such holders on the basis of the amounts of Senior Debt held by
such holders) or their Representative or Representatives, as their interests may
appear, for application to the payment of the Senior Debt remaining unpaid until
all such Senior Debt has been paid in full in cash, after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
Senior Debt.
The Indenture provides that (a) in the event of and during the continuation
of any default in the payment of principal of, interest or premium, if any, on
any Senior Debt, or any Obligation owing from time to time under or in respect
of Senior Debt, or in the event that any event of default (other than a payment
default) with respect to any Senior Debt will have occurred and be continuing
and will have resulted in such Senior Debt becoming or being declared due and
payable prior to the date on which it would otherwise have become due and
payable, or (b) if any event of default other than as described in clause (a)
above with respect to any Designated Senior Debt will have occurred and be
continuing permitting the holders of such Designated Senior Debt (or their
Representative or Representatives) to declare such Designated Senior Debt due
and payable prior to the date on which it would otherwise have become due and
payable, then no payment will be made by or on behalf of the Company on account
of the Notes (other than payments in the form of Reorganization Securities) (x)
in case of any payment or nonpayment default specified in (a), unless and until
such default will have been cured or waived in writing in accordance with the
instruments governing such Senior Debt or such acceleration will have been
rescinded or annulled, or (y) in case of any nonpayment event of default
specified in (b), during the period (a "Payment Blockage Period") commencing on
the date the Company or the Trustee receives written notice (a "Payment Notice")
of such event of default (which notice will be binding on the Trustee and the
Holders of Notes as to the occurrence of such a payment default or nonpayment
event of default) from the Credit Agent (or other holders of Designated Senior
Debt or their Representative or Representatives) and ending on the earliest of
(A) 179 days after such date, (B) the date, if any, on which such Designated
Senior Debt to which such default relates is paid in full in cash or such
default is cured or waived in writing in accordance with the instruments
governing such Designated Senior Debt by the holders of such Designated Senior
Debt and (C) the date on which the Trustee receives written notice from the
Credit Agent (or other holders of Designated Senior Debt or their Representative
or Representatives), as the case may be, terminating the Payment Blockage
Period. During any consecutive 360-day period, the aggregate of all Payment
Blockage Periods shall not exceed 179 days and there shall be a period of at
least 181 consecutive days in each consecutive 360-day period when no Payment
Blockage Period is in effect. No event of default which existed or was
continuing with respect to the Senior Debt for which notice commencing a Payment
Blockage Period was given on the date such Payment Blockage Period commenced
shall be or be made the basis for the commencement of any subsequent Payment
Blockage Period unless such event of default is cured or waived for a period of
not less than 90 consecutive days.
As a result of the subordination provisions described above, in the event
of the Company's liquidation, dissolution, bankruptcy, reorganization,
insolvency, receivership or similar proceeding or in an assignment for the
benefit of the creditors or a marshalling of the assets and liabilities of the
Company, Holders of Notes may recover less ratably than creditors of the Company
who are holders of Senior Debt. See "Risk Factors--Subordination." The Indenture
limits, subject to certain financial tests, the amount of additional
Indebtedness, including Senior Debt, that the Company and its Restricted
Subsidiaries can incur. See "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock."
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<PAGE> 47
OPTIONAL REDEMPTION
Except as provided below, the Notes will not be redeemable at the Company's
option prior to December 1, 2003. Thereafter, the Notes will be subject to
redemption at any time at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the applicable
redemption date, if redeemed during the twelve-month period beginning on
December 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003.............................................. 105.438%
2004.............................................. 103.625%
2005.............................................. 101.813%
2006 and thereafter............................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to December 1, 2001, the
Company may on one or more occasions redeem up to 35% of the original aggregate
principal amount of Notes at a redemption price of 110.875% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the redemption date, with the net cash proceeds of one or more Public
Equity Offerings; provided that at least 65% of the original aggregate principal
amount of Notes remains outstanding immediately after the occurrence of such
redemption; and provided, further, that such redemption shall occur within 90
days of the date of the closing of such Public Equity Offering.
At any time prior to December 1, 2003, the Notes may also be redeemed, in
whole but not in part, at the option of the Company upon the occurrence of a
Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event may any such redemption occur more than 90 days after the
occurrence of such Change of Control) mailed by first-class mail to each
Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest and Liquidated Damages, if any, to, the date of redemption (the
"Redemption Date").
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages
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<PAGE> 48
thereon, if any, to the date of purchase (the "Change of Control Payment").
Within 60 days following any Change of Control, the Company will mail a notice
to each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Notes on the date specified in such
notice, which date shall be no earlier than 30 days and no later than 60 days
from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by the Indenture and described in such
notice. The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of the Indenture relating to such Change of Control Offer, the
Company will comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations described in the Indenture
by virtue thereof.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of that phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash or Cash Equivalents; provided that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Company
or such Restricted Subsidiary from further liability and (y) any securities,
notes or other obligations received by the Company or
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<PAGE> 49
any such Restricted Subsidiary from such transferee that are converted by the
Company or such Restricted Subsidiary into cash or Cash Equivalents within 180
days (to the extent of the cash received), shall be deemed to be cash for
purposes of this provision; and provided further that the 75% limitation
referred to in clause (ii) above will not apply to any Asset Sale in which the
cash or Cash Equivalents portion of the consideration received therefrom,
determined in accordance with the foregoing proviso, is equal to or greater than
what the after-tax proceeds would have been had such Asset Sale complied with
the aforementioned 75% limitation.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or any such Restricted Subsidiary may apply such Net Proceeds, at
its option, (a) to repay or repurchase Senior Debt of the Company or any
Restricted Subsidiary or (b) to the acquisition of a controlling interest in
another business, the making of a capital expenditure or the acquisition of
other assets, in each case, in a Permitted Business. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce the
revolving Indebtedness under the Senior Credit Facilities or otherwise invest
such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company
will be required to make an offer to all Holders of Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Notes that may be purchased
out of the Excess Proceeds, at an offer price in cash in an amount equal to 100%
of the principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
To the extent that the provisions of any securities laws or regulations
conflict with the provisions of the Indenture relating to such Asset Sale Offer,
the Company will comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations described in the Indenture
by virtue thereof.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that from and after the date of the Indenture the
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment on
such Equity Interests in connection with any merger or consolidation involving
the Company) or to the direct or indirect holders of the Company's or any of its
Restricted Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company); (ii) purchase, redeem or otherwise acquire or retire for
value (including without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company or any
direct or indirect parent of the Company (other than any such Equity Interests
owned by the Company or any Restricted Subsidiary of the Company); (iii) make
any payment on or with respect to, or purchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness that is subordinated to the Notes,
except scheduled payments of interest or principal at Stated Maturity of such
Indebtedness; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
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<PAGE> 50
(b) the Company would, after giving pro forma effect thereto as if
such Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of the covenant described below under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (i), (ii), (iii), (iv), (viii) (other than those
permitted by clause (f) of the definition of "Permitted Investments"),
(ix), (xii), (xiii), (xiv) and (xv) of the next succeeding paragraph), is
less than the sum of (i) 50% of the Consolidated Net Income of the Company
for the period (taken as one accounting period) from the beginning of the
first full fiscal quarter commencing after the date of the Indenture to the
end of the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds
received by the Company as a contribution to the Company's capital or
received by the Company from the issue or sale since the date of the
Indenture of Equity Interests of the Company (other than Disqualified
Stock) or of Disqualified Stock or debt securities of the Company that have
been converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or debt securities) sold to a Restricted Subsidiary of
the Company and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus (iii) to
the extent that any Restricted Investment that was made after the date of
the Indenture is sold for cash or otherwise liquidated or repaid for cash,
the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, plus (iv) if any Unrestricted
Subsidiary (A) is redesignated as a Restricted Subsidiary, the fair market
value of such redesignated Subsidiary (as determined in good faith by the
Board of Directors) as of the date of its redesignation or (B) pays any
cash dividends or cash distributions to the Company or any of its
Restricted Subsidiaries, 100% of any such cash dividends or cash
distributions made after the date of the Indenture.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale or issuance (other than to a Restricted Subsidiary of the Company) of,
other Equity Interests of the Company (other than Disqualified Stock); provided
that the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (c)(ii) of the preceding paragraph; (iii) the defeasance,
redemption, repurchase or other acquisition of subordinated Indebtedness with
the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(iv) the payment of any dividend by a Restricted Subsidiary of the Company to
the holders of its Equity Interests on a pro rata basis; (v) the declaration or
payment of dividends to TTC for expenses incurred by TTC in its capacity as a
holding company or for services rendered on behalf of the Company, including,
without limitation, (a) customary salary, bonus and other benefits payable to
officers, employees and consultants of TTC, (b) fees and expenses paid to
members of the Board of Directors of TTC, (c) general corporate overhead
expenses of TTC, (d) management, consulting or advisory fees paid to TTC or to
permit TTC to pay management, consulting or advisory fees, in each case, not to
exceed $1.5 million in any fiscal year, and (e) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of TTC or the
Company held by any member or former member of TTC's or the Company's (or any of
their Restricted Subsidiaries') management pursuant to any management equity
subscription agreement, stockholders agreement or stock option agreement in
effect as of the date of the Indenture; provided, however, (A) with respect to
clauses (a) through (c) above, the aggregate amount paid does not exceed $2.0
million in any fiscal year and (B) with respect to clause (e) above, the
aggregate price paid shall not exceed (x) $1.0 million in any calendar year
(with unused amounts in any calendar year being carried over to succeeding
calendar years subject to a maximum (without giving effect to clause (y)) of
$2.0
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<PAGE> 51
million in any calendar year, plus (y) the aggregate cash proceeds received by
the Company from any issuance or reissuance of Equity Interests by TTC to
members of management of the Company and its Restricted Subsidiaries and the
proceeds to the Company of any "key-man" life insurance policies; provided that
the cancellation of Indebtedness owing to the Company from members of management
of the Company or any Restricted Subsidiary in connection with such repurchase
of Equity Interests will not be deemed to be a Restricted Payment; (vi)
Investments in any Person (other than the Company or a Restricted Subsidiary)
engaged in a Permitted Business in an amount not to exceed $5.0 million; (vii)
other Investments in Unrestricted Subsidiaries having an aggregate fair market
value, taken together with all other Investments made pursuant to this clause
(vii) that are at that time outstanding, not to exceed $3.0 million; (viii)
Permitted Investments; (ix) the declaration or payment of dividends or other
payments to TTC pursuant to any tax sharing agreement or other arrangement among
TTC or other members of the affiliated corporations of which TTC is the common
parent; (x) other Restricted Payments in an aggregate amount not to exceed $7.5
million; (xi) so long as no Default or Event of Default has occurred and is
continuing, the declaration and payment of dividends on Disqualified Stock
issued or after the date of the Indenture, the incurrence of which satisfied the
covenant set forth in the first paragraph of "--Incurrence of Indebtedness and
Issuance of Preferred Stock" below; (xii) the declaration or payment of
dividends to TTC to satisfy any required purchase price adjustment payment
arising out of the Recapitalization; (xiii) the declaration or payment of
dividends or other payments to TTC in an amount not to exceed $1.0 million to
satisfy redemption obligations in respect of Equity Interests of TTC that are
held by management of TTC or the Company; provided that such amount shall not be
applied against expenses incurred pursuant to clause (v)(e) above; (xiv)
repurchases of Equity Interests deemed to occur upon the exercise of stock
options if such Equity Interests represent a portion of the exercise price
thereof; and (xv) distributions to TTC to fund the Transactions. See "The
Transactions."
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation (as
determined in good faith by the Board of Directors). Such designation will only
be permitted if such Restricted Payment would be permitted at such time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined in good faith by the Board of
Directors whose resolution with respect thereto shall be delivered to the
Trustee; such determination will be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $10.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "--Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock or preferred stock and the Company's
Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) and
issue Disqualified Stock or preferred
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<PAGE> 52
stock if the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 2.0 to 1,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock or preferred stock had been issued, as the case may be, at
the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness and letters of credit pursuant to the Senior
Credit Facilities;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes issued on the Issue Date;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary (whether through the
direct purchase of assets or the Capital Stock of any Person owning such
Assets), in an aggregate principal amount or accreted value, as applicable,
not to exceed $10.0 million;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of assets
or a new Restricted Subsidiary; provided that such Indebtedness was
incurred by the prior owner of such assets or such Restricted Subsidiary
prior to such acquisition by the Company or one of its Subsidiaries and was
not incurred in connection with, or in contemplation of, such acquisition
by the Company or one of its Subsidiaries; provided further that the
principal amount (or accreted value, as applicable) of such Indebtedness,
together with any other outstanding Indebtedness incurred pursuant to this
clause (v), does not exceed $7.5 million;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness
that was permitted by the Indenture to be incurred;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; provided, however, that (i) if the
Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and (ii)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary and (B) any sale
or other transfer of any such Indebtedness to a Person that is not either
the Company or a Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging: (i) interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding; (ii) exchange rate risk with respect to any agreement or
Indebtedness of such Person payable in a currency other than U.S. dollars;
or (iii) commodities risk relating to commodities agreements, entered into
in the ordinary course of business, for the purchase of raw material used
by the Company and its Restricted Subsidiaries;
(ix) the Guarantee by the Company or any of its Restricted
Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary of
the Company that was permitted to be incurred by another provision of this
covenant;
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(x) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt; provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company;
(xi) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including without
limitation to letters of credit in respect to workers' compensation claims
or self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims; provided, however, that
upon the drawing of such letters of credit or the incurrence of such
Indebtedness, such obligations are reimbursed within 30 days following such
drawing or incurrence;
(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 or assumed in
connection with the disposition of any business, asset or Subsidiary, other
than guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Subsidiary for the purpose of financing
such acquisition; provided that (x) such Indebtedness is not reflected on
the balance sheet of the Company or any Restricted Subsidiary (contingent
obligations referred to in a footnote or footnotes to financial statements
and not otherwise reflected on the balance sheet will not be deemed to be
reflected on such balance sheet for purposes of this clause (x)) and (y)
the maximum assumable liability in respect of such Indebtedness shall at no
time exceed the gross proceeds including non-cash proceeds (the fair market
value of such non-cash proceeds being measured at the time received and
without giving effect to any such subsequent changes in value) actually
received by the Company and/or such Restricted Subsidiary in connection
with such disposition;
(xiii) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
in the ordinary course of business;
(xiv) guarantees incurred in the ordinary course of business in an
aggregate principal amount not to exceed $5.0 million at any time
outstanding; and
(xv) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness, including Attributable Debt
incurred after the date of the Indenture, in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any other Indebtedness incurred pursuant to this clause (xv), not to exceed
$10.0 million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xv) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. In addition, the Company may, at any time, change
the classification of an item of Indebtedness (or any portion thereof) to any
other clause or to the first paragraph hereof provided that the Company would be
permitted to incur such item of Indebtedness (or portion thereof) pursuant to
such other clause or the first paragraph hereof, as the case may be, at such
time of reclassification. Accrual of interest, accretion or amortization of
original issue discount and the accretion of accreted value will not be deemed
to be an incurrence of Indebtedness for purposes of this covenant.
LIENS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or
suffer to exist or become effective any Lien of any kind securing trade payables
or Indebtedness that does not constitute Senior Debt (other than Permitted
Liens) upon any of their property or assets, now owned or hereafter acquired
unless (i) in the case of Liens securing Indebtedness
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that is expressly subordinated or junior in right of payment to the Notes, the
Notes are secured on a senior basis to the obligations so secured until such
time as such obligations are no longer secured by a Lien and (ii) in all other
cases, the Notes are secured on an equal and ratable basis with the obligations
so secured until such time as such obligations are no longer secured by a Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any Indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, (b) the Senior Credit
Facilities as in effect as of the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive in the aggregate (as
determined in the good faith judgment of the Company's Board of Directors) with
respect to such dividend and other payment restrictions than those contained in
the Senior Credit Facilities as in effect on the date of the Indenture, (c) the
Indenture and the Notes, (d) any applicable law, rule, regulation or order, (e)
any instrument of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be incurred, (f) by
reason of customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (h) Permitted Refinancing Indebtedness, provided that the
material restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, in the good faith judgment of
the Company's board of directors, taken as a whole, to the Holders of Notes than
those contained in the agreements governing the Indebtedness being refinanced,
(i) contracts for the sale of assets, including without limitation customary
restrictions with respect to a Subsidiary pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary, (j) restrictions on cash or other
deposits or net worth imposed by customers under contracts entered into in the
ordinary course of business and (k) other Indebtedness or Disqualified Stock of
Restricted Subsidiaries permitted to be incurred subsequent to the Issuance Date
pursuant to the provisions of the covenant described under "--Incurrence of
Indebtedness and Issuance of Preferred Stock."
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless (i) the Company is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of the Company under the Notes and the Indenture pursuant to
a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) the Company
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or the entity or Person formed by or surviving any such consolidation or merger
(if other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (a) will, after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described above under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock" or (b) would
(together with its Restricted Subsidiaries) have a higher Fixed Charge Coverage
Ratio immediately after such transaction (after giving pro forma effect thereto
as if such transaction had occurred at the beginning of the applicable
four-quarter period) than the Fixed Charge Coverage Ratio of the Company and its
subsidiaries immediately prior to the transaction. The foregoing clause (iv)
will not prohibit (a) a merger between the Company and a Wholly Owned Subsidiary
of TTC created for the purpose of holding the Capital Stock of the Company, (b)
a merger between the Company and a Wholly Owned Subsidiary or (c) a merger
between the Company and an Affiliate incorporated solely for the purpose of
reincorporating the Company in another state of the United States so long as, in
each case, the amount of Indebtedness of the Company and its Restricted
Subsidiaries is not increased thereby. The Indenture will also provide that the
Company may not, directly or indirectly, lease all or substantially all of its
properties or assets, in one or more related transactions, to any other Person.
The provisions of this covenant will not be applicable to a sale, assignment,
transfer, conveyance or other disposition of assets between or among the Company
and its Wholly Owned Restricted Subsidiaries.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction")
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $7.5 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing; provided that the following shall not be deemed Affiliate
Transactions: (a) customary directors' fees, indemnification or similar
arrangements or any employment agreement or other compensation plan or
arrangement entered into by the Company or any of its Restricted Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Restricted Subsidiary, (b) transactions between or among the
Company and/or its Restricted Subsidiaries, (c) Permitted Investments and
Restricted Payments that are permitted by the provisions of the Indenture
described above under the caption "--Restricted Payments," (d) customary loans,
advances, fees and compensation paid to, and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any of its
Restricted Subsidiaries, (e) transactions pursuant to any contract or agreement
in effect on the date of the Indenture as the same may be amended, modified or
replaced from time to time so long as any such amendment, modification or
replacement is no less favorable to the Company and its Restricted Subsidiaries
than the contract or agreement as in effect on the Issue Date, (f) insurance
arrangements among TTC and its Subsidiaries that are not less favorable to the
Company or any of its Subsidiaries than those that are in effect on the date
hereof provided such arrangements are conducted in the ordinary course of
business consistent with past practices, (g) payments under any tax sharing
agreement or other arrangement among TTC and other members of the affiliated
group of corporations of which either is the common parent and (h) payments in
connection with the Transactions (including the payment of fees and expenses
with respect thereto).
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ANTI-LAYERING
The Indenture provides that the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is both
(a) subordinate or junior in right of payment to any Senior Debt and (b) senior
in any respect in right of payment to the Notes.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that the Company or any Restricted Subsidiary may enter
into a sale and leaseback transaction if (i) the Company or such Restricted
Subsidiary could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the covenant described above under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock" and (b) incurred a Lien to secure such Indebtedness
pursuant to the covenant described above under the caption "--Liens," (ii) the
gross cash proceeds of such sale and leaseback transaction are at least equal to
the fair market value (as determined in good faith by the Board of Directors and
set forth in an Officers' Certificate delivered to the Trustee) of the property
that is the subject of such sale and leaseback transaction and (iii) the
transfer of assets in such sale and leaseback transaction is permitted by, and
the Company applies the proceeds of such transaction in compliance with, the
covenant described above under the caption "--Repurchase at the Option of
Holders--Asset Sales."
LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS
The Indenture provides that the Company will not permit any Domestic
Restricted Subsidiary, directly or indirectly, to incur Indebtedness or
Guarantee or pledge any assets to secure the payment of any other Indebtedness
of the Company or any Restricted Subsidiary unless either such Restricted
Subsidiary (x) is a Subsidiary Guarantor or (y) simultaneously executes and
delivers a supplemental indenture to the Indenture and becomes a Subsidiary
Guarantor, which Guarantee shall (x) with respect to any Guarantee of Senior
Debt, be subordinated in right of payment on the same terms as the Notes are
subordinated to such Senior Debt and (y) with respect to any Guarantee of any
other Indebtedness, be senior to or pari passu with such Restricted Subsidiary's
other Indebtedness or Guarantee of or pledge to secure such other Indebtedness.
Notwithstanding the foregoing, any such Guarantee by a Restricted Subsidiary of
the Notes shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon any sale, exchange or transfer, to
any Person not an Affiliate of the Company, of all of the Company's stock in, or
all or substantially all the assets of, such Restricted Subsidiary, which sale,
exchange or transfer is made in compliance with the applicable provisions of the
Indenture.
ADDITIONAL GUARANTEES
The Indenture provides that if the Company shall acquire or create a
Domestic Restricted Subsidiary after the date of the Indenture, or if any
Subsidiary of the Company becomes a Domestic Restricted Subsidiary, then such
newly acquired or created Domestic Restricted Subsidiary shall become a
Guarantor and execute a Supplemental Indenture and deliver an opinion of
counsel, in accordance with terms of the Indenture.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than a Permitted Business, except to such extent as
would not be material to the Company and its Restricted Subsidiaries taken as a
whole.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms
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10-Q and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Company were required to file such reports, in each case, within the time
periods specified in the Commission's rules and regulations. In addition,
following the consummation of the exchange offer contemplated by the
Registration Rights Agreement, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company has agreed that, for so long as any Notes remain outstanding, it will
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not permitted by the
subordination provisions of the Indenture); (ii) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not permitted by
the subordination provisions of the Indenture); (iii) failure by the Company to
comply with the provisions described under the captions "--Repurchase at the
Option of Holders--Change of Control"; (iv) failure by the Company for 30 days
after notice from the Trustee or at least 25% in principal amount of the Notes
then outstanding to comply with the provisions described under the captions
"--Repurchase at the Option of Holders--Asset Sales," "--Certain
Covenants--Restricted Payments" or "--Incurrence of Indebtedness and Issuance of
Preferred Stock"; (v) failure by the Company for 60 days after notice from the
Trustee or holders of at least 25% in principal amount of the Notes then
outstanding voting as a single class to comply with any of its other agreements
in the Indenture or the Notes; (vi) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Restricted Subsidiaries) whether such Indebtedness or Guarantee now
exists, or is created after the date of the Indenture, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $5.0
million or more; (vii) failure by the Company or any of its Subsidiaries to pay
final judgments aggregating in excess of $5.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days; and (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Restricted
Subsidiaries that are Significant Subsidiaries. In the event of a declaration of
acceleration of the Notes because an Event of Default has occurred and is
continuing as a result of the acceleration of any Indebtedness described in
clause (vi) of the preceding paragraph, the declaration of acceleration of the
Notes shall be automatically annulled if the holders of any Indebtedness
described in clause (vi) of the preceding paragraph have rescinded the
declaration of acceleration in respect of such Indebtedness within 30 days of
the date of such declaration and if (a) the annulment of the acceleration of
Notes would not conflict with any judgment or decree of a court of competent
jurisdiction and (b) all existing Events of Default, except nonpayment of
principal or interest on the Notes that became due solely because of the
acceleration of the Notes have been cured or waived.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately; provided, that so long
as any Indebtedness permitted to be incurred pursuant to the Senior Credit
Facilities shall be outstanding, such acceleration shall not be effective until
the earlier of (i) an acceleration of any such Indebtedness under the Senior
Credit Facilities or (ii) five business days after receipt by the Company of
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written notice of such acceleration. Notwithstanding the foregoing, in the case
of an Event of Default arising from certain events of bankruptcy or insolvency,
with respect to the Company or any of its Subsidiaries all outstanding Notes
will become due and payable without further action or notice. Holders of the
Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
December 1, 2003 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to December 1, 2003, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium and Liquidated Damages,
if any, and interest on such Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "--Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable
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Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages, if any,
and interest on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, subject to customary assumptions and exclusions, the Holders of
the outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that, subject to customary assumptions and exclusions, the Holders of
the outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Covenant Defeasance had not occurred; (iv)
no Default or Event of Default shall have occurred and be continuing on the date
of such deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit); (v) such Legal Defeasance or
Covenant Defeasance will not result in a breach or violation of, or constitute a
default under any material agreement or instrument (other than the Indenture) to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound; (vi) the Company must deliver to the
Trustee an Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (vii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel (which
opinion may be subject to customary assumptions and exclusions), each stating
that all conditions precedent provided for relating to the Legal Defeasance or
the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture and
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver; (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to
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the covenants described above under the caption "--Repurchase at the Option of
Holders"); (iii) reduce the rate of or change the time for payment of interest
on any Note; (iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration); (v) make any Note payable in money other than that
stated in the Notes; (vi) make any change in the provisions of the Indenture
relating to waivers of (a) past Defaults or (b) the rights of Holders of Notes
to receive payments of principal of or premium, if any, or interest on the
Notes; (vii) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders"); (viii) make any change in the
foregoing amendment and waiver provisions or (ix) release any guarantor from any
of its obligations under its guarantee of the Notes or the Indenture, except in
accordance with the terms of the Indenture. In addition, any amendment to the
provisions of Article 10 of the Indenture (which relate to subordination) will
require the consent of the Holders of at least 75% in aggregate principal amount
of the Notes then outstanding if such amendment would adversely affect the
rights of Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation or the sale of all or substantially all of the assets of
the Company, to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with requirements of
the Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act, to provide for the issuance of Additional Notes
in accordance with the limitations set forth in the Indenture or to allow any
Subsidiary to guarantee the Notes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to True Temper Sports,
Inc., 8275 Tournament Drive, Suite 200, Memphis, Tennessee 38125; Attention:
Vice President--Finance and Administration.
BOOK-ENTRY, DELIVERY AND FORM
The Notes were offered and sold to QIBs in reliance on Rule 144A ("Rule
144A Notes").
Rule 144A Notes initially were represented by one or more Notes in
registered, global form without interest coupons (collectively, the "144A Global
Notes"). The 144A Global Notes were deposited upon
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issuance with the Trustee as custodian for The Depository Trust Company ("DTC"),
in New York, New York, and registered in the name of DTC or its nominee, in each
case for credit to an account of a direct or indirect participant as described
below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"--Book-Entry, Delivery and Form--Exchange of Book-Entry Notes for Certificated
Notes."
Rule 144A Notes (including beneficial interests in the 144A Global Notes)
are subject to certain restrictions on transfer and will bear a restrictive
legend as described under "Notice to Investors." In addition, transfer of
beneficial interests in the Global Notes are subject to the applicable rules and
procedures of DTC and its direct or indirect participants (including, if
applicable, those of Euroclear and Cedel Bank), which may change from time to
time.
The Notes may be presented for registration of transfer and exchange at the
offices of the Registrar.
DEPOSITORY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and Indirect Participants.
DTC has also advised the Company that pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchaser with portions of the principal
amount of Global Notes and (ii) ownership of such interests in the Global Notes
will be shown on, and the transfer ownership thereof will be effected only
through, records maintained by DTC (with respect to Participants) or by
Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Notes).
Investors in the 144A Global Notes may hold their interests therein
directly through DTC or indirectly through organizations such as Euroclear and
Cedel Bank. All interests in a Global Note, including those held through
Euroclear or Cedel Bank, may be subject to the procedures and requirements of
DTC. Those interests held by Euroclear or Cedel Bank may also be subject to the
procedures and requirements of such system.
The laws of some states require that certain persons take physical delivery
in definitive form of securities they own. Consequently, the ability to transfer
beneficial interest in a Global Note to such persons may be limited to that
extent. Because DTC can act only on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in a Global Note to pledge such interest to persons
or entities that do not participate in the DTC system, or otherwise take actions
in respect of such interests, may be affected by the lack of physical
certificate evidencing such interests. For certain other restrictions on the
transferability of the Notes, see "--Book-Entry, Delivery and Form--Exchange of
Book-Entry Notes for Certificated Notes" and "--Book-Entry, Delivery and
Form--Exchanges of Rule 144A Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
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Payments in respect of the principal and premium and Liquidated Damages, if
any, and interest on a Global Note registered in the name of DTC or its nominee
will be payable by the Trustee to DTC or its nominee in its capacity as the
registered holder under the Indenture. Under the terms of the Indenture, the
Company and the Trustee will treat the persons in whose names the Notes,
including the Global Notes, are registered as the owners thereof for the purpose
of receiving such payments and for any and all other purposes whatsoever.
Consequently, none of the Company, the Trustee nor any agent of the Company or
the Trustee has or will have any responsibility or liability for (i) any aspect
of DTC's records or any Participant's or Indirect Participant's records relating
to or payments made on account of beneficial ownership interests in the Global
Notes, or for maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Notes or (ii) any other matter relating to the
actions and practices of DTC or any of its Participants or Indirect
Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Notes as shown on the records of DTC. Payments by
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or its Participants in
identifying the beneficial owners of the Notes, and the Company and the Trustee
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee as the registered owner of the Notes for all purposes.
Except for trades involving only Euroclear and Cedel Bank participants,
interests in the Global Notes will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
Participants in Euroclear and Cedel Bank will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes described herein, cross-market transfers between Participants in DTC, on
the one hand, and Euroclear or Cedel Bank Participants, on the other hand, will
be effected through DTC in accordance with DTC's rules on behalf of Euroclear or
Cedel Bank, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Cedel Bank, as the case may be, by the counterparty in such system in accordance
with the rules and procedures and within the established deadlines (Brussels
time) of such system. Euroclear or Cedel Bank, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Note in DTC, and making
or receiving payment in accordance with normal procedures for same-day fund
settlement applicable to DTC. Euroclear Participants and Cedel Bank Participants
may not deliver instructions directly to the depositaries for Euroclear or Cedel
Bank.
Because of time zone differences, the securities accounts of a Euroclear or
Cedel Bank Participant purchasing an interest in a Global Note from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Cedel Bank Participant, during the securities
settlement processing day (which must be a business day for Euroclear or Cedel
Bank) immediately following the settlement date of DTC. Cash received in
Euroclear or Cedel Bank as a result of sales of interests in a Global Note by or
through a Euroclear or Cedel Bank Participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel Bank cash account only as of the business day for
Euroclear or Cedel Bank following DTC's settlement date. DTC has advised the
Company that it will take any action permitted to be taken by a holder of Notes
only at the direction of one or more Participants to whose account DTC interests
in the Global Notes are credited and only in respect of such portion of the
aggregate principal amount of the Notes as to which such Participant or
Participants have given direction.
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However, if there is an Event of Default under the Notes, DTC reserves the right
to exchange Global Notes for legended Notes in certificated form, and to
distribute such Notes to its Participants.
The information in this section concerning DTC, Euroclear and Cedel Bank
and their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures
to facilitate transfers of interests in the 144A Global Notes among Participants
in DTC, Euroclear and Cedel Bank, they are under no obligation to perform or to
continue to perform such procedures, and such procedures may be discontinued at
any time. None of the Company, the Initial Purchaser or the Trustee will have
any responsibility for the performance by DTC, Euroclear or Cedel Bank or their
respective Participants or indirect Participants of their respective obligations
under the rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depositary for the Global Note and the Company thereupon
fails to appoint a successor depositary or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be continuing
to occur a Default or an Event of Default with respect to the Notes. In
addition, beneficial interests in a Global Note may be exchanged for
certificated Notes upon request but only upon at least 20 days' prior written
notice given to the Trustee by or on behalf of DTC in accordance with customary
procedures. In all cases, certificated Notes delivered in exchange for any
Global Note or beneficial interest therein will be registered in the names, and
issued in any approved denominations, requested by or on behalf of the
depositary (in accordance with its customary procedures) and will bear, in the
case of the 144A Global Notes, the restrictive legend referred to in "Notice to
Investors" unless the Company determines otherwise, in compliance with
applicable law.
EXCHANGES OF RULE 144A NOTES
Any beneficial interest in one of the Global Notes that is transferred to a
person who takes delivery in the form of an interest in another Global Note
will, upon transfer, cease to be an interest in such Global Note and become an
interest in such other Global Note, and accordingly, will thereafter be subject
to all transfer restrictions and other procedures applicable to beneficial
interests in such other Global Note for as long as it remains such an interest.
Transfers involving an exchange of a beneficial interest in a Global Note
for a beneficial interest in another Global Note will be effected by DTC by
means of an instruction originated by the Trustee through the DTC/Deposit
Withdraw at Custodian system. Accordingly, in connection with such transfer,
appropriate adjustments will be made to reflect a decrease in the principal
amount of the one Global Note and a corresponding increase in the principal
amount of the other Global Note, as applicable.
CERTIFICATED NOTES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Notes. Upon any such issuance,
the Trustee is required to register such Certificated Notes in the name of, and
cause the same to be delivered to, such person or persons (or the nominee of any
thereof). All such certificated Notes would be subject to the legend
requirements described herein under "Notice to Investors." In addition, if (i)
the Company notifies the Trustee in writing that the Depositary is no longer
willing or able to act as a depositary and the Company is unable to locate a
qualified successor within 90 days or (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in the form
of Certificated Notes under the Indenture, then, upon surrender by the Global
Note Holder of its Global Note, Notes in such form will be issued to each person
that the Global Note Holder and the Depositary identify as being the beneficial
owner of the related Notes.
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Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Note (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available next day
funds to the accounts specified by the Global Note Holder. With respect to
Certificated Notes, the Company will make all payments of principal, premium, if
any, interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The Company expects that secondary trading in the Certificated Notes
will also be settled in immediately available funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Pursuant to the Registration Rights Agreement between the Company and the
Initial Purchaser, the Company has agree to file with the Commission the
Exchange Offer Registration Statement on the appropriate form under the
Securities Act with respect to the New Notes. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company will offer to the Holders of
Transfer Restricted Securities pursuant to the Exchange Offer who are able to
make certain representations the opportunity to exchange their Transfer
Restricted Securities for New Notes. If (i) the Company is not required to file
the Exchange Offer Registration Statement or permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any Holder of Transfer Restricted Securities notifies
the Company prior to the 20th day following consummation of the Exchange Offer
that (A) it is prohibited by law or Commission policy from participating in the
Exchange Offer, (B) that it may not resell the New Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales or (C) that it is a broker-dealer and owns Notes
acquired directly from the Company or an affiliate of the Company, the Company
will file with the Commission a Shelf Registration Statement to cover resales of
the Notes by the Holders thereof who satisfy certain conditions relating to the
provision of information in connection with the Shelf Registration Statement.
The Company will use its reasonable best efforts to cause the applicable
registration statement to be declared effective as promptly as possible by the
Commission. For the purposes of the Registration Rights Agreement, "Transfer
Restricted Securities" means each (A) Note, until the earliest to occur of (i)
the date on which such Note is exchanged in the Exchange Offer for a New Note
which is entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Securities Act, (ii)
the date on which such Note has been disposed of in accordance with a Shelf
Registration Statement (and purchasers thereof have been issued New Notes) or
(iii) the date on which such Note is distributed to the public pursuant to Rule
144 under the Securities Act and each (B) New Note held by a Broker Dealer until
the date on which such New Note is disposed of by a Broker Dealer pursuant to
the "Plan of Distribution" contemplated by the Exchange Offer Registration
Statement (including the delivery of the Prospectus contained therein).
The Registration Rights Agreement provides that (i) the Company will file
an Exchange Offer Registration Statement with the Commission on or prior to 90
days after the Closing Date, (ii) the Company will use its reasonable best
efforts to have the Exchange Offer Registration Statement declared effective by
the Commission on or prior to 180 days after the Closing Date, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its reasonable best efforts
to issue on or prior to 30 business days after the date on which the Exchange
Offer Registration Statement was declared effective by the Commission, New Notes
in exchange for all Notes tendered prior thereto in the Exchange Offer and (iv)
if obligated to file the Shelf Registration Statement, the Company will use its
reasonable best efforts to file the Shelf Registration Statement with the
Commission on or prior to 60 days after such filing obligation arises and to
cause the Shelf Registration to be declared effective
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by the Commission on or prior to 180 days after such obligation arises. If (a)
the Company fails to file any of the Registration Statements required by the
Registration Rights Agreement on or before the date specified for such filing,
(b) any of such Registration Statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), (c) the Company fails to consummate the Exchange
Offer within 30 business days of the Effectiveness Target Date with respect to
the Exchange Offer Registration Statement or (d) the Shelf Registration
Statement or the Exchange Offer Registration Statement is declared effective but
thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in the Registration
Rights Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), then the Company will pay Liquidated Damages to each
Holder of Notes, with respect to the first 90-day period immediately following
the occurrence of the first Registration Default in an amount equal to $.05 per
week per $1,000 principal amount of Notes held by such Holder. The amount of the
Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of Notes with respect to each subsequent 90-day period until
all Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of $.25 per week per $1,000 principal amount of Notes. All accrued
Liquidated Damages will be paid by the Company on each Damages Payment Date to
the Global Note Holder by wire transfer of immediately available funds or by
federal funds check and to Holders of Certificated Notes by mailing checks to
their registered addresses. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease.
Holders of Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Applicable Premium" means, with respect to any Note on any Redemption
Date, the greater of (i) 1.0% of the principal amount of such Note or (ii) the
excess of (A) the present value at such Redemption Date of (1) the redemption
price of such Note at December 1, 2003 (such redemption price being set forth in
the table above under the caption "Optional Redemption") plus (2) all required
interest payments due on such Note through December 1, 2003 (excluding accrued
but unpaid interest), computed using a discount rate equal to the Treasury Rate
plus 50 basis points over (B) the principal amount of such Note, if greater.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition (a
"Disposition") of any assets or rights (including, without limitation, by way of
a sale and leaseback) (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company and its
Restricted Subsidiaries taken as a whole will be governed by the provisions of
the Indenture described above under the
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caption "Repurchase at the Option of Holders--Change of Control" and/or the
provisions described above under the caption "Certain Covenants--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant), and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $3.0 million or (b) for net proceeds in excess of $3.0
million. Notwithstanding the foregoing the following items shall not be deemed
to be Asset Sales: (i) a disposition of assets by the Company to a Restricted
Subsidiary or by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary, (ii) an issuance of Equity Interests by a Restricted Subsidiary to
the Company or to another Restricted Subsidiary, (iii) a Restricted Payment that
is permitted by the covenant described above under the caption "--Certain
Covenants--Restricted Payments"; (iv) a disposition in the ordinary course of
business, (v) the sale and leaseback of any assets within 90 days of the
acquisition thereof, (vi) foreclosures on assets, (vii) any exchange of property
pursuant to Section 1031 on the Internal Revenue Code of 1986, as amended, for
use in a Related Business and (vii) the licensing of intellectual property.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) Government
Securities having maturities of not more than six months from the date of
acquisition, (iii) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any lender party to the Senior Credit Facilities or
with any domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the rating of "P-2" (or higher) from Moody's
Investors Service, Inc. or "A-3" (or higher) from Standard & Poor's Corporation
and in each case maturing within six months after the date of acquisition and
(vi) any fund investing exclusively in investments of the type described in
clauses (i) through (v) above.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principals or their Related Parties (as defined below), (ii)
the adoption of a plan relating to the liquidation or dissolution of the
Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act, directly or indirectly, of more than 50%
of the Voting Stock of the Company (measured by voting power rather than number
of shares), or (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors.
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"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other non-cash charges (excluding any such non-cash
charge to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, plus (v) expenses and
charges of the Company related to the Transactions which are paid, taken or
otherwise accounted for within 90 days of the consummation of the Transactions,
plus (vi) any non-capitalized transaction costs incurred in connection with
actual or proposed financings, acquisitions or divestitures (including, but not
limited to, financing and refinancing fees and costs incurred in connection with
the Transactions), plus (vii) any extraordinary and non-recurring charges for
such period to the extent that such charges were deducted in computing such
Consolidated Net Income, plus (viii) amounts paid pursuant to the Management
Services Agreement to the extent such amounts were deducted in computing such
Consolidated Net Income. Notwithstanding the foregoing, the provision for taxes
on the income or profits of, and the depreciation and amortization and other
non-cash charges of, a Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in the same proportion) that Net Income of such Subsidiary was included in
calculating Consolidated Net Income of such Person.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication, (a) the interest expense of such Person
and its Restricted Subsidiaries for such period, on a consolidated basis,
determined in accordance with GAAP (including amortization of original issue
discount, non-cash interest payments, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments,
if any, pursuant to Hedging Obligations; provided that in no event shall any
amortization of deferred financing costs be included in Consolidated Interest
Expense); and (b) the consolidated capitalized interest of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued.
Notwithstanding the foregoing, the Consolidated Interest Expense with respect to
any Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary shall
be included only to the extent (and in the same proportion) that the net income
of such Restricted Subsidiary was included in calculating Consolidated Net
Income.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period
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prior to the date of such acquisition shall be excluded, (iv) the cumulative
effect of a change in accounting principles shall be excluded and (v) the Net
Income of any Unrestricted Subsidiary shall be excluded, whether or not
distributed to the Company or one of its Restricted Subsidiaries for purposes of
the covenant described under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock" and shall be included for purposes of the covenant
described under the caption "Restricted Payments" only to the extent of the
amount of dividends or distributions paid in cash to the Company or one of its
Restricted Subsidiaries.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture, (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election or (iii) was nominated by the Principals pursuant to the
Stockholders Agreement.
"Credit Agent" means The First National Bank of Chicago, in its capacity as
Administrative Agent for the lenders party to the Senior Credit Facilities, or
any successor thereto or any person otherwise appointed.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Senior Credit Facilities and (ii) any other Senior Debt permitted under the
Indenture the principal amount of which is $25.0 million or more and that has
been designated by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature; provided, however,
that any Capital Stock that would not qualify as Disqualified Stock but for
change of control provisions shall not constitute Disqualified Stock if the
provisions are not more favorable to the holders of such Capital Stock than the
provisions described under "--Change of Control" applicable to the Holders of
the Notes.
"Domestic Restricted Subsidiary" means, with respect to the Company, any
Subsidiary of the Company that was formed under the laws of the United States of
America.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Credit Facilities) in
existence on the date of the Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the Consolidated Interest Expense of such Person for
such period, (ii) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such Guarantee or Lien is called upon) and (iii) the product of (a) all
dividend payments, whether or not in cash, on any series of preferred stock of
such Person or any of its Restricted Subsidiaries, other than dividend payments
on Equity Interests payable solely in Equity Interests of the Company, times (b)
a fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the
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date on which the event for which the calculation of the Fixed Charge Coverage
Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio
shall be calculated giving pro forma effect to such incurrence, assumption,
Guarantee or redemption of Indebtedness, or such issuance or redemption of
preferred stock, as if the same had occurred at the beginning of the applicable
four-quarter reference period. In addition, for purposes of making the
computation referred to above, (i) acquisitions that have been made by the
Company or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be calculated to include the Consolidated
Cash Flow of the acquired entities on a pro forma basis after giving effect to
cost savings resulting from employee terminations, facilities consolidations and
closings, standardization of employee benefits and compensation policies,
consolidation of property, casualty and other insurance coverage and policies,
standardization of sales and distribution methods, reductions in taxes other
than income taxes and other cost savings reasonably expected to be realized from
such acquisition, shall be deemed to have occurred on the first day of the four-
quarter reference period and Consolidated Cash Flow for such reference period
shall be calculated without giving effect to clause (iii) of the proviso set
forth in the definition of Consolidated Net Income, (ii) the Consolidated Cash
Flow attributable to discontinued operations, as determined in accordance with
GAAP, and operations or businesses disposed of prior to the Calculation Date,
shall be excluded, and (iii) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only to the
extent that the obligations giving rise to such Fixed Charges will not be
obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"Foreign Subsidiary" means any Subsidiary of the Company that is not
organized under the laws of a state or territory of the United States or the
District of Columbia.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture, except that
calculations made for purposes of determining compliance with the terms of the
covenants and with other provisions of the Indenture shall be made without
giving effect to depreciation, amortization or other expenses recorded as a
result of the application of purchase accounting in accordance with Accounting
Principles Board Opinion Nos. 16 and 17.
"Global Notes" means, individually and collectively, each of the Restricted
Global Notes and the Unrestricted Global Notes, issued in accordance with
certain sections of the Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or currency exchange rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, in respect of borrowed money or evidenced by bonds, notes, debentures or
similar instruments or letters of credit (or reimbursement agreements in respect
thereof) or bankers' acceptances or representing Capital Lease Obligations or
the balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP, as well as all indebtedness of others secured by a Lien on any asset of
such Person (whether or not such Indebtedness is
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assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person; provided that
Indebtedness shall not include the pledge by the Company of the Capital Stock of
an Unrestricted Subsidiary of the Company to secure Non-Recourse Debt of such
Unrestricted Subsidiary. The amount of any Indebtedness outstanding as of any
date shall be (i) the accreted value thereof, in the case of any Indebtedness
that does not require current payments of interest, and (ii) the principal
amount thereof, together with any interest thereon that is more than 30 days
past due, in the case of any other Indebtedness.
"Insolvency or Liquidation Proceedings" means (i) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding, relative to the Company or to the creditors
of the Company, as such, or to the assets of the Company, or (ii) any
liquidation, dissolution, reorganization or winding up of the Company, whether
voluntary or involuntary, and involving insolvency or bankruptcy, or (iii) any
assignment for the benefit of creditors or any other marshalling of assets and
liabilities of the Company.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted 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 Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "--Restricted Payments."
"Issue Date" means the date on which the initial $100.0 million in
aggregate principal amount of the Notes is originally issued under the
Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Management Services Agreement" means the Management Services Agreement
dated on the date of the Indenture, between the Company and Cornerstone.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), the amounts required to be applied to the payment of Indebtedness
(other than Indebtedness incurred pursuant to the Senior Credit Facilities),
secured by a Lien on the asset or assets that were the subject of the Asset
Sale,
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and any reserve for adjustment in respect of the sale price of such asset or
assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness (other than the Notes being
offered hereby) of the Company or any of its Restricted Subsidiaries to declare
a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock (other than stock of an Unrestricted Subsidiary pledged by the Company
to secure debt of such Unrestricted Subsidiary) or assets of the Company or any
of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means any business in which the Company and its
Restricted Subsidiaries are engaged on the date of the Indenture or any business
reasonably related, incidental or ancillary thereto.
"Permitted Investments" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company; (b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Restricted Subsidiary of the Company in
a Person, if as a result of such Investment (i) such Person becomes a Restricted
Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company; (d) any Restricted Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--Repurchase at
the Option of Holders--Asset Sales"; (e) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock) of
the Company; and (f) other Investments made after the date of the Indenture in
any Person having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause (f)
that are at the time outstanding, not to exceed $7.5 million.
"Permitted Liens" means (i) Liens securing Senior Debt (including, without
limitation, Indebtedness under the Senior Credit Facilities) that was permitted
by the terms of the Indenture to be incurred or other Indebtedness allowed to be
incurred under clause (i) of the covenant described above under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock"; (ii) Liens in
favor of the Company or any Restricted Subsidiary; (iii) Liens on property of a
Person existing at the time such Person is merged into or consolidated with the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were not incurred in contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or consolidated
with the Company or any Restricted Subsidiary; (iv) Liens on property existing
at the time of acquisition thereof by the Company or any Restricted Subsidiary
of the Company, provided such Liens were not incurred in contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vi) Liens existing on the date of
the Indenture; (vii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (viii) Liens to secure
Indebtedness (including Capital Lease Obligations) permitted by clause (iv) of
the second paragraph of the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock"; (ix) Liens securing Permitted Refinancing
Indebtedness where the Liens securing the Indebtedness being refinanced were
permitted under the Indenture; (x) Liens incurred in the ordinary course of
business of the Company or any Restricted Subsidiary of the Company with respect
to obligations that do not exceed $5.0
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million at any one time outstanding and that (a) are not incurred in connection
with the borrowing of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Restricted
Subsidiary; (xi) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries; (xii) easements, rights-of-way,
zoning and similar restrictions and other similar encumbrances or title defects
incurred or imposed, as applicable, in the ordinary course of business and
consistent with industry practices; (xiii) any interest or title of a lessor
under any Capital Lease Obligation; (xiv) 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; (xv) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset and
set-off; (xvi) Liens securing Hedging Obligations which Hedging Obligations
relate to Indebtedness that is otherwise permitted under the Indenture; (xvii)
leases or subleases granted to others that do not materially interfere with the
ordinary course of business of the Company and its Restricted Subsidiaries;
(xviii) Liens arising from filing Uniform Commercial Code financing statements
regarding leases; and (xiv) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customer duties in connection
with the importation of goods.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (ii) such
Permitted Refinancing Indebtedness has a final maturity date no earlier than the
final maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Principals" means Cornerstone Equity Investors and its affiliates.
"Public Equity Offering" means a public offering of Equity Interests (other
than Disqualified Stock) of (i) the Company or (ii) TTC to the extent the net
proceeds thereof are contributed to the Company as a capital contribution.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Notes" means a global note bearing the global note
legend and the private placement legend and deposited with or on behalf of and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the notes resold in
reliance on Rule 904 of Regulation S.
"Related Party" with respect to any Principal means (A) any controlling
stockholder or partner, 80% (or more) owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding (directly or through one or
more Subsidiaries) a 51% or more controlling interest of which consist of the
Principals and/or such other Persons referred to in the immediately preceding
clause (A).
"Reorganization Securities" means securities distributed to Holders of the
Notes in an Insolvency or Liquidation Proceeding pursuant to a plan of
reorganization consented to by each class of the Senior Debt, but
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only if all of the terms and conditions of such securities (including, without
limitation, term, tenor, interest, amortization, subordination, standstills,
covenants and defaults) are at least as favorable (and provide the same relative
benefits) to the holders of Senior Debt and to the holders of any security
distributed in such Insolvency or Liquidation Proceeding on account of any such
Senior Debt as the terms and conditions of the Notes and the Indenture are, and
provide to the holders of Senior Debt.
"Representative" means the Trustee, agent or representative for any Senior
Debt.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 144A Global Note" means a permanent global note that is deposited
with and registered in the name of the Depositary or its nominee, representing a
series of Notes sold in reliance on Rule 144A.
"Senior Credit Facilities" means the Senior Credit Facilities, dated as of
September 30, 1998, between the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, as arranger, DLJ Capital Funding, Inc., as syndication
agent and The First National Bank of Chicago, as administrative agent, providing
for revolving credit borrowings and term loans, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time (including increases in principal
amount).
"Senior Debt" means (i) all Indebtedness outstanding under the Senior
Credit Facilities, including any Guarantees thereof and all Hedging Obligations
with respect thereto, (ii) any other Indebtedness permitted to be incurred by
the Company under the terms of the Indenture, unless the instrument under which
such Indebtedness in incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes and (iii) all Obligations with
respect to the foregoing. Notwithstanding anything to the contrary in the
foregoing, Senior Debt will not include (w) any liability for federal, state,
local or other taxes owed or owing by the Company, (x) any Indebtedness of the
Company to any of its Subsidiaries or other Affiliates, (y) any trade payables
or (z) any Indebtedness that is incurred in violation of the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership or limited liability company (a) the sole
general partner or the managing general partner or managing member of which is
such Person or a Subsidiary of such Person or (b) the only general partners of
which are such Person or of one or more Subsidiaries of such Person (or any
combination thereof).
"Subsidiary Guarantor" means (i) any Domestic Restricted Subsidiary that
executes a supplemental indenture providing for the Guarantee of the payment of
the Notes by such Domestic Restricted Subsidiary and (ii) any other Subsidiary
of the Company that executes a Guarantee in accordance with the provisions of
the Indenture, and their respective successors and assigns.
71
<PAGE> 74
"Treasury Rate" means, as of any Redemption Date, the yield to maturity as
of such Redemption Date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the Redemption Date to December 1, 2003;
provided, however, that if the period from the Redemption Date to December 1,
2003 is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company; (c) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the covenant described above under the caption
"Certain Covenants--Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock," the Company shall be in default of such covenant).
The Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall be permitted only if (i) such Indebtedness is permitted under
the covenant described under the caption "Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," and (ii) no Default or Event of
Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
72
<PAGE> 75
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of Exchange Notes received in respect of such Notes pursuant to the
Exchange Offer. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of Exchange Notes received in exchange for Notes where such Notes were acquired
as a result of market-making activities or other trading activities. The Company
has agreed to make this Prospectus, as amended or supplemented, available to any
Participating Broker-Dealer for use in connection with any such resale. In
addition, until , 1999, all dealers effecting transactions in the
Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchaser or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such Exchange Notes. Any Participating Broker-Dealer that resells the
Exchange Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a prospectus
meeting the requirements of the Securities Act, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Issuers believe that a holder or other person who receives Exchange Notes,
whether or not such person is the holder (other than a person that is an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act) who receives Exchange Notes in exchange for Notes in the ordinary course of
business and who is not participating, does not intend to participate, and has
no arrangement or understanding with person to participate, in the distribution
of the Exchange Notes, will be allowed to resell the Exchange Notes to the
public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the Exchange Notes, such holder cannot rely
on the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction and such a secondary resale transaction
should be covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K under the Securities Act, unless an exemption from registration
is otherwise available. Further, each Participating Broker-Dealer that receives
Exchange Notes for its own account in exchange for Notes, where such Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Company has
agreed to make this Prospectus available to any Participating Broker-Dealer for
use in connection with any such resale.
In connection with the Offering, the Initial Purchaser may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Initial Purchaser may over allot the Offering, creating
a syndicate short position. The Initial Purchaser may bid for and purchase Notes
in the open market to cover syndicate short positions. In addition, the Initial
Purchaser may bid for and purchase Notes in the open market to stabilize the
price of the Notes. These activities may stabilize or maintain the market price
of
73
<PAGE> 76
the Notes above independent market levels. The Initial Purchaser is not required
to engage in these activities, and may end these activities at any time.
In connection with the Transactions, an affiliate of the Initial Purchaser
has received customary fees in connection with their agreement to finance a
portion of the Recapitalization. In addition, the Initial Purchaser received a
customary fee for financial advisory services rendered to Black & Decker in
connection with the Transactions.
In the ordinary course of business, the Initial Purchaser and its
affiliates have engaged, and may in the future engage, in investment banking and
commercial banking transactions with the Company. The Initial Purchaser is
acting as the Arranger and DLJ Capital Funding, Inc. will act as the Syndication
Agent under the Senior Credit Facilities.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the Exchange Notes
offered hereby will be passed upon for the Company by Kirkland & Ellis, New
York, New York. Certain partners of Kirkland & Ellis collectively own, through
investment entities, 0.5% of the membership interests of TTS LLC, the Company's
indirect parent.
EXPERTS
The financial statements of the Company at December 31, 1996 and December
31, 1997, appearing in this prospectus and Registration Statement, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
74
<PAGE> 77
TRUE TEMPER SPORTS, INC.
INDEX TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
<TABLE>
<S> <C>
Unaudited Pro Forma Condensed Balance Sheet as of September
29, 1998.................................................. P-3
Notes to Unaudited Pro Forma Condensed Balance Sheet........ P-4
Unaudited Pro Forma Condensed Statement of Operations for
the twelve months ended September 29, 1998................ P-5
Unaudited Pro Forma Condensed Statement of Operations for
the nine months ended September 29, 1998.................. P-6
Unaudited Pro Forma Condensed Statement of Operations for
the nine months ended September 28, 1997.................. P-7
Unaudited Pro Forma Condensed Statement of Operations for
the year ended December 31, 1997.......................... P-8
Notes to Unaudited Pro Forma Condensed Statements of
Operations................................................ P-9
</TABLE>
P-1
<PAGE> 78
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed financial information of the
Company (the "Unaudited Pro Forma Financial Information") has been prepared to
give effect to the following transactions as of January 1, 1997 (together, the
"Transactions"): (i) the Recapitalization; (ii) the Offering; (iii) the
contribution of the Assets to the Company as a capital contribution; (iv) $30.0
million of borrowings by the Company under the term loan facilities of the
Senior Credit Facilities; (v) a $58.7 million equity investment by the Equity
Investor; (vi) a Management Contribution of $0.4 million; (vii) equity of TTC
held by EII having an imputed value of $3.7 million; and (viii) $25.0 million in
gross proceeds from the Seller Note. For purposes of the Unaudited Pro Forma
Financial Information, the Equity Investment and Seller Notes (which
transactions are recorded by TTC not the Company) are necessary to determine the
total imputed value of the Company for purposes of the calculation of deferred
tax assets. The unaudited pro forma adjustments presented are based upon
available information and certain assumptions that the Company believes are
reasonable under the circumstances.
The unaudited pro forma condensed balance sheet of the Company as of
September 29, 1998 (the "Unaudited Pro Forma Balance Sheet") gives effect to the
Transactions, assuming that the Recapitalization of TTC and application of the
net proceeds of the Offering had occurred on September 29, 1998. The unaudited
pro forma condensed statements of operations of the Company for the twelve
months ended September 29, 1998, for the year ended December 31, 1997 and for
the nine months ended September 29, 1998 and September 28, 1997 (the "Unaudited
Pro Forma Statements of Operations") give effect to the Transactions as if they
had occurred at January 1, 1997.
The Recapitalization has been accounted for as a leveraged
recapitalization, which will have no impact on the historical basis of the
Company's assets and liabilities. The unaudited pro forma financial information
should be read in conjunction with "Use of Proceeds," "Selected Historical
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements of the Company and notes
thereto all included elsewhere in this prospectus. The Unaudited Pro Forma
Financial Information and related notes are provided for informational purposes
only and do not purport to be indicative of the Company's financial condition or
results of operations that would have actually been obtained had the
Transactions been consummated as of the assumed dates and for the periods
presented, nor are they indicative of the Company's financial condition or
results of operations for any future period.
The unaudited pro forma adjustments to operations exclude approximately
$5.3 million of estimated transaction fees and expenses incurred in connection
with the Transactions. These fees and expenses are non-recurring and will be
recorded in the condensed statement of operations during the period in which the
Transactions are consummated. There are $4.8 million of financing expenses
capitalized by the Company in connection with the Transactions.
P-2
<PAGE> 79
TRUE TEMPER SPORTS, INC.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF SEPTEMBER 29, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Current assets
Cash.................................................. $ 1,084 $ (1,084)(a) $ 888
888(a) --
Receivables, net...................................... 11,550 -- 11,550
Inventories........................................... 8,964 -- 8,964
Deferred tax asset.................................... -- 3,526(b) 3,526
Prepaid expenses and other............................ 195 527(c) 722
-------- -------- --------
Total current assets.......................... 21,793 3,857 25,650
Property and equipment, net............................. 21,061 -- 21,061
Goodwill................................................ 75,545 -- 75,545
Long-term deferred tax asset............................ -- 49,369(b) 49,369
Other assets............................................ 61 4,317(c) 4,378
-------- -------- --------
Total assets.................................. $118,460 $ 57,543 $176,003
======== ======== ========
Current liabilities
Accounts payable...................................... $ 5,520 $ -- $ 5,520
Current portion of capital lease liability............ 126 -- 126
Current portion of long-term debt..................... -- 700(d) 700
Due to EI............................................. -- 646(a) 646
Other current liabilities............................. 5,017 (2,200)(a) 2,817
-------- -------- --------
Total current liabilities..................... 10,663 (854) 9,809
Long term debt less the current portion................. -- 129,300(d) 129,300
Post-retirement medical obligation...................... -- 5,627(a) 1,965
(3,662)(a)
Capital lease liability, net of current portion......... 50 -- 50
-------- -------- --------
Total liabilities............................. 10,713 130,411 141,124
Net invested capital.................................... 107,747 (72,868)(e) 34,879
-------- -------- --------
Total liabilities and net invested capital.... $118,460 $ 57,543 $176,003
======== ======== ========
</TABLE>
See accompanying notes.
P-3
<PAGE> 80
NOTES TO UNAUDITED PRO FORMA
CONDENSED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) To record adjustments for assets retained and liabilities assumed by EI
pursuant to the Recapitalization agreement:
<TABLE>
<S> <C>
Cash and cash equivalents retained by EI.................... $(1,084)
Group medical liability retained by EI...................... 594
Reclassification of accumulated post-retirement medical
benefit obligation included in net invested capital in the
historical balance sheet.................................. (5,627)
Product liability reserves retained by EI................... 557
Workman's compensation liability retained by EI............. 449
Portion of retiree medical liability retained by EI......... 3,662
Other liabilities retained by EI............................ 600
Estimated post-closing adjustment due to EI................. (646)
-------
Net distribution to EI............................ $(1,495)
=======
Cash available for corporate purposes....................... $ 888
=======
</TABLE>
(b) The adjustment reflects the increase in the deferred tax assets of the
Company because, for federal and state income tax purposes, the
Recapitalization is treated as a taxable business combination. As a result
there is a step-up in tax basis which will provide future tax deductions of
$185.6 million which are expected to reduce future tax payments by
approximately $52.9 million to be amortized over 15 years (net of valuation
allowance of $17.6 million) as shown below:
<TABLE>
<S> <C> <C>
Fair market value
Imputed value of Common Stock and Preferred Stock...... $ 62,800
Senior Subordinated Notes.............................. 100,000
Term Loans............................................. 30,000
Gross proceeds from Seller Note........................ 25,000
Liabilities assumed.................................... 10,713
Total imputed value............................... 228,513
--------
Tax basis - book value
Historical total assets................................ 118,460
Less: non-deductible goodwill.......................... (75,545)
--------
Tangible book value............................... 42,915
--------
Excess of purchase price over book value.......... 185,598
Statutory tax rate................................ 38.0%
--------
Deferred tax asset................................ 70,527
Less: valuation allowance......................... (17,632)
--------
Deferred tax asset, net of valuation allowance.... $ 52,895
--------
--------
</TABLE>
(c) To record deferred financing costs of approximately $4.8 million associated
with the Company's $100.0 million of Senior Subordinated Notes and the
Senior Credit Facilities.
(d) To record gross proceeds from the issuance of $100.0 million of Senior
Subordinated Notes and $30.0 million of Term Loans.
(e) The adjustment to net invested capital reflects the following:
<TABLE>
<S> <C>
Dividend to TTC............................................. $(118,971)(1)
Transaction costs (including deferred financing costs of
approximately $4.8 million)............................... (10,141)
Deferred financing costs capitalized........................ 4,844
Deferred taxes.............................................. 52,895
Net distribution to EI...................................... (1,495)
---------
Total............................................. $ (72,868)
=========
</TABLE>
- ---------------
(1) Balance represents proceeds of the issuance of $100.0 million of Senior
Subordinated Notes and $30.0 million of Term Loans less excess cash of $0.9
million retained at the Company and transaction costs of approximately $10.1
million.
P-4
<PAGE> 81
TRUE TEMPER SPORTS, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SEPTEMBER 29, 1998(H)
-----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------- ----------- ---------
<S> <C> <C> <C>
Revenues................................................ $ 91,323 $ -- $ 91,323
Expenses:
Costs of sales........................................ 57,433 -- 57,433
Selling, general and administrative expenses.......... 13,999 (7,210)(a) 14,308
6,519(b)
500(b)
500(c)
Amortization of goodwill.............................. 2,783 -- 2,783
Write off of goodwill................................. 40,000 -- 40,000
Allocated corporate expenses.......................... 926 (926)(a) --
-------- -------- --------
Operating income (loss)................................. (23,818) 617 (23,201)
Interest expense........................................ -- 13,693(d) 13,693
Other expense........................................... 82 -- 82
-------- -------- --------
Earnings (loss) before income taxes..................... (23,900) (13,076) (36,976)
Income taxes............................................ 7,176 (4,969)(e) 2,207
-------- -------- --------
Net income (loss)....................................... $(31,076) $ (8,107) $(39,183)
======== ======== ========
OTHER FINANCIAL DATA:
EBITDA(f)......................................................................... $ 23,448
EBITDA margin(g).................................................................. 25.7%
Cash interest expense............................................................... $ 13,166
Ratio of EBITDA to cash interest expense............................................ 1.8x
</TABLE>
See accompanying notes.
P-5
<PAGE> 82
TRUE TEMPER SPORTS, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 29, 1998
----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenues................................................ $ 71,892 $ -- $ 71,892
Expenses:
Costs of sales........................................ 45,308 -- 45,308
Selling, general and administrative expenses.......... 10,446 (5,330)(a) 10,755
4,889(b)
375(b)
375(c)
Amortization of goodwill.............................. 1,848 -- 1,848
Write off of goodwill................................. 40,000 -- 40,000
Allocated corporate expenses.......................... 763 (763)(a) --
-------- ------- --------
Operating income (loss)................................. (26,473) 454 (26,019)
Interest expense........................................ -- 10,270(d) 10,270
Other expense........................................... 75 -- 75
-------- ------- --------
Earnings (loss) before income taxes..................... (26,548) (9,816) (36,364)
Income taxes............................................ 5,814 (3,730)(e) 2,084
-------- ------- --------
Net income (loss)....................................... $(32,362) $(6,086) $(38,448)
======== ======= ========
OTHER FINANCIAL DATA:
EBITDA(f)........................................................................ $ 18,688
EBITDA margin(g)................................................................. 26.0%
Cash interest expense............................................................ 9,874
Ratio of EBITDA to cash interest expense......................................... 1.9x
</TABLE>
See accompanying notes.
P-6
<PAGE> 83
TRUE TEMPER SPORTS, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 28, 1997
--------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenues................................................... $63,166 $ -- $63,166
Expenses:
Cost of sales............................................ 41,761 -- 41,761
Selling, general and administrative expenses............. 9,771 (4,718)(a) 10,692
4,889(b)
375(b)
375(c)
Restructuring charges.................................... 520 -- 520
Amortization of goodwill................................. 2,811 -- 2,811
Write off of goodwill.................................... -- -- --
Allocated corporate expenses............................. 764 (764)(a) --
------- ------- -------
Operating income........................................... 7,539 (157) 7,382
Interest expense........................................... -- 10,270(d) 10,270
Other expense.............................................. 47 -- 47
------- ------- -------
Earnings (loss) before income taxes........................ 7,492 (10,427) (2,935)
Income taxes............................................... 3,915 (3,962)(e) (47)
------- ------- -------
Net income (loss).......................................... $ 3,577 $(6,465) $(2,888)
======= ======= =======
OTHER FINANCIAL DATA:
EBITDA(f)........................................................................... $13,809
EBITDA margin(g).................................................................... 21.9%
Cash interest expense............................................................... $ 9,874
Ratio of EBITDA to cash interest expense............................................ 1.4x
</TABLE>
See accompanying notes.
P-7
<PAGE> 84
TRUE TEMPER SPORTS, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenues................................................. $82,597 $ -- $82,597
Expenses:
Costs of sales......................................... 53,886 -- 53,886
Selling, general and administrative expenses........... 13,324 (6,598)(a) 14,245
6,519(b)
500(b)
500(c)
Restructuring charges.................................. 520 520
Amortization of goodwill............................... 3,746 3,746
Allocated corporate expenses........................... 927 (927)(a) --
------- -------- -------
Operating income......................................... 10,194 6 10,200
Interest expense......................................... -- 13,693(d) 13,693
Other expense............................................ 54 54
------- -------- -------
Earnings (loss) before income taxes...................... 10,140 (13,687) (3,547)
Income taxes............................................. 5,277 (5,201)(e) 76
------- -------- -------
Net income (loss)........................................ $ 4,863 $ (8,486) $(3,623)
======= ======== =======
OTHER FINANCIAL DATA:
EBITDA(f)......................................................................... $18,569
EBITDA margin(g).................................................................. 22.5%
Cash interest expense............................................................. $13,166
Ratio of EBITDA to cash interest expense.......................................... 1.4x
</TABLE>
See accompanying notes.
P-8
<PAGE> 85
NOTES TO UNAUDITED PRO FORMA
CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) To record the elimination of certain Black & Decker allocated corporate
costs and the additional costs associated with corporate pass through costs
to be replaced by management's estimate of the stand alone costs listed
below:
<TABLE>
<CAPTION>
TWELVE
MONTHS NINE MONTHS ENDED
ENDED ------------------------------ YEAR ENDED
SEPTEMBER 29, SEPTEMBER 29, SEPTEMBER 28, DECEMBER 31,
1998 1998 1997 1997
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Allocated corporate costs:
Legal & accounting........... $ 334 $ 251 $ 251 $ 334
General & administrative..... 482 362 362 482
Human resources.............. 76 57 57 76
Executive compensation
plan...................... 76 57 57 76
Other........................ (42) 36 37 (41)
------ ------ ------ ------
Total................ $ 926 $ 763 $ 764 $ 927
====== ====== ====== ======
Pass through corporate costs:
Product liability & general
insurance................. 719 555 522 686
Human resources.............. 3,972 2,872 2,471 3,571
Other........................ 2,519 1,903 1,725 2,341
------ ------ ------ ------
Total................ $7,210 $5,330 $4,718 $6,598
====== ====== ====== ======
</TABLE>
(b) To record management's estimate of the stand alone costs to replace services
formerly provided by Black & Decker:
<TABLE>
<CAPTION>
TWELVE
MONTHS NINE MONTHS ENDED
ENDED ------------------------------ YEAR ENDED
SEPTEMBER 29, SEPTEMBER 29, SEPTEMBER 28, DECEMBER 31,
1998 1998 1997 1997
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Management's stand alone
allocated costs:
Legal & accounting........... $ 296 $ 222 $ 222 $ 296
General & administrative..... 105 79 79 105
Human resources.............. 50 38 38 50
Other........................ 49 36 36 49
------ ------ ------ ------
Total................ $ 500 $ 375 $ 375 $ 500
====== ====== ====== ======
Management's stand alone pass
through costs:
Product liability & general
insurance................. 721 541 541 721
Human resources.............. 3,591 2,693 2,693 3,591
Other........................ 2,207 1,655 1,655 2,207
------ ------ ------ ------
Total................ $6,519 $4,889 $4,889 $6,519
====== ====== ====== ======
</TABLE>
(c) To record the Cornerstone management fee payable by the Company, in the
amount of $500 per annum.
P-9
<PAGE> 86
NOTES TO UNAUDITED PRO FORMA
CONDENSED STATEMENTS OF OPERATIONS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(d) The increase to unaudited pro forma interest expense as a result of the
Recapitalization is as follows:
<TABLE>
<CAPTION>
TWELVE
MONTHS NINE MONTHS ENDED
ENDED ------------------------------ YEAR ENDED
SEPTEMBER 29, SEPTEMBER 29, SEPTEMBER 28, DECEMBER 31,
1998 1998 1997 1997
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Senior Subordinated Notes(1)... $10,875 $ 8,156 $ 8,156 $10,875
Term Loans:
Term A Loan ($10,000 @ 7.47%
per annum)(2)............. 747 560 560 747
Term B Loan ($20,000 @ 7.72%
per annum)(2)............. 1,544 1,158 1,158 1,544
Amortization of deferred
financing costs.............. 527 396 396 527
------- ------- ------- -------
Total................ $13,693 $10,270 $10,270 $13,693
======= ======= ======= =======
</TABLE>
- ---------------
(1) Interest expense was calculated at an interest rate of 10.875%.
(2) Represents 3 month LIBOR @ 5.2192% (at October 26, 1998) plus 2.25% and
2.50% for Term A and Term B Loans, respectively.
(e) To record the difference between the historical tax expense and unaudited
pro forma tax expense at the statutory rate of 38% as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS ENDED
ENDED ----------------------------- YEAR ENDED
SEPTEMBER 29, SEPTEMBER 29, SEPTEMBER 28, DECEMBER 31,
1998 1998 1997 1997
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Pro forma pretax
income (loss)....... $(36,976) $(36,364) $(2,935) $(3,547)
Goodwill
amortization........ 2,783 1,848 2,811 3,746
Goodwill writeoff..... 40,000 40,000 -- --
-------- -------- ------- -------
Taxable income........ 5,807 5,484 (124) 199
Statutory rate........ 38% 38% 38% 38%
-------- -------- ------- -------
Pro forma tax
expense............. 2,207 2,084 (47) 76
Less: historical tax
expense............. 7,176 5,814 3,915 5,277
-------- -------- ------- -------
Adjustment............ $ (4,969) $ (3,730) $(3,962) $(5,201)
======== ======== ======= =======
</TABLE>
(f) EBITDA represents operating income plus depreciation, amortization,
restructuring charges and goodwill writeoff. EBITDA is presented because it
is a widely accepted financial indicator used by certain investors and
analysts to analyze and compare companies on the basis of operating
performance. EBITDA is not intended to represent cash flows for the period,
nor has it been presented as an alternative to operating income as an
indicator of operating performance and should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles ("GAAP") in the United States and
is not indicative of operating income or cash flow from operations as
determined under GAAP. Pro forma EBITDA represents EBITDA plus: (i)
corporate expenses and charges that historically have been allocated to the
Company by Black & Decker; less (ii) the Company's estimate of its costs as
a stand alone entity for the same services corresponding to such corporate
expenses and charges. Pro forma EBITDA has not been reduced by the
management fee
P-10
<PAGE> 87
NOTES TO UNAUDITED PRO FORMA
CONDENSED STATEMENTS OF OPERATIONS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
payable under the Management Services Agreement, which is an obligation of
TTC and is contractually subordinated to all obligations under the Notes and the
Senior Credit Facilities.
(g) Unaudited pro forma EBITDA margin represents pro forma EBITDA as a
percentage of total revenues.
(h) Information for the latest twelve months ended September 29, 1998 represents
the sum of the unaudited pro forma year ended December 31, 1997 and
unaudited pro forma nine months ended September 29, 1998 information, less
the unaudited pro forma nine months ended September 28, 1997.
P-11
<PAGE> 88
TRUE TEMPER SPORTS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of independent auditors.............................. F-2
Balance sheets as of December 31, 1996 and 1997 and as of
September 29, 1998 (unaudited)............................ F-3
Statements of operations for the years ended December 31,
1995, 1996 and 1997 and for the nine month periods ended
September 28, 1997 (unaudited) and September 29, 1998
(unaudited)............................................... F-4
Statements of net invested capital as of December 31, 1995,
1996, 1997, and September 29, 1998 (unaudited)............ F-5
Statements of cash flows for the fiscal years ended December
31, 1995, 1996 and 1997 and for the nine month periods
ended September 28, 1997 (unaudited) and September 29,
1998 (unaudited).......................................... F-6
Notes to financial statements............................... F-7
</TABLE>
F-1
<PAGE> 89
REPORT OF INDEPENDENT AUDITORS
The Black & Decker Corporation
Towson, Maryland
We have audited the accompanying balance sheets of True Temper Sports as of
December 31, 1996 and 1997, and the related statements of operations, net
invested capital, and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statement based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of True Temper Sports as of
December 31, 1996 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
March 6, 1998
Baltimore, Maryland
F-2
<PAGE> 90
TRUE TEMPER SPORTS, INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 29,
1996 1997 1998
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash................................................... $ 793 $ 1,299 $ 1,084
Receivables, net....................................... 6,970 8,165 11,550
Inventories............................................ 10,741 11,373 8,964
Prepaid expenses and other............................. 15 349 195
-------- -------- --------
Total current assets................................ 18,519 21,186 21,793
Property and equipment, net.............................. 23,341 21,701 21,061
Goodwill................................................. 121,139 117,393 75,545
Other assets............................................. 187 61 61
-------- -------- --------
Total assets........................................ $163,186 $160,341 $118,460
======== ======== ========
LIABILITIES
Current liabilities
Accounts payable....................................... $ 5,054 $ 7,324 $ 5,520
Current portion of capital lease liability............. 182 193 126
Other current liabilities.............................. 5,863 5,952 5,017
-------- -------- --------
Total current liabilities........................... 11,099 13,469 10,663
Capital lease liability, net of current portion.......... 180 156 50
-------- -------- --------
Total liabilities................................... 11,279 13,625 10,713
NET INVESTED CAPITAL..................................... 151,907 146,716 107,747
-------- -------- --------
Total liabilities and net invested capital............... $163,186 $160,341 $118,460
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 91
TRUE TEMPER SPORTS, INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, --------------------------------
-------------------------------- SEPTEMBER 28, SEPTEMBER 29,
1995 1996 1997 1997 1998
-------- -------- -------- -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.......................... $67,531 $71,603 $82,597 $63,166 $ 71,892
Expenses
Cost of sales................... 49,228 49,628 53,886 41,761 45,308
Selling, general and
administrative
expenses..................... 9,668 11,145 13,324 9,771 10,446
Restructuring charges........... 421 492 520 520 --
Amortization of goodwill........ 3,775 3,746 3,746 2,811 1,848
Write-off of goodwill........... -- -- -- -- 40,000
Allocated corporate expenses.... 1,282 668 927 764 763
------- ------- ------- ------- --------
Operating income (loss)........... 3,157 5,924 10,194 7,539 (26,473)
Other expense..................... 59 72 54 47 75
------- ------- ------- ------- --------
Earnings (loss) before income
taxes........................... 3,098 5,852 10,140 7,492 (26,548)
Income taxes...................... 2,612 3,647 5,277 3,915 5,814
------- ------- ------- ------- --------
Net income (loss)................. $ 486 $ 2,205 $ 4,863 $ 3,577 $(32,362)
======= ======= ======= ======= ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 92
TRUE TEMPER SPORTS, INC.
STATEMENTS OF NET INVESTED CAPITAL
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NET INVESTED
CAPITAL
------------
<S> <C>
BEGINNING BALANCE JANUARY 1, 1995........................... $163,832
Current year net income..................................... 486
Net financing activities with Black & Decker................ (8,154)
BALANCE DECEMBER 31, 1995................................... 156,164
Current year net income..................................... 2,205
Net financing activities with Black & Decker................ (6,462)
--------
BALANCE DECEMBER 31, 1996................................... 151,907
Current year net income..................................... 4,863
Net financing activities with Black & Decker................ (10,054)
--------
BALANCE DECEMBER 31, 1997................................... 146,716
Current period net loss (unaudited)......................... (32,362)
Net financing activities with Black & Decker (unaudited).... (6,607)
--------
BALANCE SEPTEMBER 29, 1998 (UNAUDITED)...................... $107,747
========
</TABLE>
See accompanying notes.
F-5
<PAGE> 93
TRUE TEMPER SPORTS, INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR DECEMBER 31, --------------------------------
------------------------------ SEPTEMBER 28, SEPTEMBER 29,
1995 1996 1997 1997 1998
------- ------- -------- -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................ $ 486 $ 2,205 $ 4,863 $ 3,577 $(32,362)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and
amortization................ 7,344 7,309 7,349 5,532 4,332
Write-off goodwill............. -- -- -- -- 40,000
Changes in operating assets and
liabilities.................
Trade receivables, net......... (2,277) 1,122 (1,195) (2,936) (3,385)
Inventories.................... 1,865 36 (632) 2,121 2,409
Trade accounts payable......... 1,300 (408) 2,270 (32) (1,804)
Other assets and liabilities,
net......................... (1,335) (682) 344 (1,226) (954)
------- ------- -------- ------- --------
Net cash from operating
activities..................... 7,383 9,582 12,999 7,036 8,236
INVESTING ACTIVITIES:
Capital expenditures............. (4,123) (2,784) (2,452) (1,686) (1,844)
Proceeds from the sale of fixed
assets......................... 4,822 -- 13 -- --
------- ------- -------- ------- --------
Net cash from investing
activities..................... 699 (2,784) (2,439) (1,686) (1,844)
FINANCING ACTIVITIES
Net proceeds to parent........... (8,154) (6,462) (10,054) (6,134) (6,607)
------- ------- -------- ------- --------
Net cash from financing
activities..................... (8,154) (6,462) (10,054) (6,134) (6,607)
Net increase (decrease) in
cash........................... (72) 336 506 (784) (215)
Cash at beginning of period...... 529 457 793 793 1,299
------- ------- -------- ------- --------
Cash at end of the period........ $ 457 $ 793 $ 1,299 $ 9 $ 1,084
======= ======= ======== ======= ========
</TABLE>
See accompanying notes.
F-6
<PAGE> 94
TRUE TEMPER SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND BASIS OF PRESENTATION
Throughout the period covered by the financial statements, separate
push-down financial statements for True Temper were not prepared. These
financial statements have been prepared from the historical accounting records
of Black & Decker. The financial statements include all revenues of True Temper,
all items of expense directly incurred by it and expenses charged or allocated
to it by Black & Decker in the normal course of business. In addition, certain
expenses were allocated by Black & Decker to True Temper for the sole purpose of
preparing these financial statements.
Black & Decker utilizes a centralized cash management system. Under this
system, True Temper's cash requirements were provided directly by Black &
Decker; similarly, cash generated by True Temper was remitted directly to Black
& Decker. All charges and allocations of cost for functions and services
provided by Black & Decker are deemed paid by True Temper, in cash, in the
period in which the cost is recorded in the financial statements. Intercompany
balances with Black & Decker, net of cash, are included in owner's net
investment. No Black & Decker indebtedness is directly attributable to the
assets of True Temper. Accordingly, no debt of Black & Decker or related
interest expense has been allocated .
True Temper's results have been included in Black & Decker consolidated
income tax returns in the various taxing jurisdictions in which it operates. The
amount of taxes payable or receivable due to/from Black & Decker for 1995, 1996
and 1997 is included as a component of owner's net investment. The provision for
income taxes, the related assets and liabilities, and the related footnote
disclosures are presented as if True Temper had filed separate tax returns and
are in accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes".
The accompanying financial statements present the financial position of
True Temper, the golf club shaft manufacturing business of Black & Decker, as of
December 31, 1996 and 1997, and the statements of operations and cash flows for
each of the three years in the period ended December 31, 1997. True Temper is
indirectly owned by Black & Decker. Black & Decker acquired True Temper in April
1989, through Black & Decker's purchase of True Temper's parent company, Emhart
Corporation.
DESCRIPTION OF BUSINESS
True Temper is primarily engaged in the design, manufacture and sale of
steel and composite golf club shafts as well as a variety of other high
strength, high tolerance tubular components for the bicycle, automotive and
recreational sports markets. True Temper's manufacturing plants and primary
related facilities are located in Memphis, Tennessee as well as Olive Branch and
Amory, Mississippi. The majority of True Temper's sales are to golf club
manufacturers and distributors primarily located in the United States, the
United Kingdom, Australia and Japan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue is generally recognized as products are shipped to customers.
Liabilities are established for estimated returns, allowances, and discounts at
the time revenue is recognized.
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results inevitably will differ from
those estimates, and such differences may be material to the financial
statements. All of the accounting judgments, estimations and allocations used in
preparation of the financial statements are based on
F-7
<PAGE> 95
TRUE TEMPER SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
assumptions that Black & Decker management believes are reasonable under the
circumstances. However, these allocations and estimates are not necessarily
indicative of the costs that would have resulted if True Temper had been
operated as a separate entity.
TRADE ACCOUNTS RECEIVABLE
Trade receivables are net of allowance for doubtful accounts of $266 and
$268 as of December 31, 1996 and 1997, respectively. Credit risk with respects
to accounts receivable is limited due to the large number of customers
comprising True Temper's customer base and their dispersion across many
geographical areas.
INVENTORIES
Inventories are stated at the lower of cost or market. The cost of United
States inventories is primarily based on the last-in, first-out (LIFO) method;
all other inventories are based on the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment is stated on an historical cost basis, net of
accumulated depreciation. Property and equipment is depreciated over its
estimated useful life primarily on the straight-line basis. In general the
estimated useful lives are as follows:
<TABLE>
<CAPTION>
<S> <C>
Computers and related equipment............................. 2-4 years
Furniture and office equipment.............................. 15 years
Leasehold improvements...................................... 15 years
Machinery and equipment..................................... 8-15 years
Buildings................................................... 50 years
</TABLE>
GOODWILL
The excess of purchase price of True Temper by Black & Decker over the fair
value of the net assets acquired was recorded as goodwill. Amortization of
goodwill is recorded on the straight-line method over a period of 40 years.
Accumulated amortization was approximately $29,000 and $33,000 at December 31,
1996 and 1997.
On a periodic basis through December 31, 1997, Black & Decker estimated
True Temper's future undiscounted cash flows of the business in order to
determine that the carrying value of goodwill had not been impaired. As more
fully described in Note 11, effective January 1, 1998, Black & Decker changed
its method for measuring and recognizing an impairment of goodwill from an
undiscounted cash flow approach to a discounted cash flow approach.
FOREIGN CURRENCIES
Transaction gains and losses that arise from exchange rate changes on
transactions denominated in a currency other than the U.S. Dollar are included
currently in the results of operations as a component of cost of sales. The
total loss on foreign currency in the year ended December 31, 1997 was $143. The
gain on foreign currency in the years ended December 31, 1995 and 1996, was $2
and $5, respectively. True Temper hedges its foreign currency transaction
exposure through the use of forward exchange contracts. Gains and losses on
foreign currency transaction hedges are recognized in income and offset the
foreign exchange gains and losses on the underlying transaction.
F-8
<PAGE> 96
TRUE TEMPER SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes the contractual amounts of True Temper's
forward exchange contracts as of December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Pound Sterling............................................. $1,162 $1,834
Australian dollar.......................................... 1,015 1,325
------ ------
$2,177 $3,159
====== ======
</TABLE>
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with FASB Statement No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," True Temper
records impairment losses on long-lived assets when events and circumstances
indicate that the assets might be impaired.
ADVERTISING AND PROMOTIONAL COSTS
Advertising and promotional costs are accounted for in accordance with
Statement of Position 93-7 "Reporting on Advertising Costs". Advertising and
promotional costs primarily consists of trade show costs, media spots including
print, radio and television, advertising production and agency fees,
sponsorships, spokesperson fees and product and promotional samples. Advertising
and promotional expense for the years ended December 31, 1995, 1996, and 1997
were $3,346, $3,913, and $4,241, respectively.
RESEARCH AND DEVELOPMENT COSTS
Costs associated with the development of new products and changes to
existing products are expensed as incurred and are included in selling, general,
and administrative expenses in the accompanying Statements of Operations.
Research and development costs amounted to $1,463, $1,610, and $2,272 for the
years ended December 31, 1995, 1996, and 1997, respectively.
POST-RETIREMENT BENEFITS
Substantially all of True Temper's employees are covered by Black & Decker
non-contributory defined benefit plans. The defined benefit plans are funded in
conformity with funding requirements of applicable government regulations.
Generally, benefits are based on age, years of service, and the level of
compensation during the final years of employment. Prior service costs for
defined benefit plans generally are amortized over the estimated remaining
service periods of employees.
Certain employees are covered by Black & Decker defined contribution plans.
True Temper's contribution to these plans is based on a percentage of employee
compensation or employee contribution. These plans are funded on a current
basis. In addition to pension benefits, certain post-retirement medical, dental,
and life insurance benefits are provided.
INCOME TAXES
True Temper is included in the consolidated tax return of The Black &
Decker Corporation. Income taxes have been provided as if True Temper had filed
a separate tax return. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes. Income taxes payable/receivable and deferred tax
assets and liabilities are included as a component of net invested capital.
F-9
<PAGE> 97
TRUE TEMPER SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments represents the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than a forced sale or liquidation. Significant differences can arise
between the fair value and carrying amount of financial instruments that are
recognized at historical cost amounts.
The following methods and assumptions were used by True Temper in
estimating fair value disclosures for financial instruments:
Cash, trade receivables and payables: The amounts reported in the
balance sheets approximate fair value.
Foreign currency contracts: The fair value of forward exchange
contracts is estimated using prices established by financial institutions
for comparable instruments and approximates carrying value.
3. RELATED PARTY TRANSACTIONS
Affiliate receivables and payables: All affiliate receivables and payables
have been classified as net invested capital in the accompanying financial
statements.
Following is a summarization of certain related party transactions:
Black & Decker and its affiliates charge True Temper for corporate expense
allocations, "corporate pass-through charges" and other shared services. The
costs charged to True Temper for such services are included in the accompanying
financial statements, and are based upon various allocation methodologies
determined by Black & Decker and, accordingly, may not represent the actual cost
of providing such services. Furthermore, the amounts charged for these services
may not necessarily be representative of the costs that would be incurred by
True Temper on a stand-alone basis.
Corporate Expense Allocation: True Temper receives certain services
provided by Black & Decker that include cash management, tax reporting, risk
management and internal audit. Allocated expenses for such services, amounting
to $1,282, $668 and $927 for the years ended December 31, 1995, 1996 and 1997,
respectively, have been included in the accompanying statements of operations.
Charges for these corporate services were based upon a general allocation
methodology determined by Black & Decker (used to allocate all corporate
overhead expenses to Black & Decker's operating divisions), and have not
necessarily been allocated on a basis which approximates True Temper's estimated
usage of such services. The corporate expense allocation of $413 and $135 in
1995 and 1996 consisted primarily of salaries for additional management
personnel Black & Decker. Group management was disbanded in early 1996.
Net Investment: The net invested capital account includes transactions of
an intercompany nature, related to deferred income taxes, post-retirement
benefits, other intercompany transactions and the residual net investment
balance in True Temper Sports. The following table sets forth the components of
net investments recognized in True Temper's balance sheet at December 31, 1996
and 1997.
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Deferred income taxes.................................. $ (990) $ (236)
Post-retirement Benefits............................... 9,277 7,456
Residual Investment.................................... 143,620 139,496
-------- --------
$151,907 $146,716
======== ========
</TABLE>
All transactions between Black & Decker and True Temper have been accounted
for as settled in cash at the time the transactions were recorded by True Temper
for the purposes of the statement of cash flows.
F-10
<PAGE> 98
TRUE TEMPER SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Corporate Pass-through Charges: Black & Decker provides certain common
services for True Temper and other Black & Decker affiliates, including group
self-insurance programs and blanket insurance coverage. Many of these services
represent services provided by third parties whereby Black & Decker incurs the
cost of the service on behalf of True Temper. Black & Decker charges True Temper
for the estimated cost of these services. The costs for these services and/or
expenses have been allocated to True Temper by Black & Decker based upon certain
allocation methodologies determined by Black & Decker. Accordingly, there is no
assurance that the amounts allocated for such items provided by Black & Decker
would be indicative of the actual amounts that True Temper would have incurred
on a stand-alone basis.
Reflected in the statements of operations are the following pass-through
costs:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Product liability........................................ $ 274 $ 282 $ 303
General liability and loss insurance................... 106 105 94
Workers' compensation.................................. 335 323 289
Employee benefits:
Group medical, dental and life......................... 3,032 2,623 2,952
Pension................................................ 271 336 336
Post-retirement medical................................ 145 (94) 139
401(k)................................................. 140 150 144
Legal expenses......................................... 70 4 351
Employer employment taxes.............................. 1,764 1,733 1,796
Payroll and benefits processing........................ 59 46 85
Communication services................................. 0 73 109
------ ------ ------
Total.......................................... $6,196 $5,581 $6,598
====== ====== ======
</TABLE>
Shared Direct Services with Black & Decker Affiliates: True Temper
utilizes certain direct services provided by other Black & Decker affiliates
mainly in conjunction with the Company's non-domestic sales. The direct services
primarily include payroll and benefit processing, accounts receivable support,
and inventory warehousing. Total charges for these services are approximately
$62 in each of the three years ended December 31, 1997. The amounts charged to
True Temper for these services may not necessarily be representative of the
costs that would be incurred by True Temper on a stand-alone basis.
4. RESTRUCTURING
In 1995, 1996 and 1997, True Temper incurred restructuring provisions of
$421, $492 and $520 primarily consisting of severance and other costs related to
the consolidation of manufacturing and administrative facilities.
F-11
<PAGE> 99
TRUE TEMPER SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. INVENTORIES
Inventories consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
------------------ 29,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials............................... $ 1,105 $ 2,045 $1,543
Work-in process............................. 2,583 2,349 2,556
Finished goods.............................. 7,012 6,815 4,709
LIFO Reserve................................ 41 164 156
------- ------- ------
$10,741 $11,373 $8,964
======= ======= ======
</TABLE>
6. PROPERTY AND EQUIPMENT
Major classes of property and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
<S> <C> <C>
Land improvements........................................ $ 303 $ 303
Buildings................................................ 5,886 6,208
Furniture and office equipment........................... 628 605
Machinery and equipment.................................. 35,572 37,091
Computer equipment and capitalized software.............. 2,006 2,130
Leasehold improvements................................... 2,714 2,080
Construction in progress................................. 1,142 1,246
------- -------
48,251 49,663
Less accumulated depreciation............................ 24,910 27,962
------- -------
$23,341 $21,701
======= =======
</TABLE>
Depreciation expense for the years ended December 31, 1995, 1996, and 1997,
was $3,569, $3,563, and $3,603, respectively. Total cost of property obtained
under capital leases was $776 and $980 at December 31, 1996 and 1997,
respectively. Accumulated depreciation on assets obtained under capital leases
was $406 and $642 at December 31, 1996 and 1997, respectively. Amortization of
assets acquired under capital leases is included within depreciation expense in
all years presented.
7. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------ ------
<S> <C> <C>
Salaries, wages and related payroll taxes, including
vacation and bonus....................................... $1,900 $1,837
Corporate-pass-through due to Black & Decker............... 1,663 1,603
Other...................................................... 2,300 2,512
------ ------
$5,863 $5,952
====== ======
</TABLE>
F-12
<PAGE> 100
TRUE TEMPER SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Corporate pass-through due to Black & Decker includes certain reserves
related to product liability, workers compensation, disability and medical
benefits.
8. INCOME TAXES
For the periods, federal and state income taxes are provided as if True
Temper filed its own separate income tax returns. True Temper uses the liability
method in accounting for income taxes. Under this method, deferred tax assets
and liabilities are determined based on the differences between financial
reporting and tax bases of assets and liabilities and are measured using enacted
tax rates and laws that will be in effect when differences are expected to
reverse.
The provision for income taxes is comprised of the following for the years
ended December 31, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------- ------
<S> <C> <C> <C>
Current................................................. $ (484) $ 5,963 $4,522
Deferred................................................ 3,096 (2,316) 755
------ ------- ------
$2,612 $ 3,647 $5,277
====== ======= ======
</TABLE>
Significant components of True Temper's deferred tax liabilities and assets
are as follows as of December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment............................. $4,194 $4,067
Deferred tax assets:
Post-retirement benefits.................................... 3,525 2,833
Accrued expenses............................................ 1,048 1,053
Other....................................................... 611 417
------ ------
5,184 4,303
------ ------
Net deferred tax assets..................................... $ 990 $ 236
====== ======
</TABLE>
The reason for the difference between applicable income taxes and the
amount computed by applying the statutory federal income tax rate of 35% to
income before taxes is primarily attributable to goodwill amortization and state
income taxes.
9. EMPLOYEE BENEFIT PLANS
Net pension costs for all defined benefit plans include the following
components for each year:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Service cost.......................................... $ 484 $ 707 $ 710
Interest cost on projected benefit obligation......... 1,732 1,764 1,848
Actual return on assets............................... (3,023) (2,293) (4,693)
Net amortization and deferral......................... 1,078 158 2,471
------- ------- -------
Net pension cost...................................... $ 271 $ 336 $ 336
======= ======= =======
</TABLE>
F-13
<PAGE> 101
TRUE TEMPER SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The funded status of the defined benefit plans at the end of each year is
as follows:
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit........................................ $ 21,447 $ 24,755
============ ============
Accumulated benefit................................... $ 23,014 $ 26,160
============ ============
Projected benefit obligation.......................... $ 23,763 $ 27,762
Plan assets at fair value............................... 26,045 31,875
------------ ------------
Plan assets in excess of projected benefit obligation... 2,282 4,113
Unrecognized net loss (gain)............................ (1,499) (3,579)
Unrecognized prior service costs........................ 408 321
------------ ------------
Net pension asset recognized in net invested capital.... $ 1,191 $ 855
============ ============
Discount rates.......................................... 8.0% 7.5%
Salary scales........................................... 5.0 to 6.0% 5.0 to 6.0%
Expected return on plan assets.......................... 10.5% 9.75%
</TABLE>
Assets of the plans consist primarily of investments in equity securities,
debt securities and cash equivalents. Expenses for defined contribution plans
amounted to $140, $150 and $144 in 1995, 1996 and 1997, respectively.
True Temper participates in certain unfunded health care plans of Black &
Decker that provide post-retirement medical, dental, and life insurance to most
employees. The post-retirement medical and dental plans are contributory and
include certain cost-sharing features, such as deductibles and co-payments.
Net periodic post-retirement benefit expense included the following
components at December 31:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Service expense............................................ $ 48 $ 65 $ 67
Interest expense........................................... 268 247 470
Net amortization........................................... (171) (406) (398)
----- ----- -----
Net periodic post-retirement benefit expense (income)...... $ 145 $ (94) $ 139
===== ===== =====
</TABLE>
The reconciliation of the accumulated post-retirement benefit obligation to
the liability recognized in the balance sheets at the end of the years was as
follows:
<TABLE>
<CAPTION>
1996 1997
------- ------
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees.................................................. $ 4,669 $3,661
Fully eligible active participants........................ 757 873
Other active participants................................. 838 1,093
------- ------
Total....................................................... 6,264 5,627
Unrecognized prior service costs............................ 2,488 1,761
Unrecognized net loss....................................... 1,716 923
------- ------
Net post-retirement benefit liability recognized in net
invested capital.......................................... $10,468 $8,311
======= ======
</TABLE>
The health care cost trend rate used to determine the post-retirement
benefit obligation was 9.7% for 1997 and 7.2% for 1998, decreasing gradually to
an ultimate rate of 5.25% in 2001, where it remains thereafter.
F-14
<PAGE> 102
TRUE TEMPER SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The trend factor is a significant factor in determining the amounts reported.
The effect of a 1% annual increase in these assumed health care cost trend rates
would increase the accumulated benefit obligation at December 31, 1997 by
approximately $400. The effect of a 1% increase on the aggregate of the service
and interest cost components of net periodic post-retirement benefit cost is
immaterial. An assumed discount rate of 7.5% was used to measure the accumulated
post-retirement benefit obligation in 1997 compared to 8% used in 1996.
10. COMMITMENTS AND CONTINGENCIES
LEASE OBLIGATIONS
The Company is obligated under various non-cancelable leases for office
facilities and equipment. These leases generally provide for renewal options
and, in the case of facilities leases, for periodic rate increases based upon
economic factors. All non-cancelable leases with an initial term greater than
one year have been categorized as either capital or operating leases in
conformity with Statement of Financial Accounting Standards No. 13, "Accounting
for Leases."
Future minimum payments under non-cancelable operating and capital leases
with initial terms of one year or more as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
<S> <C> <C>
1998...................................................... $ 280 $209
1999...................................................... 225 99
2000...................................................... 124 64
2001...................................................... 99 5
2002...................................................... 74 --
Thereafter................................................ 27 --
----- ----
Total lease payments...................................... 829 377
less Sublease rentals................................... (173) --
Imputed interest.......................................... -- (28)
----- ----
Total minimum lease payments.............................. $ 656 $349
===== ====
</TABLE>
Rental expense on operating leases was $263, $282, and $274 for the years
ended December 31, 1995, 1996 and 1997, respectively.
The Amory manufacturing plant and certain manufacturing equipment, located
in Amory Mississippi was previously financed through various Industrial Revenue
Bonds issued by the City of Amory Mississippi and the County of Monroe. These
bonds had original maturities through June, 1986. Upon maturity of the various
Industrial Revenue Bonds, the Company is subject to annual rental payments to
the City of Amory and County of Monroe in lieu of property taxes. These various
operating minimum lease payments are fixed at a total annual payment of $26 and
continue through various dates ending in June 2075.
The Company leases a building with minimum rental payments on this lease of
approximately $100 per year. This lease expires in August, 1999. True Temper has
the option to purchase this property. Currently, True Temper does not utilize
this facility and has entered a sublease agreement with a third party, which
expires August 31, 1999 and calls for annual sublease rent of approximately
$104.
LEGAL PROCEEDINGS
True Temper is involved in a number of legal proceedings and claims with
private and governmental parties, including those relating to contract claims
and disputes, investigation of compliance with government
F-15
<PAGE> 103
TRUE TEMPER SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
contract regulations, and employment related matters. In the opinion of
management, based upon information presently available, after consideration of
existing accruals, none of these proceedings is likely to have a material
adverse effect upon the financial position of True Temper.
11. CHANGE IN ACCOUNTING FOR GOODWILL
Black & Decker elected to change its method of measuring goodwill
impairment from an undiscounted cash flow approach to a discounted cash flow
approach effective January 1, 1998. On a periodic basis, Black & Decker will
estimate future discounted cash flows of the businesses to which goodwill
relates. When such an estimate of the future discounted cash flows, net of the
carrying amount of tangible net assets, is less than the carrying amount of
goodwill, the difference will be charged to operations. For purposes of
determining the future discounted cash flows of the businesses to which goodwill
relates, Black & Decker, based upon historical results, current projections, and
internal earnings targets, determines the projected future operating cash flows,
net of income tax payments, of the individual businesses. These projected future
cash flows are then discounted at a rate corresponding to Black & Decker's
estimated cost of capital, which also is the hurdle rate used by Black & Decker
in making investment decisions. Future discounted cash flows for businesses to
be sold include an estimate of the proceeds from the eventual sale of such
businesses, net of associated selling expenses and taxes. Black & Decker
believes that measurement of the value of goodwill through a discounted cash
approach is preferable in that it facilitates the timely identification of
impairment of the carrying value of investments in businesses and provides a
more current and, with respects to business to be sold, more realistic valuation
than the undiscounted approach.
In connection with Black & Decker's change in accounting policy with
respect to measurement of goodwill impairment described above, $40 million of
goodwill related to True Temper will be written off through a charge to
operations during the first quarter of 1998. This is a change in accounting
estimate that is inseparable from a change in principle. That write-down
represents the amount necessary to write-down the carrying value of goodwill for
True Temper, according to Black & Decker's best estimate as of January 1, 1998,
of True Temper's future discounted cash flows using the methodology described in
the preceding paragraph.
12. UNAUDITED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
The unaudited financial statements as of September 29, 1998 and September
28, 1997 and for the nine months then ended have been prepared in accordance
with generally accepted accounting principles for interim financial information
and Article 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting of recurring adjustments, necessary for a fair
presentation of financial position and results of operations of these periods
have been included. Operating results for the period ended September 29, 1998
are not necessarily indicative of the results that may be expected for the
entire year.
13. SUBSEQUENT EVENT (UNAUDITED)
Pursuant to the June 29, 1998 Reorganization, Recapitalization and Stock
Purchase Agreement, TTC was recapitalized on September 30, 1998. In connection
with the recapitalization aggregate consideration of $204.5 million was paid to
Black & Decker consisting of $175.8 million in cash, a $25 million note
receivable and $3.7 million in retained equity. The transaction, including
transaction fees, was funded by certain bridge financing in the amount of $125
million, borrowings under the Senior Credit Facilities and an equity investment
of $62.8 million.
F-16
<PAGE> 104
- ------------------------------------------------------
- ------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT
RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT OFFER TO SELL OR
BUY ANY SHARES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE INFORMATION IN THIS
PROSPECTUS IS CURRENT AS OF , 1999.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 10
Use of Proceeds....................... 16
Capitalization........................ 17
Selected Historical Financial Data.... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 25
Management............................ 35
Security Ownership of Certain
Beneficial Owners and Management.... 38
Certain Relationships and Related
Transactions........................ 39
Description of Senior Credit
Facilities.......................... 41
Description of Exchange Notes......... 43
Notice to Investors...................
Plan of Distribution.................. 73
Legal Matters......................... 74
Independent Auditors.................. 74
Index to Unaudited Pro Forma Financial
Information......................... P-1
Index to Financial Statements......... F-1
</TABLE>
UNTIL , 1999 ([ ] DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE THESE SECURITIES, WHETHER OR NOT PARTICIPATING
IN THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
TRUE TEMPER LOGO
TRUE TEMPER SPORTS, INC.
$100,000,000
10 7/8% SENIOR SUBORDINATED NOTES
DUE 2008
--------------------
PROSPECTUS
--------------------
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 105
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware, inter alia,
("Section 145") provides that a Delaware corporation may indemnify any persons
who were, are or are threatened to be made, parties 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 such corporation),
by reason of the fact that such person is or was an officer, director, employee
or agent of such corporation, or is or was serving at the request of such
corporation as a director, officer employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
were or are threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by reason of the
fact that such person was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit, provided such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the corporation's best
interests, provided that no indemnification is permitted without judicial
approval if the officer, director, employee or agent is adjudged to be liable to
the corporation. Where an officer, director, employee or agent is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred.
The Certificate of Incorporation of the Company provides for the
indemnification of directors and officers to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as it currently exists or may
hereafter be amended.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
The Company maintain and have in effect insurance policies covering all of
their respective directors and officers against certain liabilities for actions
taken in such capacities, including liabilities under the Securities Act of
1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
(A) EXHIBITS
2.1 -- Reorganization, Recapitalization and Stock Purchase
Agreement dated as of June 29, 1998 by and between The
Black & Decker Corporation, True Temper Sports, Inc. and
TTSI LLC ("Recapitalization Agreement").
2.2 -- Amendment No. 1 to Recapitalization Agreement dated August
1, 1998.
2.3 -- Amendment No. 2 to Recapitalization Agreement dated
September 30, 1998.
2.4 -- Assignment and Assumption Agreement by and between TTC and
the Company dated September 30, 1998.
3.1 -- Amended and Restated Certificate of Incorporation of the
Company, dated September 29, 1988.
</TABLE>
II-1
<PAGE> 106
<TABLE>
<S> <C>
3.2 -- By-laws of the Company.
4.1 -- Indenture dated as of November 23, 1998 between the Company and United States Trust of New York.
4.2 -- Purchase Agreement dated November 18, 1998 between the Company and Donaldson, Lufkin & Jenrette.
4.3 -- Registration Rights Agreement dated as of November 23, 1998 between the Company and Donaldson, Lufkin &
Jenrette.
5.1 -- Opinion of Kirkland & Ellis.
10.1 -- Management Services Agreement dated as of September 30, 1998 between the Company and Cornerstone Equity
Investors, LLC ("Management Services Agreement").
10.2 -- Amendment to Management Services Agreement dated November 23, 1998.
10.3 -- Credit Agreement dated as of September 30, 1998 by and among the Company, various financial
institutions, DLJ Capital Funding, Inc. and The First National Bank of Chicago.
10.4 -- Securities Purchase Agreement dated as of September 30, 1998 among True Temper Corporation and the
Purchase Party thereto.
12.1 -- Statement of Ratio of Earnings to Fixed Charges.
23.1 -- Consent of Ernst & Young, LLP.
23.2 -- Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 -- Powers of Attorney (included in Signature page).
25.1 -- Statement of Eligibility of Trustee on Form T-1.
27.1 -- Financial Data Schedule.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Letter of Notice of Guaranteed Delivery.
99.3 -- Form of Tender Instructions.
</TABLE>
ITEM 22. UNDERTAKINGS.
Each undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering; and
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will
II-2
<PAGE> 107
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described under
Item 20 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 the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(5) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(6) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Each undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
Each 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> 108
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Memphis,
State of Tennessee, on February 12, 1999.
Time Temper Sports, Inc.
By: /s/ SCOTT C. HENNESSY
------------------------------------
Name: Scott C. Hennessy
Title: Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Scott C. Hennessy his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities (including
his capacity as a director and/or officer of True Temper Sports, Inc.), to sign
any or all amendments (including post-effective amendments) to this registration
statement and any subsequent registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated on February 12, 1999.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
/s/ SCOTT C. HENNESSY Chief Executive Officer and Director
- -------------------------------------------------------- (principal executive officer)
Scott C. Hennessy
/s/ FRED H. GEYER Vice President, Finance -- Chief Financial
- -------------------------------------------------------- Officer, (principal financial officer and
Fred H. Geyer accounting officer)
/s/ ROBERT A. KNOX Director
- --------------------------------------------------------
Robert A. Knox
/s/ RAYMOND A. DEVITA Director
- --------------------------------------------------------
Raymond A. Devita
/s/ MARK ROSSI Director
- --------------------------------------------------------
Mark Rossi
/s/ TYLER J. WOLFMAN Director
- --------------------------------------------------------
Tyler J. Wolfman
</TABLE>
II-4
<PAGE> 109
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ------- ----------- ------------
<C> <C> <S> <C>
2.1 -- Reorganization, Recapitalization and Stock Purchase
Agreement dated as of June 29, 1998 by and between The
Black & Decker Corporation, True Temper Sports, Inc. and
TTSI LLC ("Recapitalization Agreement").
2.2 -- Amendment No. 1 to Recapitalization Agreement dated August
1, 1998.
2.3 -- Amendment No. 2 to Recapitalization Agreement dated
September 30, 1998.
2.4 -- Assignment and Assumption Agreement by and between TTC and
the Company dated September 30, 1998.
3.1 -- Amended and Restated Certificate of Incorporation of the
Company, dated September 29, 1988.
3.2 -- By-laws of the Company.
4.1 -- Indenture dated as of November 23, 1998 between the Company
and United States Trust of New York.
4.2 -- Purchase Agreement dated November 18, 1998 between the
Company and Donaldson, Lufkin & Jenrette.
4.3 -- Registration Rights Agreement dated as of November 23, 1998
between the Company and Donaldson, Lufkin & Jenrette.
5.1 -- Opinion of Kirkland & Ellis.
10.1 -- Management Services Agreement dated as of September 30, 1998
between the Company and Cornerstone Equity Investors, LLC
("Management Services Agreement").
10.2 -- Amendment to Management Services Agreement dated November
23, 1998.
10.3 -- Credit Agreement dated as of September 30, 1998 by and among
the Company, various financial institutions, DLJ Capital
Funding, Inc. and The First National Bank of Chicago.
10.4 -- Securities Purchase Agreement dated as of September 30, 1998
among True Temper Corporation and the Purchase Party
thereto.
12.1 -- Statement of Ratio of Earnings to Fixed Charges.
23.1 -- Consent of Ernst & Young, LLP.
23.2 -- Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 -- Powers of Attorney (included in Signature page).
25.1 -- Statement of Eligibility of Trustee on Form T-1.
27.1 -- Financial Data Schedule.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Letter of Notice of Guaranteed Delivery.
99.3 -- Form of Tender Instructions.
</TABLE>
<PAGE> 1
EXHIBIT 2.1
================================================================================
REORGANIZATION,
RECAPITALIZATION AND STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 29, 1998
BY AND BETWEEN
THE BLACK & DECKER CORPORATION,
TRUE TEMPER SPORTS, INC.
AND
TTSI LLC
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TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.01 Definitions................................................... 2
ARTICLE II
TRANSACTIONS AND CLOSING
Section 2.01 Reorganization of TTS Business................................ 2
Section 2.02 Recapitalization of TTSI...................................... 3
Section 2.03 Closing Transactions.......................................... 3
Section 2.04 Section 338(h)(10) Election; Exchange Consideration........... 5
Section 2.05 Closing....................................................... 5
Section 2.06 Estimation and Adjustment of Exchange Consideration........... 6
Section 2.07 Contingent Purchase Price..................................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 3.01 Representations and Warranties of Parent...................... 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.01 Representations and Warranties of Buyer....................... 9
ARTICLE V
COVENANTS AND AGREEMENTS OF PARENT
Section 5.01 Conduct of Business........................................... 9
Section 5.02 Access to Information; Confidentiality........................ 12
Section 5.03 Change of Lockbox Accounts.................................... 13
Section 5.04 Access to Information; Cooperation After Closing.............. 13
Section 5.05 Maintenance of Insurance Policies............................. 14
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Section 5.06 Noncompetition................................................ 14
Section 5.07 Debt Financing................................................ 15
Section 5.08 Advice of Changes............................................. 15
Section 5.09 No Hire....................................................... 15
ARTICLE VI
COVENANTS AND AGREEMENTS OF BUYER
Section 6.01 Confidentiality............................................... 15
Section 6.02 Provision and Preservation of and Access to Certain
Information; Cooperation...................................... 16
Section 6.03 Insurance; Financial Support Arrangements..................... 17
Section 6.04 Use of Intellectual Property.................................. 18
Section 6.05 Conduct of TTS Business After Closing......................... 19
Section 6.06 Debt Financing................................................ 19
Section 6.07 Certain Environmental Investigations.......................... 19
ARTICLE VII
COVENANTS AND AGREEMENTS OF THE PARTIES
Section 7.01 Further Assurances............................................ 20
Section 7.02 Certain Filings; Consents..................................... 20
Section 7.03 Public Announcements.......................................... 20
Section 7.04 Intellectual Property......................................... 20
Section 7.05 HSR Act....................................................... 21
Section 7.06 Certain Environmental Insurance Matters....................... 21
Section 7.07 Legal Privileges.............................................. 21
Section 7.08 Tax Matters................................................... 21
Section 7.09 Limitations on Confidentiality Restrictions................... 24
ARTICLE VIII
EMPLOYEES AND EMPLOYEE BENEFIT MATTERS
Section 8.01 Employees and Employee Benefit Matters........................ 24
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ARTICLE IX
CONDITIONS TO CLOSING
Section 9.01 Conditions to the Obligations of Each Party................... 24
Section 9.02 Conditions to Obligations of Buyer............................ 25
Section 9.03 Conditions to Obligation of Parent and TTSI................... 26
Section 9.04 Updated Disclosure Schedules.................................. 26
Section 9.05 Effect of Waiver.............................................. 26
ARTICLE X
SURVIVAL; INDEMNIFICATION
Section 10.01 Survival...................................................... 26
Section 10.02 Indemnification............................................... 28
Section 10.03 Procedures.................................................... 29
Section 10.04 Limitations................................................... 32
ARTICLE XI
TERMINATION
Section 11.01 Termination................................................... 32
Section 11.02 Effect of Termination......................................... 33
ARTICLE XII
MISCELLANEOUS
Section 12.01 Notices....................................................... 33
Section 12.02 Amendments; Waivers........................................... 35
Section 12.03 Expenses...................................................... 35
Section 12.04 Successors and Assigns........................................ 35
Section 12.05 Disclosure.................................................... 35
Section 12.06 Construction.................................................. 36
Section 12.07 Entire Agreement.............................................. 36
Section 12.08 Governing Law................................................. 37
Section 12.09 Counterparts; Effectiveness................................... 37
Section 12.10 Jurisdiction.................................................. 37
Section 12.11 Severability.................................................. 37
Section 12.12 Captions...................................................... 37
Section 12.13 Bulk Sales.................................................... 37
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EXHIBITS
EXHIBIT A Definitions
EXHIBIT B Representations and Warranties of Parent
EXHIBIT C Representations and Warranties of Buyer
EXHIBIT D Employees and Employee Benefit Matters
EXHIBIT E Additional Matters Relating to Product Liability Issues
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ATTACHMENTS
Attachment I Opening Statement
Attachment II Assignment and Assumption Agreement
Attachment III Assignment of United States Trademarks, Trademark
Registrations and Applications for Registration
Attachment IV Assignment of Foreign Trademarks, Trademark Registrations and
Applications for Registration
Attachment V Assignment of United States Patents and Patent Applications
Attachment VI Assignment of Foreign Patents and Applications for Patents
Attachment VII Services Agreement
Attachment VIII Reserved
Attachment IX Exchange Consideration Allocation Schedule
Attachment X Intellectual Property (Registrations and Applications Therefor)
Attachment XI Consents and Approvals Required Prior to Closing
Attachment XII TTSI Financial Statements
Attachment XIII Certain Active Employees
Attachment XIV Terms of Stockholders' and Registration Rights Agreements
Attachment XV Assignment of U.S. Copyright Registration
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REORGANIZATION, RECAPITALIZATION AND
STOCK PURCHASE AGREEMENT
This Reorganization, Recapitalization and Stock Purchase Agreement
(together with the Exhibits, Schedules and Attachments hereto, this "Agreement")
is made as of the 29th day of June 1998, by and among The Black & Decker
Corporation, a Maryland corporation ("Parent"), True Temper Sports, Inc., a
Delaware corporation ("TTSI"), and TTSI LLC, a Delaware limited liability
company ("Buyer").
W I T N E S E T H:
WHEREAS, Parent, through certain of its direct and indirect
Subsidiaries, is engaged in the TTS Business and indirectly beneficially owns
all of the issued and outstanding capital stock of TTSI;
WHEREAS, subsequent to the execution and delivery of this Agreement but
prior to the Closing, Parent desires to cause Emhart Industries, Inc., a
Connecticut corporation and an indirect, wholly-owned subsidiary of Parent
("EII"), to make a capital contribution of all of the assets and liabilities of
EII which are used exclusively in or relate exclusively to the TTS Business to
TTSI in exchange for newly issued shares of TTSI Common Stock and TTSI Preferred
Stock and TTSI desires to accept such capital contribution, to issue such shares
of TTSI Common Stock and TTSI Preferred Stock and to assume and agree to pay,
satisfy and discharge such liabilities, all as more fully set forth herein;
WHEREAS, subsequent to the execution and delivery of this Agreement but
prior to the Closing, TTSI desires to acquire from Emhart Inc., a Delaware
corporation and an indirect, wholly-owned subsidiary of Parent ("Emhart"), and
Parent desires to cause Emhart to sell and transfer to TTSI, certain
Intellectual Property used in connection with the TTS Business in exchange for
newly issued shares of TTSI Common Stock and TTSI Preferred Stock, all as more
fully set forth herein;
WHEREAS, subsequent to the execution and delivery of this Agreement but
prior to the Closing, Parent desires to cause certain of its other Subsidiaries
to contribute certain assets used exclusively in the TTS Business to TTSI in
exchange for promissory notes from TTSI payable at Closing and TTSI's assumption
of related liabilities;
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, following the reorganization of the TTS Business contemplated by the
preceding recitals, Parent desires to cause TTSI to incur indebtedness to
facilitate the recapitalization of TTSI, and Buyer desires to assist TTSI to
incur such indebtedness, all as more fully set forth herein;
WHEREAS, Parent desires to cause TTSI, and Buyer desires to assist
TTSI, to use the proceeds of such borrowings to redeem 100% of the TTSI Common
Stock and 100% of the TTSI Preferred Stock then owned by Emhart for an aggregate
consideration of $161,484,126 and 50% of
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the TTSI Common Stock and 50% of the TTSI Preferred Stock then owned by EII for
an aggregate consideration of $26,914,021;
WHEREAS, following such redemption, Buyer desires to purchase, buy and
acquire from EII and Parent desires to cause EII to sell, transfer and convey to
Buyer the Acquired Shares, and Parent and Buyer desire to enter into certain
agreements and arrangements ancillary to such transactions; and
WHEREAS, upon consummation of the transactions contemplated by this
Agreement, (i) Buyer and Buyer's Permitted Assigns will own TTSI Common Stock
representing, in the aggregate, not less than 94.18% of all of the issued and
outstanding shares of TTSI Common Stock and TTSI Preferred Stock representing,
in the aggregate, 94.0% of all of the issued and outstanding shares of TTSI
Preferred Stock, (ii) EII will own 5.82% of all of the issued and outstanding
shares of TTSI Common Stock and 6.0% of all of the issued and outstanding shares
of TTSI Preferred Stock, and (iii) management of the TTSI Business designated by
Buyer will own any remaining shares of TTSI Common Stock.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Capitalized terms used in this Agreement
shall have the meanings specified in this Agreement or in Exhibit A.
ARTICLE II
TRANSACTIONS AND CLOSING
Section 2.01 Reorganization of TTS Business. Upon the terms and subject
to the conditions set forth in this Agreement, the parties agree that following
the execution of this Agreement and prior to consummation of the transactions
contemplated by Sections 2.02 and 2.03, among other things:
(a) TTSI will file an Amended and Restated Certificate of Incorporation
consistent with the terms of this Agreement as agreed to by Buyer and Parent;
(b) Parent will cause EII to contribute the Contributed Assets to TTSI,
free and clear of all Liens (other than Permitted Liens), and TTSI will assume
and agree to pay, satisfy and discharge all of the Assumed Liabilities, all as
contemplated by the Assignment and Assumption Agreement;
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(c) In exchange for the capital contribution contemplated by Section
2.01(b), TTSI will issue 1,000 shares of TTSI Common Stock and 250 shares of
TTSI Preferred Stock to EII, which upon such issuance shall be duly authorized,
fully paid and non-assessable shares of capital stock of TTSI;
(d) Parent shall and will cause Emhart and, to the extent applicable,
EII to sell, transfer and convey to TTSI the Transferred Intellectual Property,
all as contemplated by the Intellectual Property Assignment Agreements;
(e) In exchange for the transfer of the Transferred Intellectual
Property contemplated by Section 2.01(d), TTSI will issue 6,000 shares of TTSI
Common Stock and 750 shares of TTSI Preferred Stock to Emhart, which upon such
issuance shall be duly authorized, fully paid and non-assessable shares of
capital stock of TTSI;
(f) Parent (i) will cause TTSI to establish a branch in each of the
United Kingdom, Australia and Japan and (ii) will cause each of Tucker Fasteners
Limited ("Tucker"), Black & Decker (Australasia) Pty. Limited ("B&D
Australasia") and Nippon Pop Rivets & Fasteners, Ltd. ("Nippon") to contribute
the assets and liabilities relating exclusively to the TTS Business operations
in the United Kingdom, Australia and Japan, respectively, to TTSI; and
(g) In exchange for the contributions contemplated by Section 2.01(f),
TTSI will issue and deliver to each of Tucker, B&D Australasia and Nippon a
promissory note payable in full at Closing with an initial principal amount
equal to the net book value of the respective contributed assets with a fixed
interest rate equal to 7.5% per annum.
Section 2.02 Recapitalization of TTSI. (a) Upon the terms and subject
to the conditions set forth in this Agreement, the parties agree that following
the execution of this Agreement and immediately prior to Closing, among other
things, Buyer will use commercially reasonable best efforts to assist TTSI in
obtaining debt financing in an aggregate amount of not less than $155,000,000,
together with a revolving credit facility in the amount of $20,000,000, in the
manner contemplated by the Commitment Letters or on other terms reasonably
acceptable to Buyer, the proceeds of which will be used to consummate the
Redemptions and to pay off the promissory notes contemplated by Section 2.01(g).
(b) Buyer may elect at its option to pursue an alternative financing
structure, provided that such structure does not result in any incremental
increase in costs to TTSI.
Section 2.03 Closing Transactions.
(a) Redemption of TTSI Shares. On and subject to the terms and
conditions set forth in this Agreement, at the Closing, TTSI shall:
(i) Redeem all of the issued and outstanding TTSI Common Stock
and TTSI Preferred Stock owned by Emhart by making a cash payment equal
to
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$161,484,126 by wire transfer of immediately available funds to an
account or accounts of Emhart designated by Parent at least two
Business Days prior to Closing; and
(ii) Redeem 1,000 shares of the issued and outstanding TTSI
Common Stock and 125 shares of the issued and outstanding TTSI
Preferred Stock owned by EII by making a cash payment equal to
$26,914,021 by wire transfer of immediately available funds to such
account or accounts of EII designated by Parent at least two Business
Days prior to Closing;
such that, immediately following the consummation of the transactions
contemplated by this Section 2.03(a), EII will own 1,000 shares of TTSI Common
Stock and 125 shares of TTSI Preferred Stock which shares, in the aggregate,
will constitute 100% of the issued and outstanding capital stock of TTSI.
(b) Acquisition of Acquired Shares. On and subject to the terms and
conditions set forth in this Agreement, at the Closing:
(i) Parent shall cause EII to sell, transfer and convey to
Buyer and Buyer's Permitted Assignees, free and clear of all Liens
(other than Permitted Liens) an aggregate of 941.8 shares of TTSI
Common Stock and an aggregate of 117.5 shares of TTSI Preferred Stock;
and
(ii) In consideration for the transfer of the Acquired Shares,
Buyer shall make cash payments equalling, in the aggregate, $14,301,853
by wire transfer of immediately available funds to an account or
accounts of EII designated by Parent at least two Business Days prior
to Closing;
such that, immediately following consummation of the transactions contemplated
by this Section 2.03(b), EII will own 58.2 shares of TTSI Common Stock
representing 5.82% of all the issued and outstanding shares of TTSI Common Stock
and 7.5 shares of TTSI Preferred Stock representing 6.0% of all the issued and
outstanding shares of TTSI Preferred Stock and Buyer and Buyer's Permitted
Assignees will own, in the aggregate, 941.8 shares of TTSI Common Stock
representing 94.18% of all the issued and outstanding shares of TTSI Common
Stock and 117.5 shares of TTSI Preferred Stock representing 94.0% of all the
issued and outstanding shares of TTSI Preferred Stock.
(c) Consent and Waiver by Buyer. By execution and delivery of this
Agreement, Buyer hereby consents to and waives any rights in respect of the
redemption of TTSI Common Stock owned by EII or Emhart contemplated by Section
2.03(a).
(d) Additional Closing Transactions. Upon the terms and subject to the
conditions set forth in this Agreement, the parties agree that at the Closing,
among other things:
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(i) Parent or its Affiliates, as the case may be, and TTSI
shall execute and deliver the Services Agreement with such additions,
deletions and changes as may be agreed to by Buyer and Parent; and
(ii) TTSI, Buyer, Buyer's Permitted Assigns and EII shall
execute and deliver a Stockholders' and a Registration Rights
Agreements containing the provisions contemplated by Attachment XIV.
Section 2.04 Section 338(h)(10) Election; Exchange Consideration.
(a) The parties agree to make an election under Section 338(h)(10) of
the Code (and any corresponding elections under any applicable state, local, or
foreign tax law) with respect to the sale of the Acquired Shares by EII to
Buyer.
(b) The consideration to be paid to Parent and its Affiliates in
connection with the Contemplated Transaction (the "Exchange Consideration")
shall consist of the following:
(i) the aggregate amounts paid by TTSI to redeem shares of
TTSI Common Stock and TTSI Preferred Stock pursuant to Section 2.03(a);
and
(ii) the aggregate amount paid by Buyer to EII in exchange for
the Acquired Shares pursuant to Section 2.03(b); and
(iii) the aggregate amounts payable to Tucker, B&D Australasia
and Nippon pursuant to the promissory notes to be delivered in
accordance with Section 2.01(g) (as so adjusted and together with the
amount contemplated by Section 2.04(b)(i) and 2.04(b)(ii) above, the
"Adjusted Purchase Price"); and
(iv) the assumption by TTSI of the Assumed Liabilities in
accordance with the Transaction Documents.
(c) The Exchange Consideration and each Annual Thiokol Payment shall be
allocated to and among the respective Contributed Assets and Transferred
Intellectual Property as set forth in Attachment IX to this Agreement. Parent,
TTSI and Buyer agree that the allocation of the Exchange Consideration has been
negotiated by them and is consistent with the value of the Contributed Assets
and the principles of Section 1060 of the Code and the regulations promulgated
by the Internal Revenue Service thereunder. Parent, TTSI and Buyer agree that
they shall use the allocation of the Exchange Consideration reflected in
Attachment IX to this Agreement in any Tax Returns or other reports that deal
with the Contemplated Transactions and are filed with any Tax Authority and
shall promptly prepare and timely file such reports and information as may be
required to report the allocation contemplated by this Section 2.04(c).
Section 2.05 Closing. The closing (the "Closing") of the Contemplated
Transactions (other than the transactions contemplated by Section 2.01, which
may occur on an earlier date) shall take
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place at the offices of Kirkland & Ellis, 153 East 53rd Street, New York, New
York 10022, on September 24, 1998; provided, however, that if all of the
conditions to Closing set forth in Article IX have not been satisfied (or
waived) as of that date and if closing on that date therefore would be
impractical, the Closing shall take place on the fifth Business Day following
the satisfaction or waiver (by the party entitled to waive the condition) of all
conditions to the Closing set forth in Article IX, or at such other time and
place as the parties to this Agreement may agree. The Closing will occur at
10:00 a.m. on the Closing Date.
Section 2.06 Estimation and Adjustment of Exchange Consideration.
(a) Not later than two Business Days and not more than five Business
Days prior to the Closing Date, Parent shall deliver to Buyer a statement of net
working capital setting forth, in reasonable detail, Parent's reasonable good
faith calculation of the estimated Net Working Capital of TTSI as of the close
of business on the day prior to the scheduled Closing Date (the "Estimated Net
Working Capital"). To the extent that the Estimated Net Working Capital is less
than $11,600,000, Parent shall contribute, or cause to be contributed, to TTSI
an amount, in cash, equal to such deficiency. To the extent that the Estimated
Net Working Capital exceeds $11,600,000, Parent shall have the right to cause
TTSI to distribute to its shareholders at or immediately prior to the Closing an
amount, in cash, equal to such excess.
(b) Promptly following the Closing Date, but in no event later than 60
days after the Closing Date, Parent shall, at its expense, with the assistance
of Buyer and TTSI prepare and submit to Buyer a statement of net working capital
setting forth, in reasonable detail, Parent's calculation of the actual Net
Working Capital of TTSI as of the close of business on the day prior to the
Closing Date after giving effect to any distribution or contribution made
pursuant to Section 2.06(a) above (the "Proposed Final Net Working Capital
Amount"). In the event Buyer disputes the correctness of the Proposed Final Net
Working Capital Amount, Buyer shall notify Parent of its objections within 45
days after receipt of Parent's calculation of the Proposed Final Net Working
Capital Amount and shall set forth, in writing and reasonable detail, the
reasons for Buyer's objections. If Buyer fails to deliver such notice of
objections within such time, Buyer shall be deemed to have accepted Parent's
calculation. To the extent Buyer does not object, in writing and in reasonable
detail, as required and within the time period contemplated by this Section
2.06(a) to a matter in the statement of net working capital prepared and
submitted by Parent, Buyer shall be deemed to have accepted Parent's calculation
and presentation in respect of the matter and the matter shall not be considered
to be in dispute. Parent and Buyer shall endeavor in good faith to resolve any
disputed matters within 20 days after Parent's receipt of Buyer's notice of
objections. If they are unable to do so, Parent and Buyer shall select a
nationally known independent accounting firm (other than Ernst & Young LLP or
KPMG Peat Marwick LLP to resolve the matters in dispute (in a manner consistent
with Section 2.06(b) and with any matters not in dispute), and the determination
of such firm in respect of the correctness of each matter remaining in dispute
shall be conclusive and binding on Parent and Buyer. The independent
accountant's determination of Net Working Capital of TTSI as of the close of
business on the day prior to the Closing Date shall be within the range
established by Parent and Buyer. The Net Working Capital of TTSI as of the close
of business on the day prior to the Closing Date, as finally determined pursuant
to this Section 2.06(a) (whether by failure of Buyer
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to deliver notice of objection, by agreement of Parent and Buyer or by
determination of the independent accountants selected as set forth above), is
referred to herein as the "Final Net Working Capital Amount."
(c) The Proposed Final Net Working Capital Amount and the Final Net
Working Capital Amount shall be determined in accordance with the accounting
principles, policies, practices and methods utilized in the preparation of the
Opening Statement, as disclosed in the notes to the Opening Statement, except as
otherwise set forth in Note 8 to the Opening Statement.
(d) If the Final Net Working Capital Amount is greater than
$11,600,000, the difference shall be paid to Parent by TTSI with simple interest
thereon from the Closing Date to the date of payment at a floating rate per
annum equal to the per annum interest rate announced from time to time by
Citibank, N.A. as its prime rate in effect. If the Final Net Working Capital
Amount is less than $11,600,000, the difference shall be paid to TTSI by Parent
with simple interest thereon from the Closing Date to the date of payment at a
floating rate per annum equal to the per annum interest rate announced from time
to time by Citibank, N.A. as its prime rate in effect. Such payment shall be
made in immediately available funds not later than five Business Days after the
determination of the Final Net Working Capital Amount by wire transfer to a bank
account designated in writing by the party entitled to receive the payment. Any
payment contemplated by this Section 2.06(d) shall be treated as an increase or
decrease, as the case may be, in the amount paid pursuant to Section 2.03(a) on
a pro rata basis between Emhart and EII.
(e) Parent shall make available and shall cause Ernst & Young LLP to
make available, in accordance with reasonable and customary practices and
professional standards and subject to such reasonable conditions as Ernst &
Young LLP shall impose, the books, records, documents and work papers underlying
the preparation and review of the Opening Statement and the calculation of the
Proposed Final Net Working Capital Amount. TTSI shall make available and shall
cause KPMG Peat Marwick LLP to make available, in accordance with reasonable and
customary practices and professional standards and subject to such reasonable
conditions as KPMG Peat Marwick LLP shall impose, the books, records, documents
and work papers created or prepared by or for TTSI in connection with the review
of the Proposed Final Net Working Capital Amount and the other matters
contemplated by Section 2.06(a).
(f) The fees and expenses, if any, of the accounting firm selected to
resolve any disputes between Parent and TTSI in accordance with Section 2.06(b)
shall be paid one-half by Parent and one-half by TTSI.
Section 2.07 Contingent Purchase Price.
(a) Promptly following the last day of each fiscal year of TTSI after
the Closing Date, but in no event later than 90 days thereafter, TTSI shall
prepare and submit to Parent a statement of TTSI's estimate of the Thiokol
Payment for the preceding fiscal year, setting forth, in reasonable detail,
TTSI's calculation of the Thiokol Payment for that year together with detailed
support for such calculation (the "Proposed Annual Thiokol Payment") and a
certificate of the president of TTSI
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to the effect that the Proposed Annual Thiokol Payment was determined in
accordance with the provisions of this Section 2.07. In the event that Parent
disputes the correctness of the Proposed Annual Thiokol Payment, Parent shall
notify TTSI of its objections within 45 days of receipt of TTSI's calculation of
the Proposed Annual Thiokol Payment and shall set forth, in reasonable detail,
the reasons for Parent's objections. If Parent fails to deliver such notice of
objections within such time, Parent shall be deemed to have accepted TTSI's
calculation. Parent and TTSI shall, and Buyer shall cooperate with Parent and
TTSI to, endeavor in good faith to resolve any disputed matters within 20 days
after TTSI's receipt of a notice of objections. If they are unable to do so,
Parent and TTSI shall select a nationally known independent accounting firm
(other than Ernst & Young LLP, KPMG Peat Marwick LLP or TTSI's independent
accountants) to resolve the matters in dispute (in a manner consistent with
Section 2.07(b) and with any matters not in dispute), and the determination of
such firm in respect of the correctness of each matter remaining in dispute
shall be conclusive and binding on the parties. The independent accountants
determination of the Thiokol Payment for that year shall be within the range
established by TTSI and Parent. The Thiokol Payment for that year, as finally
determined pursuant to this Section 2.07(a) (whether by failure of Parent to
deliver notice of objections, by agreement of Parent and TTSI or by
determination of the independent accountants selected as set forth above), is
referred to herein as the "Annual Thiokol Payment."
(b) The Annual Thiokol Payment for each fiscal year of TTSI
shall be paid by TTSI to Parent with simple interest thereon from the last date
of the applicable fiscal year to the date of payment at a floating rate per
annum equal to the per annum interest rate announced from time to time by
Citibank, N.A. (or its successors) as its prime rate. Such payment shall be made
within 5 Business Days after the determination of the Annual Thiokol Payment for
the respective fiscal year of TTSI by wire transfer to a bank account designated
by Parent.
(c) TTSI shall make available and shall cause TTSI's
independent accountants to make available, in accordance with reasonable and
customary practices and professional standards and subject to such reasonable
conditions as TTSI's independent accountants shall impose, the books, records,
documents and work papers underlying the preparation and review of the Proposed
Annual Thiokol Payment.
(d) The fees and expenses, if any, of the accounting firm
selected to resolve any dispute between Parent and TTSI in accordance with
Section 2.07(a) shall be borne by Parent if the Annual Thiokol Payment
determined by the accounting firm selected is closer to the end of the range
established by TTSI or by TTSI if the Annual Thiokol Payment is closer to the
end of the range established by Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 3.01 Representations and Warranties of Parent. Parent
represents and warrants to Buyer as set forth in Exhibit B.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.01 Representations and Warranties of Buyer. Buyer represents
and warrants to Parent as set forth in Exhibit C.
ARTICLE V
COVENANTS AND AGREEMENTS OF PARENT
Section 5.01 Conduct of Business. Except with the written consent of
Buyer, as otherwise provided in this Agreement, as set forth in Schedule 5.01 or
required by Applicable Law, or as required by the terms and conditions of
Contracts either disclosed on or not required to be disclosed on Schedule B.12
("Existing Contracts"), from the date of this Agreement until the Closing Date,
Parent shall cause Seller Companies and TTSI to conduct the TTS Business in all
material respects in accordance with the historical and customary operating
practices relating to the conduct of the TTS Business and shall use commercially
reasonable best efforts to preserve intact the TTS Business and the
relationships of Seller Companies and TTSI with third parties in connection with
the TTS Business, and Seller Companies and TTSI shall not:
(i) make any capital expenditure, or group of related capital
expenditures relating to the TTS Business in excess of $100,000 (other
than capital expenditures contemplated by the 1998 capital plan
previously provided to Buyer);
(ii) sell or dispose of more than an aggregate of $250,000 of
assets that would constitute Contributed Assets or Transferred
Intellectual Property if owned, held or used by TTSI on the Closing
Date (other than the sale of Inventory (including obsolete Inventory
whether or not in the ordinary course of business), and any sale made
in the ordinary course of business);
(iii) notwithstanding Section 5.01(ii), sell, transfer,
license or otherwise dispose of, any Transferred Intellectual Property
(except for certain Intellectual Property with registrations that will
expire in the normal course that will not constitute Transferred
Intellectual Property, the license or sale of Intellectual Property in
connection with the Shaft Lab product line or other licenses of
Intellectual Property granted in the ordinary course of business which
do not materially deplete the value of such Intellectual Property prior
to Closing);
(iv) except as contemplated by this Agreement, amend, modify
or supplement TTSI's Certificate of Incorporation or bylaws;
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(v) issue any shares of capital stock of TTSI or any options,
warrants or other rights to acquire any shares of capital stock of TTSI
or securities convertible into or exchangeable for shares of TTSI
capital stock, except as contemplated by Section 2.01;
(vi) incur any indebtedness for money borrowed, other than the
debt financing contemplated by Section 2.02 or intercompany
indebtedness with another Seller Company cancelled at or prior to
Closing;
(vii) terminate or materially reduce the coverage of any
policies of title, liability, fire, workers' compensation, property and
any other form of insurance covering the operations of TTSI or the TTS
Business other than any termination or reduction of any insurance
covering Parent's businesses generally or where such policies are
replaced by policies that are substantially similar in all material
respects to the terminated policies;
(viii) settle any material lawsuit, claim or other material
dispute nor settle any other lawsuit, claim or other dispute if such
settlement imposes a material continuing non-monetary obligation on
TTSI or the TTS Business or any of the Contributed Assets or
Transferred Intellectual Property or any material monetary obligation
that will not be satisfied prior to the Closing or due and payable on
or before the one year anniversary of the Closing Date;
(ix) except as would not otherwise be prohibited by Section
5.01(x) below and except as would not constitute an Assumed Liability,
grant or implement any new or modified severance, termination or other
employee benefit or compensation arrangement or increase or accelerate
any benefits payable under the severance or termination pay policies or
other employee benefit or compensation arrangement with respect to any
Transferred Employee; or
(x) except as otherwise may be permitted or required by this
Agreement or Applicable Law and except as would not constitute an
Assumed Liability, adopt or amend in any material respect any Employee
Plan or Benefit Arrangement in respect of any Transferred Employee or,
other than compensation increases in the ordinary course of business,
with respect to any Transferred Employee whose base compensation is
$75,000 or above of TTSI or the TTS Business, as the case may be,
increase the compensation or fringe benefits of any such Transferred
Employee or pay any benefit not required by any Employee Plan or
Benefit Arrangement with respect to such Transferred Employee as in
effect on the date hereof.
(xi) fail to keep the equipment, machinery and systems used in
the TTS Business in compliance, in all material respects, with all
Applicable Laws and with all licenses and permits, and reasonably
maintain all such assets and replace any thereof which shall be worn
out, lost, stolen, or destroyed, in accordance with past practices
(other than assets that are no longer necessary for the operation of
the TTS Business);
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(xii) fail to maintain the files and records of the TTS
Business in the usual, regular and ordinary manner, consistent with
past practices;
(xiii) fail to manage or cause to be managed the collection
and payment of the accounts receivable and accounts payable of the TTS
Business and otherwise maintain and manage their respective inventories
and other current assets and current liabilities in the ordinary course
of business and consistent with past practice, including making payment
with respect to all of their respective accounts payable, current
maturities of long term debt and other current payables in a timely
manner and in accordance with the terms of such payable or such
indebtedness, as the case may be, provided that no such indebtedness
(other than intercompany indebtedness) shall be prepaid or otherwise
retired in whole or in part prior to the date on which such
indebtedness or portion thereof is due to be repaid, it being
understood that the covenant set forth in this Section 5.01(xiii) shall
not prohibit Parent or the Seller Companies from disputing any accounts
payable in good faith, in the ordinary course of business and
consistent with past practice or require Parent or the Seller Companies
to generally change its practices with respect to the collection and
payment of accounts receivable and accounts payable;
(xiv) fail to take commercially reasonable steps consistent
with current practices, and to cause any relevant Seller Company to
take commercially reasonable steps consistent with current practices,
to protect all Transferred Intellectual Property and take commercially
reasonable best efforts to prevent any of it from falling into the
public domain;
(xv) enter into any agreement, contract, lease, license,
commitment or instrument (or series of related agreements, contracts,
leases, licenses, commitments or instruments) that would be required to
be listed on Schedule B.12 or accelerate, terminate, modify or cancel
in a manner materially adverse to the TTS Business any agreement,
contract, lease, license, commitment or instrument (or series of
related agreements, contracts, leases, licenses, commitments or
instruments) that is required to be listed on Schedule B.12;
(xvi) impose any material Lien (other than any Lien of the
type that would constitute a Permitted Lien if in existence on the date
hereof) upon any of the Contributed Assets or Transferred Intellectual
Property;
(xvii) make any investment in, any loan to, or any acquisition
of the securities of, other than in the ordinary course of business,
assets of, any other Person (or series of related investments, loans,
and acquisitions) either involving more than $100,000 or outside the
ordinary course of business;
(xviii) make any loan to, or enter into any other transaction
with, any of its directors, officers, or employees, other than in their
capacity as such in connection with employee benefits or compensation
arrangements and in the ordinary course of business consistent with
past practices;
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(xix) implement any layoffs of any employee who would
otherwise be a Transferred Employee other than the termination of any
employee in the ordinary course of business;
(xx) make or pledge to make any charitable or other capital
contribution that would be payable following the closing and not
reflected in the Final Net Working Capital Amount or otherwise
exceeding $50,000; and
(xxi) commit to any of the foregoing.
Section 5.02 Access to Information; Confidentiality.
(a) Except as may be necessary to comply with any Applicable Laws and
subject to any applicable privileges (including, without limitation, the
attorney-client and work-product privileges; provided that Parent and the Seller
Companies shall use commercially reasonable efforts to provide access to Buyer
in a manner that does not violate any applicable privileges), from the date of
this Agreement until the Closing Date, Parent, TTSI and Seller Companies shall
(i) give Buyer and its Representatives reasonable access to the records of TTSI
and Seller Companies relating to the TTS Business during normal business hours
and upon reasonable prior notice, (ii) give Buyer and its Representatives
reasonable access to any facilities the possession of which will be transferred
to Buyer at Closing during normal business hours and upon reasonable prior
notice for the purpose of Buyer's conduct of an environmental audit of such
facilities or documentary diligence, (iii) furnish to Buyer and its
Representatives such financial and operating data and other information relating
to TTSI and the TTS Business as Buyer may reasonably request and (iv) instruct
the employees and Representatives of TTSI and Seller Companies to provide
reasonable cooperation to Buyer in its investigation of the TTS Business.
Without limiting the generality of the foregoing, subject to the limitations set
forth in the first sentence of this Section 5.02(a), from the date of this
Agreement to the Closing Date Parent shall (i) use reasonable commercial efforts
to enable Buyer and its Representatives to conduct, at Buyer's expense, business
and financial reviews, investigations and studies as to the operation of TTSI
and the TTS Business, including any tax, operating or other efficiencies that
may be achieved and (ii) give Buyer and its Representatives access upon
reasonable request to information relating to TTSI and the TTS Business of the
type and with the same level of detail as in the ordinary course of business
currently is being made available to the president or chief financial officer,
or other senior management of the TTS Business. Notwithstanding the foregoing,
neither Buyer nor its Representatives shall have access to personnel records of
any Seller Companies or TTSI relating to individual performance or evaluation
records, medical histories or other information that in Parent's good faith
opinion is sensitive or the disclosure of which could subject TTSI or any Seller
Companies to risk of liability.
(b) For a period of two years after the Closing Date and, with respect
to any confidential information provided to Parent or any Seller Companies
pursuant to Section 2.07, for a period of two years thereafter, Parent and the
Seller Companies will treat and hold as confidential, any confidential
information relating primarily to the operations or affairs of TTSI or the TTS
Business. In the event Parent or any Seller Companies are requested or required
(by oral or written request for information
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or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand or similar process or by Applicable Law) to disclose any
such confidential information, then Parent shall notify Buyer promptly of the
request or requirement so that Buyer, at its expense, may seek an appropriate
protective order or waive compliance with this Section 5.02(b). If, in the
absence of a protective order or receipt of a waiver hereunder, any Seller
Companies are, on the advice of counsel, compelled to disclose such confidential
information Parent or Seller Companies may so disclose the confidential
information, provided that Parent or Seller Companies, as the case may be, shall
use reasonable efforts to obtain reliable assurance that confidential treatment
will be accorded to such confidential information. The provisions of this
Section 5.02(b) shall not be deemed to prohibit the disclosure of confidential
information relating to the operations or affairs of TTSI or the TTS Business by
Parent or any Seller Companies to the extent reasonably required (i) to prepare
or complete any required Tax Returns or financial statements, (ii) in connection
with audits or other proceedings by or on behalf of a Governmental Authority,
(iii) in connection with any insurance or benefits claims, (iv) to the extent
necessary to comply with any Applicable Laws, (v) to provide services to TTSI in
accordance with the terms and conditions of any of the Transaction Documents or
(vi) as Parent reasonably determines to be necessary and not materially
inconsistent with the intentions of this Section 5.02(b) in connection with any
other similar administrative functions in the ordinary course of business. In
addition, the provisions of this Section 5.02(b) shall not apply to information
that (i) is or becomes publicly available other than as a result of a disclosure
by any Seller Company, (ii) is or becomes available to a Seller Company on a
non-confidential basis from a source that, to Parent's knowledge, is not
prohibited from disclosing such information by a legal, contractual or fiduciary
obligation or (iii) is or has been independently developed by a Seller Company
(other than primarily for the TTS Business). This Section 5.02(b) shall not
apply to the use, license or sale of Intellectual Property not constituting
Transferred Intellectual Property.
Section 5.03 Change of Lockbox Accounts. Prior to or immediately after
the Closing, Parent shall take such steps as Buyer may reasonably request to
cause TTSI to be substituted as the sole party having control over any lockbox
or similar bank account maintained exclusively by the TTS Business to which
customers of the TTS Business directly make payments in respect of the TTS
Business or to direct the bank at which any such lockbox or similar account is
maintained to transfer any payments made thereto to an account established by
TTSI. To the extent that TTSI is not substituted as the sole party having
control over any such lockbox account prior to Closing, Parent or the applicable
Seller Company shall pay to TTSI any amount paid to such account following the
Closing with respect to any account receivable constituting part of the
Contributed Assets.
Section 5.04 Access to Information; Cooperation After Closing. On and
after the Closing Date and subject to any applicable privileges (including,
without limitation, the attorney-client and work-product privileges; provided
that Parent and the Seller Companies shall use commercially reasonable efforts
to provide access to Buyer in a manner that does not violate any applicable
privileges), Parent shall, and shall cause each of the other Seller Companies
to, at their expense (i) afford Buyer and its Representatives reasonable access
upon reasonable prior notice during normal business hours, to all employees,
offices, properties, agreements, records, books and affairs of Seller Companies
to the extent relating to the conduct of the TTS Business prior to the Closing
and (ii) cooperate fully with Buyer with respect to matters relating to the
conduct of the TTS
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Business prior to the Closing, including, without limitation, in the defense or
pursuit of any Contributed Asset, Transferred Intellectual Property or Assumed
Liability or any claim or action that relates to occurrences involving the TTS
Business prior to the Closing Date.
Section 5.05 Maintenance of Insurance Policies. Except as otherwise
provided in Exhibit D, on and after the date of this Agreement and until the
Closing Date, Parent shall not take or fail to take any action if such action or
inaction, as the case may be, would adversely affect the applicability of any
insurance (including reinsurance) in effect on the date of this Agreement that
covers all or any part of the assets that would constitute Contributed Assets,
or Transferred Intellectual Property if owned, held or used by any Seller
Companies on the Closing Date, TTSI, the TTS Business or the Transferred
Employees. Except as otherwise provided in Exhibit D or as may otherwise be
agreed in writing by the parties, Parent and its Affiliates shall not have any
obligation to maintain the effectiveness of any such insurance policy after the
Closing Date or to make any monetary payment in connection with any such policy.
Section 5.06 Noncompetition.
(a) Parent covenants and agrees, as an inducement to Buyer to enter
into this Agreement and to consummate the Contemplated Transactions, that for a
period of five years following the Closing Date no Seller Company (for so long
but only for so long as it remains a Seller Company) will, directly or
indirectly, carry on or participate in the ownership, management or control of,
or license Intellectual Property to be used in a manner competitive with the TTS
Business by, any business enterprise (other than the Seller Companies' ownership
interest in TTSI following Closing) that competes anywhere in the world with the
TTS Business as it is being conducted on the Closing Date (a "Competing
Business").
(b) Nothing contained in this Section 5.06 shall limit or restrict the
right of any Seller Company to hold and make investments in securities of any
Person that has securities listed on a national securities exchange or admitted
to trading privileges thereon or actively traded in a generally recognized
over-the-counter market, provided that the aggregate equity interest therein of
Seller Companies does not exceed five percent of the outstanding shares or
interests in such Person at the time of Seller Companies' investment therein.
Notwithstanding any provisions of this Section 5.06 to the contrary, if Parent
or any other Seller Company acquires securities of any Person that is engaged in
a Competing Business, Seller Companies shall not be deemed to be in violation of
this Section 5.06, provided that (A) (i) at the time of acquisition the
Competing Business represents less than one-third of the gross revenues of the
acquired Person for the acquired Person's most recently completed fiscal year
and (ii) Seller Companies use reasonable commercial efforts to divest the
operations of such Competing Business subsequent to such acquisition, or (B) at
the time of acquisition the Competing Business represents less than five percent
of the gross revenues of the acquired Person for the acquired Person's most
recently completed fiscal year.
(c) Parent recognizes and agrees that a breach by Seller Companies of
any of the covenants and agreements in this Section 5.06 could cause irreparable
harm to Buyer, that Buyer's remedies at law in the event of such breach would be
inadequate, and that, accordingly, in the event
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of such breach a restraining order or injunction or both may be issued against
Seller Companies, in addition to any other rights and remedies that may be
available to Buyer under Applicable Law. If this Section 5.06 is more
restrictive than permitted by the Applicable Laws of the jurisdiction in which
Buyer seeks enforcement hereof, this Section 5.06 shall be limited to the extent
required to permit enforcement under such Applicable Laws.
Section 5.07 Debt Financing. Parent shall, and shall cause the Seller
Companies and TTSI to, cooperate in a commercially reasonable manner with Buyer
to assist Buyer to assist TTSI in obtaining the debt financing for TTSI
contemplated by Section 2.02. In no event, however, shall Parent or any Seller
Companies be required to guaranty or otherwise provide any Financial Support
Arrangement in connection with TTSI obtaining the debt financing contemplated by
Section 2.02. Notwithstanding the foregoing sentence, in the event that Parent
elects to cause TTSI to obtain the bridge financing contemplated by the
Commitment Letters in order to satisfy the financing conditions contained in
Article IX, Parent agrees to reimburse TTSI for additional fees payable to the
bridge lenders for the take down of such financing in the amount of up to
$1,875,000 at Closing.
Section 5.08 Advice of Changes. Parent shall advise Buyer promptly in
writing after Parent obtains knowledge of any fact that, if known as of the date
of this Agreement, would have been required to be set forth or disclosed in or
pursuant to this Agreement or the Schedules hereto, or which would result in the
breach by the Parent or any Seller Company of any of its representations,
warranties, covenants or agreements hereunder or which could reasonably be
expected to result in or cause a Material Adverse Effect.
Section 5.09 No Hire. For a period of 12 months following the Closing
Date, no Seller Company shall hire for employment or offer employment to Scott
C. Hennessy.
ARTICLE VI
COVENANTS AND AGREEMENTS OF BUYER
Section 6.01 Confidentiality. Buyer agrees that all non-public
information provided or otherwise made available in connection with the
Contemplated Transactions to Buyer or any of its Representatives shall be
treated as if provided under the Confidentiality Agreement (whether or not the
Confidentiality Agreement is in effect or has been terminated). The
Confidentiality Agreement shall continue to apply in accordance with its terms
following the Closing to any confidential information of Parent or any Seller
Company that does not relate to the TTS Business or TTSI. In the event that
Buyer or TTSI is requested or required (by oral or written request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process or by Applicable Law) to disclose any
such confidential information, then Buyer and TTSI shall notify Parent promptly
of their request or requirement so that Parent, at its expense, may seek an
appropriate protective order or waive compliance with this Section 6.01. If, in
the absence of a protective order or receipt of a waiver hereunder, Buyer or
TTSI is, on the advice of counsel, compelled to disclose such confidential
information, Buyer or TTSI may so disclose the confidential
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information, provided that Buyer or TTSI, as the case may be, shall use
reasonable commercial efforts to obtain reliable assurance that confidential
treatment shall be accorded to such confidential information. The provisions of
this Section 6.01 shall not be deemed to prohibit the disclosure of confidential
information relating to the operations or affairs of TTSI or the TTS Business by
Buyer to the extent reasonably required (i) to prepare or complete any required
Tax Returns or financial statements, (ii) in connection with audits or other
proceedings by or on behalf of a Governmental Authority, (iii) in connection
with any insurance or benefits claims, or (iv) to the extent necessary to comply
with any Applicable Laws. In addition, the provisions of this Section 6.01 shall
not apply to information that (i) is or becomes publicly available other than as
a result of a disclosure by TTSI or Buyer, (ii) is or becomes available to TTSI
or Buyer on a non-confidential basis from a source that, to TTSI's and Buyer's
knowledge, is not prohibited from disclosing such information by legal,
contractual or fiduciary obligation, or (iii) is or has been independently
developed by TTSI. Nothing in this Section 6.01, however, shall limit or
otherwise restrict the applicability of any other confidentiality or similar
provisions included in the Transaction Documents.
Section 6.02 Provision and Preservation of and Access to Certain
Information; Cooperation.
(a) Prior to the Closing Date, Buyer shall provide to Parent promptly
upon its receipt thereof copies of all environmental audit and similar reports
with respect to facilities the possession of which will be transferred to TTSI
in accordance with this Agreement. Buyer shall provide to Parent a copy of all
sampling results, boring logs, analysis and other data and reports regarding any
environmental review conducted by Buyer immediately upon obtaining them.
(b) On and after the Closing Date, TTSI or any successor to the TTS
Business shall preserve all books and records of the TTS Business for a period
of six years commencing on the Closing Date (or in the case of books and records
relating to Tax, employment and employee benefits matters, until such time as
Parent notifies TTSI in writing that all statutes of limitations to which such
records relate have expired), and thereafter, not to destroy or dispose of such
records without giving notice to Parent of such pending disposal and offering
Parent such records. In the event Parent has not requested such materials within
90 days following the receipt of notice from TTSI, TTSI may proceed to destroy
or dispose of such materials without any liability.
(c) From and after the Closing Date and subject to any applicable
privileges (including, without limitation, the attorney-client and work-product
privileges; provided that Buyer and TTSI shall use commercially reasonable
efforts to provide access to Parent in a manner that does not violate any
applicable privileges), Buyer shall at its expense (i) afford Parent and its
Representatives reasonable access upon reasonable prior notice during normal
business hours, to all employees, offices, properties, agreements, records,
books and affairs of Buyer, and provide copies of such information, including,
without limitation, manifests regarding pre-closing disposal of Hazardous
Materials, concerning TTSI and the TTS Business as Parent may reasonably request
for any proper purpose, including, without limitation, in connection with the
matters contemplated by Section 2.06, the preparation of any Tax Returns, in
connection with any judicial, quasi-judicial, administrative, Tax, audit or
arbitration proceeding, in connection with the preparation of any financial
statements
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or reports and in connection with the defense or prosecution of any claims or
allegations that relate to or may relate to Excluded Assets or Excluded
Liabilities and (ii) cooperate fully with Parent as reasonably requested for any
proper purpose, including, without limitation, the defense of or pursuit of any
Excluded Liability, Excluded Asset or Indemnified Claim, or any claim or action
that relates to an Excluded Liability, Excluded Asset or Indemnified Claim.
Section 6.03 Insurance; Financial Support Arrangements.
(a) Buyer acknowledges and agrees that as of the Closing Date, neither
TTSI, the TTS Business, any property owned or leased by any of the foregoing nor
any of the directors, officers, employees (including, without limitation, the
Transferred Employees) or agents of any of the foregoing will be insured under
any insurance policies maintained by Parent or any of its Affiliates, except (i)
in the case of certain claims made policies, to the extent that a claim has been
reported as of the Closing Date, (ii) in the case of a policy that is an
occurrence policy, to the extent the accident, event or occurrence that results
in an insurable loss occurs prior to the Closing Date and has been, is or will
be reported or noticed to the respective carrier by Buyer, TTSI or any Seller
Company in accordance with the requirements of such policies (which claims
Parent shall, at TTSI's cost and expense, pursue diligently on TTSI's behalf and
the net proceeds of which claims (except to the extent they relate to Excluded
Liabilities) shall be remitted promptly to TTSI upon receipt thereof), and (iii)
as otherwise provided in Exhibit D or agreed to in writing by the parties.
Except as otherwise provided in Exhibit D or as otherwise may be agreed to in
writing by the parties, from and after the Closing Date, Parent and its
Affiliates shall have no obligation of any kind to maintain any form of
insurance covering TTSI or all or any part of the Contributed Assets, the
Transferred Intellectual Property, the TTS Business or the Transferred
Employees.
(b) From and after the Closing Date, TTSI agrees to reimburse Parent
within 30 days of receipt of an invoice for any self insurance, retention,
deductible, retrospective premium, cash payment for reserves calculated or
charged on an incurred loss basis and similar items, including but not limited
to associated administrative expenses and allocated loss adjustment or similar
expenses (collectively, "Insurance Liabilities") allocated to TTSI or the TTS
Business by Parent on a basis consistent with past practices resulting from or
arising under any and all current or former insurance policies maintained by
Parent or any of its Affiliates to the extent that such Insurance Liabilities
relate to or arise out of Assumed Liabilities, but only to the extent that the
underlying claim was that of a third party and not a Seller Company. TTSI agrees
that, to the extent any of the insurers under the insurance policies, in
accordance with the terms of the insurance policies, requests or requires
collateral, deposits or other security to be provided with respect to claims
made against such insurance policies relating to or arising from TTSI or the TTS
Business, TTSI shall provide the collateral, deposits or other security or, upon
request of Parent, will replace any collateral, deposits or other security
provided by Parent or any of its Affiliates.
(c) TTSI agrees that, for a period of six years commencing on the
Closing Date, to the extent TTSI maintains product liability or similar
insurance coverage, TTSI will (at Parent's cost to the extent of any additional
cost therefor, provided that, in the event there will be such a cost, TTSI will
give Parent a reasonable period of time to determine whether it desires to incur
such cost before
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TTSI commits to such coverage with respect to Parent) include Parent and its
Affiliates as an additional insured/loss payee on any such policies in respect
of which Parent or its Affiliates has or may have an insurable interest with
respect to TTSI or the TTS Business, the Contributed Assets, Transferred
Intellectual Property, any of the Assumed Liabilities or any facilities the
possession of which will be transferred to TTSI in accordance with this
Agreement prior to Closing.
(d) Parent, TTSI and, prior to Closing, Buyer agree that they shall in
good faith seek to obtain the release of Parent and its Affiliates from all
obligations under all Financial Support Arrangements maintained by Parent or any
of its Affiliates in connection with TTSI or the TTS Business.
(e) If, at any time after the Closing Date, (i) any amounts are drawn
on or paid under any Financial Support Arrangement where Parent or any of its
Affiliates is obligated to reimburse the Person making such payment or (ii)
Parent or any of its Affiliates pays any amounts under, or any fees, costs or
expenses relating to, any Financial Support Arrangement, TTSI shall indemnify
and hold Parent and its Affiliates harmless and pay Parent such amounts promptly
after receipt from Parent of notice thereof accompanied by written evidence of
the underlying payment obligation.
Section 6.04 Use of Intellectual Property. Each of Buyer and TTSI
acknowledge and agrees that except as otherwise specifically contemplated by the
Transaction Documents neither TTSI nor Buyer is obtaining any rights in or to
use any Intellectual Property. Buyer and TTSI further acknowledge and agree that
notwithstanding any provision to the contrary in the Transaction Documents,
Buyer and TTSI shall not use, and each shall cause their respective Affiliates
not to use, any trademark, logo or tradename of Parent or any Affiliate of
Parent (other than those listed on Attachment X as Transferred Intellectual
Property and transferred to Buyer under the terms of this Agreement) or any
trademarks, logos or trade names that are confusingly similar thereto or that
are a translation or transliteration thereof into any language or alphabet.
Without limiting the generality of the foregoing, Buyer and TTSI shall not use,
and shall cause their respective Affiliates not to use (i) the words "The Black
& Decker Corporation," "Emhart Inc.," "Emhart Industries, Inc.," "Black &
Decker," "Emhart" or any derivatives, translations or transliterations of any of
the foregoing or (ii) the words "True Temper" or any derivative, translation or
transliteration thereof in violation of the Huffy Trademark Agreement; provided,
however, that with respect to any work-in-progress, preprinted stationery,
invoices, receipts, forms, advertising and promotional materials, training and
source literature, packaging material or other supplies that TTSI has in
inventory after the Closing which bears the name "The Black & Decker
Corporation," "Black & Decker," "Emhart Inc.," "Emhart Industries, Inc." or
"Emhart," Parent hereby grants to TTSI a paid-up license to use such names on
such inventory; provided, further, that TTSI agrees to use its reasonable best
efforts to exhaust such inventory in the ordinary course of business as soon as
is reasonably practicable after the Closing. The provisions of this Section 6.04
shall survive the Closing indefinitely.
Section 6.05 Conduct of TTS Business After Closing. From and after the
Closing, TTSI shall, and Buyer shall cause TTSI (and any successor or assign in
respect of the TTS Business) to, conduct the TTS Business in all respects in
accordance with each of the 1959 TTSI Consent Decree
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and the 1961 TTSI Consent Decree for so long as either such decree is in force
and binding upon the TTS Business. The provisions of this Section 6.05 shall
survive the Closing indefinitely.
Section 6.06 Debt Financing. Buyer shall use its commercially
reasonable best efforts to assist TTSI to obtain the debt financing contemplated
by Section 2.02. In this regard, and without limiting the generality of the
foregoing, Buyer shall take all action within its control which is necessary or
appropriate and consistent with commercially reasonable best efforts to secure
the debt financing contemplated by the Commitment Letters or other financing
satisfactory to Buyer. Buyer shall not amend or otherwise modify the Commitment
Letters (or any term or condition thereof) in any respect that would materially
and adversely affect the ability of TTSI to obtain such financing without the
prior written consent of Parent.
Section 6.07 Certain Environmental Investigations.
(a) Buyer agrees that, if Buyer decides to conduct prior to
Closing an environmental audit or similar review of the TTS Business that
involves testing, drilling or sampling at any facility, possession of which is
contemplated to be transferred to TTSI, Buyer shall be permitted to do so,
provided Buyer will so advise Parent and will give Parent sufficient prior
written notice to enable Parent's Representatives to be present during any such
testing, drilling or sampling and to review and comment on any work plans
related to such audit or review. Buyer further agrees to arrange for split
samples to be taken in connection with any such auditor review. Buyer agrees
that it will conduct such testing, drilling, or sampling, including disposal of
all materials associated with such activities, such as drill cuttings, waste
water, and sampling equipment, at Buyer's sole cost and expenses and in
accordance with all Applicable Laws, including Environmental Laws. If the
Closing contemplated by the Transaction Documents is not consummated for any
reason, Buyer agrees to restore each facility at which any such testing,
drilling or sampling was conducted to its condition prior to the commencement of
Buyer's environmental audit or similar review.
(b) All information obtained from Buyer's environmental review
shall be kept confidential and Buyer shall not provide it to any Person other
than Parent. In the event that Buyer's environmental review discloses conditions
at any of Seller Companies' facilities that may require notice to a Governmental
Authority prior to Closing, Parent shall determine what reporting, if any, is
necessary and shall conduct such reporting.
ARTICLE VII
COVENANTS AND AGREEMENTS OF THE PARTIES
Section 7.01 Further Assurances. Subject to the terms and conditions of
this Agreement, each party shall use commercially reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or desirable under Applicable Laws to consummate the
Contemplated Transactions. Parent and Buyer shall execute and deliver, and shall
cause Seller Companies and TTSI, as appropriate or required and as the case may
be, to execute and deliver such
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other documents, certificates, agreements and other writings and to take such
other actions as may be necessary or desirable to consummate or implement the
Contemplated Transactions. Except as otherwise expressly set forth in the
Transaction Documents, nothing in this Section 7.01 shall require any Seller
Companies, TTSI or Buyer to make any payments in order to obtain any consents or
approvals necessary or desirable in connection with the consummation of the
Contemplated Transactions (other than any payments specifically required by the
term of any Contract).
Section 7.02 Certain Filings; Consents. Parent and Buyer shall
cooperate with one another and use their respective commercially reasonable best
efforts (i) in determining whether any action by or in respect of, or filing
with, any Governmental Authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
Contracts, in connection with the consummation of the Contemplated Transactions
and (ii) subject to the terms and conditions of this Agreement, in taking such
actions or making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers.
Section 7.03 Public Announcements. Prior to the Closing, Parent and
Buyer shall consult with each other before issuing any press release or making
any public statement with respect to this Agreement or the Contemplated
Transactions and, except as may be required by Applicable Law or any listing
agreement with any national or international securities exchange, shall not
issue any such press release or make any such public statement prior to such
consultation. Notwithstanding the foregoing, no provision of this Agreement
shall relieve Buyer from any of its obligations under the Confidentiality
Agreement, or terminate any of the restrictions imposed upon Buyer under Section
6.01.
Section 7.04 Intellectual Property.
(a) Buyer and TTSI acknowledge and agree that TTSI shall hold all
Transferred Intellectual Property constituting part of the Contributed Assets
subject to any licenses thereof granted by Seller Companies prior to the Closing
Date that have been disclosed to Buyer in writing or that are immaterial in the
aggregate, are granted in connection with the license or sale of Intellectual
Property in connection with the Shaft Lab product line or are incurred in the
ordinary course of business after the date of this Agreement and prior to
Closing and do not materially deplete the value of such Intellectual Property.
(b) Buyer and TTSI further acknowledge and agree that the transfer of
Transferred Intellectual Property to TTSI shall not affect the right of Seller
Companies to use, disclose or otherwise freely deal with any know-how, trade
secrets and other technical information not constituting Transferred
Intellectual Property or Contributed Assets; provided, however, that the
foregoing shall not constitute a license to the Seller Companies under any
patents included among the Transferred Intellectual Property.
Section 7.05 HSR Act. Parent and Buyer shall use their respective
commercially reasonable best efforts to cause the prompt expiration or
termination of any applicable waiting period
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under the HSR Act in respect of the Contemplated Transactions, including,
without limitation, complying as promptly as practicable with any requests for
additional information.
Section 7.06 Certain Environmental Insurance Matters. Notwithstanding
any provision to the contrary in this Agreement, this Section 7.06 shall
constitute Parent's and Buyer's agreement regarding the allocation of insurance
proceeds with respect to matters that arise under or relate to Environmental
Laws that are comprised, in whole or in part, of Environmental Liabilities that
constitute Assumed Liabilities (the "Environmental Insurance Claims"). Each of
Buyer and TTSI acknowledges and agrees that, notwithstanding any other
provisions of the Transaction Documents, Parent shall control the Environmental
Insurance Claims and shall have the right to compromise or settle any
Environmental Insurance Claims; provided, however, that without the prior
written consent of Buyer, Parent shall not have the right to enter into any
compromise or settlement of any Environmental Insurance Claim that (i) imposes
any liability, obligation or responsibility on TTSI or (ii) imposes any
condition, restriction or limitation on the operation or conduct of the TTS
Business. Parent agrees to act in good faith and with reasonable prudence to
maximize recovery (after costs and Taxes) with respect to the Environmental
Insurance Claims and shall allocate any recovery received with respect to such
Environmental Insurance Claims, first, to the costs incurred to collect such
recovery (whether incurred before or after Closing) and, second, to all net Tax
costs related to such recovery. Any recovery remaining shall be apportioned
equitably between Parent and TTSI. Any obligations assumed in any such
compromise or settlement of the Environmental Insurance Claims shall be
apportioned between Parent or the applicable Seller Company and TTSI in the same
proportion as a recovery would be allocated pursuant to this Section 7.06.
Section 7.07 Legal Privileges. Parent, Buyer and TTSI acknowledge and
agree that all attorney-client, work product and other legal privileges that may
exist with respect to TTSI and the TTS Business (including, without limitation,
with respect to the Contributed Assets, Transferred Intellectual Property,
Excluded Assets, Assumed Liabilities and Excluded Liabilities) shall, from and
after the Closing Date, be deemed joint privileges of Seller Companies, Buyer
and TTSI. Each of Seller Companies, TTSI and Buyer shall use all commercially
reasonable efforts after the Closing Date to preserve all such privileges and
none of Seller Companies, TTSI nor Buyer shall knowingly waive any such
privilege without the prior written consent of the other party (which consent
shall not be unreasonably withheld or delayed).
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Section 7.08 Tax Matters.
(a) The parties hereto recognize that the transactions that are
contemplated by this Agreement constitute a fully taxable sale for all Tax
purposes of all of the assets of the TTS Business to TTSI. Except as provided
below, it is the intention of the parties that Seller Companies will accept
liability for and pay any and all Taxes based on the income of TTSI due for or
attributable to Tax periods ending on or before the Closing Date and that
portion related to the operation of the Business on or prior to the Closing Date
for any Tax period ending after the Closing Date. Seller Companies will accept
liability for and pay any and all Taxes attributable to the transfer of assets
to TTSI. Seller Companies will accept liability for and pay all Taxes
attributable to the deemed sale of assets pursuant to the Section 338(h)(10)
election; provided, however, for those state jurisdictions which do not respect
or allow the Section 338(h)(10) election contemplated by Section 2.05, Seller
Companies will pay Taxes on the sale of stock of TTSI, but their respective
obligations to pay Taxes on the deemed asset sale under the Section 338(h)(10)
election will be reduced correspondingly, thereby causing the Contemplated
Transactions to be subject to Tax only once for any state or local purposes.
Accordingly, the Buyer will indemnify Seller Companies to the extent of any
double Tax imposed by such states.
(b) (i) Parent will file with the appropriate Tax Authorities all Tax
Returns required to be filed on its behalf and on behalf of TTSI for any taxable
period ending on or before the Closing Date, and Parent will include the taxable
income of TTSI (to the extent permitted by Applicable Law) for each such period
in its consolidated federal income Tax Return and in any consolidated, combined
or unitary Tax Return (including Tax Returns based on or measured by net income)
filed by Parent or any Affiliate thereof in which such income can be included
under Applicable Law. TTSI will furnish Tax information to Parent for inclusion
in such consolidated, combined or unitary Tax Returns filed by Parent or an
Affiliate thereof for the period which includes the Closing Date. Parent and its
Affiliates agree that they will take commercially reasonable efforts to treat
the transactions contemplated by this Agreement as being a fully taxable sale of
all of the assets of the TTS Business pursuant to a taxable transfer under the
Code and the Section 338(h)(10) election of the Code at the time of the transfer
of Contributed Assets and Transferred Intellectual Property to TTSI. As a
result, all Contributed Assets and Transferred Intellectual Property will have a
basis equal to their fair market value for purposes of determining any gain
under the deemed sale resulting from the 338(h)(10) election.
(ii) TTSI will, and Buyer will cause TTSI to, file with the
appropriate Tax Authorities all Tax Returns required to be filed by TTSI or any
of its Affiliates for any taxable period ending after the Closing Date and will
remit any Taxes due in respect of such Tax Returns. Parent will pay to TTSI the
Taxes for which Parent or any Seller Company is liable pursuant to Section
7.08(b)(i) and 7.08(c) hereof, but which are payable in respect of Tax Returns
to be filed by TTSI pursuant to this Section 7.08(b)(ii) within 10 Business Days
prior to the due date (taking account of any extensions of time for filing) for
the filing of such Tax Returns but no earlier than 20 Business Days after such
Tax Returns and the tax allocation calculations have been submitted to Parent
for review and approval.
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(c) Parent will be liable for and will pay, and hereby indemnifies,
TTSI for all Taxes, resulting from TTSI ceasing to be a member of any affiliated
group (as defined in Section 1504(a) of the Code without regard to the
limitations contained in Section 1504(d) of the Code) that includes Parent or
any of its predecessors; Taxes imposed on any member of Parent's affiliated
group for any taxable year (i) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign law), (ii) as a transferee or
successor of a member of Parent's affiliated group, or (iii) by contract or
otherwise; amounts pursuant to any guaranty, indemnification, tax sharing, or
similar agreement made on or before the Closing Date relating to the sharing of
liability for payment of Taxes; and any real estate transfer Taxes or charges
resulting from transactions described in Section 2.01 hereof, for any taxable
year ending on or prior to the Closing Date and for the portions of such taxable
year or period ending on or prior to the Closing Date (or, in the case of
consolidated, combined or unitary Tax Returns, including Parent, any period
including the Closing Date) and any costs and expenses (including, without
limitation, costs of collection and attorneys' fees) arising out of or resulting
from Parent's liability and indemnity for Taxes hereunder. Parent will be
entitled to retain any refund of Taxes with respect to TTSI or the TTS Business
relating to any such periods. To apportion appropriately any income Taxes
relating to any taxable year or period that begins before and ends after the
Closing Date, the parties hereto will, to the extent permitted by Applicable
Law, elect with the relevant Tax Authority to terminate the taxable year as of
the Closing Date (provided, however, that any Taxes related to the transfer of
assets or the Section 338(h)(10) election will be determined as provided in
Section 7.08(a) hereof). In any case where Applicable Law does not permit any
company to treat the Closing Date as the end of a taxable year of such
corporation, then whenever it is necessary to calculate the liability for income
or franchise Taxes of such company for a portion of a taxable year, such
determination will (unless otherwise agreed to in writing by Buyer and Parent)
be determined by a closing of such corporation's books at the close of business
on the Closing Date, except that exemptions, allowances or deductions that are
calculated on an annual basis, such as the deduction for depreciation, will be
apportioned on a daily basis. To apportion appropriately any Taxes, other than
income or franchise Taxes, relating to any taxable year or period that begins
before and ends after the Closing Date, (i) ad valorem Taxes (including, without
limitation, real and personal property Taxes) will be accrued on a daily basis
over the period for which the Taxes are levied, or if it cannot be determined
over what period the Taxes are being levied, over the fiscal period of the
relevant Tax Authority, in each case irrespective of the lien or assessment date
of such Taxes, and (ii) franchise and other privilege Taxes not measured by
income will be accrued on a daily basis over the period to which the privilege
relates.
(d) (i) Parent will be entitled to control the defense of any audits of
or administrative or court proceedings relating to Parent's or any of its
Affiliate's consolidated, combined or unitary Tax Returns which relate to the
operations of the TTS Business for periods ending prior to the Closing Date.
(ii) Buyer and TTSI will give notice to Parent of any Tax
claim relating to any taxable year or period that includes the Closing Date, and
will keep Parent and its counsel informed of the progress of, and the issues
involved in, the same, in each case which may be the subject of indemnification
by Parent pursuant to this Agreement. Buyer and TTSI will be entitled to control
the defense and resolution of any such audits or proceedings, provided, however,
that if Buyer, TTSI
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or any of their Affiliates settles any Tax claim for the portion of a taxable
year or period ending on or prior to or after the Closing Date or including the
Closing Date which may be the subject of indemnification by Parent pursuant to
this Agreement without the prior written consent of Parent, which consent will
not be unreasonably withheld, Parent will be released from any indemnification
or other obligations hereunder in respect of such matter.
(e) The parties hereto will provide such necessary information as any
other party hereto may reasonably request in connection with the preparation of
such party's Tax Returns, or to respond to or contest any audit, prosecute any
claim for refund or credit or otherwise satisfy the provisions of Applicable Law
relating to Taxes of each party hereto or their respective Affiliates.
(f) The obligations of the parties set forth in this Section 7.08
relating to Taxes will, except as otherwise agreed in writing, be unconditional
and absolute and will remain in effect without limitation as to time or amount
of recovery by any party hereto until thirty (30) days after the expiration of
the applicable statute of limitations governing the Tax to which such
obligations relate (after giving effect to any agreement extending or tolling
such statute of limitations).
Section 7.09 Limitations on Confidentiality Restrictions. The parties
hereby agree that the provisions relating to confidentiality contained in
Sections 5.02 and 6.01 and the provisions of the Confidentiality Agreement shall
not apply to the disclosure of any information relating primarily to TTSI or the
TTS Business in a registration statement, offering memorandum, offering circular
or similar or related document, which is created and used in connection with the
placement of any debt or equity financing by TTSI.
ARTICLE VIII
EMPLOYEES AND EMPLOYEE BENEFIT MATTERS
Section 8.01 Employees and Employee Benefit Matters. The parties agree
as to employee and employee benefit matters as set forth in Exhibit D.
ARTICLE IX
CONDITIONS TO CLOSING
Section 9.01 Conditions to the Obligations of Each Party. The
obligations of Parent and Buyer to consummate the Closing are subject to the
satisfaction (or waiver) of the following conditions:
(a) any applicable waiting period under the HSR Act relating to the
Contemplated Transactions shall have expired or been terminated;
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(b) no provision of any Applicable Law and no judgment, injunction,
order or decree shall prohibit the Closing, and no action or proceeding shall be
pending before any court, arbitrator or Governmental Authority with respect to
which counsel reasonably satisfactory to Parent and Buyer shall have rendered a
written opinion that there is a substantial likelihood of a determination that
would materially restrain or prohibit the Closing or otherwise have a material
adverse effect on the transactions contemplated hereby or Buyer's right to own
or exercise rights with respect to any capital stock of TTSI;
(c) all actions by or in respect of or filings with any Governmental
Authority required to permit the consummation of the Closing shall have been
obtained; and
(d) Parent or TTSI, as the case may be, shall have obtained the
consents, approvals or permits contemplated by Attachment XI.
Section 9.02 Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the Closing are subject to the satisfaction (or waiver by
Buyer) of the following further conditions:
(a) (i) Each of Parent and TTSI shall have performed in all material
respects all of its obligations under the Transaction Documents required to be
performed by it on or prior to the Closing Date, (ii) the representations and
warranties of Parent contained in the Transaction Documents shall be true and
correct at and as of the date of this Agreement and as of the Closing Date, as
if made at and as of each such date, except that those representations and
warranties which are by their express terms made as of a specific date shall be
true and correct only as of such date, in each case except for inaccuracies that
could not reasonably be expected to have a Material Adverse Effect on the TTS
Business, and (iii) Buyer shall have received a certificate signed by an
executive officer of Parent to the foregoing effect;
(b) the transactions contemplated by Section 2.01 shall have occurred
in accordance with the terms of this Agreement;
(c) Parent or the applicable Seller Company shall have executed and
delivered, on or before the Closing Date, the Transaction Documents that are
required to be signed by a Seller Company;
(d) there shall not have occurred from March 29, 1998 to the Closing a
material adverse effect on the assets, properties, business, financial
condition, results of operations or prospects of the TTS Business taken as a
whole;
(e) TTSI shall have obtained the financing contemplated by the
Commitment Letters or on other terms satisfactory to Buyer; and
(f) TTSI shall not be obligated for any indebtedness for borrowed money
other than as contemplated by Section 2.02.
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Section 9.03 Conditions to Obligation of Parent and TTSI. The
obligation of Parent and TTSI to consummate the Closing is subject to the
satisfaction (or waiver by Parent) of the following further conditions:
(a) (i) Buyer shall have performed in all material respects all of its
obligations under the Transaction Documents required to be performed by it at or
prior to the Closing Date, (ii) the representations and warranties of Buyer
contained in the Transaction Documents shall be true and correct at and as of
the date of this Agreement and as of the Closing Date, as if made at and as of
each such date, except that those representations and warranties which are by
their express terms made as of a specific date shall be true and correct only as
of such date, in each case except for inaccuracies that could not reasonably be
expected to have a Material Adverse Effect on Buyer, and (iii) Parent shall have
received a certificate signed by an executive officer of Buyer to the foregoing
effect;
(b) The transactions contemplated by Section 2.02 and Section 2.03(a)
shall have been consummated in accordance with the terms of this Agreement; and
(c) Buyer shall have executed and delivered, on or before the Closing
Date, the Transaction Documents that are required to be signed by Buyer.
Section 9.04 Updated Disclosure Schedules. At any time prior to the
Closing, Parent shall be entitled to deliver to Buyer updates to or
substitutions of the Disclosure Schedules provided that such updates or
substitutions are clearly marked as such and are addressed to Buyer at the
address listed in Section 12.01. In the event that Parent delivers updated or
substitute Disclosure Schedules on or after the third day before any scheduled
closing date, Buyer shall be entitled to extend the scheduled closing date to
the third day after it receives the updated or substitute Disclosure Schedules,
or if such day is not a Business Day, to the next Business Day. The delivery by
Parent of updated or substitute Disclosure Schedules shall not prejudice any
rights of Buyer under this Agreement, including but not limited to the right to
claim that the representations and warranties of Parent, when made on the date
of this Agreement, were untrue.
Section 9.05 Effect of Waiver. Any waiver by Buyer of the conditions
specified in clause (ii) of Section 9.02(a), and any waiver by Parent of the
conditions specified in clause (ii) of Section 9.03(a), if made knowingly and in
writing, shall also be deemed a waiver of any claim for Damages as the result of
the matters waived.
ARTICLE X
SURVIVAL; INDEMNIFICATION
Section 10.01 Survival.
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(a) None of the representations, warranties, covenants or agreements of
the parties contained in any Transaction Document or in any certificate or other
writing delivered pursuant to any Transaction Document or in connection with any
Transaction Document shall survive the Closing, except for:
(i) the representations and warranties in Sections B.01, B.02
B.05, B.09(b) and B.14 shall survive indefinitely;
(ii) the representations and warranties in Section B.15 shall
not survive the Closing Date;
(iii) the representations and warranties in Sections B.18 and
B.20 shall survive until 30 days after the expiration of the applicable
statute of limitations (or extensions or waivers thereof);
(iv) the representations and warranties in Exhibit B (other
than those Sections of Exhibit B referenced in the preceding clauses
(i), (ii) and (iii)), shall survive for a period that is the earlier to
occur of the date on which audited financial statements for TTSI are
delivered to the Company by its independent auditors for TTSI's year
ended December 31, 1999 or 18 months following the Closing Date;
(v) the representations and warranties in Sections C.01, C.02,
C.09 and C.10 shall survive indefinitely;
(vi) the representations and warranties in Exhibit C (other
than those Sections of Exhibit C referenced in the preceding clause
(v)) shall survive for a period of one year from the Closing Date;
(vii) the covenants and agreements set forth in Section 2.07
shall survive until payment of the final Annual Thiokol Payment
contemplated thereby; and
(viii) those covenants and agreements set forth in the
Transaction Documents that, by their terms, are to have effect after
the Closing Date shall survive for the period contemplated by the
covenants and agreements, or if no period is expressly set forth,
indefinitely.
The representations, warranties, covenants and agreements referenced in the
preceding clauses (i) and (iii) through (vii) are referred to herein as the
"Surviving Representations or Covenants." It is understood and agreed that, (i)
before the Closing the remedies expressly set forth in Article XI are the sole
and exclusive remedies for any breach of any representation, warranty, covenant
or agreement and (ii) following the Closing the sole and exclusive remedy with
respect to any breach of any representation, warranty, covenant or agreement
(other than (1) with respect to a breach of the terms of a covenant or
agreement, as to which Buyer or Parent, as the case may be, shall be entitled to
seek specific performance or other equitable relief and (2) with respect to
claims
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for fraud) shall be a claim for Damages (whether by contract, in tort or
otherwise, and whether in law, in equity or both) made pursuant to this Article
X.
(b) Except as otherwise provided in this Agreement, Parent, its
Affiliates and their respective Representatives and successors on the one hand,
and TTSI and Buyer for itself, its Affiliates, TTSI and their respective
Representatives and successors, on the other hand, effective as of the Closing,
release and discharge one another from any and all Damages (whether by contract,
in tort or both, and whether in law, in equity or both), rights of subrogation
and contribution and remedies of any nature whatsoever, known or unknown,
relating to or arising out of Environmental Liabilities or Environmental Laws,
in either case, arising in connection with or in any way relating to TTSI or the
TTS Business.
Section 10.02 Indemnification.
(a) Effective as of the Closing and subject to the limitations set
forth in Section 10.04(a), Buyer hereby indemnifies Parent and its Affiliates
and their respective directors, officers, employees and agents against, and
agrees to hold them harmless from any and all Damages incurred or suffered by
any of them, arising out of or related in any way to any misrepresentation or
breach of any Surviving Representation or Covenant made or to be performed by
Buyer pursuant to any of the Transaction Documents. Effective as of the Closing
and subject to the limitations set forth in Section 10.04(a), TTSI hereby
indemnifies Parent and its Affiliates and their respective directors, officers,
employees and agents against, and agrees to hold them harmless from any and all
Damages incurred or suffered by any of them arising out of or related in any way
to (i) any misrepresentation or breach of any Surviving Representation or
Covenant made or to be performed by Buyer or TTSI pursuant to any of the
Transaction Documents, (ii) except as otherwise contemplated by Sections
10.02(b)(iii), 10.04(b)(ii) and Exhibit D, any Assumed Liabilities (including,
without limitation, TTSI's failure to perform or in due course pay or discharge
any Assumed Liability), (iii) any Financial Support Arrangement, (iv) any
matters for which indemnification is provided under Exhibit D (it being
understood that the terms of such indemnification shall be governed by and
subject to the terms of Exhibit D) or (v) any liabilities or obligations arising
in connection with or in any way relating to TTSI or the TTS Business (but only
where and to the extent conducted on or after the Closing Date), or a facility
the possession of which is transferred to TTSI after the date of this Agreement
and at or prior to the Closing (but only during a period in which TTSI or any of
its Affiliates or successors owns or leases such facility), or the use,
ownership or operation of such facilities by TTSI or an Affiliate of TTSI, or a
successor of TTSI or such Affiliate, whether vested or unvested, contingent or
fixed, actual or potential, which arise under or relate to Environmental Laws to
the extent conditions underlying such liabilities arise out of, relate to, are
based on or result from any action taken by any Person other than a Seller
Company or a willful or intentional failure by any such person to take action on
or after the Closing Date, including, without limitation, (A) Remedial Actions,
(B) personal injury, wrongful death, economic loss or property damage claims,
(C) claims for natural resource damages, (D) violations of Applicable Law or (E)
any other Damages with respect to such Environmental Laws. Buyer hereby
indemnifies Parent and its Affiliates and their respective directors, officers,
employees and agents against, and agrees to hold them harmless from any and all
Damages incurred or suffered by any of them and caused by any actions taken or
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failure to act by Buyer or any of its Representatives in connection with any
environmental audit or similar review of the TTS Business that involves testing,
drilling or sampling at any facility possession of which is contemplated to be
transferred to TTSI, including, without limitation, (A) Remedial Actions, (B)
personal injury, wrongful death, economic loss or property damage claims, (C)
claims for natural resource damages, (D) violations of Applicable Law, or (E)
any other Damages with respect to such Environmental Laws excluding any such
Damages arising from pre-existing conditions of contamination which are
identified but are not exacerbated by such audit or review.
(b) Effective as of the Closing and subject to the limitations set
forth in Section 10.04(b), Parent hereby indemnifies Buyer, TTSI and their
Affiliates and their respective directors, officers, employees and agents
against, and agrees to hold them harmless from any and all Damages incurred or
suffered by any of them arising out of or related in any way to (i) any
misrepresentation or breach of any Surviving Representation or Covenant made or
to be performed by the Seller Companies pursuant to any Transaction Document,
(ii) any Excluded Liabilities (including, without limitation, Parent's (or any
other Seller Company's) failure to perform or in due course pay or discharge any
Excluded Liability), (iii) any Environmental Liabilities to the extent the
conditions underlying arise out of, relate to, are based on or result from
actions taken (or failures to take action), conditions existing or events
occurring prior to the Closing, (iv) any matters for which indemnification is
provided under Exhibit D (it being understood that the terms of such
indemnification shall be governed by and subject to the terms of Exhibit D) or
(v) any indemnification paid by TTSI to any of its directors as a result of a
claim by any Person (other than Buyer, TTSI or any of their respective
Affiliates, any Permitted Assigns or any other Person (other than a Seller
Company) who purchases shares of capital stock of TTSI) against such directors
that is a result of any action taken by such directors on or prior to Closing.
Section 10.03 Procedures.
(a) If Parent or any of its Affiliates or any of their directors,
officers, employees and agents, shall seek indemnification pursuant to Section
10.02(a), or if Buyer or any of its Affiliates or any of their directors,
officers, employees and agents, shall seek indemnification pursuant to Section
10.02(b), the Person seeking indemnification (the "Indemnified Party") shall
give written notice to the party from whom such indemnification is sought (the
"Indemnifying Party") promptly (and in any event within 30 days) after the
Indemnified Party (or, if the Indemnified Party is a corporation, any officer or
employee of the Indemnified Party) becomes aware of the facts giving rise to
such claim for indemnification (an "Indemnified Claim") specifying in reasonable
detail the factual basis of the Indemnified Claim, stating the amount of the
Damages, if known, the method of computation thereof, containing a reference to
the provision of the Transaction Documents in respect of which such Indemnified
Claim arises and demanding indemnification therefor. The failure of an
Indemnified Party to provide notice in accordance with this Section 10.03 shall
not constitute a waiver of that party's claims to indemnification pursuant to
Section 10.02, except to the extent that (i) any such failure or delay in giving
notice causes the amounts paid by the Indemnifying Party to be greater than they
otherwise would have been or otherwise results in prejudice to the Indemnifying
Party or (ii) such notice is not delivered to the Indemnifying Party prior to
the
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expiration of the applicable survival period set forth in Section 10.01. If
the Indemnified Claim arises from the assertion of any claim, or the
commencement of any suit, action, proceeding or Remedial Action brought by a
Person that is not a party hereto (a "Third Party Claim"), any such notice to
the Indemnifying Party shall be accompanied by a copy of any papers theretofore
served on or delivered to the Indemnified Party in connection with such Third
Party Claim.
(b) (i) Upon receipt of notice of a Third Party Claim from an
Indemnified Party pursuant to Section 10.03(a), the Indemnifying Party will be
entitled to assume the defense and control of such Third Party Claim subject to
the provisions of this Section 10.03. After written notice by the Indemnifying
Party to the Indemnified Party of its election to assume the defense and control
of a Third Party Claim, the Indemnifying Party shall not be liable to such
Indemnified Party for any legal fees or expenses subsequently incurred by such
Indemnified Party in connection therewith. Notwithstanding anything in this
Section 10.3 to the contrary, if the Indemnifying Party does not assume defense
and control of a Third Party Claim as provided in this Section 10.3, the
Indemnified Party shall have the right to defend such Third Party Claim, subject
to the limitations set forth in this Section 10.03, in such manner as it may
deem appropriate. Whether the Indemnifying Party or the Indemnified Party is
defending and controlling any such Third Party Claim, they shall select counsel,
contractors, experts and consultants of recognized standing and competence,
shall take all steps necessary in the investigation, defense or settlement
thereof, and shall at all times diligently and promptly pursue the resolution
thereof. The party conducting the defense thereof shall at all times act as if
all Damages relating to the Third Party Claim were for its own account and shall
act in good faith and with reasonable prudence to minimize Damages therefrom.
The Indemnified Party shall, and shall cause each of its Affiliates, directors,
officers, employees, and agents to, cooperate fully with the Indemnifying Party
in connection with any Third Party Claim.
(ii) Subject to the provisions of Section 10.03(b)(iii) and
Section 10.03(b)(iv), the Indemnifying Party shall be authorized to consent to a
settlement of, or the entry of any judgment arising from, any Third Party
Claims, and the Indemnified Party shall consent to a settlement of, or the entry
of any judgment arising from, such Third Party Claims; provided, that the
Indemnifying Party shall (1) pay or cause to be paid all amounts arising out of
such settlement or judgment concurrently with the effectiveness thereof; (2)
shall not encumber any of the assets of any Indemnified Party or agree to any
restriction or condition that would apply to such Indemnified Party or to the
conduct of that party's business; and (3) shall obtain, as a condition of any
settlement or other resolution, a complete release of each Indemnified Party.
Except to the extent of the foregoing, no settlement or entry of judgment in
respect of any Third Party Claim shall be consented to by any Indemnifying Party
or Indemnified Party without the express written consent of the other party.
(iii) Notwithstanding the provisions of Section 10.03(b)(i),
Buyer shall manage all Remedial Actions conducted with respect to facilities
which constitute Contributed Assets, provided that Parent and its
Representatives shall have the right, consistent with Buyer's right to manage
such Remedial Actions as aforesaid, to participate fully in all decisions
regarding any Remedial Action, including reasonable access to sites where any
Remedial Action is being conducted, reasonable access to all documents,
correspondence, data, reports or information
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regarding the Remedial Action, reasonable access to employees and consultants of
Buyer with knowledge of relevant facts about the Remedial Action and the right
to attend all meetings and participate in any telephone or other conferences
with any Government Authority or other third party regarding the Remedial
Action.
(iv) In the case of the indemnification contemplated by
Section 10.02(b)(iii), in the event that the Indemnifying Party desires to
settle the matters referenced therein or consent to the entry of any judgment
arising thereunder and the Indemnified Party does not wish to consent to such
settlement or entry of judgment, the Indemnified Party shall have no obligation
to consent to the settlement or entry of judgment provided that it agrees in
writing to pay and be responsible for 100% of any Damages; provided that the
Indemnified Party shall not be required to consent to any settlement or agree to
be responsible for the payment of Damages thereafter incurred with respect to
any matter the settlement or entry of judgment of which would require the
consent of such Indemnified Party pursuant to Section 10.03(b)(ii). The
obligation of an Indemnified Party that rejects any proposed settlement offer or
entry of any such judgment to pay and be responsible for 100% of any Damages in
accordance with this Section 10.03(b)(iv) shall be conditioned upon and subject
to the payment by the Indemnifying Party, within five Business Days of the date
such Indemnified Party provides the written agreement contemplated by the
preceding sentence, of an amount, in immediately available funds, equal to the
portion of the total settlement that would have been payable by the Indemnifying
Party according to the percentage sharing arrangement contemplated by Section
10.04(b)(ii). Thereafter, the Indemnified Party shall be solely responsible for
any Damages and for the defense of the matter that is the subject of the
proposed settlement or entry of judgment. Notwithstanding the foregoing, an
Indemnifying Party may, at its option and expense, participate in the defense of
any Indemnified Claim.
(v) In furtherance of and not in limitation of the provisions
of this Section 10.03, with respect to product liability matters and other
matters contemplated by Exhibit E, Parent and Buyer covenant and agree as set
forth in Exhibit E.
(c) If the Indemnifying Party and the Indemnified Party are unable to
agree with respect to a procedural matter arising under Section 10.03(b)(iii),
the Indemnifying Party and the Indemnified Party shall, within 10 days after
notice of disagreement given by either party, agree upon a third-party referee
("Referee"), who shall be an environmental attorney or environmental consultant
as appropriate under the circumstances and who shall have the authority to
review and resolve the disputed matter. The parties shall present their
differences in writing (each party simultaneously providing to the other a copy
of all documents submitted) to the Referee and shall cause the Referee promptly
to review any facts, law or arguments either the Indemnifying Party or the
Indemnified Party may present. The Referee shall be retained to resolve specific
differences between the parties within the range of such differences. Either
party may request that all discussions with the Referee by either party be in
each other's presence. The decision of the Referee shall be final and binding
unless both the Indemnifying Party and the Indemnified Party agree. The parties
shall share equally all costs and fees of the Referee.
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(d) If an Indemnifying Party makes any payment on an Indemnified Claim,
the Indemnifying Party shall be subrogated, to the extent of such payment, to
all rights and remedies of the Indemnified Party to any insurance benefits or
other claims or benefits of the Indemnified Party with respect to such claim.
Section 10.04 Limitations. Notwithstanding anything to the contrary in
this Agreement or in any of the Transaction Documents (other than in Section
7.08, but, except to the extent of Assumed Liabilities):
(a) Buyer and TTSI shall only have liability to Parent or any other
Person hereunder with respect to the representations and warranties described in
clause (i) of Section 10.02(a) if such matters were the subject of a written
notice given by the Indemnified Party pursuant to Section 10.03(a) within the
period following the Closing Date specified for each respective matter in
Section 10.01. Effective as of the Closing, and subject to the limitations set
forth in Section 10.04(a), Buyer hereby indemnifies Parent and its Affiliates
and their respective directors, officers, employees and agents against, and
agrees to hold them harmless from any and all Damages incurred or suffered by
any of them, arising out of or related in any way to any misrepresentation or
breach of any Surviving Representation or Covenant made or to be performed by
Buyer pursuant to any of the Transaction Documents.
(b) Parent shall only have liability to Buyer, TTSI or any other Person
hereunder:
(i) with respect to the representations and
warranties described in clause (i) of Section 10.02(b), (y) to the
extent that the aggregate Damages of all Indemnified Parties as the
result thereof exceed $5,000,000 but are not greater than an amount
equal to $5,000,000 plus 25% of the Adjusted Purchase Price (it being
understood that Parent's maximum liability under Section 10.02(b)(i)
with respect to representations and warranties and this Section
10.04(b)(i) shall be an amount equal to 25% of the Adjusted Purchase
Price), and (z) if such matters were the subject of a written notice
given by the Indemnified Party pursuant to Section 10.03(a) within the
period following the Closing Date specified for each respective matter
in Section 10.01; and
(ii) with respect to the matters described in clause
(iii) of Section 10.02(b), to the extent of (x) 50% of the first
$10,000,000 and (y) 80% of all amounts over $10,000,000 of the
aggregate Damages incurred and paid within five years following the
Closing Date by all Indemnified Parties as the result thereof based on
the use of the facilities constituting Contributed Assets.
ARTICLE XI
TERMINATION
Section 11.01 Termination. The Transaction Documents may be terminated
at any time prior to the Closing:
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(i) by mutual written agreement of Parent and Buyer;
(ii) by Parent or Buyer if the Closing shall not have been
consummated on or before September 30, 1998; provided, however, that
neither Parent nor Buyer may terminate the Transaction Documents
pursuant to this clause (ii) if the Closing shall not have been
consummated on or before September 30, 1998, by reason of the failure
of such party or any of its Affiliates to perform in all material
respects any of its or their respective covenants or agreements
contained in the Transaction Documents;
(iii) by either Parent or Buyer if there shall be any
Applicable Law that makes consummation of the Contemplated Transactions
illegal or otherwise prohibited or if consummation of the Contemplated
Transactions would violate any order, decree or judgment of any
Governmental Authority having competent jurisdiction;
(iv) by Buyer if there shall have occurred following March 29,
1998 a material adverse effect on the assets, properties, business,
financial condition, results of operations or prospects of the TTS
Business taken as a whole; and
(v) by Buyer or Parent if the other party shall have
materially breached any representation or warranty or any covenant
hereunder and such breach prevents or renders impossible the
satisfaction of any of the conditions to Closing set forth herein;
provided, that as a condition to the right of a party to elect to
terminate this Agreement pursuant to the immediately preceding proviso,
the parties shall first provide 10 Business Days prior written notice
to the other party specifying in reasonable detail the nature of the
condition that such party has concluded will not be satisfied, and the
other party shall be entitled during such 10 Business Day period to
take any actions it may elect consistent with the terms of this
Agreement such that the condition reasonably could be expected to be
satisfied prior to the expiration of such time period.
Any party desiring to terminate this Agreement pursuant to this Section 11.01
shall give written notice of such termination to the other parties to this
Agreement.
Section 11.02 Effect of Termination. If this Agreement is terminated as
permitted by Section 11.01, such termination shall be without liability of any
party (or any Affiliate, stockholder, director, officer, employee, agent,
consultant or Representative of such party) to any other party to this
Agreement; provided, however, that if the Contemplated Transactions fail to
close as a result of a breach of the provisions of any Transaction Document by
Parent or Buyer, such party shall be fully liable for any and all losses and
other damages incurred or suffered by the other party as a result of all such
breaches if the other party is ready, willing and able to otherwise satisfy in
all material respects its obligations under the Transaction Documents.
Notwithstanding the foregoing, the provisions of Sections 6.01 and 12.03 and
this Section 11.02 shall survive any termination hereof pursuant to Section
11.01.
ARTICLE XII
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MISCELLANEOUS
Section 12.01 Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given,
if to Parent (or TTSI prior to Closing):
c/o The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
Attention: Senior Vice President and
Chief Financial Officer
Telecopy: (410) 716-3318
with a copy to:
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
Attention: Senior Vice President and
General Counsel
Telecopy: (410) 716-2660
and
Miles & Stockbridge P.C.
10 Light Street
Baltimore, Maryland 21202
Attention: Glenn C. Campbell
David A. Gibbons
Telecopy: (410) 385-3700
if to Buyer (or TTSI after Closing):
TTSI LLC
c/o Cornerstone Equity Investors, LLC
717 5th Avenue
Suite 1100
New York, New York 10022
Attention: Mr. Mark Rossi
Telecopy: (212) 826-6798
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<PAGE> 41
with a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022
Attention: Frederick Tanne, Esquire
Telecopy: (212) 446-4900
or to such other address or telecopy number and with such other copies, as such
party may hereafter specify by notice to the other parties. Each such notice,
request or other communication shall be effective (i) if given by telecopy, when
such telecopy is transmitted to the telecopy number specified in this Section
12.01 and evidence of receipt is received or (ii) if given by any other means,
upon delivery or refusal of delivery at the address specified in this Section
12.01.
Section 12.02 Amendments; Waivers.
(a) Subject to the provisions of Section 9.04, any provision of the
Transaction Documents may be amended or waived prior to the Closing Date if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by Parent and Buyer, or in the case of a waiver, by the party against
whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege under any Transaction Document shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
Section 12.03 Expenses. Except as otherwise provided in the Transaction
Documents, all costs and expenses incurred in connection with the Transaction
Documents shall be paid by the party incurring such cost or expense; provided
that TTSI shall not incur any material costs or expenses on behalf of Parent or
any Seller Company in connection with the transactions contemplated hereby
(except for any costs, expenses or fees associated with the transfer of the
Japanese country club membership to TTSI under the terms of that membership).
Notwithstanding the foregoing, after Closing, TTSI may pay reasonable costs,
expenses and fees incurred by Buyer, Cornerstone Equity Investors IV, LP, or
Cornerstone Equity Investors, LLC in connection with the Contemplated
Transactions, including a closing fee to Cornerstone Equity Investors LLC or one
of its Affiliates.
Section 12.04 Successors and Assigns. The provisions of the Transaction
Documents shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other party, provided the Buyer may assign
its or TTSI's rights hereunder to an agent for the financing sources in
connection with the Contemplated
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Transactions, as collateral security for TTSI's obligations, and Buyer may
assign its rights to purchase Acquired Shares to Permitted Assignees.
Section 12.05 Disclosure. Certain information set forth in the
Disclosure Schedules has been included and disclosed solely for informational
purposes and may not be required to be disclosed pursuant to the terms and
conditions of the Transaction Documents. The disclosure of any such information
shall not be deemed to constitute an acknowledgement or agreement that the
information is required to be disclosed in connection with the representations
and warranties made in the Transaction Documents or that the information is
material, nor shall any information so included and disclosed be deemed to
establish a standard of materiality or otherwise used to determine whether any
other information is material.
Section 12.06 Construction. As used in the Transaction Documents, any
reference to the masculine, feminine or neuter gender shall include all genders,
the plural shall include the singular, and the singular shall include the
plural. With regard to each and every term and condition of the Transaction
Documents, the parties understand and agree that the same have or has been
mutually negotiated, prepared and drafted, and that if at any time the parties
desire or are required to interpret or construe any such term or condition or
any agreement or instrument subject hereto, no consideration shall be given to
the issue of which party actually prepared, drafted or requested any term or
condition of the Transaction Documents.
Section 12.07 Entire Agreement.
(a) The Transaction Documents and any other agreements contemplated
thereby (including, to the extent contemplated herein, the Confidentiality
Agreement) constitute the entire agreement among the parties with respect to the
subject matter of such documents and supersede all prior agreements,
understandings and negotiations, both written and oral, between the parties with
respect to the subject matter thereof.
(b) The parties hereto acknowledge and agree that no representation,
warranty, promise, inducement, understanding, covenant or agreement has been
made or relied upon by any party hereto other than those expressly set forth in
the Transaction Documents. Without limiting the generality of the disclaimer set
forth in the preceding sentence, (i) neither Parent nor any of its Affiliates
has made or shall be deemed to have made any representations or warranties, in
any presentation or written information relating to TTSI or the TTS Business
given or to be given in connection with the Contemplated Transactions, in any
filing made or to be made by or on behalf of Parent or any of its Affiliates
with any Governmental Authority, and no statement, made in any such presentation
or written materials, made in any such filing or contained in any such other
information shall be deemed a representation or warranty hereunder or otherwise,
(ii) neither Parent nor any of its Affiliates has made or shall be deemed to
have made any representations or warranties in respect of the accounting or tax
treatment to be afforded Buyer, TTSI or the TTS Business in respect of the
Contemplated Transactions, and (iii) Parent, on its own behalf and on behalf of
the other Seller Companies, expressly disclaims any implied warranties,
including but not limited to warranties of fitness for a particular purpose and
warranties of merchantability. Buyer acknowledges that Parent
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<PAGE> 43
has informed it that no Person has been authorized by Parent or any of its
Affiliates to make any representation or warranty in respect of TTSI or the TTS
Business or in connection with the Contemplated Transactions, unless in writing
and contained in this Agreement or in any of the Transaction Documents to which
they are a party.
(c) Except as expressly provided herein or in any other Transaction
Document, no Transaction Document or any provision thereof is intended to confer
upon any Person other than the parties hereto any rights or remedies hereunder.
Section 12.08 Governing Law. Except as otherwise provided in any of the
Transaction Documents, this Agreement and the other Transaction Documents shall
be construed in accordance with and governed by the law of the State of Delaware
(without regard to the choice of law provisions thereof).
Section 12.09 Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other party hereto.
Section 12.10 Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, any of the Transaction Documents or the Contemplated Transactions shall be
brought in the United States District Court for the District of Delaware (or, if
subject matter jurisdiction is unavailable, any of the state courts of the State
of Delaware), and each of the parties hereby consents to the exclusive
jurisdiction of such court (and of the appropriate appellate court) in any such
suit, action or proceeding and waives any objection to venue laid therein.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the State of Delaware. Without
limiting the foregoing, Parent, TTSI and Buyer agree that service of process
upon such party at the address referred to in Section 12.01, together with
written notice of such service to such party, shall be deemed effective service
of process upon such party.
Section 12.11 Severability. Any provision of the Transaction Documents
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of the
Transaction Documents or affecting the validity or enforceability of such
provision in any other jurisdiction. To the extent any provision of the
Transaction Documents is determined to be prohibited or unenforceable in any
jurisdiction Parent and Buyer agree to use reasonable commercial efforts, and
agree to cause the other Seller Companies and TTSI, as the case may be, to use
reasonable commercial efforts, to substitute one or more valid, legal and
enforceable provisions that, insofar as practicable implement the purposes and
intent of the prohibited or unenforceable provision.
Section 12.12 Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
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Section 12.13 Bulk Sales. Buyer and TTSI hereby waive compliance by
Parent and each Seller Company, in connection with the Contemplated
Transactions, with the provisions of Article 6 of the Uniform Commercial Code as
adopted in the States of Tennessee, California, Maryland and Mississippi, and as
adopted in any other states or jurisdictions where any of the Contributed Assets
or Transferred Intellectual Property are located, and any other applicable bulk
sales or similar laws with respect to or requiring notice to Parent's (or any
Seller Company) creditors, as the same may be in effect on the date of such
contribution or transfer, as the case may be. Parent shall indemnify and hold
harmless TTSI against any and all liabilities (other than liabilities in respect
of Assumed Liabilities) which may be asserted by third parties against TTSI as a
result of noncompliance with any such bulk sales or similar law.
IN WITNESS WHEREOF, the parties hereto caused this Agreement to be duly
executed by their respective authorized officers on the day and year first above
written.
THE BLACK & DECKER CORPORATION
By:_____________________________________
Name:
Title:
TRUE TEMPER SPORTS, INC.
By:_____________________________________
Name:
Title:
TTSI LLC
By:_____________________________________
Name:
Title:
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<PAGE> 45
EXHIBIT A
DEFINITIONS
(a) The following terms have the following meanings:
"Acquired Shares" means the shares of capital stock of TTSI to be
acquired by Buyer from EII, all as contemplated by Section 2.03(b).
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person. For purposes of determining whether a Person is an Affiliate, the term
"control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of securities, contract or otherwise. For purposes of
this Agreement, TTSI shall not be deemed to be an Affiliate of Parent or any
other Seller Companies after Closing.
"Amory Facility" means the TTS Business' steel shaft manufacturing
facility located in Amory, Mississippi.
"Applicable Law" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, decree or other requirement
of any Governmental Authority (including any Environmental Law) applicable to
such Person or any of their respective properties, assets, officers, directors,
employees, consultants or agents (in connection with such officer's, director's,
employee's, consultant's or agent's activities on behalf of such Person).
"Assignment and Assumption Agreement" means the Assignment and
Assumption Agreement to be entered into by EII and TTSI, in the form
contemplated by Attachment II (with such changes as may be required to satisfy
any requirements of Applicable Law in any country or jurisdiction where
Contributed Assets are located) and any other similar agreements contemplated by
this Agreement executed and delivered by EII and TTSI in connection with the
sale, assignment and transfer by EII or a Seller Company of Contributed Assets
and the assumption by EII And TTSI of Assumed Liabilities, as the same may be
amended from time to time.
"Assumed Liabilities" means all debts, liabilities and obligations of
Seller Companies, to the extent relating to or arising out of the operation,
affairs and conduct of the TTS Business, the Contributed Assets or the TTSI
Leases, of any kind, character or description, whether liquidated or
unliquidated, known or unknown, fixed or contingent, accrued or unaccrued,
absolute, determined, determinable or indeterminable or otherwise, whether or
not reflected or reserved against in the Opening Statement or in the calculation
of the Final Net Working Capital Amount and whether presently in existence or
arising hereafter, except for Excluded Liabilities, including but not limited to
the following:
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<PAGE> 46
(i) all debts, liabilities and obligations relating to the TTS
Business, the Contributed Assets or the Transferred Intellectual Property,
whether accrued, liquidated, contingent, matured or unmatured, at or prior to
the date the transactions contemplated by Section 2.01 are consummated, that (a)
are set forth on, reflected or referred to in the Opening Statement, (b) are
disclosed in any of the Disclosure Schedules delivered hereunder, (c) would be
subject to disclosure in any of the Disclosure Schedules delivered in connection
with any of Parent's representations and warranties but for the materiality
standards contained in such representation and warranty, (d) are reflected in
the Final Net Working Capital Amount as determined in accordance with Section
2.06 herein (including without limitation accounts payable and reserves
reflected as contra-asset accounts) or (e) are otherwise a liability or
obligation that TTSI is expressly assuming in accordance with this Agreement;
(ii) all liabilities and obligations arising under Contracts,
whether or not the Contracts have been completed or terminated prior to the
Closing Date, including, without limitation, any such liabilities and
obligations arising from or relating to the performance or non-performance of
the Contracts by TTSI, Buyer or any other Person, whether arising prior to, on
or after the Closing Date, except to the extent they constitute Excluded
Liabilities and except to the extent that a claim of non-performance, breach or
other violation has been asserted prior to Closing and is not otherwise included
within clause (xi);
(iii) all liabilities and obligations in respect of employees
and former employees of TTSI or the TTS Business, and beneficiaries of employees
and former employees of TTSI or the TTS Business, including, without limitation,
liabilities and obligations under or relating to WARN or any similar state or
local law to the extent relating to or arising out of any actions taken by TTSI
or Buyer or any Affiliate of either of the foregoing on or after the Closing
Date, except to the extent otherwise required by Exhibit D to be retained by
Parent or Seller Companies;
(iv) all liabilities and obligations in respect of Transferred
Employees and dependents and beneficiaries of Transferred Employees under (A)
Employee Plans to the extent listed or referred to in Schedule B.20, (B) post
employment medical, dental, or life insurance benefits, and (C) Benefit
Arrangements to the extent such Benefit Arrangements are listed on or referred
to in Schedule B.20, but in the case of the foregoing clause (C) limited to an
amount equal to the extent that such liabilities or obligations are reflected in
the Final Net Working Capital Amount or cash equal to such liabilities or
obligations is transferred to TTSI on the Closing Date, plus $100,000, except to
the extent otherwise required by Exhibit D to be retained by Parent or Seller
Companies;
(v) all liabilities and obligations relating to claims of
manufacturing or design defects with respect to any product sold or service
provided by TTSI prior to, on or after the Closing Date, including liabilities
and obligations in respect of investigations regarding product safety, product
recall and related matters, except to the extent they constitute Excluded
Liabilities;
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<PAGE> 47
(vi) all liabilities and obligations relating to warranty
obligations or services with respect to any product manufactured or sold or
service provided by TTSI or the TTS Business prior to, on or after the Closing
Date;
(vii) all Environmental Liabilities, whether arising prior to,
on or after the Closing Date, to the extent relating to or arising out of
conditions at, or the current or former operations of TTSI or the TTS Business
at, the facilities owned or leased by TTSI or the TTS Business as of the date
the transactions contemplated by Section 2.01(ii) of this Agreement are
consummated and included in the Contributed Assets (whether by fee ownership or
leasehold interest), except to the extent they constitute Excluded Liabilities;
(viii) all liabilities and obligations relating to the TTSI
Leases, whether arising prior to, on or after the Closing Date;
(ix) all Tax liabilities and obligations relating to sales and
use taxes, gross receipts taxes, property taxes, licenses, employee and employer
withholding and unemployment taxes and other non-income Taxes relating
exclusively to TTSI or the TTS Business;
(x) all liabilities and obligations arising from or relating
to governmental, judicial or adversarial proceedings (public or private),
litigation, suits, arbitration, disputes, claims, causes of action or
investigations (collectively, "Proceedings") arising from or directly or
indirectly relating to the TTS Business, any Contributed Assets or any
Transferred Intellectual Property, whether or not accrued, liquidated,
contingent, matured, unmatured, or known or unknown to Parent or Buyer at or
prior to the Closing, except for liabilities and obligations of a type
contemplated by the foregoing clause (v), which shall be governed by such
clause; and
(xi) all liabilities and obligations relating to the ownership
by TTSI or any of its successors of the Contributed Assets, directly or
indirectly relating to the Transferred Employees, the lease of properties under
the TTSI Leases or otherwise, or the conduct of the TTS Business or any other
business, in each case, arising from actions occurring after the Closing Date,
including, without limitation, any and all Proceedings in respect thereof.
"Benefit Arrangements" means all life and health insurance,
hospitalization, retirement, savings, bonus, deferred compensation, incentive
compensation, severance pay, disability and fringe benefit plans, holiday or
vacation pay, profit sharing, seniority, and other policies, practices,
agreements or statements of terms and conditions providing employee or executive
compensation or benefits to employees of the TTS Business or any of their
dependents, which are maintained by Seller Companies and constitute Assumed
Liabilities, other than an Employee Plan.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or required by
law to close.
"Closing Date" means the date of the Closing.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment Letters" means the following letters expressing the
commitment of reputable third parties relating to the debt financing
contemplated by Section 2.02: (i) that certain letter, dated June 28, 1998
(including the Annexes attached thereto) from DLJ Capital Funding, Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation to Cornerstone Equity
Investors IV, L.P. regarding the commitment to provide certain senior secured
financing and (ii) that certain letter dated June 28, 1998 (including the
Annexes attached thereto) from DLJ Bridge Financing, Inc. to Cornerstone Equity
Investors IV, L.P. regarding the commitment to provide certain bridge financing.
"Confidentiality Agreement" means the letter agreement dated March 13,
1998, by and between Parent and Buyer, as the same has been or may be amended
from time to time.
"Contemplated Transactions" means the transactions contemplated by the
Transaction Documents.
"Contracts" means all contracts, agreements, leases (including leases
of real property), licenses, commitments, sales and purchase orders, and other
undertakings of any kind, whether written or oral, relating exclusively to the
TTS Business other than Employee Plans and Benefit Arrangements.
"Contributed Assets" means, other than Excluded Assets and Transferred
Intellectual Property, all of the assets, properties, rights, licenses, permits,
Contracts, causes of action and business of every kind and description as the
same shall exist on the date of the contributions contemplated by Section
2.01(ii) of this Agreement, wherever located, real, personal or mixed, tangible
or intangible, owned by, leased by or in the possession of Parent or any Seller
Company, whether or not reflected in the books and records thereof, and held or
used exclusively in the conduct of the TTS Business as the same shall exist on
the date of the capital contribution of EII contemplated by Section 2.01 of this
Agreement, and including, without limitation, except as otherwise specified
herein, all direct or indirect right, title and interest of Parent or any Seller
Company in, to and under:
(i) the Olive Branch Property, together with all buildings,
fixtures, easements, rights of way, and improvements thereon and appurtenances
thereto to the extent relating to the TTS Business;
(ii) the rights and interests of Seller Companies under the
TTSI Leases;
(iii) all personal property and interests therein (other than
Intellectual Property), including machinery, equipment, furniture, office
equipment, communications equipment, vehicles, storage tanks, spare and
replacement parts, fuel and other tangible property (and interests in any of the
foregoing) owned by any Seller Company that are used exclusively in connection
with the TTS Business;
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(iv) all Inventory that is owned by Seller Companies and held
for sale, use or consumption exclusively in the TTS Business;
(v) all Contracts;
(vi) all accounts, accounts receivable and notes receivable
whether or not billed, accrued or otherwise recognized in the Opening Statement
or taken into account in the determination of the Final Net Working Capital
Amount, together with any unpaid interest or fees accrued thereon or other
amounts due with respect thereto of Seller Companies that relate exclusively to
the TTS Business, and any security or collateral for any of the foregoing;
(vii) all expenses that have been prepaid by Seller Companies
relating exclusively to the operation of the TTS Business, including but not
limited to ad valorem Taxes, lease and rental payments;
(viii) all of Parent's or any of Seller Companies' rights,
claims, credits, causes of action or rights of set-off against Persons other
than Seller Companies relating exclusively to the TTS Business or the
Contributed Assets, including, without limitation, unliquidated rights under
manufacturers' and vendors' warranties;
(ix) all transferable franchises, licenses, permits or other
governmental authorizations owned by, or granted to, or held or used by, Seller
Companies and exclusively related to the TTS Business;
(x) except to the extent a Seller Company is required to
retain the originals pursuant to any Applicable Law (in which case copies will
be provided to TTSI upon request), all business books, records, files and
papers, whether in hard copy or computer format, of a Seller Company used
exclusively in the TTS Business, including, without limitation, books of
account, invoices, engineering information, sales and promotional literature,
manuals and data, sales and purchase correspondence, lists of present and former
suppliers, lists of present and former distributors, lists of present and former
customers, personnel and employment records of present or former employees,
documentation developed or used for accounting, marketing, engineering,
manufacturing, or any other purpose relating to the conduct of the TTS Business
at any time prior to the Closing;
(xi) the right to represent to third parties that TTSI is the
successor to the TTS Business; and
(xii) all insurance proceeds (except to the extent relating to
Excluded Assets or Excluded Liabilities or to the extent relating to or arising
out of Environmental Insurance Claims), net of any retrospective premiums,
deductibles, retention or similar amounts, arising out of or related to damage,
destruction or loss of any property or asset of or used exclusively in
connection with the TTS Business to the extent of any damage or destruction that
remains unrepaired, or to the extent any property or asset remains unreplaced at
the Closing Date.
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"Damages" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement, including,
without limitation, reasonable costs, fees and expenses of attorneys, experts,
accountants, appraisers, consultants, witnesses, investigators and any other
agents or representatives of such Person (with such amounts to be determined net
of any resulting Tax benefit actually received or realized and net of any refund
or reimbursement of any portion of such amounts actually received or realized,
including, without limitation, reimbursement by way of insurance or third party
indemnification), but specifically excluding (i) any costs incurred by or
allocated to an Indemnified Party with respect to time spent by employees of the
Indemnified Party or any of its Affiliates, (ii) any lost profits or opportunity
costs or exemplary or punitive damages (except to the extent assessed in
connection with a third-party claim with respect to which the Person against
which such damages are assessed is entitled to indemnification hereunder) and
(iii) the decrease in the value of any Contributed Asset to the extent that such
valuation is based on any use of the Contributed Asset other than its use as of
the Closing Date.
"Disclosure Schedules" means the Disclosure Schedules dated the date of
this Agreement relating to this Agreement, as amended from time to time in
accordance with this Agreement.
"EBIT Contribution" means revenues derived from the Thiokol Contract,
less (i) cost of sales of the Thiokol Contract, (ii) direct selling, general and
administrative costs of the Thiokol Contract, and (iii) an amount equal to
indirect non-promotional selling, general and administrative costs of TTSI times
the ratio of revenues derived from the Thiokol Contract to total revenues of
TTSI.
"EII" means Emhart Industries, Inc., a Delaware corporation.
"Emhart" means Emhart Inc., a Delaware corporation.
"Employee Plans" means each "employee benefit plan" as defined in
Section 3(3) of ERISA, maintained or contributed to by Parent or any of its
Affiliates which provides benefits to employees of TTSI or the TTS Business or
their dependents.
"Encumbrances" means Liens, title defects, encumbrances, easements and
restrictions, invalidities of leasehold interests.
"Environmental Claim" means any written or oral notice, claim, demand,
action, suit, complaint, proceeding or other communication by any third Person
alleging liability or potential liability (including without limitation
liability or potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property damage, personal
injury, fines or penalties) arising out of, relating to, based on or resulting
from (i) the presence, discharge, emission, release or threatened release of any
Hazardous Substances at any location, (ii) circumstances forming the basis of
any violation or alleged violation of any Environmental Laws, or (iii) otherwise
relating to obligations or liabilities under any Environmental Laws.
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"Environmental Laws" means any and all past, present or future federal,
state, local and foreign statutes, laws, regulations, ordinances, judgments,
orders, permits, codes, or injunctions, and all common law, which (i) impose
liability for or standards of conduct concerning the manufacture, processing,
generation, distribution, use, treatment, storage, disposal, cleanup, transport
or handling of Hazardous Substances including, The Resource Conservation and
Recovery Act of 1976, as amended, The Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, The Superfund Amendment and
Reauthorization Act of 1984, as amended, The Toxic Substances Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, to the
extent it relates to the handling of and exposure to hazardous or toxic
materials or similar substances, and any other so-called "Superfund" or
"Superlien" law or (ii) otherwise relate to the protection of human health or
the environment.
"Environmental Liabilities" means all liabilities to the extent arising
in connection with or in any way relating to the TTS Business or Parent's or any
of its Affiliates' use or ownership thereof, whether vested or unvested,
contingent or fixed, actual or potential, which arise under or relate to
Environmental Laws including, without limitation, (i) Remedial Actions, (ii)
personal injury, wrongful death, economic loss or property damage claims, (iii)
claims for natural resource damages, (iv) violations of law or (v) any Damages
with respect thereto. Notwithstanding the foregoing, Environmental Liabilities
shall not include any increased liabilities resulting from or arising out of a
use of a facility constituting a Contributed Asset other than an industrial use.
"ERISA" means the Employee Retirement Income Security act of 1974, as
amended.
"Excluded Assets" means:
(i) all cash and cash equivalents of Seller Companies,
including, without limitation, cash and cash equivalents used as collateral for
letters of credit, advance payments, deposits with utilities, insurance
companies and other Persons, except to the extent taken into account in the
determination of the Final Net Working Capital Amount;
(ii) all original books and records that Seller Companies
shall be required to retain pursuant to any Applicable Law (in which case copies
of such books and records to the extent relating to the TTS Business shall be
provided to TTSI upon request), or that contain information relating to any
business or activity of Seller Companies not forming a part of the TTS Business,
or any employee of a Seller Company that is not a Transferred Employee;
(iii) all Tax assets of any Seller Companies, other than Tax
assets relating to sales and use taxes, gross receipts taxes, property taxes,
licenses, employee and employer withholding and unemployment taxes and other
non-income related taxes relating exclusively to the TTS Business;
(iv) all assets of Seller Companies not held or owned by or
used exclusively in connection with the TTS Business;
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(v) all rights and claims of Seller Companies under any of the
Transaction Documents and the agreements and instruments delivered to Seller
Companies by Buyer pursuant to any of the Transaction Documents;
(vi) all accounts receivable, notes receivable or similar
claims or rights (whether or not billed or accrued) of the TTS Business from any
Seller Companies;
(vii) all capital stock or any other securities of any Seller
Companies or any other Person;
(viii) all Intellectual Property not used or held for use
exclusively in the TTS Business;
(ix) all assets related to Excluded Liabilities, including,
without limitation, any reserve on the books of Parent or TTSI relating to any
labor grievances filed by employees prior to Closing;
(x) all ownership and leasehold interests of Seller Companies
in respect of the facility, real property, fixtures and equipment located at or
constituting the Seneca and Wheatley Facilities; and
(xi) all accounts receivable, notes receivable or similar
claims or rights of Seller Companies arising out of or relating to any judgments
entered by a court or arbitrator prior to the Closing Date in favor of Seller
Companies, except to the extent taken into account in the determination of the
Final Net Working Capital Amount.
"Excluded Liabilities" means the following liabilities and obligations:
(i) all liabilities and obligations of Seller Companies not
arising out of the conduct of the TTS Business, except as otherwise specifically
provided in the Transaction Documents;
(ii) except as otherwise specifically provided in the
Transaction Documents, all liabilities or obligations for any Tax arising from
or with respect to the Contributed Assets or the operations of the TTS Business
prior to the date on which the transactions contemplated by Section 2.01 of this
Agreement are consummated, other than Tax liabilities or obligations relating to
sales and use taxes, gross receipts taxes, property taxes, licenses, employee
and employer withholding and unemployment taxes and other non-income related
taxes;
(iii) all liabilities or obligations, whether presently in
existence or arising after the date of this Agreement, in respect of accounts
payable, notes payable (including intercompany promissory notes and similar
financing arrangements) or similar obligations (whether or not billed or
accrued) to Seller Companies, except for amounts accrued by the TTS Business and
not billed by Seller Companies to the TTS Business as of the date on which the
transaction contemplated by
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Section 2.01 of this Agreement are consummated in respect of accounts payable,
notes payable or similar obligations relating to specific services provided to
and specific expenses paid on behalf of the TTS Business by Seller Companies;
(iv) all liabilities or obligations, whether presently in
existence or arising after the date of the Agreement, relating to fees,
commissions or expenses owed to any broker, finder, investment banker,
accountant, attorney or other intermediary or advisor employed by Seller
Companies in connection with the Contemplated Transactions;
(v) all liabilities or obligations retained by Parent pursuant
to Exhibit D;
(vi) except to the extent otherwise covered by Exhibit D, all
liabilities or obligations related to Excluded Assets;
(vii) all liabilities or obligations related to claims of
manufacturer or design defects with respect to any products sold or services
provided by the TTS Business prior to, on or after the Closing Date, including
liabilities and obligations in respect of investigations regarding product
safety, product recall and related matters, to the extent but only to the extent
relating to products manufactured or sold prior to the Closing Date;
(viii) all Environmental Liabilities, whether arising prior
to, on or after the date on which the transactions contemplated by Section 2.01
are consummated, (1) relating to the disposal prior to the date on which the
transactions contemplated by Section 2.01(ii) are consummated of Hazardous
Substances at locations that at the time of such disposal were not owned or
leased by a Seller Company or any of its predecessors, it being understood and
agreed that the migration of Hazardous Substances in soil or groundwater from a
facility included in the Contributed Assets to surrounding properties shall not
be considered a disposal of Hazardous Substances, or (2) relating to or arising
out of conditions at, or the current or former operations at, any facilities not
included in the Contributed Assets (whether by fee ownership or leasehold
interest) (including any predecessors to such facilities);
(ix) all Environmental Liabilities, whether arising prior to,
on or after the Closing Date, relating to the operations at the Seneca and
Wheatley Facilities; and
(x) all liabilities or obligations of Seller Companies
relating to worker's compensation and labor grievances filed against Seller
Companies on or prior to Closing.
"Financial Support Arrangements" means any obligations, contingent or
otherwise, of a Person in respect of any indebtedness, obligation or liability
(including assumed indebtedness, obligations or liabilities) of another Person,
including but not limited to remaining obligations or liabilities associated
with indebtedness, obligations or liabilities that are assigned, transferred or
otherwise delegated to another Person, if any, letters of credit and standby
letters of credit (including any related reimbursement or indemnity agreements),
direct or indirect guarantees, endorsements (except for collection or deposit in
the ordinary course of business), notes co-made or discounted,
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recourse agreements, take-or-pay agreements, keep-well agreements, agreements to
purchase or repurchase such indebtedness, obligation or liability or any
security therefor or to provide funds for the payment or discharge thereof,
agreements to maintain solvency, assets, level of income or other financial
condition, agreements to make payment other than for value received and any
other financial accommodations.
"GAAP" means Generally Accepted Accounting Principles in the United
States as in effect on the date of the Agreement consistently applied.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"Hazardous Substances" means (i) substances defined as "hazardous
substances," "hazardous materials" or "hazardous waste" pursuant to The
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or The Resource Conservation and Recovery Act of 1976, as amended, (ii)
substances defined as "hazardous wastes" in the regulations adopted and
publications promulgated pursuant to any of said laws, (iii) substances defined
as "toxic substances" in The Toxic Substances Control Act, as amended, and (iv)
petroleum, its derivatives and petroleum products, and asbestos and asbestos
containing materials.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Huffy Trademark Agreement" means the Trademark Agreement dated as of
November 7, 1990, by and between Emhart Industries, Inc. and H.C.A., Inc.
regarding the assignment of rights with respect to the True Temper trademarks.
"Intellectual Property" means all patents, copyrights, technology,
know-how, processes, trade secrets, inventions, proprietary data, formulae,
specifications, research and development data and computer software programs;
all trademarks, trade names, trade dress, service marks and service names; all
registrations, applications, recordings, licenses whether as licensee or
licensor and common-law rights relating thereto, all rights to sue at law or in
equity for any infringement or other impairment thereto, including the right to
receive all proceeds and damages therefrom, and all rights to obtain renewals,
continuations, continuations in a part, reissues, reexaminations, divisions or
other extensions of legal protections pertaining thereto; and all other United
States, state and foreign intellectual property.
"Intellectual Property Assignment Agreements" means the Assignment of
United States Trademarks, Trademark Registrations and Applications for
Registration, the Assignment of Foreign Trademarks, Trademark Registrations and
Applications for Registration, the Assignment of United States Patents and
Patent Applications, the Assignment of Foreign Patents and Application for
Patents and the Assignment of U.S. Copyright Registrations, in the forms
contemplated by Attachments III, IV, V, VI and XV to this Agreement.
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"Inventory" means all items of inventory notwithstanding how classified
in the financial records of Seller Companies, including all raw materials,
work-in-process and finished goods.
"Lien" means, with respect to any asset, any mortgage, lien, claim,
pledge, charge, security interest or other encumbrance of any kind in respect of
such asset.
"Material Adverse Effect" means (i) with respect to TTSI or the TTS
Business, a material adverse effect on the assets, properties, business,
financial condition or results of operations of the TTS Business taken as a
whole, or (ii) with respect to any other Person, a material adverse effect on
the assets, properties, business, financial condition or results of operations
of such Person and its Subsidiaries taken as a whole.
"Net Working Capital" means (i) all Contributed Assets that are current
assets of the TTS Business, minus (ii) all Assumed Liabilities that are current
liabilities of the TTS Business, in each case calculated in accordance with the
practices and policies that were employed in the preparation of the Opening
Statement, determined consistent with the Opening Statement and the notes
thereto.
"1959 TTSI Consent Decree" means the Final Judgment dated August 20,
1959 in connection with Civil Action No. 58 C 1158 in the United States District
Court for the Northern District of Illinois, Eastern Division.
"1961 TTSI Consent Decree" means the Final Judgment dated August 1,
1961, in connection with Civil Action No. 58 C 1159 in the United States
District Court for the Northern District of Illinois, Eastern Division.
"Non US Benefit Arrangements" means Benefit Arrangements in respect of
Non US Transferred Employees.
"Non US Transferred Employees" means Transferred Employees who are not
US Transferred Employees.
"Olive Branch Property" means the real property owned by Seller
Companies located at 8706 Deerfield Drive, Olive Branch, Mississippi 38654.
"Opening Statement" means the special purpose statement of net assets
of the TTS Business at March 29, 1998, together with the notes thereto, as
attached in Attachment I to this Agreement.
"Permitted Assigns" means any Person to which Buyer assigns its right
to purchase Acquired Shares hereunder, provided that (i) such assignment will
not jeopardize the exemption or exemptions from registration under applicable
securities and blue sky laws pursuant to which the Acquired Shares are being
transferred, and (ii) such Person delivers to Parent evidence satisfactory to
Parent that such Person has agreed to be bound by the provisions of Section
2.03(b) and such Person makes the representations and warranties contained in
Sections C.8 and C.9 of Exhibit C for the benefit of the Seller Companies and
agrees to indemnify, defend and hold harmless Parent and its Affiliates
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and their respective directors, officers, employees and agents for any breach of
such representations and warranties.
"Permitted Liens" means any of the following:
(i) Liens for Taxes that (x) are not yet due or delinquent or
(y) are being contested in good faith by appropriate proceedings and for which
appropriate reserves have been made or are not required under GAAP;
(ii) statutory Liens or landlords', carriers', warehousemen's,
mechanic's, suppliers', materialmen's or other like Liens arising in the
ordinary course of business with respect to amounts not yet overdue or amounts
being contested in good faith by appropriate proceedings and for which
appropriate reserves have been made or are not required under GAAP;
(iii) easements, rights of way, restrictions and other similar
charges or encumbrances on real property interests, that, individually or in the
aggregate, do not materially interfere with the ordinary course of operation of
the TTS Business or the use of any such real property for its current uses;
(iv) with respect to real property, title defects or
irregularities that do not in the aggregate materially impair the use of such
real property for its current use;
(v) rights and licenses granted to others in Intellectual
Property prior to the date of this Agreement or, prior to Closing, the license
or sale of Intellectual Property in connection with the Shaft Lab product line
or other licenses of Intellectual Property granted in the ordinary course of
business which do not materially deplete the value of such Intellectual Property
prior to Closing;
(vi) with respect to any of the TTSI Leases where any Seller
Company is a lessee, any Lien affecting the interest of the landlord thereunder;
and
(vii) Encumbrances disclosed in the Disclosure Schedules or
taken into account in the Opening Statement.
"Person" means an individual, a corporation, a general partnership, a
limited partnership, a limited liability company, limited liability partnership,
an association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Redemptions" shall mean the purchase by TTSI of shares of TTSI Common
Stock from EII and Emhart as contemplated by Section 2.03(a).
"Remedial Action(s)" means the investigation, clean-up or remediation
of contamination or environmental or damage caused by, related to or arising
from the generation, use, handling, treatment, storage, transportation,
disposal, discharge, release, or emission of Hazardous Substances, including,
without limitation, investigations, response, removal and remedial actions under
The
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Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, corrective action under The Resource Conservation and Recovery Act of
1976, as amended, and clean-up requirements under similar state Environmental
Laws.
"Representatives" means (i) with respect to Buyer, any of the
"Representatives" as defined in the Confidentiality Agreement and (ii) with
respect to Parent, each of its respective directors, officers, advisors,
attorneys, accountants, employees or agents.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Companies" means Parent and its Subsidiaries, other than TTSI.
"Seneca and Wheatley Facilities" means those former manufacturing
facilities of the TTS Business located in Seneca, South Carolina and Wheatley,
Arkansas.
"Services Agreement" means the Services Agreement in the form
contemplated by Attachment VII to this Agreement, as amended from time to time.
"Stockholders' and Registration Rights Agreements" means the
Stockholders' Agreement and Registration Rights Agreement in the forms to be
entered into in accordance with Section 2.03(d)(ii), as amended from time to
time.
"Subsidiary" as it relates to any Person, shall mean with respect to
any Person, any corporation, partnership, joint venture or other legal entity of
which such Person, either directly or through or together with any other
Subsidiary of such Person, owns more than 50% of the voting power in the
election of directors or their equivalents, other than as affected by events of
default.
"Tax Authority" shall mean a foreign or United States federal, state or
local Governmental Authority having jurisdiction over the assessment,
determination, collection or imposition of any Tax, as the context requires.
"Tax Returns" means all returns (including information returns),
declarations, reports, estimates and statements regarding Taxes, required to be
filed with any Tax Authority, including any claims for refund and any amendments
to any of the foregoing.
"Taxes" means all taxes, charges, fees, levies or other assessments,
including without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, estimated, severance, stamp, occupation, property
or other taxes, customs, duties, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any Tax Authority.
"Thiokol Contract" means the Teaming Agreement between Thiokol
Corporation and True Temper Sports dated January 13, 1997-March 9, 1997,
Purchase Order No. 41125 dated March 9,
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1997, Purchase Order No. 36986, dated March 14, 1997, renewed December 2, 1997,
together with the initial production contract relating thereto.
"Thiokol Payment" means 25% of EBIT Contribution derived from TTSI's
sales to Thiokol pursuant to the Thiokol Contract.
"Transaction Documents" means this Agreement, the Assignment and
Assumption Agreement, the Services Agreement, the Stockholders' and Registration
Rights Agreements, the Intellectual Property Assignment Agreements and any
exhibits or attachments to any of the foregoing, as the same may be amended from
time to time.
"Transferred Intellectual Property" shall mean all Intellectual
Property owned by or licensed to any of the Seller Companies and used or held
for use exclusively in the TTS Business, including the goodwill of the TTS
Business symbolized thereby, it being understood and agreed that the
Intellectual Property used or held for use exclusively in the TTS Business that
is patented, registered or as to which an application for patent or registration
is pending, along with all material unregistered trademarks, servicemarks, trade
names and copyrights used or held for use exclusively in the TTS Business, is
listed as "Transferred Intellectual Property" on Attachment X.
"TTS Business" means the True Temper Sports business as presently
conducted by Seller Companies involving the development, manufacturing,
marketing or sale of steel and composite golf club shafts, tubular steel and
composite components for the bicycle, automotive and recreational sports
industries and high performance, lightweight, low-cost composite cylinders for
rocket motor cases, ordnance, and space structure applications.
"TTSI Common Stock" means the shares of common stock, $1.00 par value
per share, of TTSI.
"TTSI Financial Statements" means the (i) Unaudited Balance Sheet of
TTSI as of March 29, 1998, (ii) Unaudited Statements of Earnings for each of the
three month periods ended March 29, 1998 and March 30, 1997, (iii) the Balance
Sheets of TTSI at December 31, 1997 and 1996, and (iv) the Statements of
Earnings of TTSI for each of the three years ended December 31, 1997, 1996 and
1995, including in each case all notes thereto, all as set forth in Attachment
XII to this Agreement.
"TTSI Leases" means the real property leases relating to the facilities
used exclusively by the TTS Business, as the same may be amended and
supplemented from time to time, including the interests of Seller Companies in
any related fixtures, improvements and personal property located therein.
"TTSI Preferred Stock" means shares of preferred stock of TTSI with
such voting powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special rates, and
qualifications, limitations or restrictions thereof, as shall be
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agreed to by Buyer and Parent and expressed in the Amended and Restated
Certificate of Incorporation.
"US Benefit Arrangements" means Benefit Arrangements in respect of US
Transferred Employees.
"US Transferred Employees" means Transferred Employees employed by the
TTS Business in the United States.
"WARN" means the Worker Adjustment Retraining and Notification Act, as
amended.
"West Coast Technical Center" means the TTS Business facility located
in Carlsbad, California.
(b) "To the knowledge," "known by" or "known" (and any similar phrase) means (i)
with respect to Parent, to the actual knowledge of any of the Senior Vice
President and Chief Financial Officer, the Senior Vice President and General
Counsel, the Treasurer or the Controller of Parent, and shall be deemed to
include a representation that a reasonable investigation or inquiry of the
subject matter thereof has been made by such individuals, (ii) with respect to
Buyer, to the actual knowledge of the Chief Financial Officer, the General
Counsel, the Treasurer or the Controller of Buyer, and shall be deemed to
include a representation that a reasonable investigation or inquiry of the
subject matter thereof has been made by such individuals or (iii) with respect
to TTSI, Scott C. Hennessy and Fred H. Geyer.
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(c) Each of the following terms is defined in the Section set forth opposite
such term:
Term Section
---- -------
Active Employee...............................................D.01
Adjusted Purchase Price.......................................2.04
Agreement.................................................Preamble
Annual Thiokol Payment........................................2.07
B&D Australasia...............................................2.01
Buyer.....................................................Preamble
Closing.......................................................2.05
Competing Business............................................5.06
Controlled Group..............................................B.20
EII.......................................................Recitals
Emhart....................................................Recitals
Encumbrances.................................................. A
Environmental Insurance Claims................................7.06
Estimated Net Working Capital.................................2.06
Exchange Consideration........................................2.04
Existing Contracts............................................5.01
Final Net Working Capital Amount..............................2.06
Indemnified Claim............................................10.03
Indemnified Party............................................10.03
Indemnifying Party...........................................10.03
Insurance Liabilities.........................................6.03
Leased Real Property..........................................B.07
Nippon........................................................2.01
Owned Real Property...........................................B.07
PBGC..........................................................B.20
Proceedings.................................................. A
Prohibited Transaction....................................... B.20
Proposed Final Net Working Capital Amount.....................2.06
Referee......................................................10.03
Remaining Recovery............................................7.06
Reportable Events.............................................B.20
Parent....................................................Preamble
Parent's Hourly Pension Plan..................................D.08
Parent's Salaried Pension Plan................................D.07
Parent's Savings Plan.........................................D.09
Proposed Annual Thiokol Payment...............................2.07
Successor Hourly Pension Plan.................................D.08
Successor Salaried Pension Plan...............................D.07
Successor Savings Plan........................................D.09
Surviving Representations or Covenants.......................10.01
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Third Party Claim..................................10.03
Transferred Employees...............................D.01
TTSI............................................Preamble
Tucker..............................................2.01
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EXHIBIT B
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Buyer, that:
B.01 Corporate Existence and Power. Each of Parent, Emhart, EII and TTSI
is a corporation duly incorporated, validly existing and in good standing under
the laws of the state or jurisdiction of its incorporation and has all corporate
powers and all governmental licenses, authorizations, consents and approvals
required to carry on the TTS Business as now conducted and as contemplated to be
conducted upon consummation of the transactions contemplated by Section 2.01,
except where the failure to have such licenses, authorizations, consents and
approvals does not have a Material Adverse Effect on the TTS Business. Each of
Parent, Emhart, EII and TTSI, as the case may be, is duly qualified to do
business as a foreign corporation in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities make such
qualification necessary to carry on the TTS Business as now conducted and as
contemplated to be conducted upon consummation of the transactions contemplated
by Section 2.01, except where the failure to be so qualified does not have a
Material Adverse Effect on the TTS Business.
B.02 Corporate Authorization. The execution, delivery and performance by
Parent and TTSI of each of the Transaction Documents to which it is a party and
the consummation by Parent and TTSI of the Contemplated Transactions are within
their respective corporate powers and have been duly authorized by all necessary
corporate action on their respective parts. The execution, delivery and
performance by Seller Companies other than Parent and TTSI of the Transaction
Documents to which a Seller Company other than Parent is a party and the
consummation by such Seller Company of the Contemplated Transactions are within
such Seller Company's corporate powers and, as of the respective date of
execution thereof, will have been duly authorized by all necessary corporate
action on its part. Each of the Transaction Documents to which it is a party
constitutes or will constitute as of the respective date of execution thereof a
legal, valid and binding agreement of the applicable Seller Company, enforceable
against it in accordance with its terms (i) except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally, including the effect of statutory and other laws
regarding fraudulent conveyances and preferential transfers and (ii) subject to
the limitations imposed by general equitable principles (regardless of whether
such enforceability is considered in a proceeding at law or in equity).
B.03 Governmental Authorization. The execution, delivery and performance
by each Seller Company of the Transaction Documents to which it is a party
require no action by or in respect of, or consent or approval of, or filing
with, any Governmental Authority other than:
(i) compliance with any applicable requirements of the HSR
Act;
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(ii) filing of an amendment to the Certificate of
Incorporation of TTSI to increase authorized capital;
(iii) compliance with the terms and conditions under which any
industrial revenue or other bonds were issued (or leases related thereto)
in connection with financing the acquisition, lease, development or
improvement of any Owned Real Property, Leased Real Property or any
machinery or equipment used in connection with the TTS Business;
(iv) compliance with the terms and conditions of the 1959 TTSI
Consent Decree and the 1961 TTSI Consent Decree;
(v) the filing of applicable documentation with Governmental
Authorities in each of the United Kingdom, Japan and Australia for the
establishment of branches in those countries as contemplated by Section
2.01(f);
(vi) actions, consents, approvals or filings set forth in
Schedule B.03 or otherwise expressly referred to in this Agreement; and
(vii) such other consents, approvals, authorizations, permits
and filings the failure to obtain or make would not have, in the
aggregate, a Material Adverse Effect on TTSI or the TTS Business after
giving effect to or as the result of the transactions contemplated by
Section 2.01.
B.04 Non-Contravention. Except as set forth in Schedule B.04, assuming
compliance with the matters referred to in Section B.03, the execution, delivery
and performance by Parent or any Seller Company of the Transaction Documents do
not and will not (i)(A) contravene or conflict with the charter or bylaws of
Parent or any Seller Company, (B) contravene or conflict with or constitute a
violation of any provisions of any Applicable Law binding upon Parent or any
Seller Company that is applicable to the TTS Business; (C) constitute a default
under or give rise to any right of termination, cancellation or acceleration of,
or to a loss of any benefit relating exclusively to the TTS Business to which
Parent or any Seller Company is entitled under, any Contract binding upon Parent
or any Seller Company and relating exclusively to the TTS Business or by which
any of the Contributed Assets is or may be bound or any license, franchise,
permit or similar authorization held by Parent or any Seller Company relating
exclusively to the TTS Business except, in the case of clauses (B) and (C), for
any such contravention, conflict, violation, default, termination, cancellation,
acceleration or loss that could not reasonably be expected to have a Material
Adverse Effect on the TTS Business or (ii) result in the creation or imposition
of any Lien on any Contributed Asset, other than Permitted Liens.
B.05 Capitalization of TTSI. As of the date hereof, the authorized
capital stock of TTSI consists of 1,000 shares, all of one class called Common
Stock, par value $1.00 per share. As of the date hereof, EII owns 1,000 shares
of TTSI Common Stock representing 100% of all of the issued and outstanding
shares of TTSI Common Stock. Following the consummation of the transactions
contemplated by Section 2.01 and prior to the Closing, (i) the authorized
capital stock of TTSI will
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consist of 8,000 shares of TTSI Common Stock and 1,000 shares of TTSI Preferred
Stock, (ii) EII will own 2,000 shares of TTSI Common Stock and 250 shares of
TTSI Preferred Stock, (iii) Emhart will own 6,000 shares of TTSI Common Stock
and 750 shares of TTSI Preferred Stock, and (iv) the shares of TTSI Common Stock
and TTSI Preferred Stock owned by EII and Emhart, in the aggregate, will
constitute 100% of the issued and outstanding capital stock of TTSI. Other than
as contemplated by this Agreement, there are not now, and as of Closing there
will not be, any options, warrants or other rights to acquire or securities
convertible into or exchangeable for shares of capital stock or any stock
appreciation, phantom stock or similar rights of TTSI outstanding. Each
outstanding share of capital stock of TTSI has been duly authorized and is
validly issued, fully paid and nonassessable. In addition, (i) there are no
rights of first refusal, rights of first offer, or other similar rights
affecting TTSI's outstanding or unissued capital stock, and (ii) there are no
Liens affecting any of the outstanding shares of TTSI capital stock.
B.06 Organizational Instruments; Subsidiaries. Parent has made available
to Buyer complete and accurate copies of the Certificate of Incorporation and
Bylaws of TTSI, in each case as amended to date. TTSI is not in violation of any
provision of its Certificate of Incorporation or Bylaws. TTSI does not have any
Subsidiaries nor does TTSI directly or indirectly own or have the power to vote
shares of capital stock or other ownership interests of any Person.
B.07 Financial Statements.
(a) Except as set forth in the notes to the Opening Statement, the
Opening Statement has been prepared in conformity with GAAP applied on a
consistent basis and presents fairly, in all material respects, the net assets
of the TTS Business as of March 29, 1998.
(b) Subject to the provisions of B.07(c) below, the TTSI Financial
Statements present fairly in all material respects the financial position and
results of operations of TTSI at the dates and for the periods set forth
therein, in conformity with (i) GAAP applied on a consistent basis other than as
described therein or in the notes thereto and (ii) the principles and procedures
set forth in the notes thereto.
(c) Notwithstanding anything contained herein or in the TTSI
Financial Statements to the contrary, neither Seller Companies nor TTSI make any
representation or warranty as to (i) goodwill reflected in the TTSI Financial
Statements or (ii) any accounting treatment which may or may not be available to
TTSI or Buyer upon consummation of the Contemplated Transactions or in
connection with the debt financing contemplated by Section 2.02, including,
without limitation, the availability of leveraged recapitalization accounting
treatment and the existence of goodwill (or the amount thereof) that is or may
be required to be reflected in the TTSI Financial Statements or any financial
statements of TTSI covering periods after the TTSI Financial Statements.
B.08 Absence of Certain Changes. Except for matters that would be
permitted in accordance with Section 5.01 if they occurred after the date of
this Agreement or as set forth in Schedule B.08, from March 29, 1998 to the date
of this Agreement, there has not been any material
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adverse change in the business, financial condition or results of operations of
the TTS Business taken as a whole and there has not been:
(a) any event or occurrence that has had a Material Adverse Effect
on the TTS Business, other than those resulting from changes, whether actual or
prospective, in general conditions applicable to the industries in which the TTS
Business is involved or general economic conditions;
(b) any damage, destruction or other casualty loss affecting the TTS
Business or any assets that would constitute Contributed Assets or Transferred
Intellectual Property if owned, held or used by Parent or any of the Seller
Companies on the date on which the transactions contemplated by Section 2.01 are
consummated that has a value in excess of $250,000;
(c) other than this Agreement, any transaction or commitment made,
or any Contract entered into, by Parent or any Seller Company relating primarily
to the TTS Business or any assets that would constitute Contributed Assets or
Transferred Intellectual Property if owned, held or used by Parent or any of the
Seller Companies on the date on which the transactions contemplated by Section
2.01 are consummated (including the acquisition or disposition of any assets) or
any termination or amendment by Parent or any Seller Company of any Contract or
other right relating primarily to the TTS Business, in either case, which would
be prohibited by the provisions of Section 5.01 of the Agreement if it were so
made, entered, amended or modified;
(d) any sale or other disposition, other than as contemplated by
this Agreement, of more than $50,000 individually or $250,000 in the aggregate
of assets (other than the sale of Inventory (including obsolete Inventory
whether or not made in the ordinary course of business) in the ordinary course
of business) that would constitute Contributed Assets or Transferred
Intellectual Property if owned, held or used by any Seller Companies on the date
on which the transactions contemplated by Section 2.01 are consummated;
(e) any increase in the compensation of any current employee of the
TTS Business other than as would be permitted under Section 5.01 and other than
nondiscretionary increases pursuant to Employee Plans or Benefit Arrangements
disclosed in Schedule B.20 or referenced in Exhibit D; and
(f) any cancellation, compromise, waiver or release by Parent or any
Seller Company of any claim or right (or a series of related rights and claims)
related to the TTS Business, other than cancellations, compromises, waivers or
releases in the ordinary course of business.
B.09 Sufficiency of and Title to the Contributed Assets.
(a) Except as set forth in Schedule B.09, the Contributed Assets and
the Transferred Intellectual Property, together with the services to be provided
to TTSI after Closing pursuant to the Services Agreement, constitute, and on the
Closing Date will constitute, all of the
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tangible and intangible assets and services that are necessary for TTSI to
operate the TTS Business in the same manner in all material respects as such
operations have heretofore been conducted.
(b) Except as set forth in Schedule B.09, subject to the receipt of
any consents or approvals of any other Person, upon consummation of the
Contemplated Transactions, TTSI will have acquired good and marketable title in
and to, or a valid leasehold interest in, each of the Contributed Assets and
Transferred Intellectual Property that were used in the TTS Business to generate
the financial and operating results that are reflected in the Opening Statement
and the TTSI Financial Statements (other than any such Contributed Assets that
are consumed in the ordinary conduct of the TTS Business prior to Closing and in
a manner consistent with Section 5.01), free and clear of all Liens, except for
Permitted Liens.
(c) Schedule B.09 includes a true and complete list of all real
property owned by Seller Companies (or real property which Seller Companies have
a right to acquire in connection with the operation of the TTS Business) which
is included in the Contributed Assets (collectively, the "Owned Real Property").
Schedule B.09 sets forth (i) the address of each parcel of Owned Real Property
and (ii) the owner of such Owned Real Property.
(d) Schedule B.09 includes a true and complete list of all
agreements (together with any amendments thereof) pursuant to which Seller
Companies lease, sublease or otherwise occupy (whether as landlord, tenant,
subtenant or other occupancy arrangement) any real property used in, or relating
to, the TTS Business (collectively, the "Leased Real Property"). Schedule B.09
sets forth (i) the address or location of each parcel of Leased Real Property
and (ii) the owner of the leasehold, subleasehold or occupancy interest for each
Leased Real Property.
B.10 No Undisclosed Liabilities. There are no liabilities (including
indebtedness for borrowed money) of Parent or any Seller Company relating to the
TTS Business that will constitute Assumed Liabilities of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
other than:
(a) liabilities disclosed in or provided for in the Opening
Statement or the TTSI Financial Statements and liabilities for matters reflected
in the determination of the Final Net Working Capital Amount;
(b) liabilities (i) disclosed in Schedule B.10, (ii) related to any
contract, agreement, lease, license, commitment, sales or purchase order or
other undertaking disclosed in the Disclosure Schedules or (iii) related to any
Employee Plan or Benefit Arrangements identified in Exhibit D or disclosed in
Schedule B.20, other than, with respect to clause (iii) those arising from any
breach, non-performance or other violation of any of the foregoing or any
fiduciary duty relating thereto;
(c) liabilities incurred in the ordinary course of business
consistent with past practice since March 29, 1998;
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(d) liabilities which in the aggregate are not in excess of $100,000
not required to be accrued for or reserved against in accordance with GAAP as of
March 29, 1998; and
(e) with respect to the bring down of this representation and
warranty as of the Closing Date, liabilities which in the aggregate are not in
excess of $100,000 not required to be accrued for or reserved against in
accordance with GAAP (or the other policies and procedures set forth in the
notes to the Opening Statement) as of the Closing Date.
B.11 Litigation. Except as set forth in Schedule B.11 or reserved against
or described in the Opening Statement, there is no action, suit, investigation
or proceeding pending against, or to the knowledge of Parent, threatened against
or affecting, the TTS Business or any Contributed Asset or Transferred
Intellectual Property before any Governmental Authority that could reasonably be
expected to result in damages, in the aggregate, in excess of $100,000.
B.12 Material Contracts.
(a) Except as set forth in Schedule B.12 and except for Contracts
that do not constitute Assumed Liabilities, no Seller Company, with respect to
the TTS Business, is, and as of Closing TTSI will not be, party to or otherwise
bound by or subject to:
(i) any written employment, severance, consulting or sales
representative Contract which contains an obligation (excluding
commissions) to pay more than $100,000 per year and constitutes an Assumed
Liability;
(ii) any Contract containing any covenant limiting the freedom
of Seller Companies, with respect of the TTS Business or the operations of
the TTS Business, to engage in any line of business or compete with any
Person in any geographic area if such Contract will be binding on TTSI
after the Closing;
(iii) any Contract in effect on the date of this Agreement
relating to the disposition or acquisition of the assets of, or any
interest in, any business enterprise which relates to the TTS Business
other than the purchase and sale of inventory or the license or sale of
Intellectual Property in connection with the Shaft Lab product line or
other licenses of Intellectual Property granted in the ordinary course of
business which do not materially deplete the value of such Intellectual
Property prior to Closing;
(iv) any Financial Support Arrangements;
(v) any indebtedness for borrowed money of the TTS Business
(other than intercompany indebtedness that will be paid or otherwise
cancelled at or prior to Closing) that will constitute an Assumed
Liability if in existence on the date on which the transactions
contemplated by Section 2.01 are consummated;
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(vi) any offset agreement entered into in connection with an
international sales transaction and relating to any Contract that imposes
on the TTS Business an obligation to perform that will continue in effect
on or after the Closing Date;
(vii) any agreement that places any Lien (other than a
Permitted Lien) on the Contributed Asset or any of the Transferred
Intellectual Property;
(viii) any agreements regarding leasing of any material
property (real or personal) as lessor or lessee;
(ix) any license or other grant of any rights or interest in
any Transferred Intellectual Property (other than any such license or
grant that would not be prohibited under Section 5.01);
(x) any warranty or indemnification agreement with respect to
the sale or distribution of its products;
(xi) any material agreement or contract with a distributor,
broker, sales agent or the like; and
(xii) any other agreement of any type involving payments of
more than $250,000 annually.
(b) Except as disclosed in Schedule B.12, each Contract disclosed in
Schedule B.12 is a legal, valid and binding obligation of Parent (or the
applicable Seller Company) enforceable against Parent (or the applicable Seller
Company) in accordance with its terms (except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally,
including the effect of statutory and other laws regarding fraudulent
conveyances and preferential transfers, and subject to the limitations imposed
by general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity), and Parent (or the applicable
Seller Company) is not in material default and has not failed to perform any
material obligation thereunder, and, to the knowledge of Parent, there does not
exist any event, condition or omission which would constitute a material breach
or default (whether by lapse of time or notice or both) by any other Person.
B.13 Licenses and Permits. To the knowledge of Parent, except as set
forth in Schedule B.13, Parent (or the appropriate Seller Company) has and
immediately following the Closing TTSI will have all licenses, franchises,
permits and other similar authorizations affecting, or relating in any way to,
the TTS Business required by law to be obtained by Parent (or the appropriate
Seller Company) or, following the Closing, TTSI to permit Parent or TTSI to
conduct the TTS Business in substantially the same manner as the TTS Business
has heretofore been conducted. As of Closing, except as set forth in Schedule
B.13, TTSI will have all licenses, franchises, permits and other similar
authorizations necessary for the conduct of the TTS Business,
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except where the failure to have any such license, franchise, permit or other
similar authorization could not reasonably be expected to have a Material
Adverse Effect on the TTS Business.
B.14 Finders' Fees. Except for Donaldson, Lufkin & Jenrette Securities
Corporation, whose fees and expenses relating exclusively to the sale of the TTS
Business by Parent will be paid by Parent, there is no investment banker,
broker, finder or other intermediary that has been retained by or is authorized
to act on behalf of Parent or any Seller Company or TTSI who might be entitled
to any fee or commission from Parent or Buyer or any of their Affiliates upon
consummation of the Contemplated Transactions.
B.15 Environmental Compliance. Except as disclosed in Schedule B.15 and
except as reserved against or specifically identified in the Opening Statement,
Parent the TTS Business is and has been in material compliance with all
applicable Environmental Laws, and has obtained all material permits, licenses
and other authorizations that are required under applicable Environmental Laws.
Except as set forth in Schedule B.15 and except as reserved against or
specifically identified in the Opening Statement, (i) the TTS Business is and
has been in material compliance with the terms and conditions under which the
permits, licenses and other authorizations referenced in the preceding sentence
were issued or granted, (ii) Seller Companies hold all permits required by
Environmental Laws that are appropriate to conduct the TTS Business as presently
conducted in all material respects and to operate the Contributed Assets in all
material respects as they are presently operated; (iii) no suspension,
cancellation or termination of any permit referred to in clause (ii) is pending
or threatened; (iv) Parent has not received written notice of any material
Environmental Claim relating to or affecting the TTS Business or the Contributed
Assets, and there is no such threatened Environmental Claim; (v) no Hazardous
Substance is present at the facilities constituting Contributed Assets in a
manner to give rise to a material Environmental Liability; and (vi) Parent, in
connection with the TTS Business or the Contributed Assets, has not entered
into, agreed in writing to, or is subject to any judgment, decree, order or
other similar requirement of any Governmental Authority under any Environmental
Laws.
B.16 Compliance with Laws. Except as set forth in Schedule B.16, for
violations or infringements of Environmental Laws, the operation of the TTS
Business and condition of the Contributed Assets and the Transferred
Intellectual Property have not violated or infringed, and do not violate or
infringe, in any material respect any material Applicable Law or any material
order, writ, injunction or decree of any Governmental Authority.
B.17 Intellectual Property. Except as set forth in Schedule B.17:
(a) Parent (or a Seller Company) owns, free and clear of all Liens
other than Permitted Liens, and subject to any licenses granted by Seller
Companies prior to the date of this Agreement, or after the date of this
Agreement and prior to Closing in accordance with Section 5.01, all right, title
and interest in the Transferred Intellectual Property;
(b) The operation of the TTS Business as heretofore conducted does
not conflict with, infringe upon or violate the Intellectual Property rights of
any other Persons and none of the
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Seller Companies have received any written notices or claims with respect to the
TTS Business alleging infringement or misappropriation of any Intellectual
Property of any third party or contesting the validity, enforceability, use or
ownership of the Transferred Intellectual Property (including, without
limitation, any demands or offers to license any Intellectual Property from any
third party, except as previously disclosed to Buyer, except to the extent that
such conflict, infringement or violation has not had, and cannot reasonably be
expected to have, a Material Adverse Effect on the TTS Business;
(c) Parent (or a Seller Company) has the right to use all
Intellectual Property used by the TTS Business and necessary for the continued
operation of the TTS Business in substantially the same manner as its operations
have heretofore been conducted;
(d) Upon the consummation of the Closing hereunder, (i) TTSI will be
vested with all of Parent's (or the Seller Company's) rights, title and interest
in, and Parent's (or the Seller Company's) rights and authority to use in
connection with the TTS Business, all of the Transferred Intellectual Property
and (ii) the Transferred Intellectual Property, and any other interests in
Intellectual Property transferred hereunder collectively constitute all rights
and interests in Intellectual Property which are necessary for the continued
operation of the TTS Business as a whole in substantially the same manner as its
operations have heretofore been conducted;
(e) Neither Parent nor any of the Seller Companies has received any
written notice of any infringement or misappropriation by any third party with
respect to the Transferred Intellectual Property;
(f) To the knowledge of Parent and each of the Seller Companies, all
of the desktop software and all of the Oracle financial software necessary for
the conduct of the TTS Business will operate without interruption and/or
malfunction due to the recognition and processing of dates on and beyond January
1, 2000, except to the extent that a failure to do so could not reasonably be
expected to have a Material Adverse Effect on the TTS Business. The TTS Business
has commenced review of its CNC manufacturing computer software located at the
Amory Facility and the Olive Branch Facility. This review is in its early stages
and no year 2000 remediation plans have been finalized. To the knowledge of
Parent and TTSI, there exists sufficient time to remediate any material
non-compliance issues that may arise with respect to the CNC manufacturing
computer software such that the CNC manufacturing computer software will operate
without interruption and/or malfunction due to the recognition and processing of
dates on and beyond January 1, 2000 except to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect on the TTS
Business.
(g) Notwithstanding the provisions of this Section B.17, Parent
makes no representation or warranty, and no such representation or warranty
shall be implied, that any of such Intellectual Property is valid or
enforceable.
B.18 Taxes.
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(a) Except as set forth in Schedule B.18, Parent and each Seller
Company has exercised reasonable care in the preparation of, and has duly and
timely filed, all applicable material Tax Returns with respect to all Taxes
required to be filed prior to the date hereof and, as of the Closing Date will
have exercised reasonable care in the preparation of, and will have timely
filed, all applicable Tax Returns with respect to Taxes required to have been
filed prior to the Closing Date, except where the failure to exercise reasonable
care or to file such Tax Returns could not reasonably be expected to have a
Material Adverse Effect on the TTS Business. Except as set forth in Schedule
B.18, all Taxes shown on the Tax Returns or pursuant to any declarations or
assessments received by Parent and each Seller Company (including estimated
Taxes), have been duly and timely paid, except when the failure to make payment
could not reasonably be expected to have a Material Adverse Effect on the TTS
Business, and no such Taxes have created a Lien (other than a Permitted Lien)
against or impair the ability to transfer the Contributed Assets to TTSI free
and clear of any Lien (other than a Permitted Lien) in accordance with the terms
of this Agreement. Except as set forth in Schedule B.18, all such Tax Returns
are true, correct and complete in all material respects, except where the
failure to be true, correct and complete could not reasonably be expected to
have a Material Adverse Effect on the TTS Business. Except as set forth in
Schedule B.18, there exists no Tax deficiency or unpaid Tax assessed by any
Governmental Authority against Parent or any Seller Company, except where such
deficiency or assessment could not reasonably be expected to have a Material
Adverse Effect on the TTS Business.
(b) As of the date of this Agreement, Schedule B.18 contains a list
of all states and other jurisdictions where Seller Companies have filed Tax
Returns during the past three years with respect to Contributed Assets or
Transferred Intellectual Property.
(c) (i) TTSI has filed all material Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all material
respects. All Taxes owed by TTSI (whether or not shown on any Tax Return) have
been paid. TTSI is not currently the beneficiary of any extension of time within
which to file any Tax Return, other than as disclosed on Schedule B.18 or as a
result of being a member of a combined or a consolidated group for Tax purposes.
There are no Liens on any of the assets of TTSI that arose in connection with
any failure (or alleged failure) to pay any Tax.
(ii) TTSI has withheld and paid all material Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholders, or other third party.
(iii) Neither Parent nor any Seller Company expects any
authority to assess any additional Taxes for any period for which Tax Returns
have been filed for TTSI, other than as disclosed on Schedule B.18 or as a
result of being a member of a combined or a consolidated group for Tax purposes.
There is no dispute or claim concerning any Tax Liability of TTSI either (A)
claimed or raised by any authority in writing or (B) as to which any of the
Parent or any Seller Company has knowledge based upon personal contact with any
agent of such authority, other than as disclosed on Schedule B.18 or as a result
of being a member of a combined or a consolidated group for Tax purposes.
Schedule B.18 lists all federal, state, local, and foreign income Tax Returns
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filed with respect to TTSI for taxable periods ended on or after December 31,
1993, indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit.
(iv) TTSI has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency, other than as disclosed on Schedule B.18 or as a result of being a
member of a combined or a consolidated group for Tax purposes.
(v) TTSI has not filed a consent under Code Section 341(f)
concerning collapsible corporations. TTSI has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G. TTSI has not been a United States real
property holding corporation within the meaning of Code "897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii).
B.19 Insurance. Schedule B.19 contains a correct and complete list of all
material policies of insurance held by any Seller Companies that are in effect
on the date of this Agreement and that are applicable to the TTS Business. None
of the insurance carriers listed in Schedule B.19 are related to or affiliated
with Parent, other than Shenandoah Insurance, Inc., and Parent has not received
notice or any other indication from any insurer or agent (other than Shenandoah
Insurance, Inc.) of any intent to cancel or not to renew any of the insurance
policies listed in Schedule B.19, except for cancellations or failures to renew
that will occur as a result of the Closing.
B.20 Employee Benefit Matters.
(a) Schedule B.20 lists each Employee Plan and material Benefit
Arrangement which covers Transferred Employees and each collective bargaining
agreement covering Transferred Employees.
(b) Except as set forth in Schedule B.20, with respect to the TTS
Business:
(i) neither Parent nor any member of its "Controlled Group"
(defined as any organization which is a member of a controlled group of
organizations within the meaning of Code Sections 414(b), (c), (m) or (o))
has ever contributed to or had any liability to a multi-employer plan, as
defined in Section 3(37) of ERISA;
(ii) no fiduciary of any funded Employee Plan has engaged in a
nonexempt "prohibited transaction" (as that term is defined in Section
4975 of the Code and Section 406 of ERISA) which could subject Buyer to a
penalty tax imposed by Section 4975 of the Code;
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(iii) no Employee Plan that is subject to Section 412 of the
Code has incurred an "accumulated funding deficiency" within the meaning
of Section 412 of the Code, whether or not waived;
(iv) each Employee Plan and Benefit Arrangement has been
established and administered in all material respects in accordance with
its terms, the terms of any applicable collective bargaining agreements
and in compliance with Applicable Law;
(v) TTSI has not incurred and Parent is not aware of any facts
which would result in TTSI incurring any liability under Title IV of ERISA
other than for the payment of premiums to the Pension Benefit Guaranty
Corporation ("PBGC"), all of which, to the knowledge of Parent, have been
paid when due with respect to any plan that TTSI or any member of its
controlled group (within the meaning of Code Section 414) maintains or
ever has maintained or to which any of them contributes or ever has been
required to contribute;
(vi) no defined benefit Employee Plan has been terminated; nor
have there been any "reportable events" (as that term is defined in
Section 4043 of ERISA and the regulations thereunder), other than
reportable events arising directly from the Contemplated Transactions,
which would present a risk that an Employee Plan would be terminated by
the PBGC in a distress termination;
(vii) each Employee Plan intended to qualify under Section 401
of the Code has received a determination letter that it is so qualified
and to the knowledge of Parent, no event has occurred with respect to any
such Employee Plan which could cause the loss of such qualification or
exemption;
(viii) with respect to each Employee Plan listed in Schedule
B.20, Parent has made available to Buyer the most recent true and complete
copy (where applicable) of (A) the plan document; (B) the most recent
determination letter; (C) any summary plan description; (D) Form 5500; (E)
the most recent actuarial report; and (6) a complete copy of any
collective bargaining agreement pursuant to which any Employee Plan or
Benefit Arrangement is maintained;
(ix) with respect to the Transferred Employees, there are no
post-retirement medical or health plans in effect (other than as required
under Section 4980B of the Code);
(x) there are no actions, claims or investigations pending or,
to the knowledge of Parent threatened, against any Employee Plan, Benefit
Arrangement, or any administrator, fiduciary or sponsor thereof with
respect to the TTS Business, other than benefit claims arising in the
normal course of operation of such Employee Plan or Benefit Arrangement;
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(xi) none of the Employee Plans or Benefit Arrangements
obligates TTSI to pay any separation, severance, termination or similar
benefit solely as a result of any transaction contemplated by this
Agreement or solely as a result of a change in control or ownership;
(xii) none of the Employee Plans or Benefit Arrangements has
unfunded liabilities that are Assumed Liabilities (other than those
relating to post employment medical, dental and life insurance benefits);
(xiii) the post-retirement medical benefits liability set
forth in the TTSI audited December 31, 1997 financial statements was
calculated in accordance with Financial Accounting Statement 106 based on
claim experience which is reasonably representative of that historically
incurred by the Parent Company and its Affiliates in the aggregate and
such claim experience is not materially different from that which was
historically incurred by the TTS Business;
(xiv) assets under the Parent's Hourly Pension Plan (as such
term is defined in Section D.08) may be transferred to the Successor
Hourly Pension Plan (as such term is defined in Section D.08) in
accordance with Section D.08 of this Agreement without violating the
collective bargaining agreement or other Applicable Law;
(xv) all Employee Plans and material Benefit Arrangements
required under any collective bargaining agreement or Applicable Law
relating to the bargaining unit employees of the TTS Business are listed
or referred to on Schedule B.20; and
(xvi) to the knowledge of Parent no organizational effort is
presently being made or threatened by or on behalf of any labor union with
respect to employees of any of the nonunionized TTS Business locations.
Except for the matters referenced in Items 1 and 19 of Schedule B.11 of
the Disclosure Schedule, with respect to the TTS Business, no labor
strike, work stoppage or slowdown, or other material labor dispute is
underway or, to the knowledge of Parent, threatened.
Section B.21. No Material Shared Assets/Liabilities. Except to the extent
contemplated by the services to be provided under the Services Agreement, there
is no material asset, tangible or intangible, necessary for the conduct of the
TTS Business as it has historically been conducted the use of which is shared by
the TTS Business and any business of Parent or any of the Seller Companies other
than the TTS Business. There is no material Assumed Liability the obligation for
which is shared by the TTS Business and any business of Parent or any of the
Seller Companies other than the TTS Business.
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EXHIBIT C
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Parent that:
C.01 Organization and Existence. Buyer is a limited liability company
duly formed, validly existing and in good standing under the laws of the state
of its formation and has all powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted and as contemplated to be conducted in connection with the
transactions contemplated hereby, except where the failure to have such
licenses, authorizations, consents and approvals has not had and may not
reasonably be expected to have, a Material Adverse Effect on Buyer. As of the
Closing Date, Buyer will be duly qualified to do business as a foreign
corporation in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities (after giving effect to the
Contemplated Transactions) make such qualification necessary to carry on its
business as now conducted, except, in the case of Buyer, for those jurisdictions
where failure to be so qualified has not had, and may not reasonably be expected
to have, a Material Adverse Effect on Buyer.
C.02 Corporate Authorization. The execution, delivery and performance by
Buyer of the Transaction Documents and the consummation by each of Buyer of the
Contemplated Transactions are within the powers of Buyer and have been (or,
prior to the Closing, will have been) duly authorized by all necessary action on
the part of Buyer. Each of the Transaction Documents to which Buyer is party
constitutes a legal, valid and binding agreement of Buyer, enforceable against
Buyer in accordance with its terms (i) except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally, including the effect of statutory and other laws regarding
fraudulent conveyances and preferential transfers and (ii) subject to the
limitations imposed by general equitable principles (regardless of whether such
enforceability is considered in a proceeding at law or in equity).
C.03 Governmental Authorization. Except as set forth on Schedule C.03,
the execution, delivery and performance by Buyer of the Transaction Documents
require no action by or in respect of, consents or approvals of, or filing with,
any governmental body, agency, official or authority other than compliance with
any applicable requirements of the HSR Act.
C.04 Non-Contravention. The execution, delivery and performance by Buyer
of the Transaction Documents do not and will not (i) contravene or conflict with
the articles of organization or limited liability company agreement of Buyer,
(ii) assuming compliance with the matters referred to in Section C.03,
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to Buyer, or (iii) constitute a default under or give rise to any
right of termination, cancellation or acceleration
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of any right or obligation of Buyer or to a loss of any benefit to which Buyer
is entitled under any provision of any agreement, contract or other instrument
binding upon Buyer or any license, franchise, permit or other similar
authorization held by Buyer, except, in the case of clauses (ii) and (iii), for
any such contravention, conflict, violation, default, termination, cancellation,
acceleration or loss that could not reasonably be expected to have a Material
Adverse Effect on Buyer taken as a whole.
C.05 Finders' Fees. There is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Buyer who might be entitled to any fee or commission from Parent or Buyer (or
any of their Affiliates) upon consummation of the Contemplated Transactions.
C.06 Litigation. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of Buyer, threatened against or affecting,
Buyer before any court or arbitrator or any Governmental Authority that in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
Contemplated Transactions.
C.07 Financing. Buyer has or will have prior to Closing available to it
cash, marketable securities or other investments, or presently available sources
of credit, to enable it to purchase the Acquired Shares as contemplated by
Section 2.03(b) and Buyer will use its commercially reasonable best efforts to
assist TTSI to have available to it prior to Closing borrowings sufficient to
consummate the Redemptions and to pay off the promissory notes to be delivered
to Tucker, B&D Australasia and Nippon pursuant to Section 2.01(g). As of the
date hereof, Buyer has delivered true, correct and complete copies of the
Commitment Letters to Parent. The copies of the Commitment Letters delivered to
Parent include all of the terms and conditions of the financings contemplated
therein, including but not limited to the conditions to any such financings, and
there are no other terms or conditions applicable to such financings.
C.8 Investment Representations. The Buyer is acquiring the Acquired
Shares for its own account and not with a view to or for sale in connection with
any distribution other than in accordance with federal and state securities
laws. The Buyer has received from Parent all information that is requested and
considers necessary or appropriate for deciding whether to purchase the Acquired
Shares. The Buyer further represents that it has had an opportunity to ask
questions and receive answers from Parent, the Seller Companies and TTSI
regarding the terms and conditions of its acquisition of the Acquired Shares.
The Buyer has experience as an investor in securities of companies and
acknowledges that it can bear the economic risk of its investment in the
Acquired Shares. The Buyer has (i) by reason of its business or financial
experience or the business or financial experience of its professional advisers
who are unaffiliated with, and who are not compensated by, Parent or the Seller
Companies or any affiliate thereof, directly or indirectly, has the capacity to
protect is own interest in connection with its purchase of the Acquired Shares.
The Buyer has the financial capacity to bear the risk of this investment and has
received from Parent, TTSI and the Seller Companies all information that it
requested and considers necessary or appropriate for deciding whether to
purchase the Acquired Shares. The Buyer is an "Accredited Investor" within the
meaning of Rule 501(a) of Regulation D under the Securities Act.
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C.9 Restrictive Legends. The Buyer understands that the Acquired Shares
will be "restricted securities" under the Securities Act, in as much as they are
being acquired from an affiliate of TTSI in a transaction not involving a public
offering, and that, under the Securities Act, and applicable regulations
thereunder, such securities may be resold without registration under the
Securities Act, only in certain limited circumstances. The Buyer understands
that the certificates evidencing the Acquired Shares will bear the legend set
forth below, together with any other legends required by the applicable state
securities laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE RIGHTS OF HOLDERS
THEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER
RESTRICTIONS, AND THE HOLDER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE, INCLUDING ANY FUTURE HOLDERS IS BOUND BY THE TERMS OF
THE STOCKHOLDERS' AND REGISTRATION RIGHTS AGREEMENTS BETWEEN THE
ORIGINAL PURCHASER, THE COMPANY AND CERTAIN OTHER STOCKHOLDERS
(COPIES OF WHICH MAY BE OBTAINED FROM THE COMPANY).
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EXHIBIT D
EMPLOYEES AND EMPLOYEE BENEFIT MATTERS
I. Employees and Employment.
D.01 General. In connection with the Contemplated Transactions, and on or
before the Closing Date, the employment of all Active Employees of the TTS
Business including, without limitation, employees based in the TTS Business
headquarters in Memphis, Tennessee, employees based in the Olive Branch
Facility, the Amory Facility and the West Coast Technical Center and the
employees listed on Attachment XIII, shall be transferred to TTSI such that the
employment of such persons shall be considered continuous employment under
Applicable Law. "Active Employee" shall mean any individual who is actively
employed by TTSI or any Seller Company in connection with the TTS Business or is
on authorized leave of absence, military service (without restriction) or
lay-off with recall rights (without restriction) with respect to the TTS
Business and where applicable shall include independent contractors. The Active
Employees who are employed at any time on or after the Closing Date with Buyer
or TTSI are herein collectively referred to as "Transferred Employees." Buyer
shall ensure that such employment shall be at the same workplace and on the same
terms and conditions as those under which such employees are currently employed
by Seller Companies and the employment of each Transferred Employee shall be
continued by Buyer or TTSI for the maximum applicable termination notice period
to which the Seller Companies may be subject under Applicable Law as a result of
the Contemplated Transactions. From and after the Closing Date, except as
otherwise provided herein, Buyer and TTSI shall assume all obligations under any
agreements, contracts or Applicable Law relating to the terms and conditions of
employment of all Active Employees of the TTS Business, and Buyer and TTSI shall
be responsible for any liability or obligations arising out of or pertaining to
the termination of employment of, hiring of or failure or refusal to hire any
Active Employee of the TTS Business on and after the Closing Date.
No later than three days prior to Closing, Parent shall provide buyer with
a listing of each Active Employee and the status of each such Active Employee,
including whether such Active Employee is actively employed, on leave of absence
(and the reason for such leave of absence) or on lay-off with recall rights.
D.02 Labor Agreements. TTSI shall recognize the applicable labor unions,
collective bargaining representative, trade unions or work councils representing
any employees of the TTS Business as the exclusive collective bargaining
representatives of such employees with respect to wages, hours, fringe benefits
and other terms and conditions of employment to the extent so recognized by
Seller Companies for all such employees who are within the appropriate
bargaining unit as determined by Applicable Law. TTSI shall become a successor
employer under any labor or collective bargaining agreements and Buyer and TTSI
agree to honor the terms of and to assume all obligations of the Seller
Companies under existing collective bargaining agreements in respect
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of such unionized employees from and after the Closing Date and all legal
obligations arising from such recognition or assumption.
D.03 Recalled or Rehired Employees. Buyer and TTSI confirm that any
employees of the TTS Business that are laid off or on leave as of the Closing
Date and who are recalled or rehired by Buyer or TTSI or return from leave on or
after the Closing Date will be recalled or rehired by Buyer or TTSI or returned
to employment in compliance with any applicable agreements, contracts or
Applicable Law and will be accorded the benefits otherwise provided to
Transferred Employees by Buyer or TTSI. Buyer further agrees that during the
term of such leave or layoff, Buyer, in accordance with the terms of such plans
and arrangements and Applicable Law, shall credit such employee with service and
shall provide benefits under TTSI's plans.
D.04 Negotiations with Employees or Employee Representatives. If and to
the extent that any provisions of this Agreement are or may be subject to
negotiation with employees, or applicable labor unions, trade unions or work
councils, by policy, contract, collective agreement or Applicable Law, the
Seller Companies, Buyer and TTSI shall cooperate fully in such negotiations.
D.05 Termination and Plant Closing Notices; WARN. Parent shall provide or
cause to be provided any notices to the employees of the TTS Business that may
be required under any Applicable Law, including but not limited to WARN or any
similar state or local law, with respect to events that occur prior to the
reorganization of the TTS Business. Buyer shall provide any such notices to
Active Employees with respect to events that occur as a result of the
Contemplated Transactions, and to Transferred Employees with respect to events
that occur on and after the Closing Date. Buyer shall not take, and shall cause
TTSI not to take, any action after the Closing that would cause any termination
of employees by Seller Companies that occur on or before the Closing Date to
constitute a "plant closing" or "mass layoff" under WARN or any similar state or
local law, or create any liability to the Seller Companies for employment
termination under Applicable Law. Seller shall provide Buyer, upon request, with
a list of employees terminated prior to Closing who may be affected under WARN
or similar state or local law.
D.06 Immigration Matters. Buyer acknowledges that the Contemplated
Transactions may trigger certain obligations under the immigration laws of the
countries where the TTS Business operates. Buyer shall be solely responsible for
compliance with all requirements of such immigration laws and agrees to make any
necessary filings with the appropriate Governmental Authority to ensure the
continued employment eligibility of the Transferred Employees.
II. United States Employee Benefit Matters.
D.07 Salaried Employee Pension Plans.
(a) As soon as practicable after the Closing Date, with effect as of
the Closing Date, TTSI shall establish a defined benefit plan ("Successor
Salaried Pension Plan"). As soon as practicable following the earlier of
delivery to Parent of a favorable determination letter from the Internal Revenue
Service regarding the qualified status of the Successor Salaried Pension Plan or
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the issuance of indemnities satisfactory to the Parent in its sole discretion,
Parent shall cause the transfer from The Black & Decker Pension Plan ("Parent's
Salaried Pension Plan") to the Successor Salaried Pension Plan of assets (in
accordance with paragraphs (c) and (d) below) and liabilities which are
attributable to the Active Employees who are participants in the Parent's
Salaried Pension Plan as of the Closing Date.
(b) The Active Employees shall be eligible to participate under the
Successor Salaried Pension Plan for a period of at least one year following the
Closing Date on the same terms and conditions as provided to the Active
Employees under Parent's Salaried Pension Plan immediately prior to the Closing
Date. Service with Parent or any of its Affiliates prior to the Closing Date
which was recognized under Parent's Salaried Pension Plan shall be recognized
for the same purposes under the Successor Salaried Pension Plan.
(c) The amount of assets to be transferred from the Parent's
Salaried Pension Plan shall be equal to the Projected Benefit Obligation ("PBO")
as determined in accordance with the Financial Accounting Standards Board
Statement 87 ("FAS 87") and which is attributable to the Active Employees who
are participants in Parent's Salaried Pension Plan as of the Closing Date (the
"Transfer Amount"). Determination of the PBO shall be in accordance with the
actuarial demographic assumptions used by the Seller's actuary in preparing the
January 1, 1996 actuarial report for Parent's Salaried Pension Plan and the
economic assumptions used by Parent for its December 31, 1997 FAS 87 year end
disclosures. The above-described calculation of the amount to be transferred
from the Parent's Salaried Pension Plan to the Successor Salaried Pension Plan
shall be made by Seller's actuary and reviewed by Buyer's actuary.
(d) All assets transferred under this Section D.07 shall be made in
cash. The transfer contemplated herein shall comply with all requirements of
Sections 414(l) and 401(a)(12) of the Code and in no event shall the Transfer
Amount be less than the amount determined pursuant to Section 414(l) of the
Code, using an interest rate of 5.75%. Pending completion of the transfers
contemplated by this Section D.07, any benefits that are payable to Active
Employees under the Parent's Salaried Pension Plan shall be paid or continue to
be paid out of such plan. The Transfer Amount will be adjusted on a pro-rata
basis (based on the ratio of the PBO calculated under this Section D.07 versus
the total PBO for Parent's Salaried Pension Plan, calculated as of the Closing
Date) to reflect the actual asset performance of the Parent's Salaried Pension
Plan from the Closing Date to the first day of the month prior to the date of
transfer and credited with interest from that date until the date of transfer at
the rate of 7.5% per year, and adjusted to reflect benefit payments and expenses
paid after the Closing Date by the Parent's Salaried Pension Plan which are
related to the obligations being transferred to the Successor Salaried Pension
Plan. Pending the completion of such transfers, Parent will cooperate with Buyer
with respect to plan administration, disbursement of benefits and other
pertinent information.
(e) The Successor Salaried Pension Plan and TTSI shall be liable for
benefits with respect to Active Employees accrued under the Parent's Salaried
Pension Plan prior to the Closing Date to the extent of the assets transferred
in accordance with this Section D.07. The Buyer agrees
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that neither Parent nor Parent's Salaried Pension Plan shall have any further
responsibility with respect to the assets and liabilities so transferred.
D.08 Hourly Paid Employee Pension Plans.
(a) As soon as practicable after the Closing Date, with effect as of
the Closing Date, TTSI shall establish a defined benefit plan ("Successor Hourly
Pension Plan"). As soon as practicable following the earlier of delivery to
Parent of a favorable determination letter from the Internal Revenue Service
regarding the qualified status of the Successor Hourly Pension Plan, or the
issuance of indemnities satisfactory to the Parent, in its sole discretion
Parent shall cause the transfer from the Pension Plan for Hourly Employees of
the True Temper Sports Division represented by the United Steelworkers of
America ("Parent's Hourly Pension Plan") to the Successor Hourly Pension Plan of
assets (in accordance with paragraph (c) and (d) below) and liabilities which
are attributable to the Active Employees who are participants in the Parent's
Hourly Pension Plan as of the Closing Date.
(b) The Active Employees shall be eligible to participate under the
Successor Hourly Pension Plan in accordance with any applicable collective
bargaining agreement and Applicable Law. Service with Parent or any of its
Affiliates prior to the Closing Date which was recognized under Parent's Hourly
Pension Plan shall be recognized for the same purposes under the Successor
Hourly Pension Plan.
(c) The amount of assets to be transferred from the Parent's Hourly
Pension Plan shall be equal to the Projected Benefit Obligation ("PBO") as
determined in accordance with the Financial Accounting Standards Board Statement
87 ("FAS 87") and which is attributable to the Active Employees who are
participants in Parent's Hourly Pension Plan as of the Closing Date (the
"Transfer Amount"). Determination of the PBO shall be in accordance with the
actuarial demographic assumptions used by Seller's actuary in preparing the
January 1, 1996 actuarial report for Parent's Hourly Pension Plan and the
economic assumptions used by Parent for its December 31, 1997 FAS 87 year end
disclosures. The above-described calculation of the amount to be transferred
from the Parent's Hourly Pension Plan to the Successor Hourly Pension Plan shall
be made by Seller's actuary and reviewed by Buyer's actuary.
(d) All assets transferred under this Section D.08 shall be made in
cash. The transfer contemplated herein shall comply with all requirements of
Sections 414(l) and 401(a)(12) of the Code and in no event shall the Transfer
Amount be less than the amount determined pursuant to Section 414(l) of the
Code, using an interest rate of 5.75%. Pending completion of the transfers
contemplated by this Section D.08, any benefits that are payable to Active
Employees under the Parent's Hourly Pension Plan shall be paid or continue to be
paid out of such plan. The Transfer Amount will be adjusted on a pro-rata basis
(based on the ratio of the PBO calculated under this Section D.08 versus the
total PBO for Parent's Hourly Pension Plan, calculated as of the Closing Date)
reflect the actual asset performance of the Parent's Hourly Pension Plan from
the Closing Date to the first day of the month prior to the date of transfer and
credited with interest from that date until the date of transfer at the rate of
7.5% per year, and adjusted to reflect benefit payments and
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expenses paid after the Closing Date by the Parent's Hourly Pension Plan which
are related to the obligations being transferred to the Successor Hourly Pension
Plan. Pending the completion of such transfers, Parent will cooperate with Buyer
with respect to plan administration, disbursement of benefits and other
pertinent information.
(d) The Successor Hourly Pension Plan shall be liable for benefits
with respect to Active Employees accrued under the Parent's Hourly Pension Plan
prior to the Closing Date to the extent of the assets transferred in accordance
with this Section D.08. The Buyer agrees that neither Parent nor Parent's
Salaried Pension Plan shall have any further responsibility with respect to the
assets and liabilities so transferred.
D.09 Savings Plans.
(a) Parent shall cause the trustee of The Black & Decker Retirement
Savings Plan ("Parent's Savings Plan") to transfer, as of the transfer date
specified below, the full account balances of the Active Employees under
Parent's Savings Plan, to the Successor Savings Plan (as hereinafter defined).
To the extent permissible under Parent's Savings Plan and to the extent
participants' account balances are invested in Parent's stock, such assets shall
be transferred to the Successor's Savings Plan in kind. Parent, Buyer and TTSI
shall make any and all filings and submissions to the appropriate Governmental
Authorities, and shall make any necessary plan amendments arising in connection
with the transfer of assets from Parent's Savings Plan to the Successor Savings
Plan.
(b) As soon as practicable after the Closing Date, TTSI shall, and
Buyer shall cause TTSI to, establish or designate an individual account plan for
the benefit of Active Employees who were participants in Parent's Savings Plan
(the "Successor Savings Plan"), shall take all necessary action, if any, to
qualify the Successor Savings Plan under the applicable provisions of the Code
and shall make any and all filings and submissions to the appropriate
Governmental Authorities required to be made by it in connection with the
transfer of assets contemplated hereby. The Successor Savings Plan shall provide
that those Transferred Employees and their beneficiaries who were participants
in Parent's Savings Plan shall receive credit for all service and compensation
with Parent or any of its Affiliates prior to the Closing Date for all purposes,
to the same extent as such service and compensation are recognized under
Parent's Savings Plan immediately prior to the Closing Date. TTSI shall, and
Buyer shall cause TTSI to, take all action required or appropriate to vest fully
all such Transferred Employees in their entire account balances transferred to
the Successor Savings Plan and, to the extent required under Section 411(d)(6)
of the Code, to protect and preserve all benefits, rights and features relating
to those account balances transferred from Parent's Savings Plan. As soon as
practicable following the earlier of the delivery to Parent of a favorable
determination letter from the Internal Revenue Service regarding the qualified
status of the Successor Savings Plan or the issuance of indemnities satisfactory
to Parent in its sole discretion, Parent shall cause the trustee of Parent's
Savings Plan, to transfer the full account balances of Transferred Employees
under Parent's Savings Plan as of the transfer date to the appropriate trustee
designated by TTSI and Buyer under the trust agreement forming a part of the
Successor Savings Plan; provided, that assets consisting of notes or other
instruments evidencing loans made to
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participating Transferred Employees shall be transferred in such form to the
Successor Savings Plan.
(c) Effective as of the date of the transfer of assets contemplated
by this Section D.09, TTSI shall assume all of the liabilities and obligations
of Parent or any of its Affiliates in respect of the account balances
accumulated by Transferred Employees under Parent's Savings Plan (to the extent
that assets relating to such account balances have been transferred to the
Successor Savings Plan), and the Successor Savings Plan assumes all liabilities
and obligations of Parent's Savings Plan with respect to all account balances
under Parent's Savings Plan of such US Transferred Employees (to the extent that
assets relating to such account balances have been transferred to the Successor
Savings Plan). Neither Buyer, TTSI nor any of their respective Affiliates shall
assume any other obligations or liabilities arising under or attributable to
Parent's Savings Plan and neither Parent nor any of its Affiliates shall assume
any liabilities or obligations under or attributable to the Successor Savings
Plan. Prior to the transfer of assets contemplated by this Section D.09, TTSI,
if consented to by the applicable Transferred Employee, shall withhold from such
Transferred Employee's pay, loan repayments relating to any outstanding loan to
such Transferred Employee under Parent's Savings Plan and shall promptly forward
those withholdings to Parent's Savings Plan.
D.10 Health and Welfare Plans; Benefit Arrangements.
(a) For a period of one year following the Closing Date, TTSI shall
ensure, and Buyer shall cause TTSI to ensure, that the US Transferred Employees
are provided benefits that are substantially equivalent on an aggregate basis
(and "substantially identical" with respect to health benefit coverage for
purposes of satisfying Section 4980B of the Code) to those provided under the
Employee Plans and Benefit Arrangements as in effect for those US Transferred
Employees immediately prior to the Closing Date, it being understood and agreed
that such benefits provided by TTSI shall include health, medical, dental, life,
disability and severance benefits. Notwithstanding anything to the contrary in
the preceding sentence, Buyer shall take commercially reasonable steps for
purposes of TTSI providing health benefit coverage to US Transferred Employees
on the Closing Date through CIGNA and agrees that such health benefit coverage
will be "substantially identical" to that provided under Parent's group health
plan as in effect immediately prior to the Closing Date for purposes of
satisfying Section 4980B of the Code; provided, however, that if such health
benefit coverage is not in place as of the Closing Date, Parent agrees to
provide continuation coverage to US Transferred Employees (and their covered
dependents) to the extent required by Section 4980B of the Code. Parent, at its
option, may provide and administer continuation coverage and benefit claims
under its group health plan and in such event TTSI shall reimburse Parent for
the reasonable and customary cost of the provision and administration of
benefits thereunder for the TTSI employees and covered dependents. Parent agrees
to cooperate and assist Buyer and TTSI as is reasonably necessary to put such
TTSI's health benefit coverage in place.
(b) In furtherance and not in limitation of the provisions of this
Section D.10, as of the Closing Date, TTSI shall, and Buyer shall cause TTSI to,
(i) establish severance plans, agreements and arrangements with the same terms
and conditions as those provided under the
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applicable severance agreements, plans or arrangements listed on Schedule B.20,
(ii) maintain such severance agreements, plans and arrangements for a period of
at least one year following the Closing Date, and (iii) pay any benefits to any
US Transferred Employees that they may be entitled to receive under such
severance agreements, plans or arrangements. In furtherance and not in
limitation of the provisions of this Section D.10, as of the Closing Date, TTSI
shall assume the obligations of Seller Companies under the individual employee
severance agreements listed on Schedule B.20.
(c) With respect to any US Transferred Employee (including any
beneficiary or dependent thereof), except as expressly set forth herein, Seller
Companies shall retain (i) all liabilities and obligations arising under any
group life, accident, medical, dental or disability plan or similar arrangement
(whether or not insured) to the extent that such liability or obligation relates
to claims incurred (whether or not reported) on or prior to the Closing Date,
and (ii) all liabilities and obligations arising under any worker"s compensation
laws to the extent such liability or obligation relates to the period prior to
the Closing Date.
(d) Any group health plan, disability plan or other plans
established or designated by TTSI after closing for the benefit of US
Transferred Employees shall not contain any exclusion or limitation with respect
to any preexisting condition.
(e) In furtherance and not in limitation of the provisions of this
Section D.10, TTSI covenants and agrees that in 1998 it shall continue the
annual incentive plan arrangements in effect for the individuals listed in
Attachment B.20-A to Schedule B.20 on the basis set forth in Attachment B.20-A
and shall not amend or otherwise modify such arrangements. Buyer covenants and
agrees to take all actions necessary or appropriate after the Closing to cause
TTSI to satisfy its obligations under this Section D.10(e).
D.11 Post-Retirement Medical and Life Insurance.
(a) Seller Companies shall retain responsibility for providing
health, medical, dental, hospitalization, life insurance or similar benefits
(including, without limitation, reimbursement for Medicare premiums) to any
employee or former employee of the TTS Business (other than US Transferred
Employees) who retires or has retired on or before the Closing Date. TTSI and
Buyer shall be responsible for providing any post-retirement medical, life or
similar benefits to US Transferred Employees.
(b) Notwithstanding the provisions of this Exhibit D, including but
not limited to the provisions of this Section D.11, Seller Companies may amend,
modify or terminate any plans or arrangements providing post-retirement health,
medical, dental, hospitalization, life insurance or similar benefits (including,
without limitation, reimbursement for Medicare premiums) to any employee or
former employee of the TTS Business, subject in each case to the provisions of
Applicable Law.
(c) Except as may be required by Applicable Law, Buyer shall not be
obligated by this Agreement to provide post-retirement, health, medical, dental,
hospitalization, life insurance
D-7
<PAGE> 85
or similar benefits (including, without limitation, reimbursement for Medicare
premiums), or any particular level of such benefits, to US Transferred
Employees.
D.12 Supplemental Plans. Parent shall retain all liability and obligation
with respect to Active Employees under the Black & Decker Executive Deferred
Compensation Plan, the Black & Decker Supplemental Executive Retirement Plan,
the Black & Decker Supplemental Pension Plan and the Black & Decker Supplemental
Retirement Savings Plan.
III. Other Country Employee Benefit Matters.
D.13 General. For a period of one year following the Closing Date, Buyer
and TTSI shall ensure that the Non-US Transferred Employees are provided
benefits that are substantially similar to those provided under the Non-U.S.
Benefit Arrangements as in effect for those Non-US Transferred Employees
immediately prior to the Closing Date, it being understood that each Non-US
Transferred Employee shall receive credit for all service and compensation with
Seller Companies and any of their predecessors or Affiliates prior to the
Closing Date for all purposes other than Benefit Service to the same extent that
service and compensation are recognized immediately prior to the Closing.
D.14 Severance/Termination Indemnities. In furtherance and not in
limitation of the provisions of Section D.12, for a period of at least one year,
TTSI shall provide severance programs and termination indemnities with the same
terms and conditions as those provided by the Seller Companies or TTSI to the
Non-US Transferred Employees immediately prior to the Closing and agrees to pay
any benefit to Non-US Transferred Employees to which they may be entitled under
such severance programs and/or termination indemnities applicable to Buyer and
its Affiliates with respect to events that occur on or after the Closing Date or
as a result of the Contemplated Transactions, or applicable to Parent and its
Affiliates as a result of the Contemplated Transactions.
VII. General.
D.15 No Third Party Beneficiaries. No provision of this Exhibit D or any
other provision in the Transaction Documents shall create any third party
beneficiary or other rights in any employee or former employee (including any
beneficiary or dependent thereof) of Parent or of any of its Affiliates in
respect of continued employment (or resumption of employment) with Parent,
Buyer, TTSI or any of their Affiliates, and no provision of this Exhibit D shall
create any such rights in any such individuals in respect of any benefits that
may be provided, directly or indirectly, under any Employee Plan or Benefit
Arrangement, or any plan or arrangement which may be established by Buyer, TTSI
or any of their Affiliates. Subject to Applicable Law, unless otherwise provided
herein, no provision of this Agreement shall constitute a limitation on rights
to amend, modify or terminate, either before or after Closing, any such Employee
Plan or Benefit Arrangement of the Parent or any of its Affiliates.
D.16 Indemnification by Buyer. Effective as of the Closing, Buyer hereby
indemnifies Parent and its Affiliates and their respective directors, officers,
employees and agents against, and
D-8
<PAGE> 86
agrees to hold them harmless from, any and all Damages arising out of or
pertaining to (i) the termination of employment of, hiring of or failure or
refusal to hire, any Active Employee of the TTS Business on or after the
Closing; (ii) in relation to any Active Employee any modification of the pay,
benefits or other terms and conditions of employment of any Active Employee on
or after the Closing; and (iii) any breach of any covenants of the Buyer
contained in this Exhibit D.
D.17 Indemnification by Parent. Effective as of the Closing, Parent hereby
indemnifies Buyer and TTSI and agrees to hold each harmless from any and all
Damages arising out of or pertaining to any breach of any covenants of the
Parent or its Affiliates contained in this Exhibit D.
D-9
<PAGE> 87
EXHIBIT E
ADDITIONAL MATTERS RELATING TO PRODUCT LIABILITY ISSUES
Parent and Buyer acknowledge and agree that each has a continuing interest
in ensuring that claims involving alleged product defects and product safety are
handled by TTSI after the Closing in a manner that minimizes liability of the
parties and otherwise protects the parties' interests. This Exhibit E sets forth
certain additional procedures, covenants and agreements relating to product
liability and related matters in respect of products sold and services provided
by TTSI or the TTS Business that, among other things, are intended to enhance
the parties' ability to achieve these objectives.
E.01 With respect to liabilities and obligations relating to claims of
manufacturing or design defects, the parties have agreed that certain of these
liabilities and obligations will constitute Assumed Liabilities for which TTSI
will be responsible and certain of these liabilities and obligations will
constitute Excluded Liabilities for which Seller Companies will be responsible.
Because (i) it is likely that TTSI may receive the initial notice or claim with
respect to liabilities and obligations that ultimately prove to be Seller
Companies' responsibility and vice versa and (ii) in many cases it is critical
to the defense of such claims that products and the location in which the
alleged incident occurs be inspected as soon as practicable, each of Parent,
TTSI and Buyer agree to give immediate notice to the other party in the event
that they receive notice of a claim involving or potentially involving claims of
manufacturing or design defects where the party first receiving such notice
reasonably believes that the responsibility for the liability or obligation, if
any, will be that of the other party or if there is any doubt as to which party
ultimately will be responsible for any related liabilities or obligations. Each
of Parent, TTSI and Buyer also agree with respect to each claim of manufacturing
or design defects that they will perform a prompt, diligent and continuing
investigation to determine whether the claim is an Assumed Liability or an
Excluded Liability, and agree to give immediate notice to the other parties at
any time if the investigation reveals that the responsibility for the liability
or obligation, if any, will be that of the other party if there is any doubt as
to which party ultimately will be responsible for any related liabilities or
obligations. Each of Parent, TTSI and Buyer agree that the party providing such
notice will thereafter cooperate with the other party to permit the other party
to conduct its own investigation, and the party providing such notice will
provide to the other party reports on the status of the claim and subject to the
provisions of Article X an opportunity to participate in the defense of the
claim, at its own cost and expense. To expedite the review of these issues and
ensure that both parties' rights and defenses are preserved, Parent, TTSI and
Buyer shall provide such notice as follows:
E-1
<PAGE> 88
if to Parent, or TTSI prior to Closing:
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
Attention: Product Liability Counsel
if to Buyer, or TTSI after Closing:
True Temper Sports, Inc.
8275 Tournament Drive, Suite 200
Memphis, Tennessee 38125
Attention: President
E.02 To the extent that either Parent, TTSI or Buyer (or any of their
directors, officers, advisors, attorneys, accountants, employees, insurers or
agents) conducts an investigation or other inquiry into any events or
circumstances that lead to a claim of manufacturing or design defects in respect
of a product or product line generally or a specific claim or allegation and the
results of such investigation or inquiry relate to or otherwise affect the
liabilities or obligations of the other party hereunder, Parent, TTSI or Buyer,
as the case may be, agree to share any information obtained as a result of the
investigation or inquiry, in each case subject to the express provisions of
Section 7.07 of this Agreement.
E.03 To assist each of the parties to this Agreement with the defense of
claims involving allegations of manufacturing or design defects and with
compliance with each parties' respective legal obligations under this Agreement
and otherwise, Parent, TTSI and Buyer each agree from time to time to designate
individuals within their respective organizations as an "Engineering/Safety
Assurance Liaison" and a "Claims Liaison" for the purpose of coordinating the
defense of claims involving products sold and services provided by TTSI or the
TTS Business. The initial individuals serving in these capacities shall be
designated in writing by Parent, TTSI and Buyer at Closing and, thereafter, may
be changed from time to time by notice to the other party.
E.04 To assist each of the parties to this Agreement with the defense of
claims involving allegations of manufacturing or design defects and with
compliance with each parties' respective legal obligations under this Agreement
and otherwise, Parent, TTSI and Buyer each agree from time to time to provide
the other party access to all information as provided in Section 5.04 and
Section 6.02. Without limiting the generality of those provisions, Parent, TTSI
and Buyer acknowledge and agree that the aforementioned information and access
includes the existing databases relating to consumer complaints, claims and
litigation, whether maintained at the headquarters of the TTS Business or
otherwise, access to personnel and engineering and design drawings or documents
and any other relevant information.
E-2
<PAGE> 89
ATTACHMENT I
OPENING STATEMENT
ATTACHED
I-1
<PAGE> 90
ATTACHMENT II
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement (this "Agreement") is made as of
the ______ day of __________ 1998, by and between Emhart Industries, Inc., a
corporation organized and existing under the laws of Delaware ("Transferor"),
and True Temper Sports, Inc., a corporation organized and existing under the
laws of the State of Delaware ("Transferee").
W I T N E S S E T H:
WHEREAS, The Black & Decker Corporation, a Maryland corporation and the
ultimate corporate parent of Transferor and Transferee ("BDC"), Transferee and
TTSI LLC, a Delaware limited liability company ("LLC"), have entered into a
Reorganization, Recapitalization and Stock Purchase Agreement dated as of June
29, 1998 (the "Recapitalization Agreement"), pursuant to which, among other
things, BDC has agreed to sell and cause its Subsidiaries to sell, and LLC has
agreed to buy and to cause its Subsidiaries to buy, the TTS Business; and
WHEREAS, Transferor and Transferee desire to enter into this Agreement to
effect certain transactions referred to in and contemplated by the
Recapitalization Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Capitalized terms used in this Agreement but
not defined herein shall have the meanings given to them in the Recapitalization
Agreement.
ARTICLE II
CONTRIBUTED ASSETS
Section 2.01. Transfer of Assets. Effective at 12:01 a.m. (Eastern time)
on the date hereof, upon the terms and subject to the conditions set forth in
this Agreement and the Recapitalization Agreement, Transferor contributes,
transfers, conveys, assigns and delivers to Transferee, and Transferee receives,
acquires and accepts from Transferor, free and clear of all Liens other than
II-1
<PAGE> 91
Permitted Liens, all of Transferor's right, title and interest in and to the
Contributed Assets. Effective at 12:01 a.m. (Eastern time) on the date hereof,
upon the terms and subject to the conditions set forth in this Agreement and the
Recapitalization Agreement, Transferee accepts all risk of loss with respect to
the Contributed Assets.
Section 2.02. Assignment of Contracts and Rights.
(a) Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign any Contributed Asset or
any claim or right or any benefit arising thereunder or resulting therefrom if
an attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach or other contravention thereof, be ineffective with
respect to any party thereto or in any way adversely affect the rights of
Transferee or Transferor, or any Affiliates of Transferee or Transferor
thereunder.
(b) With respect to any Contract or any claim, right or benefit
arising thereunder or resulting therefrom, promptly after the date hereof, to
the extent necessary and reasonably requested by Transferee, the parties hereto
will use reasonable commercial efforts to obtain the written consent of the
other parties to any such Contract for the assignment thereof to Transferee, or
written confirmation from such parties reasonably satisfactory in form and
substance to Transferee and Transferor confirming that such consent is not
required.
(c) If such consent, waiver or confirmation is not obtained with
respect to any such Contract, as among the parties hereto, Transferee will
obtain through a subcontracting arrangement or otherwise, and subject to
Applicable Law and the terms of such Contract, the claims, rights and benefits
of Transferor and, to the extent possible, assume the obligations under such
Contracts in accordance with this Agreement, and Transferor will enforce at the
request of and for the benefit of Transferee, with Transferee assuming
Transferor's obligations, any and all claims, rights and benefits of Transferor
against a third party thereto arising from any such Contract (including the
right to elect to terminate such Contract in accordance with the terms thereof
upon the request of Transferee).
(d) Transferor will promptly pay to Transferee, when received, all
monies received by Transferor under any Contributed Asset or any claim, right or
benefit arising thereunder not transferred as a result of the provision of this
Section 2.02.
ARTICLE III
ASSUMED LIABILITIES
Section 3.01. Assumption of Liabilities. Effective at 12:01 a.m. (Eastern
time) on the date hereof, upon the terms and subject to the conditions of this
Agreement and the Recapitalization Agreement, Transferee assumes and agrees to
pay, discharge and satisfy the Assumed Liabilities.
II-2
<PAGE> 92
ARTICLE IV
EXCLUDED LIABILITIES
Section 4.01. Satisfaction of Excluded Liabilities. Transferor agrees
to pay, discharge and satisfy the Excluded Liabilities.
ARTICLE V
SURVIVAL; INDEMNIFICATION
Section 5.01. Survival; Indemnification. Transferor and Transferee
agree as to matters of survival and indemnification as set forth in Article X of
the Transaction Agreement.
ARTICLE VI
MISCELLANEOUS
Section 6.01. Construction. As used in this Agreement, the plural shall
include the singular and the singular shall include the plural. With regard to
each and every term and condition of this Agreement, the parties hereto
understand and agree that the same have or has been mutually negotiated,
prepared and drafted, and that if at any time the parties desire or are required
to interpret or construe any such term or condition or any agreement or
instrument subject hereto, no consideration shall be given to the issue of which
party actually prepared, drafted or requested any term or condition of this
Agreement.
Section 6.02. Counterparts; Effectiveness. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party has received a counterpart hereof signed
by the other party hereto.
Section 6.03. Captions. The captions used in this Agreement are
included for convenience of reference only and shall be ignored in the
construction or interpretation hereof.
Section 6.04. Severability. Any provision of this Agreement that is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement. To the extent any provision of this Agreement is determined to
be prohibited or unenforceable Transferor and Transferee agree to use reasonable
commercial efforts to substitute one or more valid, legal and enforceable
provisions that, insofar as practicable implement the purposes and intent of the
prohibited or unenforceable provision.
II-3
<PAGE> 93
Section 6.05. Governing Law. This Agreement shall be construed and
interpreted in accordance with and governed by the laws of the State of Delaware
(without regard to the choice of law provisions thereof).
IN WITNESS WHEREOF, the parties hereto here caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
EMHART INDUSTRIES, INC.
By:_______________________________(SEAL)
Name:
Title:
TRUE TEMPER SPORTS, INC.
By:_______________________________(SEAL)
Name:
Title:
II-4
<PAGE> 94
ATTACHMENT III
ASSIGNMENT OF UNITED STATES TRADEMARKS, TRADEMARK
REGISTRATIONS AND APPLICATIONS FOR REGISTRATION
WHEREAS, Emhart Inc., a corporation organized and existing under the laws
of the State of Delaware, having its principal office at Drummond Plaza Office
Park, 1423 Kirkwood Highway, Newark, Delaware 19711, (hereinafter, the
"Assignor"), is the owner of certain United States Trademarks which are the
subject of the Trademark Registrations and Applications for Registration
identified in Table 1 attached hereto, and;
WHEREAS, True Temper Sports, Inc., a corporation organized and existing
under the laws of the State of Delaware, having its principal office at 8275
Tournament Drive, Suite 200, Memphis, Tennessee 38125 (hereinafter, the
"Assignee"), is desirous of acquiring the entire right, title and interest of
the Assignor in and to said United States Trademarks, Trademark Registrations
and Applications for Registration identified in Table 1 attached hereto and the
goodwill associated therewith;
NOW THEREFORE, in consideration of the sum of One Dollar ($1.00) and other
good and valuable consideration not herein specifically enumerated, the receipt
and sufficiency of which is hereby acknowledged, the Assignor has sold, assigned
and transferred, and by these presents does hereby sell, assign and transfer
unto the Assignee, its successors, assigns or other legal representatives,
Assignor's entire right, title and interest including the goodwill associated
therewith, and any common law rights in and to the said United States
Trademarks, Trademark Registrations and Applications for Registration, along
with all renewals of the trademark registration and applications of registration
that are or may be secured under the laws of the United States, together with
all rights thereunder as the same would have been held by Assignor had this
assignment and sale not been made, Assignor reserving no rights unto itself.
The foregoing sale, assignment and transfer shall include all claims for
profits and damages of past infringement, if any, of said U.S. Trademarks,
Trademark Registrations and Applications for Registration, with the right to sue
for and collect the same for the Assignee's own use and advantage and for the
use and advantage of its successors, assigns or other legal representatives.
Assignor shall provide Assignee, its successors, assigns or other legal
representatives, cooperation and assistance at Assignee's request and expense
(including the execution and delivery of any and all affidavits, declarations,
oaths, exhibits, assignments, powers of attorney or other documentation as may
be reasonably required): (1) in the preparation and prosecution of any
application for registration of the Trademarks, (2) in the prosecution or
defense of any interference, opposition, infringement or other proceedings that
may arise in connection with the Trademarks,
III-1
<PAGE> 95
Trademark Registration and Application for Registration assigned pursuant to
this Assignment, and (3) the implementation or perfection of this Agreement.
IN WITNESS WHEREOF, the Assignor has caused this instrument to be signed
by a duly authorized corporate officer and its corporate seal to be hereto
affixed.
EMHART INC.
________________, 1998 By________________________________
Charles E. Fenton
Vice President & Assistant Secretary
(SEAL)
STATE OF MARYLAND
COUNTY OF BALTIMORE
On this _____ day of ___________, 1998, before me, ___________, personally
appeared Charles E. Fenton, who acknowledged himself to be Vice President &
Assistant Secretary of Emhart Inc. and is known to me to be a resident of the
State of Maryland and is authorized to execute documents on behalf of the
corporation.
(SEAL) __________________________________
Notary Public
My commission expires: __________________
III-2
<PAGE> 96
TABLE 1
<TABLE>
<CAPTION>
REGISTERED:
<S> <C> <C>
TRADEMARK REGISTRATION NUMBER
--------- -------------------
AVR 1674148
Black Gold 1643717
Century 1089805
Comet & Design 980306
Command 1673549
Counterpoint 2079945
Dynalite 562535
Dynalite Gold 1828401
Dynamic 2133627
Dynamic 383070
Dynamic Gold 1298940
Dynamic Lite 1833938
Eagle Design 1490102
EI-70 1676902
Extralite 1266688
Flex Flow 1355643
Gold Plus 1558189
Jet Step 1208621
Modulus EV 1582746
Ox Ultra II 1688957
Power Transition Profile 2056106
Pro Fit 666819
RC2 1671064
</TABLE>
III-3
<PAGE> 97
<TABLE>
<CAPTION>
TRADEMARK REGISTRATION NUMBER
--------- -------------------
<S> <C> <C>
Sensicore 2048292
Step Down 365954
T1 1360425
T2 1360424
True Temper 258244
True Temper 1356493
True Temper 1058338
True Temper 239511
True Temper (Stylized) 1897044
Truelite 2056105
TT & Design 1356494
TT & Design 708047
TT & Design 771149
TT Lite 1173464
TT Lite 1137450
TT Lite 1903500
PENDING:
Assailant 75/169921
Atomic Lite 75/169922
Atomic Steel 75/169920
Dynamic Titanium Matched 75/415599
Fastfit Clubfitting System 75/047221
Fifth Sense 75/364662
Flex Fit 75/315174
Power-Fit 75/083267
Quantum 75/298968
</TABLE>
III-4
<PAGE> 98
<TABLE>
<CAPTION>
TRADEMARK REGISTRATION NUMBER
--------- -------------------
<S> <C> <C>
Rocket 75/169919
Scoring Series 75/298396
Sensicore 75/381756
Shaft Lab 75/114472
Shaftware 75/106255
System Integration 75/191012
Target Strike 75/320950
The Way to Feel the Game 75/364658
Torsionally Tune 74/699677
Tri Star 75/376812
Tri Star & Design with Stars 75/376813
True Temper 75/381755
True Temper Scoring Series 75/298967
True Temper Torch 75/398709
Powerlink 75/476490
Powerlink Plus 75/476698
Silver Bullet 75/448545
Vanadium Fe 75/441963
</TABLE>
III-5
<PAGE> 99
ATTACHMENT IV
ASSIGNMENT OF FOREIGN TRADEMARKS, TRADEMARK
REGISTRATIONS AND APPLICATIONS FOR REGISTRATION
WHEREAS, Emhart Inc., a corporation organized and existing under the
laws of the State of Delaware, having its principal office address at Drummond
Plaza Office Park, 1423 Kirkwood Highway, Newark, Delaware 19711, (hereinafter,
the "Assignor"), is the owner of certain Foreign Trademarks which are the
subject of the Trademark Registrations and Applications for Registration
identified in Table 1 attached hereto, and;
WHEREAS, True Temper Sports, Inc., a corporation organized and existing
under the laws of the State of Delaware, having its principal office at 8275
Tournament Drive, Suite 200, Memphis, Tennessee 38125 (hereinafter, the
"Assignee"), is desirous of acquiring the entire right, title and interest of
the Assignor in and to said Foreign Trademarks, Trademark Registrations and
Applications for Registration identified in Table 1 attached hereto and the
goodwill associated therewith;
NOW THEREFORE, in consideration of the sum of One Dollar ($1.00) and
other good and valuable consideration not herein specifically enumerated, the
receipt and sufficiency of which is hereby acknowledged, the Assignor has sold,
assigned and transferred, and by these presents does hereby sell, assign and
transfer unto the Assignee, its successors, assigns or other legal
representatives, Assignor's entire right, title and interest including the
goodwill associated therewith, and any common law rights in and to the said
Foreign Trademarks, Trademark Registrations and Applications for Registration,
along with all renewals and extensions of the Trademark Registrations or
applications for Registration that are or may be secured throughout the world,
together with all rights thereunder as the same would have been held by Assignor
had this assignment and sale not been made, Assignor reserving no rights unto
itself.
The foregoing sale, assignment and transfer shall include all claims
for profits and damages of past infringement, if any, of said Foreign
Trademarks, Trademark Registrations and Applications for Registration, with the
right to sue for and collect the same for the Assignee's own use and advantage
and for the use and advantage of its successors, assigns or other legal
representatives.
Assignor shall provide Assignee, its successors, assigns or other legal
representatives, cooperation and assistance at Assignee's request and expense
(including the execution and delivery of any and all affidavits, declarations,
oaths, exhibits, assignments, powers of attorney or other documentation as may
be reasonably required): (1) in the preparation and prosecution of any
applicable for registration of the Trademarks, (2) in the prosecution or defense
of any interference, opposition, infringement or other proceedings that may
arise in connection with the Trademarks,
IV-1
<PAGE> 100
Trademark Registration and Application for Registration assigned pursuant to
this Assignment, and (3) the implementation or perfection of this Agreement.
IN WITNESS WHEREOF, the Assignor has caused this instrument to be
signed by a duly authorized corporate officer and its corporate seal to be
hereto affixed.
EMHART INC.
_________________, 1998 By________________________________
Charles E. Fenton
Vice President & Assistant Secretary
(SEAL)
TRUE TEMPER SPORTS, INC.
_________________, 1998 By________________________________
Name:
Title:
(SEAL)
STATE OF MARYLAND
COUNTY OF BALTIMORE
On this _____ day of ___________, 1998, before me, __________________,
personally appeared Charles E. Fenton, who acknowledged himself to be Vice
President & Assistant Secretary of Emhart Inc. and is known to me to be a
resident of Maryland and is authorized to execute documents on behalf of the
corporation.
(SEAL) __________________________________
Notary Public
My commission expires: __________________
IV-2
<PAGE> 101
STATE OF MARYLAND
COUNTY OF BALTIMORE
On this _____ day of ___________, 1998, before me, __________________,
personally appeared ____________________, who acknowledged himself to be
______________________ _____________________ of True Temper Sports, Inc. and is
known to me to be a resident of _________________ and is authorized to execute
documents on behalf of the corporation.
(SEAL) __________________________________
Notary Public
My commission expires: __________________
IV-3
<PAGE> 102
TABLE 1
<TABLE>
<CAPTION>
REGISTERED:
COUNTRY TRADEMARK REGISTRATION NUMBER
- ------- --------- -------------------
<S> <C> <C>
AT True Temper 57389
AT TT True Temper 58157
AU Assailant 725429
AU Black Gold A550178
AU Century A550179
AU Contour A364568
AU Dynalite Gold A608135
AU Dynamic A111185
AU Dynamic Gold A378007
AU Dynamic Lite A607826
AU Flex Flow A422900
AU Jet Step A350535
AU Pro Fit B178342
AU Sensicore 725490
AU The Determinator A640949
AU The Flex Fitting Solution 640950
AU True Temper A78903
AU TT & Design B302531
AU Unitized A258953
BP Dynamic 2542/52
BP True Temper 2541/52
BR True Temper 817146288
BX Dynamic 344755
</TABLE>
IV-4
<PAGE> 103
<TABLE>
<CAPTION>
COUNTRY TRADEMARK REGISTRATION NUMBER
- ------- --------- -------------------
<S> <C> <C>
BX True Temper 105886
BX TT & Design 105887
CA Black Gold 418504
CA Century TMA227830
CA Contour TMA277257
CA Counterpoint TMA490492
CA Dynalite UCA050379
CA Dynalite Gold TMA438394
CA Dynamic UCA043338
CA Dynamic Gold TMA289976
CA Dynamic Lite TMA436335
CA Eagle Design TMA466988
CA EI-70 TMA406607
CA Extralite TMA262970
CA Flex Flow TMA320262
CA Jet Step TMA259548
CA Modulus EV40 TMA406608
CA NCM 180 TMA463479
CA Power Transition Profile TMA490586
CA Pro Fit TMA210372
CA Sensicore TMA478633
CA Step Down TMA210509
CA Stratus TMA463480
CA System Integration TMA440604
CA The Determinator TMA451933
</TABLE>
IV-5
<PAGE> 104
<TABLE>
<CAPTION>
COUNTRY TRADEMARK REGISTRATION NUMBER
- ------- --------- -------------------
<S> <C> <C>
CA The Flex Fitting Solution TMA454329
CA Torsionally Tuned TMA490511
CA Tri-Wall TMA463478
CA True Temper TMA104673
CA True Temper (Stylized) TMA439902
CA True Temper (Word) TMA441035
CA Truelite TMA490584
CA TT & Design TMA137619
CA TT Lite TMA239427
CA TT-Lite TMA441028
CA Unitized TMA210510
CH Dynamic P286607
CH TT & Design 345065
DE Century 2027653
DE E1-70 2015992
DE Flex Flow 1082299
DE True Temper 503182
DE TT & Design 855089
DE Modulus EV40 2015735
DE TT True Temper 864671
DK Dynamic 2901-1978
DK True Temper 1042-1937
DK True Temper 3163-1967
ES Flex Flow 1100318
ES True Temper 513613
</TABLE>
IV-6
<PAGE> 105
<TABLE>
<CAPTION>
COUNTRY TRADEMARK REGISTRATION NUMBER
- ------- --------- -------------------
<S> <C> <C>
ES TT & Design 603263
FI Dynamic 75325
FR Black Gold 1644151
FR Black Magic 92404513
FR Century 1644152
FR Dynamic 1594632
FR EI-70 1644154
FR Flex Flow 1302972
FR Modulus EV40 1644153
FR True Temper 1481426
FR True Temper 1594633
FR TT & Design 1481427
GB Black Gold 1455042
GB Black Magic 1490249
GB Century 1455020
GB Comet (Device) 1014481
GB Command 1455898
GB Contour 1160032
GB Counterpoint 2032074
GB Counterweight 2032069
GB Dynalite 958879
GB Dynalite Gold 1541180
GB Dynamic 661728
GB Dynamic 686588
GB Dynamic Gold B1178187
</TABLE>
IV-7
<PAGE> 106
<TABLE>
<CAPTION>
COUNTRY TRADEMARK REGISTRATION NUMBER
- ------- --------- -------------------
<S> <C> <C>
GB Dynamic Lite 1541178
GB Flex Flow B1237872
GB Jet Step 1143320
GB Sensicore 2120494
GB True Temper B689098
GB True Temper B1350237
GB True Temper EI-70 1472910
GB True Temper Pro Fit B784345
GB TT (Device) B1071411
GB TT Lite (Device) B1121200
IE Comet & Design 83584
IE Dynamic B83585
IN TT True Temper 279925B
IT Black Gold 621295
IT Century 621296
IT Dynamic 341445
IT EI-70 623063
IT Modulus EV40 621294
IT True Temper 554494
IT TT & Design 554495
JP Action Plus 2556590
JP Dynalite 1992625
JP Dynamic Gold Lite 10-36821
JP Dynamic Lite 3174808
JP Jet Step 1605414
</TABLE>
IV-8
<PAGE> 107
<TABLE>
<CAPTION>
COUNTRY TRADEMARK REGISTRATION NUMBER
- ------- --------- -------------------
<S> <C> <C>
JP Modulus EV40 2696437
JP Pro Fit (Katakana) 1634899
JP Pro Fit (Katakana) 1412873
JP The Determinator 4068284
JP The Flex Fitting Solution 4068285
JP True Temper 303162
JP True Temper Dynamic 915441
JP True Temper Dynamic Gold 2691949
JP True Temper Step Down 1581181
JP TT & Design 951141
JP Unitized 1992626
KR Black Gold 324218
KR Comet & Design 33355
KR Dynalite 33358
KR Dynamic 33357
KR Flex Flow 126896
KR Pro Fit 33502
KR True Temper 34049
KR True Temper Modulus EV40 252327
KR TT & Design 33360
KR Unitized 311613
MX The Determinator 482238
MX The Flex Fitting Solution 499263
NO Dynamic 102255
</TABLE>
IV-9
<PAGE> 108
<TABLE>
<CAPTION>
COUNTRY TRADEMARK REGISTRATION NUMBER
- ------- --------- -------------------
<S> <C> <C>
NO True Temper 71441
NZ Black Gold 208050
NZ Century 208051
NZ Comet & Design B104888
NZ Dynamic 52482
NZ Dynamic Gold 143059
NZ Flex Flow 157236
NZ Jet Step A134935
NZ Pro Fit B104886
NZ Super Lite B121350
NZ True Temper B52481
NZ True Temper Kinetic & Design B121351
NZ True Temper Unitized B101160
NZ TT & Design B117684
NZ TT True Temper Lite B121349
SE Black Gold 237605
SE Century 237606
SE Dynamic 169309
SE EI-70 237608
SE EI-70 240623
SE Flex Flow 197722
SE Modulus EV40 237607
SE True Temper 120848
SE TT & Design 120775
TE Dynamic 2542/52
</TABLE>
IV-10
<PAGE> 109
<TABLE>
<CAPTION>
COUNTRY TRADEMARK REGISTRATION NUMBER
- ------- --------- -------------------
<S> <C> <C>
TE True Temper 2541/52
TW Black Gold 547170
TW Century 592535
TW Century w/Chinese Characters 483565
TW Comet & Design 483568
TW Dynalite 547158
TW Dynamic 486248
TW Dynamic Gold 483569
TW Extralite 431850
TW Flex Flow 483570
TW Modulus 556240
TW Pro Fit 483567
TW Rocket 547157
TW Step Down 483566
TW The Determinator 690272
TW True Temper 547159
TW TT & Design 547156
TW Unitized 483571
VD Dynamic 2542/52
VD True Temper 2541/52
ZA Dynalite 70/1829
ZA Dynamic 2542/52
ZA Flex Flow 85/1485
ZA True Temper 2541/52
PENDING:
</TABLE>
IV-11
<PAGE> 110
<TABLE>
<CAPTION>
COUNTRY TRADEMARK REGISTRATION NUMBER
- ------- --------- -------------------
<S> <C> <C>
BR True Temper 817146296
CA Counterwright 791154
CA Eagle Design 745362
CA Fastfit Clubfitting System 802377
CA Power-Fit 808901
CA Shaftware 813032
GB The Determinator 1585795
JP Dynalite Gold 9-8749
JP EI-70 3-13888
JP Sensicore 9-5081
</TABLE>
IV-12
<PAGE> 111
ATTACHMENT V
ASSIGNMENT OF UNITED STATES PATENTS AND PATENT
APPLICATIONS
WHEREAS, Emhart Inc., a corporation organized and existing under the
laws of the State of Delaware, having its principal office address at Drummond
Park Office Park, 1423 Kirkwood Highway, Newark, Delaware 19711, (hereinafter,
the "Assignor"), is the owner of certain United States Patents and Patent
Applications all of the foregoing being more specifically identified in Table 1
attached hereto; and
WHEREAS, True Temper Sports, Inc., a corporation organized and existing
under the laws of the State of Delaware, having its principal office at 8275
Tournament Drive, Suite 200, Memphis, Tennessee 38125 (hereinafter, the
"Assignee"), is desirous of acquiring the entire right, title and interest of
the Assignor in and to said United States Patents and Patent Applications;
NOW THEREFORE, in consideration of the sum of One Dollar ($1.00) and
other good and valuable consideration not herein specifically enumerated, the
receipt and sufficiency of which is hereby acknowledged, the Assignor has sold,
assigned and transferred, and by these presents does hereby sell, assign and
transfer unto the Assignee, its successors, assigns or other legal
representatives, its entire right, title and interest in and to the said United
States Patents and Patent Applications, along with all continuations,
continuations-in-part, divisions, reissues, reexaminations, extensions or
foreign equivalents thereof, including the subject matters which may be obtained
therefrom, and together with all claims of Assignor for profits and damages by
reason of past infringement, if any, of said United States Patents and Patent
Applications with the right to sue for and collect same for Assignee's own use
and advantage and for the use and advantage of its successors, assigns or other
legal representatives.
Assignor shall provide Assignee, its successors, assigns or other legal
representatives, cooperation and assistance at Assignee's request and expense
(including the execution and delivery of any and all affidavits, declarations,
oaths, exhibits, assignments, powers of attorney or other documentation as may
be reasonably requested): (1) in the preparation and prosecution of any
applications covering the inventions assigned herein, (2) in the prosecution or
defense of any interference, opposition, reexamination, reissue, infringement or
other proceedings that may arise in connection with the Patents and Patent
Applications assigned pursuant to this Assignment, and (3) in the implementation
and perfection of this Agreement.
V-2
<PAGE> 112
IN WITNESS WHEREOF, the Assignor has caused this instrument to be
signed by a duly authorized corporate officer and its corporate seal to be
hereto affixed.
EMHART INC.
_________________, 1998 By________________________________
Charles E. Fenton
Vice President & Assistant Secretary
(SEAL)
STATE OF MARYLAND
COUNTY OF BALTIMORE
On this _____ day of ___________, 1998, before me, ___________,
personally appeared Charles E. Fenton, who acknowledged himself to be Vice
President & Assistant Secretary of Emhart Inc. and is known to me to be a
resident of Maryland and is authorized to execute documents on behalf of the
corporation.
(SEAL) __________________________________
Notary Public
My commission expires: __________________
V-3
<PAGE> 113
TABLE 1
<TABLE>
<CAPTION>
REGISTERED:
CASE NUMBER SUBCASE FILE DATE PATNUMBER ISSDATE
----------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
3623-22 20-Mar-1978 4205845 03-Jun-1980
4525-22 03-Dec-1993 5628473 13-May-1997
4694-22 B 01-Feb-1996 5646345 08-Jul-1997
4694-22 01-Aug-1994 5520049 28-May-1996
4694-22 A 20-Jul-1995 5533386 09-Jul-1996
4750-22 12-Dec-1994 5528927 25-Jun-1996
4769-22 22-Dec-1994 5515615 14-May-1996
4770-22 21-Dec-1994 5607364 04-Mar-1997
4791-22 23-Aug-1995 5617752 08-Apr-1997
4800-22 15-Mar-1995 D370517 04-Jun-1996
4819-22 13-Mar-1996 5634860 03-Jun-1997
4824-2 31-Aug-1995 5609530 11-Mar-1997
4922-22 07-Mar-1996 5743811 28-apr-1998
PENDING:
4838-22 A 11-Jun-1997 08/873098
4922-22 A 03-Jul-1997 08/888046
4925-22 03-May-1996 08/642363
4965-22 01-Mar-1996 08/613792
4980-22 03-Jan-1997 08/775340
4984-22 13-Mar-1996 08/615353
5000-22 P 25-Jul-1997 60/053814
5195-22 P 26-Sep-1997 60/060115
5230-22 P 16-Dec-1997 60/069830
</TABLE>
V-1
<PAGE> 114
ATTACHMENT VI
ASSIGNMENT OF FOREIGN PATENTS AND APPLICATIONS FOR
PATENTS
WHEREAS, Emhart Inc., a corporation organized and existing under the
laws of the State of Delaware, having its principal office address at Drummond
Plaza Office Park, 1423 Kirkwood Highway, Newark, Delaware 19711, (hereinafter,
the "Assignor"), is the owner of certain foreign Patents and Patent Applications
all of the foregoing being more specifically identified in Table 1 attached
hereto; and
WHEREAS, True Temper Sports, Inc., a corporation organized and existing
under the laws of the State of Delaware, having its principal office at 8275
Tournament Drive, Suite 200, Memphis, Tennessee 38125 (hereinafter, the
"Assignee"), is desirous of acquiring the entire right, title and interest of
the Assignor in and to said foreign Patents and Patent Applications;
NOW THEREFORE, in consideration of the sum of One Dollar ($1.00) and
other good and valuable consideration not herein specifically enumerated, the
receipt and sufficiency of which is hereby acknowledged, the Assignor has sold,
assigned and transferred, and by these presents does hereby sell, assign and
transfer unto the Assignee, its successors, assigns or other legal
representatives, its entire right, title and interest in and to the said foreign
Patents and Patent Applications, along with all continuations,
continuations-in-part, divisions, reissues, reexaminations, extensions or
foreign equivalent thereof, including the subject matters of all claims which
may be obtained therefrom, and together with all claims of Assignor for profits
and damages by reason of past infringement, if any, of said foreign Patents and
Patent Applications with the right to sue for and collect same for Assignee's
own use and advantage and for the use and advantage of its successors, assigns
or other legal representatives.
Assignor shall provide Assignee, its successors, assigns or other legal
representatives, cooperation and assistance at Assignee's request and expense
(including the execution and delivery of any and all affidavits, declarations,
oaths, exhibits, assignments, powers of attorney or other documentation as may
be reasonably requested): (1) in the preparation and prosecution of any
applications covering the inventions assigned herein, (2) in the prosecution or
defense of any interference, opposition, reexamination, reissue, infringement or
other proceedings that may arise in connection with the Patents and Patent
Applications assigned pursuant to this Assignment, and (3) in the implementation
and perfection of this Assignment.
VI-2
<PAGE> 115
IN WITNESS WHEREOF, the Assignor has caused this instrument to be
signed by a duly authorized corporate officer and its corporate seal to be
hereto affixed.
EMHART INC.
_______________, 1998 By______________________________
Charles E. Fenton
Vice President & Assistant Secretary
(SEAL)
TRUE TEMPER SPORTS, INC.
_______________, 1998 By______________________________
Name:
Title:
(SEAL)
STATE OF MARYLAND
COUNTY OF BALTIMORE
On this _____ day of ___________, 1998, before me,
___________, personally appeared Charles E. Fenton, who acknowledged
himself to be Vice President & Assistant Secretary of Emhart Inc. and
is known to me to be a resident of Maryland and is authorized to
execute documents on behalf of the corporation.
(SEAL) __________________________________
Notary Public
My commission expires: __________________
VI-3
<PAGE> 116
STATE OF MARYLAND
COUNTY OF BALTIMORE
On this _____ day of ___________, 1998, before me,
___________, personally appeared ________________________, who
acknowledged himself to be ________________
______________________________ of True Temper Sports,Inc. and is
known to me to be a resident of __________ and is authorized to
execute documents on behalf of the corporation.
(SEAL) __________________________________
Notary Public
My commission expires: __________________
VI-4
<PAGE> 117
TABLE 1
<TABLE>
<CAPTION>
REGISTERED:
COUNTRY CASE NUMBER SUBCASE FILEDATE PATNUMBER ISSDATE
- ------- ----------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
CA 3623-22 16-Mar-1979 1137131 07-Dec-1982
CA 3624-22 07-Mar-1979 1145126 26-Apr-1983
GB 4694-22 B 18-Jul-1995 2296326 27-Nov-1996
GB 4694-22 18-Jul-1995 2292459 27-Nov-1996
GB 4694-22 A 18-Jul-1995 2294324 27-Nov-1996
TW 4694-22 02-Aug-1994 NI-080964 11-Oct-1996
PENDING:
AU 4819-22 12-Mar-1997 16250/97
AU 4824-22 30-Aug-1996 64368/96
AU 4921-22 02-Jun-1997 24639/97
AU 4984-22 12-Mar-1997 16255/97
GB 4770-22 19-Dec-1995 9525922.2
GB 4819-22 13-Mar-1997 9705253.4
GB 4824-22 21-Aug-1996 9617487.5
GB 4921-22 30-May-1997 9711132.2
GB 4984-22 13-Mar-1997 9705266.6
JP 4819-22 13-Mar-1997 9-100733
JP 4984-22 13-Mar-1997 9-100734
TW 4770-22 13-Feb-1995 84101270
TW 4819-22 20-Mar-1996 86201298
TW 4824-22 12-Sep-1995 84109486
TW 4838-22 19-Jul-1995 86206854
TW 4965-22 13-Mar-1996 86202758
TW 4984-22 30-May-1996 86201195
</TABLE>
VI-5
<PAGE> 118
ATTACHMENT VII
SERVICES AGREEMENT
This Services Agreement (together with Exhibit A hereto, this
"Agreement") is entered into as of the ____ day of ___________ 1998, by and
between Emhart Industries, Inc., a corporation organized and existing under the
laws of the State of Connecticut ("BDC Sub"), and True Temper Sports, Inc., a
corporation organized and existing under the laws of the State of Delaware
("TTSI").
W I T N E S S E T H:
WHEREAS, The Black & Decker Corporation, a Maryland corporation and the
ultimate corporate parent of BDC Sub ("BDC"), TTSI and TTSI LLC, a Delaware
limited liability company ("LLC"), have entered into a Reorganization,
Recapitalization and Stock Purchase Agreement dated as of June 29, 1998 (the
"Recapitalization Agreement"), pursuant to which, among other things, BDC has
agreed to sell and to cause its Subsidiaries to sell, and LLC has agreed to buy
and to cause its Subsidiaries to buy, the TTS Business;
WHEREAS, pursuant to Section 2.03(d)(i) of the Transaction Agreement,
BDC has agreed to provide or to cause its Subsidiaries to provide to TTSI
certain services of a type provided by BDC and its Subsidiaries to the TTS
Business as of the date of the Recapitalization Agreement on the terms and
conditions set forth in this Agreement; and
WHEREAS, BDC Sub and TTSI desire to enter into this Agreement to give
effect to the provisions of Section 2.03(d)(i) of the Recapitalization
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties contained herein, the parties agree as follows:
1. Definitions. Capitalized terms used in this Agreement but not
defined herein shall have the meanings given to them in the Recapitalization
Agreement.
2. Services Provided. During the term of this Agreement, BDC Sub shall
provide to TTSI, or at its option shall cause one or more of its Affiliates to
provide to TTSI, those services (the "Services") described in Exhibit A to this
Agreement that TTSI requests to be performed from time to time.
3. Consideration. TTSI shall pay to BDC Sub, or shall cause its
Affiliates to pay to BDC Sub, in consideration for the Services provided
hereunder, amounts determined on the basis of the fees referenced in Exhibit A
to this Agreement. In addition, TTSI shall pay to
VII-1
<PAGE> 119
BDC Sub, or shall cause its Affiliates to pay to BDC Sub, such amounts as may be
necessary to reimburse BDC Sub or its Affiliates for any reasonable
out-of-pocket expenses incurred by BDC Sub or its Affiliates in performing the
Services, including, without limitation, any incremental license or similar
fees, if any, required to be paid to software vendors or licensors as a result
of the provision of services to TTSI following the Closing. BDC Sub shall
invoice TTSI for the Services provided hereunder and related out-of-pocket
expenses on a monthly basis and TTSI shall pay to BDC Sub, or cause its
Affiliates to pay to BDC Sub, the amount of such invoice in immediately
available funds within 15 days of the date thereof.
4. Information to be Provided to BDC Sub. Where input or other
information is required to be provided by TTSI to BDC Sub or its Affiliates, or
is otherwise reasonably requested by BDC Sub or its Affiliates, in connection
with the provision of Services hereunder, TTSI shall provide BDC Sub or any
Affiliate designated by BDC Sub with information in the same general format and
level of detail and in accordance with the same schedule followed previously by
the TTS Business in furnishing such information to BDC Sub or its Affiliates.
5. Performance Standard; Confidentiality. Nothing in this Agreement
shall require or be interpreted to require BDC Sub or any of its Affiliates to
provide a Service to TTSI beyond the scope and content of such Service as
provided to TTSI or the TTS Business immediately prior to the date of this
Agreement. To the extent practicable, BDC Sub will perform, or cause its
Affiliates to perform, each Service in the same general manner that the Service
was performed for TTSI or the TTS Business immediately prior to the date of this
Agreement. BDC Sub will handle, and will cause its Affiliates to handle, all
information disclosed to it or them by TTSI that TTSI identifies as proprietary
and confidential in the same general manner as BDC Sub handles its own
information that it considers proprietary and confidential.
6. Force Majeure; Reduction of Services. Neither party shall be liable
for any loss or damage whatsoever arising out of any delay or failure in the
performance of its obligations pursuant to this Agreement to the extent such
delay or failure results from events beyond the control of that party, including
but not limited to acts of God, acts or regulations of any Governmental
Authority, war, accident, fire, flood, strikes, industrial disputes or shortages
of fuel, nor shall any party be entitled to terminate this Agreement in respect
of any such delay or failure resulting from any such event.
7. Dispute Resolution. In the event of any dispute between BDC Sub and
TTSI with respect to the provision of any Service pursuant to this Agreement,
each of BDC Sub and TTSI shall designate an employee as its representative to
attempt to resolve the dispute and each such representative will use reasonable
commercial efforts to resolve the dispute promptly. If the individuals
designated by BDC Sub and TTSI are unable to resolve the dispute promptly, the
dispute will be submitted to a member of senior management of each party. Such
members of senior management will meet in person or by telephone conference at
least once in the 10-day period following the submission of the dispute to them
and will
VII-2
<PAGE> 120
use reasonable commercial efforts to resolve the dispute promptly. If such
members of senior management are unable to resolve the dispute within 15 days of
the submission of the dispute to them, the parties may exercise any rights or
remedies available to them in the Recapitalization Agreement or otherwise.
8. Limited Liability. BDC Sub and its Affiliates shall not be liable,
whether in negligence, breach of contract, tort or otherwise, for any Damages
suffered or incurred by TTSI or any of its Affiliates arising out of or in
connection with the rendering of a Service or any failure to provide a Service,
except to the extent that such Damages are caused by the willful misconduct or
gross negligence of BDC Sub or any of its Affiliates. In no event shall BDC Sub
or any of its Affiliates be liable for special, incidental or consequential
losses or Damages, including, without limitation, lost profits.
9. Term and Termination.
(a) This Agreement shall become effective on the date hereof and,
unless sooner terminated pursuant to the terms hereof, shall continue in effect
until _______________ __, ____. Unless earlier terminated in accordance with the
provisions of this Section 9, notwithstanding this Section 9(a) individual
Services shall terminate on the date specified in Exhibit A.
(b) TTSI may terminate any Service (provided that related Services (as
determined by BDC Sub in its reasonable judgment) may not be terminated in part)
prior to the expiration of the term thereof by providing to BDC Sub written
notice of termination not less than 60 days (or such longer period as may be set
forth in Exhibit A hereto) before the date of such earlier termination and the
provision of such Service shall terminate at the end of the period provided in
such notice.
(c) This Agreement may be terminated in whole or in part (provided that
related Services may not be terminated in part) by either party prior to the
expiration of the term hereof, by written notice of termination to the other
party, if:
(i) such party reasonably and in good faith determines that
the other party is generally unable to pay its debts as they become
due;
(ii) the other party is in material breach of any provision of
this Agreement, provided that the party seeking to terminate this
Agreement for breach shall notify the other party of the breach and
provide such other party with 30 days to cure the breach; or
(iii) the provision or receipt of any such Service is
prohibited by Applicable Law, subjects BDC Sub or any of its Affiliates
or TTSI or any of its Affiliates, as the case may be, to increased
regulation by any Governmental Authority or requires BDC
VII-3
<PAGE> 121
Sub or any of its Affiliates to obtain any license or permit not
otherwise required of BDC Sub or any of its Affiliates.
10. No Agency or Partnership. Nothing in this Agreement shall be deemed
in any way or for any purpose to constitute either party an agent of the other
party in the conduct of such party"s business or to create a partnership or
joint venture between the parties.
11. Entire Agreement; Waiver. This Agreement, together with the
Recapitalization Agreement, constitutes the entire agreement of the parties with
respect to the Services, and no waiver, alteration, or modification of any
provision hereof shall be effective unless in writing and signed by authorized
representatives of both BDC Sub and TTSI. Except as otherwise expressly provided
herein, no provision hereof is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.
12. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given,
if to BDC Sub:
c/o The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
Attention: Senior Vice President and
General Counsel
Telecopy: (410) 716-2660
with a copy to:
Miles & Stockbridge P.C.
10 Light Street
Baltimore, Maryland 21202
Attention: Glenn C. Campbell
David A. Gibbons
Telecopy: (410) 385-3700
if to TTSI:
True Temper Sports, Inc.
8275 Tournament Drive, Suite 200
Memphis, Tennessee 38125
Attention: President
Telecopy: (901) 746-2162
VII-4
<PAGE> 122
with a copy to:
____________________________
____________________________
____________________________
Attention: ________________
Telecopy: (___) ___-____
or to such other address or telecopy number and with such other copies, as such
party may hereafter specify for the purpose by notice to the other party. Each
such notice, request or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified in
this Section 12 and evidence of receipt is received or (ii) if given by any
other means, upon delivery or refusal of delivery at the address specified in
this Section 12.
13. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that this Agreement may not be assigned in whole or in part
(except in the case of an assignment to a purchaser of all or a significant
portion of the business of the BDC Sub or TTSI) without the prior written
consent of the other party hereto, which consent shall not be unreasonably
withheld.
14. Construction. As used in this Agreement, the plural shall include
the singular and the singular shall include the plural. With regard to each and
every term and condition of this Agreement, the parties hereto understand and
agree that the same have or has been mutually negotiated, prepared and drafted,
and that if at any time the parties desire or are required to interpret or
construe any such term or condition or any agreement or instrument subject
hereto, no consideration shall be given to the issue of which party actually
prepared, drafted or requested any term or condition of this Agreement.
15. Counterparts; Effectiveness. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party has received a counterpart hereof signed
by the other party hereto.
16. Captions. The captions used in this Agreement are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
17. Severability. Any provision of this Agreement that is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement. To the extent any provision of this Agreement is determined to be
prohibited or unenforceable, BDC Sub and TTSI agree to use reasonable commercial
efforts to substitute one or more valid, legal and enforceable
VII-5
<PAGE> 123
provisions that, insofar as practicable implement the purposes and intent of the
prohibited or unenforceable provision.
18. Governing Law. This Agreement shall be construed and interpreted in
accordance with and governed by the laws of the State of Delaware (without
regard to the choice of law provisions thereof).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
EMHART INDUSTRIES, INC.
By:___________________________(SEAL)
TRUE TEMPER SPORTS, INC.
By:___________________________(SEAL)
Each of the undersigned joins in this Agreement for the purpose of guaranteeing
timely performance and payment, in accordance with the terms and conditions of
this Agreement, of all of the agreements and obligations of its Subsidiary party
to this Agreement.
THE BLACK & DECKER CORPORATION
______________________________(SEAL)
TTSI LLC
______________________________(SEAL)
VII-6
<PAGE> 124
EXHIBIT A
B&D SERVICES AGREEMENT FOR TTSI
1. Tucker Fasteners Limited: Tucker will continue to lease warehouse and
office space, and provide continued payroll and benefit processing,
financial accounting, accounts receivable collections, importation
support, and MIS services to TTSI's UK operations consistent with the
services currently provided.
Basis of Service Fee: Fixed Charge of $5,400 per month.
Term: Twelve months after Closing Date.
2. Black & Decker (Australasia): Will continue to provide payroll and
benefit processing, and statutory reporting, to TTSI's Australia
operations consistent with the services currently provided:
Basis of Service Fee: Fixed charge of $500 per month.
Term: Twelve months after Closing Date.
3. Nippon Pop Rivets & Fasteners, Ltd.: Will continue to provide payroll
and benefit processing, financial accounting, accounts receivable
collections, importation support, and MIS services to TTSI's Japan's
operations consistent with the services currently provided.
Basis of Service Fee: Fixed charge of $500 per month.
Term: Twelve months after Closing Date.
4. Data Network Implementation Services:
Black & Decker Global Network Services Group currently performs Network
Implementation Services for WAN (Wide Area Network). TTSI will make
arrangements to outsource the network implementation service
immediately following Closing. Black & Decker will continue to provide
monitoring and support services.
Basis of Service Fee: Fixed charge of $1,317 per month.
Term: December 31, 1998
5. Internet Security Firewall
Black & Decker Information Services Group currently performs INTERNET
Security Administration for the TTS Business INTERNET access. Black &
Decker will continue to provide this same service and support.
VII-7
<PAGE> 125
Basis of Service Fee: Fixed charge of $945 per month.
Term: December 31, 1998.
6. Peoplesoft: Black & Decker will continue to provide TTSI with the
access and use of the Peoplesoft payroll processing and human resource
management system software, consistent with the services currently
provided. There will be a one time configuration fee at Closing.
Basis of Service Fee: One-time Configuration Fee of $35,000.
Fixed monthly charge of $11,625.
Term: December 31, 1998.
7. VTNS: TTSI will continue to operate under Black & Decker's current
Virtual Telecommunications Network Service (VTNS) Agreement with AT&T.
Basis of Service Fee: All leases, maintenance and network charges will
be directly invoiced to TTSI.
Term: Through September, 2000.
VII-8
<PAGE> 126
ATTACHMENT IX
EXCHANGE CONSIDERATION ALLOCATION SCHEDULE
<TABLE>
<CAPTION>
Estimated FMV
-------------
<S> <C>
Receivables *
Inventory *
Prepared Expenses *
Property and Equipment *
Goodwill __________
Intellectual Property __________
Noncompete __________
$__________
</TABLE>
* Net book value of the Contributed Assets as of the Closing Date.
** Annual Thiokol Payments to be allocated to Noncompete/Intangible
Thiokol Contract Asset.
VIII-1
<PAGE> 127
ATTACHMENT X
INTELLECTUAL PROPERTY
(REGISTRATIONS AND APPLICATIONS THEREFOR)
Transferred Intellectual Property
The Intellectual Property listed on Table 1 to each of ATTACHMENT III,
IV, V, VI and XV is incorporated herein by reference and constitutes
"Transferred Intellectual Property."
X-1
<PAGE> 128
ATTACHMENT XI
CONSENTS AND APPROVALS REQUIRED PRIOR TO CLOSING
1. Lease Agreement for 8275 Tournament Drive, Suite 200, Memphis,
Tennessee 38125 by and between S.W. Office Partners I, L.P. (lessor) and Emhart
Industries, Inc. (lessee) dated as of March 3, 1995 (as amended).
2. Contract for lease of real estate in Amory, Mississippi located at
Highway 25 South pursuant to a Contract dated September 17, 1963 (as amended)
between the City of Amory (lessor), Monroe County and Emhart Industries, Inc.
(lessee).
3. Contract and Lease for 67,950 square feet of land in Amory,
Mississippi located at Highway 25 South dated July 1, 1976 (as amended) between
the City of Amory (lessor) and Emhart Industries, Inc. (lessee).
XI-1
<PAGE> 129
ATTACHMENT XII
TTSI FINANCIAL STATEMENTS
ATTACHED
XII-1
<PAGE> 130
ATTACHMENT XIII
CERTAIN ACTIVE EMPLOYEES
NONE
XIII-1
<PAGE> 131
ATTACHMENT XIV
TERMS OF STOCKHOLDERS' AND REGISTRATION RIGHTS AGREEMENTS
TRUE TEMPER SPORTS, INC.
SUMMARY TERMS
STOCKHOLDERS' AGREEMENT AND
REGISTRATION RIGHTS AGREEMENTS WITH
EMHART INDUSTRIES, INC.
Immediately after the consummation of the proposed recapitalization
(the "Recapitalization") of True Temper Sports, Inc. (the "Company"),
Cornerstone Equity Investors IV L.P. and/or its affiliates (collectively, "CEI")
and/or other investors (collectively with CEI, the "CEI Investors"), and Emhart
Industries, Inc. ("EII") shall collectively own all of the issued and
outstanding common stock of the Company. In connection with the foregoing the
Company, the CEI Investors and EII shall enter into a Stockholders Agreement
governing EII's rights and obligations as a stockholder in the Company after
completion of the Recapitalization which shall include the following terms:
1. Tag Along Right. If any one or more of the CEI Investors propose to
sell any common stock then held by the CEI Investors in one transaction or a
series of related transactions at any time after the six month anniversary of
closing, then such CEI Investor(s) shall not transfer such shares of voting
common stock unless EII is offered an equal opportunity to participate in such
transaction or transactions on a pro-rata basis and on terms substantially
identical to the terms (including price per share and type of consideration
paid) that such CEI Investor(s) transfer their shares of voting common stock of
the Company in such transaction or transactions; provided, however, that this
provision shall not apply in the event of (i) a transfer from any CEI Investor
to any other CEI Investor or to any Affiliate of any CEI Investor who agrees to
be bound by the terms of the Stockholders Agreement, or (ii) a transfer of the
Company's common stock pursuant to a registration statement filed with the
Securities and Exchange Commission (the "SEC").
2. Registration Rights and Lockup Agreement.
(a) Piggyback Registration Rights. If the Company files a
registration statement with the SEC for the sale or issuance of any of the
Company's common stock (other than pursuant to Form S-4 or S-8 or any similar
form), including a registration statement resulting from the exercise of demand
rights by any stockholder, then EII shall
XIV-1
<PAGE> 132
have the right to include any such common stock then owned by EII in such
registration statement; provided, however, in the event the offering includes
primary shares to be issued by the Company, such primary shares shall have
priority over shares to be sold by EII; provided, further, in the event the
offering includes secondary shares to be sold by stockholders of the Company,
such secondary shares shall have pro rata registration rights vis-a-vis shares
to be sold by EII.
(b) Lockup Agreement. If the Company consummates any
underwritten offering pursuant to a registration statement filed with the SEC,
then EII agrees to execute a lockup agreement prohibiting sales by EII of the
Company's equity securities for the seven days prior to and the 180-day period
beginning on the effective date of such underwritten offering (except as part of
such underwritten offering) provided that if any CEI Investor is subject to a
shorter lock-up period such shorter period shall also apply to EII.
3. Drag Along Rights. If holders of a majority of the voting capital
stock of the Company then outstanding approve the sale of the Company (whether
by merger, consolidation, sale of all or substantially all of its assets, sale
of all or a majority of the outstanding common stock or otherwise) to a
non-Affiliate of any CEI Investor, EII will consent to, vote for, participate in
and raise no objections against such sale provided such sale complies with all
Applicable Laws.
4. Restrictions on Transferability.
(a) EII shall not transfer any shares of preferred stock of
the Company (A) until the earlier of (x) the first day after the period
commencing on the closing date of the Recapitalization and ending on the day the
Company's financial statements are filed with the SEC for the first full fiscal
quarter after the Company closes on a registered offering of its equity or debt
securities or (y) the date two years after the date of the closing of the
Recapitalization and (B) except in compliance with applicable securities laws.
(b) EII shall not transfer any shares of common stock of the
Company prior to the date on which the Company's financial statements are filed
with the SEC for the first full fiscal quarter after the Company closes on a
registered offering of its equity or debt securities. Thereafter, EII may
transfer such shares upon the earlier of (x) the date on which the Company
closes on its initial public offering of equity securities, (y) the date two
years after the closing of the Recapitalization or (z) the first date on which
any CEI Investor sells any of its shares of common stock to a non-Affiliate of
any CEI Investor after the six month anniversary of the date of the closing of
the Recapitalization.
(c) Permitted transfers by EII will be subject to a right of
first offer to the Company and CEI in the case of common stock. Such right of
first offer shall terminate after consummation of an IPO. Prior to an IPO,
transfers of preferred stock and common stock are subject to the approval by the
Company of the purchaser, which approval will not be unreasonably withheld.
XIV-2
<PAGE> 133
ATTACHMENT XV
ASSIGNMENT OF U.S. COPYRIGHTS
WHEREAS, Emhart Inc., a Delaware corporation, having a place of
business at Drummond Plaza Office Park, 1423 Kirkwood Highway, Newark, Delaware
19711 ("Assignor"), has applied for and registered in the United States the
copyrights as listed on Exhibit A attached hereto and made a part hereof; and
WHEREAS, True Temper Sports, Inc. a Delaware corporation, having a
place of business at 8725 Tournament Drive, Suite 200, Memphis, Tennessee 38125
("Assignee"), desires to acquire said copyrights and the registrations and
applications thereof;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, said Assignor does hereby assign
unto said Assignee all its right, title and interest in and to the said
copyrights and the registrations and applications thereof, and the right to
recover for past infringement thereof.
AND, said Assignor hereby covenants that it has full right to convey
the entire interest herein assigned.
IN TESTIMONY WHEREOF, Assignor has executed this assignment by its
proper officers thereunto duly authorized.
EMHART INC.
By:________________________________
Title:_____________________________
STATE OF ______________________)
) ss:
COUNTY OF______________________)
Subscribed and sworn to before me this _____ day of ________________,
1998.
__________________________
Notary Public
My Commission Expires:
__________________________
XVI-1
<PAGE> 134
EXHIBIT A
COPYRIGHTS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
COPYRIGHT NUMBER DATE OF REGISTRATION
----------------------------------------------------------------------------
<S> <C>
A-478260 1973
----------------------------------------------------------------------------
A-568632 1974
----------------------------------------------------------------------------
</TABLE>
XVI-2
<PAGE> 1
Exhibit 2.2
AMENDMENT NO. 1
DATED AUGUST 1, 1998
TO
REORGANIZATION,
RECAPITALIZATION AND STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 29, 1998
BY AND BETWEEN
THE BLACK & DECKER CORPORATION,
TRUE TEMPER SPORTS, INC.
AND
TTSI LLC
<PAGE> 2
AMENDMENT NO. 1 TO
REORGANIZATION, RECAPITALIZATION AND
STOCK PURCHASE AGREEMENT
This Amendment No. 1 (this "Amendment") to Reorganization,
Recapitalization and Stock Purchase Agreement (together with the Exhibits,
Schedules and Attachments thereto, the "Agreement") is made as of the 1st day of
August 1998, by and among The Black & Decker Corporation, a Maryland corporation
("Parent"), True Temper Sports, Inc., a Delaware corporation ("TTSI"), and TTSI
LLC, a Delaware limited liability company ("Buyer").
W I T N E S E T H:
WHEREAS, Parent, TTSI and Buyer entered into the Agreement as of June
29, 1998; and
WHEREAS, Parent, TTSI and Buyer desire to amend and clarify certain
terms contained in the Agreement, all as more fully set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties contained herein, the parties agree as follows:
Section 1. Definitions. Capitalized terms used in but not defined in
this Amendment shall have the meanings specified in the Agreement.
Section 2. Amendment to Recitals. The sixth and seventh "WHEREAS"
clauses contained in the Agreement are hereby amended by deleting those clauses
in their entirety and replacing them with the following:
"WHEREAS, upon the terms and subject to the conditions set
forth in this Agreement, Parent desires to cause TTSI, and Buyer
desires to assist TTSI, to redeem a portion of the TTSI Common Stock
then owned by Emhart and a portion of the TTSI Common Stock then owned
by EII with promissory notes to be paid at Closing with the proceeds of
such borrowings;
WHEREAS, following such redemption, Buyer desires to purchase,
buy and acquire from EII and Emhart and Parent desires to cause EII and
Emhart to sell, transfer and convey to Buyer the Acquired Shares, and
Parent and Buyer desire to enter into certain agreements and
arrangements ancillary to such transactions; and"
Section 3. Amendment to ARTICLE II. Sections 2.01 through 2.04 of
ARTICLE II B TRANSACTIONS AND CLOSING of the Agreement are hereby amended by
deleting Section 2.01 through and including Section 2.04 in their entirety and
replacing them with the following:
<PAGE> 3
"Section 2.01 Reorganization of TTS Business. Upon the terms
and subject to the conditions set forth in this Agreement, the parties
agree that following the execution of this Agreement and prior to
consummation of the transactions contemplated by Sections 2.02 and
2.03, among other things:
(a) TTSI will file an Amended and Restated Certificate of
Incorporation consistent with the terms of this Agreement as agreed to
by Buyer and Parent;
(b) Parent will cause EII to contribute the Contributed Assets
to TTSI, free and clear of all Liens (other than Permitted Liens), and
TTSI will assume and agree to pay, satisfy and discharge all of the
Assumed Liabilities, all as contemplated by the Assignment and
Assumption Agreement;
(c) In exchange for the capital contribution contemplated by
Section 2.01(b), TTSI will issue 1,011.21 shares of TTSI Common Stock
and 368.75 shares of TTSI Preferred Stock to EII, which upon such
issuance shall be duly authorized, fully paid and non-assessable shares
of capital stock of TTSI;
(d) Parent will cause Emhart to sell, transfer and convey to
TTSI the Transferred Intellectual Property, all as contemplated by the
Intellectual Property Assignment Agreements;
(e) In exchange for the transfer of the Transferred
Intellectual Property contemplated by Section 2.01(d), TTSI will issue
6,000 shares of TTSI Common Stock and 881.25 shares of TTSI Preferred
Stock to Emhart, which upon such issuance shall be duly authorized,
fully paid and non-assessable shares of capital stock of TTSI;
(f) Parent (i) will cause TTSI to establish a branch or, at
the expense of TTSI, a subsidiary in each of the United Kingdom,
Australia and Japan and (ii) will cause each of Tucker Fasteners
Limited ("Tucker"), Black & Decker (Australasia) Pty. Limited ("B&D
Australasia") and Nippon Pop Rivets & Fasteners, Ltd. ("Nippon") to
contribute the assets and liabilities relating exclusively to the TTS
Business operations in the United Kingdom, Australia and Japan,
respectively, to TTSI; and
-2-
<PAGE> 4
(g) In exchange for the contributions contemplated by Section
2.01(f), TTSI will issue and deliver to each of Tucker, B&D Australasia
and Nippon a promissory note with a fixed interest rate equal to 7.5%
per annum payable in full at Closing with principal amounts equal to
(A) $3,860,000, (B) $1,936,024.05 and (C) $406,000, respectively, which
the parties agree is the net book value of the respective Contributed
Assets.
Section 2.02 Recapitalization of TTSI.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, the parties agree that following the execution of this
Agreement and immediately prior to Closing, among other things, Buyer
will use commercially reasonable best efforts to assist TTSI in
obtaining debt financing in an aggregate amount of not less than
$155,000,000, together with a revolving credit facility in the amount
of $20,000,000, in the manner contemplated by the Commitment Letters or
on other terms reasonably acceptable to Buyer, the proceeds of which
will be used to consummate the Redemptions and to pay off the
promissory notes contemplated by Section 2.01(g).
(b) Buyer may elect at its option to pursue an alternative
financing structure, provided that such structure does not result in
any incremental increase in costs to TTSI.
Section 2.03 Closing Transactions.
(a) Redemption of TTSI Shares. On and subject to the terms and
conditions set forth in this Agreement, immediately following the
consummation of the transactions contemplated by Section 2.02 and prior
to the Closing, TTSI shall:
(i) Redeem 5,818.60 shares of the issued and
outstanding TTSI Common Stock owned by Emhart by issuing a
promissory note to Emhart, on terms reasonably satisfactory to
Parent and Buyer, with a principal amount equal to
$112,747,535.88 to be paid at Closing with the proceeds of the
borrowings contemplated by Section 2.02; and
(ii) Redeem 1,274 shares of the issued and
outstanding TTSI Common Stock owned by EII by issuing a
promissory note to EII, on terms reasonably satisfactory to
Parent and Buyer, with a principal amount equal to
$24,686,412.66 to be paid at Closing with the proceeds of the
borrowings contemplated by Section 2.02.
-3-
<PAGE> 5
such that, immediately following the consummation of the transactions
contemplated by this Section 2.03(a), EII will own 737.21 shares of
TTSI Common Stock and 368.75 shares of TTSI Preferred Stock and Emhart
will own 181.40 shares of TTSI Common Stock and 881.25 shares of TTSI
Preferred Stock, which shares, in the aggregate, will constitute 100%
of the issued and outstanding capital stock of TTSI.
(b) Acquisition of Acquired Shares. On and subject to the
terms and conditions set forth in this Agreement, at the Closing:
(i) Parent shall cause (A) EII to sell, transfer and
convey to Buyer and Buyer's Permitted Assignees, free and
clear of all Liens (other than Permitted Liens) an aggregate
of 683.7468 shares of TTSI Common Stock and an aggregate of
293.75 shares of TTSI Preferred Stock and (B) Emhart to sell,
transfer and convey to Buyer and Buyer's Permitted Assignees,
free and clear of all Liens (other than Permitted Liens) an
aggregate of 181.40 shares of TTSI Common Stock and an
aggregate of 881.25 shares of TTSI Preferred Stock; and
(ii) In consideration for the transfer of the
Acquired Shares, Buyer and Buyer=s Permitted Assignees shall
make cash payments (A) to EII equalling $23,824,023.29 in the
aggregate, which constitutes $13,249,023.29 in respect of the
TTSI Common Stock and $10,575,000 in respect of the TTSI
Preferred Stock, by wire transfer of immediately available
funds to an account or accounts of EII designated by Parent at
least two Business Days prior to Closing and (B) to Emhart
equalling $35,240,004.13 in the aggregate, which constitutes
$3,515,004.13 in respect of the TTSI Common Stock and
$31,725,000 in respect of the TTSI Preferred Stock, by wire
transfer of immediately available funds to an account or
accounts of Emhart designated by Parent at least two Business
Days prior to Closing;
such that, immediately following consummation of the transactions
contemplated by this Section 2.03(b), EII will own 53.4632 shares of
TTSI Common Stock representing 5.82% of all the issued and outstanding
shares of TTSI Common Stock and 75 shares of TTSI Preferred Stock
representing 6.0% of all the issued and outstanding shares of TTSI
Preferred Stock and Buyer and Buyer's Permitted Assignees will own, in
the aggregate, 865.1468 shares of TTSI Common Stock representing 94.18%
of all the issued and outstanding shares of TTSI Common Stock and 1175
shares of TTSI Preferred Stock representing 94.0% of all the issued and
outstanding shares of TTSI Preferred Stock.
-4-
<PAGE> 6
(c) Consent and Waiver by Buyer. By execution and delivery of
this Agreement, Buyer hereby consents to and waives any rights in
respect of the redemption of TTSI Common Stock owned by EII or Emhart
contemplated by Section 2.03(a).
(d) Additional Closing Transactions. Upon the terms and
subject to the conditions set forth in this Agreement, the parties
agree that at the Closing, among other things:
(i) Parent or its Affiliates, as the case may be, and
TTSI shall execute and deliver the Services Agreement with
such additions, deletions and changes as may be agreed to by
Buyer and Parent;
(ii) TTSI, Buyer, Buyer's Permitted Assigns and EII
shall execute and deliver a Stockholders' and a Registration
Rights Agreements containing the provisions contemplated by
Attachment XIV;
(iii) TTSI shall pay off the promissory notes issued
to Tucker, B&D Australasia and Nippon pursuant to Section
2.01(g);
(iv) TTSI shall pay off the promissory notes issued
to each of EII and Emhart pursuant to Section 2.03(a).
Section 2.04 Section 338(h)(10) Election; Exchange Consideration.
(a) The parties agree to make an election under
Section 338(h)(10) of the Code (and any corresponding
elections under any applicable state, local, or foreign tax
law) with respect to the sale of the Acquired Shares by EII to
Buyer.
(b) The consideration to be paid to Parent and its
Affiliates in connection with the Contemplated Transaction
(the "Exchange Consideration") shall consist of the following:
(i) the aggregate amounts paid by TTSI to
pay off the promissory notes issued to redeem shares
of TTSI Common Stock and TTSI Preferred Stock
pursuant to Section 2.03(a);
-5-
<PAGE> 7
(ii) the aggregate amount paid by Buyer to
EII and Emhart in exchange for the Acquired Shares
pursuant to Section 2.03(b);
(iii) the aggregate amounts payable to
Tucker, B&D Australasia and Nippon pursuant to the
promissory notes to be delivered in accordance with
Section 2.01(g) (as so adjusted and together with the
amount contemplated by Section 2.04(b)(i) and
2.04(b)(ii) above, the "Adjusted Purchase Price");
and
(iv) the assumption by TTSI of the Assumed
Liabilities in accordance with the Transaction
Documents.
(c) The Exchange Consideration and each Annual Thiokol Payment
shall be allocated to and among the respective Contributed Assets and
Transferred Intellectual Property as set forth in Attachment IX to this
Agreement. Parent, TTSI and Buyer agree that the allocation of the
Exchange Consideration has been negotiated by them and is consistent
with the value of the Contributed Assets and the principles of Section
1060 of the Code and the regulations promulgated by the Internal
Revenue Service thereunder. Parent, TTSI and Buyer agree that they
shall use the allocation of the Exchange Consideration reflected in
Attachment IX to this Agreement in any Tax Returns or other reports
that deal with the Contemplated Transactions and are filed with any Tax
Authority and shall promptly prepare and timely file such reports and
information as may be required to report the allocation contemplated by
this Section 2.04(c)."
Section 4. Limited Amendment. Except as amended by this Amendment and
as the context may otherwise require to give effect to the intent and purposes
of this Amendment, the Agreement shall remain in full force and effect without
any other amendments or modifications.
Section 5. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given,
-6-
<PAGE> 8
if to Parent (or TTSI prior to Closing):
c/o The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
Attention: Senior Vice President and
Chief Financial Officer
Telecopy: (410) 716-3318
with a copy to:
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
Attention: Senior Vice President and
General Counsel
Telecopy: (410) 716-2660
and
Miles & Stockbridge P.C.
10 Light Street
Baltimore, Maryland 21202
Attention: Glenn C. Campbell
David A. Gibbons
Telecopy: (410) 385-3700
if to Buyer (or TTSI after Closing):
TTSI LLC
c/o Cornerstone Equity Investors, LLC
717 5th Avenue
Suite 1100
New York, New York 10022
Attention: Mr. Mark Rossi
Telecopy: (212) 826-6798
-7-
<PAGE> 9
with a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022
Attention: Frederick Tanne, Esquire
Telecopy: (212) 446-4900
or to such other address or telecopy number and with such other copies, as such
party may hereafter specify by notice to the other parties. Each such notice,
request or other communication shall be effective (i) if given by telecopy, when
such telecopy is transmitted to the telecopy number specified in this Section 5
and evidence of receipt is received or (ii) if given by any other means, upon
delivery or refusal of delivery at the address specified in this Section 5.
Section 6. Amendments; Waivers. Subject to the provisions of Section
9.04 of the Agreement, any provision of this Amendment may be amended or waived
prior to the Closing Date if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by Parent and Buyer, or in the
case of a waiver, by the party against whom the waiver is to be effective.
Section 7. Successors and Assigns. The provisions of this Amendment
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other party, provided the Buyer may assign its or
TTSI's rights hereunder to an agent for the financing sources in connection with
the Contemplated Transactions, as collateral security for TTSI's obligations,
and Buyer may assign its rights to purchase Acquired Shares to Permitted
Assignees.
Section 8. Entire Agreement. The Transaction Documents and any other
agreements contemplated thereby (including, to the extent contemplated herein,
the Confidentiality Agreement) as amended by this Amendment constitute the
entire agreement among the parties with respect to the subject matter of such
documents and supersede all prior agreements, understandings and negotiations,
both written and oral, between the parties with respect to the subject matter
thereof.
Section 9. Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Amendment or the Contemplated Transactions shall be brought in the
United States District Court for the District of Delaware (or, if subject matter
jurisdiction is unavailable, any of the state courts of the State of Delaware),
and each of the parties hereby consents to the exclusive jurisdiction of such
court (and of the appropriate appellate court) in any such suit, action or
proceeding and waives any objection to venue laid therein. Process in any such
suit, action or proceeding may be served on any party anywhere in the world,
whether within or without the State of Delaware. Without limiting the foregoing,
Parent, TTSI and
-8-
<PAGE> 10
Buyer agree that service of process upon such party at the address referred to
in Section 4 together with written notice of such service to such party, shall
be deemed effective service of process upon such party.
Section 10. Severability. Any provision of this Amendment that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of the this Amendment or affecting the
validity or enforceability of such provision in any other jurisdiction. To the
extent any provision of this Amendment is determined to be prohibited or
unenforceable in any jurisdiction Parent and Buyer agree to use reasonable
commercial efforts, and agree to cause the other Seller Companies and TTSI, as
the case may be, to use reasonable commercial efforts, to substitute one or more
valid, legal and enforceable provisions that, insofar as practicable implement
the purposes and intent of the prohibited or unenforceable provision.
Section 11. Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
IN WITNESS WHEREOF, the parties hereto caused this Amendment to be duly
executed by their respective authorized officers on the day and year first above
written.
THE BLACK & DECKER CORPORATION
By:__________________________________
Name: Stephen F. Reeves
Title: Vice President and Controller
TRUE TEMPER SPORTS, INC.
By:_______________________________
Name: Stephen F. Reeves
Title: Vice President
TTSI LLC
By:________________________________
Name: Tyler J. Wolfram
Title: Managing Director
-9-
<PAGE> 1
EXHIBIT 2.3
AMENDMENT NO. 2
DATED AS OF SEPTEMBER 30, 1998
TO
REORGANIZATION,
RECAPITALIZATION AND STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 29, 1998
BY AND BETWEEN
THE BLACK & DECKER CORPORATION,
TRUE TEMPER CORPORATION
(FORMERLY TRUE TEMPER SPORTS, INC.)
AND
TRUE TEMPER SPORTS, LLC
(FORMERLY TTSI LLC)
<PAGE> 2
AMENDMENT NO. 2 TO
REORGANIZATION, RECAPITALIZATION AND
STOCK PURCHASE AGREEMENT
This Amendment No. 2 (this "Amendment") to Reorganization,
Recapitalization and Stock Purchase Agreement (together with the Exhibits,
Schedules and Attachments thereto, as amended by Amendment No. 1 thereto dated
as of August 1, 1998, the "Agreement") is made as of the ____ day of September
1998, by and among The Black & Decker Corporation, a Maryland corporation
("Parent"), True Temper Corporation, a Delaware corporation ("TTSI", formerly
known as True Temper Sports, Inc.), and True Temper Sports, LLC, a Delaware
limited liability company ("Buyer", formerly known as TTSI LLC).
W I T N E S E T H:
WHEREAS, Parent, TTSI and Buyer entered into the Reorganization,
Recapitalization and Stock Purchase Agreement as of June 29, 1998, and Amendment
No. 1 thereto as of August 1, 1998; and
WHEREAS, Parent, TTSI and Buyer desire to amend and clarify certain terms
contained in the Agreement, all as more fully set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of the
parties contained herein, the parties agree as follows:
Section 1. Definitions. Capitalized terms used in but not defined in this
Amendment shall have the meanings specified in the Agreement.
Section 2. Amendment to Section 2.01.
(a) Section 2.01(c) is amended by deleting the number "368.75" and
inserting in lieu thereof "3,687,500".
(b) Section 2.01(e) is amended by deleting Section 2.01(e) in its
entirety and inserting in its place and stead the following:
(e) In exchange for the transfer of the Transferred Intellectual
Property contemplated by Section 2.01(d), TTSI will issue to
Emhart 4,709.82 shares of TTSI Common Stock, 8,812,500 shares
of TTSI Preferred Stock, which shares of TTSI Common Stock and
TTSI Preferred Stock shall upon such issuance be duly
authorized, fully paid and non-assessable shares of capital
Stock of TTSI, and $25,000,000 aggregate initial principal
amount of senior increasing rate notes of TTSI pursuant to a
Securities Purchase Agreement in the form attached hereto as
Exhibit A, which senior
<PAGE> 3
increasing rate notes shall include warrants to purchase
shares of TTSI Common Stock under certain circumstances;
Section 3. Amendment to Section 2.03.
(a) Section 2.03(a)(i) is amended by deleting the number "5,818.60" and
inserting in lieu thereof "4,528.42", and is further amended by deleting the
amount "$112,747,535.88" and inserting in lieu thereof "$87,747,535.88".
(b) Section 2.03(b)(i) is amended by deleting the number "293.75" and
inserting in lieu thereof "2,937,500", and is further amended by deleting the
number "881.25" and inserting in lieu thereof "8,812,500".
(c) The last unnumbered clause of Section 2.03(b) is amended by
deleting the number "75" and inserting in lieu thereof "750,000", and is further
amended by deleting the number "1175" and inserting in lieu thereof
"11,175,000".
Section 4. Stock Split. At the request of the Buyer, TTSI has effected a 10,000
to 1 split of the TTSI Common Stock by means of a stock dividend (the "Stock
Split") immediately upon the completion of the redemption described in Section
2.03(a) of the Agreement. The parties agree that the numbers of shares of TTSI
Common Stock set forth in the Agreement are before giving effect to the Stock
Split and, with respect to all transactions occurring after the Stock Split, all
such numbers of shares of TTSI Common Stock shall be adjusted to reflect the
Stock Split
Section 5. Amendment to Section D.07(d). Section D.07(d) is hereby amended by
deleting the phrase "an interest rate of 5.75%" at the end of the second
sentence and inserting in its place and stead "the actuarial assumptions used by
the PBGC pursuant to Section 1.414(l)-1(b)(5)(ii) of the U.S. Department of
Labor Regulations, provided that to the extent that the total of the Transfer
Amount under this Section D.07(d) plus the Transfer Amount under Section D.08(d)
is more than $40,000 less than the amount of the total of such Transfer Amounts
had they been determined using an interest rate of 5.75%, an amount equal to
such deficit in excess of $40,000 shall be added to the Transfer Amount under
this Section D.07(d)".
Section 6. Amendment to Section D.08(d). Section D.08(d) is hereby amended by
deleting the phrase "an interest rate of 5.75%" at the end of the second
sentence and inserting in its place and stead "the actuarial assumptions used by
the PBGC pursuant to Section 1.414(l)-1(b)(5)(ii) of the U.S. Department of
Labor Regulations".
Section 7. Amendment to Article III of Exhibit D. Article III of the Exhibit D
of the Agreement is amended by deleting Sections D.13 and D.14 and substituting
therefore the following:
D.13. Parent agrees, subject to Applicable Law, to cause its
appropriate Affiliate to continue to employ the Non U.S. Transferred Employees
for a temporary period (the "Transition Period") ending on the earlier of (i)
the date Buyer or TTSI elects to employ the Non U.S.
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<PAGE> 4
Transferred Employees, or (ii) the close of business on September 30, 1999.
Although the Non U.S. Transferred Employees will remain employed by Parent or
its Affiliate during the Transition Period, such persons will be working on the
business of the Buyer or TTSI, and will report to and be subject to the control
and supervision of Buyer and TTSI. Parent agrees that neither Parent nor any of
its Affiliates will, without a consent of Buyer or TTSI (which consent will not
be unreasonably withheld) alter any terms and conditions of or terminate the
employment of any Non U.S. Transferred Employee during the Transition Period.
Buyer and/or TTSI shall reimburse Parent or its designated Affiliate within
seven days of receipt of an invoice for any fees, costs, taxes or expenses
reasonably and properly incurred by Parent or its Affiliate, as a result of
employing and of providing and administering benefits to the Non U.S.
Transferred Employees and their dependents and beneficiaries during the
Transition Period.
D. 14. Notwithstanding any contrary provision of the Transaction
Documents, effective upon the close of the Transition Period, the employment of
all Non U.S. Transferred Employees shall be transferred to Buyer or TTSI such
that the employment of such person shall be considered continuous employment
under Applicable Law. Buyer and TTSI shall ensure that such employment shall be
on the same terms and conditions as those under which such persons are employed
immediately prior to the close of the Transition Period. Buyer and TTSI shall
assume any obligations under any agreement or Applicable Law relating to the
terms and conditions of employment of any Non U.S. Transferred Employees, and
Buyer and TTSI shall be responsible for any liability or obligations arising out
of or pertaining to the termination employment of, hiring of or failure or
refusal to hire any Non U.S. Transferred Employees on or after the close of the
Transition Period. In addition to the indemnification provisions otherwise
provided in the Transaction Documents, Buyer and TTSI agree to indemnify Parent
and its Affiliates and their respective directors, officers, employees and
agents against, and agree to hold them harmless from, any and all Damages
arising out of or pertaining to the employment of the Non U.S. Transferred
Employees during the Transition Period or by Buyer or TTSI thereafter, any
actions or omission taken or made by any Non U.S. Transferred Employee during
the Transition Period and thereafter, and the termination of employment of,
hiring of or failure to or refusal to hire, any Non U. S. Transferred Employee
on or after the close of the Transition Period.
Section 8. Limited Amendment. Except as amended by this Amendment and as the
context may otherwise require to give effect to the intent and purposes of this
Amendment, the Agreement shall remain in full force and effect without any other
amendments or modifications.
Section 9. Notices. All notices, requests and other communications to any party
hereunder shall be in writing (including telecopy or similar writing) and shall
be given,
if to Parent (or TTSI prior to Closing):
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<PAGE> 5
c/o The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
Attention: Senior Vice President and
Chief Financial Officer
Telecopy: (410) 716-3318
with a copy to:
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
Attention: Senior Vice President and
General Counsel
Telecopy: (410) 716-2660
and
Miles & Stockbridge P.C.
10 Light Street
Baltimore, Maryland 21202
Attention: Glenn C. Campbell
David A. Gibbons
Telecopy: (410) 385-3700
if to Buyer (or TTSI after Closing):
TTSI LLC
c/o Cornerstone Equity Investors, LLC
717 5th Avenue
Suite 1100
New York, New York 10022
Attention: Mr. Mark Rossi
Telecopy: (212) 826-6798
with a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022
Attention: Frederick Tanne, Esquire
Telecopy: (212) 446-4900
or to such other address or telecopy number and with such other copies, as such
party may hereafter
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<PAGE> 6
specify by notice to the other parties. Each such notice, request or other
communication shall be effective (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this Section 7 and evidence of
receipt is received or (ii) if given by any other means, upon delivery or
refusal of delivery at the address specified in this Section 7.
Section 10. Amendments; Waivers. Subject to the provisions of Section 9.04 of
the Agreement, any provision of this Amendment may be amended or waived prior to
the Closing Date if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Parent and Buyer, or in the case of a
waiver, by the party against whom the waiver is to be effective.
Section 11. Successors and Assigns. The provisions of this Amendment shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other party, provided the Buyer may assign its or TTSI's rights
hereunder to an agent for the financing sources in connection with the
Contemplated Transactions, as collateral security for TTSI's obligations, and
Buyer may assign its rights to purchase Acquired Shares to Permitted Assignees.
Section 12. Entire Agreement. The Transaction Documents and any other agreements
contemplated thereby (including, to the extent contemplated herein, the
Confidentiality Agreement) as amended by this Amendment constitute the entire
agreement among the parties with respect to the subject matter of such documents
and supersede all prior agreements, understandings and negotiations, both
written and oral, between the parties with respect to the subject matter
thereof.
Section 13. Jurisdiction. Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Amendment or the Contemplated Transactions shall be brought in the United States
District Court for the District of Delaware (or, if subject matter jurisdiction
is unavailable, any of the state courts of the State of Delaware), and each of
the parties hereby consents to the exclusive jurisdiction of such court (and of
the appropriate appellate court) in any such suit, action or proceeding and
waives any objection to venue laid therein. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the State of Delaware. Without limiting the foregoing, Parent, TTSI and
Buyer agree that service of process upon such party at the address referred to
in Section 4 together with written notice of such service to such party, shall
be deemed effective service of process upon such party.
Section 14. Severability. Any provision of this Amendment that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of the this Amendment or affecting the validity or
enforceability of such provision in any other jurisdiction. To the extent any
provision of this Amendment is determined to be prohibited or unenforceable in
any jurisdiction Parent and Buyer agree to use reasonable commercial efforts,
and agree to cause the other Seller Companies and TTSI, as the case may be, to
use reasonable commercial efforts, to substitute one or more valid, legal and
enforceable provisions that, insofar as practicable implement the purposes and
intent of the
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<PAGE> 7
prohibited or unenforceable provision.
Section 15. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
IN WITNESS WHEREOF, the parties hereto caused this Amendment to be duly executed
by their respective authorized officers on the day and year first above written.
THE BLACK & DECKER CORPORATION
By:__________________________________
Name: Charles E. Fenton
Title: Senior Vice President and General
Counsel
TRUE TEMPER CORPORATION
By:__________________________________
Name: Charles E. Fenton
Title: Vice President
TRUE TEMPER SPORTS, LLC
By:__________________________________
Name: Tyler J. Wolfram
Title: Managing Director
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<PAGE> 1
Exhibit 2.4
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement (this "Agreement") is made as
of the 30th day of September 1998, by and between True Temper Corporation
(formerly known as True Temper Sports, Inc.), a Delaware corporation
("Transferor"), and True Temper Sports, Inc. (formerly known as True Temper
Sports Subsidiary, Inc.), a Delaware corporation and wholly owned subsidiary of
Transferor ("Transferee").
WITNESSETH:
WHEREAS, The Black & Decker Corporation, a Maryland corporation
("BDC"), True Temper Sports, Inc., a Delaware corporation ("TTSI"), and TTSI
LLC, a Delaware limited liability company ("LLC") have entered into a
Reorganization, Recapitalization and Stock Purchase Agreement, dated as of June
29, 1998, as amended to date (as so amended, the "Recapitalization Agreement"),
pursuant to which, among other things, BDC has agreed to sell and to cause its
Subsidiaries to sell, and LLC has agreed to buy and to cause its Subsidiaries to
buy, the TTS Business;
WHEREAS pursuant to that certain Assignment and Assumption Agreement
(the "TTC Agreement"), dated as of September 30, 1998, by and between Emhart
Industries, Inc., a Connecticut corporation and an indirect, wholly owned
subsidiary of BDC ("EII"), and Transferor, EII contributed, transferred,
conveyed, assigned and delivered to Transferor, free and clear of all Liens
other than Permitted Liens, all of EII's right, title and interest in and to the
Contributed Assets, which assignment is effective at 12:01 a.m. (Eastern time)
on the date hereof;
WHEREAS, pursuant to the TTC Agreement, Transferor assumed and agreed
to pay, discharge and satisfy the Assumed Liabilities, which assumption is
effective at 12:01 am on the date hereof;
WHEREAS, Transferor and Transferee desire to enter into this Agreement
to effect the contribution of the Contributed Assets by the Transferor to the
Transferee, and in consideration for the contribution of the Contributed Assets
the issuance by Transferee to Transferor of (i) 100 shares of the Common Stock
of Transferee and (ii) a Note, in the form attached as Exhibit A in the
aggregate principal amount of $133,616,000;
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Capitalized terms used in this Agreement but
not defined herein shall have the meanings given to them in the Recapitalization
Agreement.
ARTICLE II
CONTRIBUTED ASSETS
Section 2.01. Transfer of Assets. Effective upon the full execution of
this Agreement, upon the terms and subject to the conditions set forth in this
Agreement, Transferor contributes, transfers, conveys, assigns and delivers to
Transferee, and Transferee receives, acquires and accepts from Transferor all of
Transferor's right, title and interest in and to the Contributed Assets.
Effective upon the full execution of this Agreement, upon the terms and subject
to the conditions set forth in this Agreement, the TTC Agreement and the
Recapitalization Agreement, Transferee accepts all risk of loss with respect to
the Contributed Assets.
Section 2.02. Assignment of Contracts and Rights.
(a) Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
Contributed Asset or any claim or right or any benefit arising thereunder or
resulting therefrom if an attempted assignment thereof, without the consent of a
third party thereto, would constitute a breach or other contravention thereof,
be ineffective with respect to any party thereto or in any way adversely affect
the rights of Transferee or Transferor, or any Affiliates of Transferee or
Transferor thereunder.
(b) With respect to any Contract or any claim, right or
benefit arising thereunder or resulting therefrom, promptly after the date
hereof, to the extent necessary and reasonably requested by Transferee, the
parties hereto will use reasonable commercial efforts to obtain the written
consent of the other parties to any such Contract for the assignment thereof to
Transferee, or written confirmation from such parties reasonably satisfactory in
form and substance to Transferee and Transferor confirming that such consent is
not required.
(c) If such consent, waiver or confirmation is not obtained
with respect to any such Contract, as among the parties hereto, Transferee will
obtain through a subcontracting arrangement or otherwise, and subject to
Applicable Law and the terms of such Contact, the claims, rights and benefits of
Transferor and, to the extent possible, assume the obligations under such
Contracts in accordance with this Agreement, and Transferor will enforce at the
request of and for the benefit of Transferee, with Transferee assuming
Transferor's obligations, any and all claims, rights and benefits of Transferor
against a third party thereto arising from any such Contract (including the
right to elect to terminate such Contract in accordance with the terms thereof
upon the request of Transferee).
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<PAGE> 3
ARTICLE III
ASSUMED LIABILITIES
Section 3.01. Assumption of Liabilities. Effective upon the full
execution of this Agreement, upon the terms and subject to the conditions of
this Agreement, Transferee assumes and agrees to pay, discharge and satisfy the
Assumed Liabilities.
ARTICLE IV
MISCELLANEOUS
Section 4.01. Construction. As used in this Agreement, the plural shall
include the singular and the singular shall include the plural. With respect to
each and every term and condition of this Agreement, the parties hereto
understand and agree that the same have or has been mutually negotiated,
prepared and drafted, and that if at any time the parties desire or are required
to interpret or construe any such term or condition or any agreement or
instrument subject hereto, no consideration shall be given to the issue of which
party actually prepared, drafted or requested any term or condition of this
Agreement.
Section 4.02. Counterparts; Effectiveness. This Agreement may be signed
in counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party has received a counterpart hereof signed
by the other party hereto.
Section 4.03. Captions. The captions used in this Agreement are included
for convenience of reference only and shall be ignored in the construction or
interpretation hereof.
Section 4.04. Severability. Any provision of this Agreement that is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement. To the extent any provision of this Agreement is determined to
be prohibited or unenforceable Transferor and Transferee agree to use reasonable
commercial efforts to substitute one or more valid, legal and enforceable
provisions that, insofar as practicable implement the purposes and intent of the
prohibited or unenforceable provision.
Section 4.05. Governing Law. This Agreement shall be construed and
interpreted in accordance with and governed by the laws of the State of Delaware
(without regard to the choice of law provisions thereof).
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<PAGE> 4
IN WITNESS WHEREOF, the parties hereto here caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TRUE TEMPER CORPORATION
By: SEAL
-----------------------------
Name:
Title:
TRUE TEMPER SPORTS, INC.
By: SEAL
-----------------------------
Name:
Title:
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<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TRUE TEMPER SPORTS, INC.
True Temper Sports, Inc. a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is True Temper Sports, Inc. True Temper Sports,
Inc. was originally incorporated as "Motion Technology, Inc.," and the original
Certificate of Incorporation of the corporation was filed with the Secretary of
State of Delaware on October 22, 1971. Motion Technology, Inc. changed its name
to "USM Community Realty Corporation" on January 19, 1976, and in turn changed
its name to "True Temper Sports, Inc." on June 5, 1986. Upon the filing with and
acceptance by the Secretary of State of Delaware of this Amended and Restated
Certificate of Incorporation, the name of the Corporation shall be changed to
"True Temper Corporation."
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the State
of Delaware, this Amended and Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of Incorporation
of the corporation.
3. The text of the Amended and Restated Certificate of Incorporation as
heretofore amended or supplemented is hereby restated and further amended to
read in its entirety as follows:
FIRST: The name of the Corporation is True Temper Corporation (the
"Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801, in the County of Newcastle, and the registered agent at such
address is The Corporation Trust Company.
THIRD: The nature of the business of the Corporation and its objects and
purposes are to have and exercise all the powers conferred by the laws of the
State of Delaware upon corporations formed under the General Corporation Law of
such State.
<PAGE> 2
FOURTH: The Corporation is authorized to issue 12,500,000 shares of
Senior Preferred Stock, par value $0.01 per share (the "SENIOR PREFERRED
STOCK"), and 11,602,000 shares of Common Stock, par value $0.01 per share (the
"COMMON STOCK").
As used in this Article Fourth, "COMMON STOCK" means the
Common Stock and any capital stock of any class of the Corporation hereafter
authorized which is not limited to a fixed sum or percentage of par value in
respect of the rights of the holders thereof to participate in dividends or in
the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation.
Set forth below is a statement of the preferences, limitations
and relative rights of each class and series of capital stock of the
Corporation. Unless otherwise indicated, all cross-references in each
subdivision of this Article Fourth refer to other paragraphs in such
subdivision.
I. PREFERRED STOCK
1. RANK. The Senior Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding-up and dissolution
of the Corporation, rank senior to all classes of Common Stock of the
Corporation and each other class of capital stock or series of preferred stock
of the Corporation hereafter created by the Board of Directors.
2. DIVIDENDS.
A. GENERAL OBLIGATION. When and as declared by the Board of Directors
and to the extent permitted under the General Corporation Law of the State of
Delaware, the Corporation shall pay preferential dividends to the holders of the
Senior Preferred Stock as provided in this paragraph 2. Except as otherwise
provided herein, dividends on each share of the Senior Preferred Stock (a
"SHARE") shall accrue and compound on a quarterly basis at the rate of 13.0% per
annum of the sum of $3.60 (the "STATED VALUE") thereof plus all accumulated and
unpaid dividends thereon, from and including the date of issuance of such Share
to and including the date on which the Stated Value of such Share (together with
all accumulated and accrued and unpaid dividends thereon) is paid. Such
dividends shall accrue whether or not they have been declared and whether or not
there are profits, surplus or other funds of the Corporation legally available
for the payment of dividends at such time. The date on which the Corporation
initially issues any Share shall be deemed to be its "DATE OF ISSUANCE"
regardless of the number of times transfer of such Share is made on the stock
records maintained by or for the Corporation and regardless of the number of
certificates that may be issued to evidence such Share.
B. DIVIDEND REFERENCE DATES. To the extent not paid on September 30,
December 31, March 31, and June 30 of each year, beginning December 31, 1998
(the "DIVIDEND REFERENCE DATES"), all dividends which have accrued on each Share
outstanding during the three-month period (or other period in the case of the
initial Dividend Reference Date) ending upon each such Dividend Reference Date
shall be accumulated and shall remain accumulated dividends
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<PAGE> 3
with respect to such Share until paid. All dividends paid on a Share shall be
applied first to and to the extent of unpaid dividends that have not been
accumulated and then to and to the extent of accumulated dividends, if any.
C. DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. Except as otherwise
provided herein, if at any time the Corporation pays less than the total amount
of unpaid dividends accrued on all Shares then outstanding, such payment shall
be allocated ratably among the holders of Senior Preferred Stock, based on the
number of Shares held by each such holder relative to the number of Shares held
by all holders.
3. REDEMPTION. The shares of Senior Preferred Stock shall be redeemable
as follows:
A. MANDATORY REDEMPTION OF SENIOR PREFERRED STOCK. Not less than 20
days prior to the consummation of any proposed Fundamental Change (as defined in
subparagraph 3E) or a public offering (a "PUBLIC OFFERING") of the Corporation's
equity securities which is registered under the Securities Act of 1933, as
amended, and immediately upon obtaining knowledge of any proposed or actual
Change in Ownership (as defined in subparagraph 3E), the Corporation shall give
to each holder of Shares written notice of such Fundamental Change, Public
Offering or Change in Ownership, setting forth in reasonable detail the terms
and anticipated date of consummation thereof. If within 15 days after receipt of
such notice the holders of record of at least a majority of the outstanding
Shares shall elect, by written notice to the Corporation (a "REDEMPTION
NOTICE"), to have all (but not less than all) of the outstanding Shares
redeemed, the Corporation shall redeem the same (in the manner and with the
effect provided in subparagraphs 3C and 3D below) not later than, in the case of
a Fundamental Change, the day prior to the effective date of consummation
thereof, in the case of a Public Offering contemporaneous with the closing
thereof and, in the case of a Change in Ownership, five days after the
Corporation's receipt of the related Redemption Notice. A Redemption Notice
shall be given by mail, postage prepaid, to the Corporation and shall state that
the holders of record of at least a majority of the outstanding Shares request
that a redemption be made pursuant to this subparagraph 3A, and shall specify
the number of Shares to be redeemed, the applicable redemption price (as set
forth in subparagraph 3C) and the place and date of such redemption, which date
(the "MANDATORY REDEMPTION DATE") shall not be a day on which banks in the City
of New York are required or authorized to close. The vote or written consent of
the holders of record of at least a majority of the outstanding Shares to
require the redemption of the Senior Preferred Stock in accordance with this
subparagraph 3A shall be binding upon all of the holders of outstanding Shares.
If, following delivery of any Redemption Notice, the proposed Fundamental
Change, Public Offering or Change in Ownership does not occur, any election
pursuant to this paragraph 3A shall be deemed to have been automatically
rescinded.
B. OPTIONAL REDEMPTION. The Corporation may at any time and from time
to time redeem all or any portion of the then outstanding Shares (in the manner
and with the effect provided in subparagraph 3C and 3D below) by providing the
holders thereof at least 15 days prior written notice of such redemption (an
"OPTIONAL REDEMPTION NOTICE"), which notice shall specify the number of Shares
to be redeemed, the redemption price (as set forth in paragraph 3C) and the
place and date of such redemption which date (the "OPTIONAL REDEMPTION DATE" and
together with the Mandatory Redemption Date, the "REDEMPTION DATE) shall not be
a day on which banks in the
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<PAGE> 4
City of New York are required or authorized to close. Any optional redemption
shall be made pro rata among all the holders of Shares based on the number of
Shares held.
C. REDEMPTION PRICE. Any redemption of the Senior Preferred Stock
pursuant to subparagraph 3A or 3B shall be at a price per share (the "REDEMPTION
PRICE") equal to the sum of the Stated Value per share plus an amount per Share
equal to accumulated, accrued and declared but unpaid dividends thereon to the
Redemption Date (the "ACCRUED DIVIDENDS"). If a Redemption Notice shall have
been duly given to the Corporation pursuant to subparagraph 3A or an Optional
Redemption Notice shall have been given by the Corporation pursuant to
subparagraph 3B and if on or before the applicable Redemption Date the funds
necessary for redemption shall have been set aside so as to be and continue to
be available therefor, then, notwithstanding that any certificate for Shares to
be redeemed shall not have been surrendered for cancellation, after the close of
business on such Redemption Date, the Shares so called for redemption shall no
longer be deemed outstanding and all rights with respect to such Shares shall,
forthwith after the close of business on the Redemption Date, cease, except only
the right of the holders thereof to receive, upon presentation of the
certificate representing Shares so called for redemption, the applicable
redemption price therefor, without interest thereon.
D. REDEEMED OR OTHERWISE ACQUIRED SHARES TO BE RETIRED. Any Shares
redeemed pursuant to this paragraph 3 or otherwise acquired by the Corporation
in any manner whatsoever shall be permanently retired and shall not under any
circumstances be reissued, and the Corporation may from time to time take such
appropriate corporate action as may be necessary to reduce the number of
authorized Shares accordingly.
E. DEFINITIONS. "FUNDAMENTAL CHANGE" means any (i) sale or transfer
of more than 51% of the assets of the Corporation and its subsidiaries on a
consolidated basis (measured by either book value in accordance with generally
accepted accounting principles consistently applied or fair market value
determined in the reasonable good faith judgment of the Corporation's board of
directors) in any transaction or series of transactions (other than sales in the
ordinary course of business) or (ii) merger or consolidation to which the
Corporation is a party, other than a merger in which the Corporation is the
surviving corporation and which will not result in more than 49% of the
Corporation's outstanding capital stock possessing the voting power (under
ordinary circumstances) to elect a majority of the Corporation's board of
directors being owned of record or beneficially by persons or entities other
than the holders of such capital stock immediately prior to such merger. "CHANGE
IN OWNERSHIP" means any sale or issuance (or series of sales or issuances) of
Common Stock or the right to acquire Common Stock by the Corporation or any
holders thereof which results in any person or entity or group of affiliated
persons or entities, other than the owners of Common Stock or the right to
acquire Common Stock as of the date of the original issuance of the Senior
Preferred Stock, owning and/or having the right to acquire more than 50% of the
Common Stock on a fully diluted basis at the time of such sale or issuance or
series of sales or issuances, other than in connection with the transactions
contemplated to occur pursuant to the Reorganization, Recapitalization and Stock
Purchase Agreement dated as of June 29, 1998, by and between The Black & Decker
Corporation, the Corporation and TTSI LLC, as amended by Amendment No.1 thereto
dated as of August 1, 1998 (as amended from time to time, the
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<PAGE> 5
"Recapitalization Agreement") on the Closing Date (as such term is defined in
the Recapitalization Agreement) or a public offering of the Common Stock.
F. PRIORITY OF SENIOR PREFERRED STOCK.
With respect to any redemption contemplated by this paragraph 3,
the right of the holders of Senior Preferred Stock to receive payment of the
Redemption Price shall be in all manner prior to and senior to the right of the
holders of Common Stock to receive payment with respect to such Common Stock. So
long as any Senior Preferred Stock remains outstanding, neither the Corporation
nor any subsidiary of the Corporation shall redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities. For purposes hereof,
"JUNIOR SECURITIES" shall mean any capital stock or other equity securities of
the Corporation other than the Senior Preferred Stock; provided that the
Corporation may redeem or repurchase Junior Securities held by members of the
Corporation's management in connection with the termination of any such
manager's employment with the Corporation.
4. LIQUIDATION.
The rights of the holders of Senior Preferred Stock upon any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, shall be senior in right with respect to the holders of all Junior
Securities such that the holders of the shares of Senior Preferred Stock, before
any distribution or payment is made upon any Junior Securities, shall be paid an
amount in cash equal to the Stated Value per Share plus an amount per Share
equal to all Accrued Dividends thereon to the date of such liquidation,
dissolution or winding up (together with the Stated Value, the "SENIOR PREFERRED
PREFERENTIAL PAYMENT AMOUNTS").
If, upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Senior Preferred Stock shall be insufficient to permit
payment to such holders of the Senior Preferred Preferential Payment Amounts
then the entire assets of the Corporation to be so distributed shall be
distributed ratably among all the holders of Senior Preferred Stock based on the
number of Shares held.
5. VOTING RIGHTS.
The holders of Senior Preferred Stock shall not be entitled to vote
on any matter submitted to the shareholders for a vote other than as expressly
provided by law.
II. COMMON STOCK
1. DIVIDENDS. The holders of shares of Common Stock shall be entitled to
receive such dividends as from time to time may be declared by the Board of
Directors of the Corporation, subject to the provisions of subdivision I of this
Article Fourth with respect to the rights of holders of the Senior Preferred
Stock.
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2. LIQUIDATION. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after payment in full of the
Senior Preferred Preferential Payment Amounts shall have been made to the
holders of all Shares, the holders of Common Stock shall share ratably based
upon the number of shares of Common Stock held by them in all remaining assets
of the Corporation available for distribution to its shareholders.
3. VOTING RIGHTS. The shares of Common Stock shall entitle the holders
thereof to one vote for each share upon all matters upon which shareholders have
the right to vote.
FIFTH:
I. DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the General Corporation Law of the State of Delaware is
amended after approval by the shareholders of this Article Fifth to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of the State of Delaware, as so amended.
Any repeal or modification of the foregoing paragraph by the
shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
II. INDEMNIFICATION
1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party or
is threatened to be made a party to or is otherwise involved (including
involvement as a witness) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "PROCEEDING"), by
reason of the fact that he or she is or was a director or officer of the
Corporation or, while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "INDEMNITEE"), whether the basis of such proceeding is alleged
action in an official capacity as a director or officer or in any other capacity
while serving as a director or officer, shall be indemnified and held harmless
by the Corporation to the fullest extent authorized by the General Corporation
Law of the State of Delaware, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than permitted
prior thereto), against all expense, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director, officer, employee
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or agent and shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that, except as provided in paragraph 2
hereof with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation. The right
to indemnification conferred in this paragraph shall be a contract right and
shall include the right to be paid by the Corporation the expenses incurred in
connection with any such proceeding in advance of its final disposition
(hereinafter an "ADVANCEMENT OF EXPENSES"); provided, however, that, if and to
the extent that the General Corporation Law of the State of Delaware requires,
an advancement of expenses incurred by an indemnitee in his or her capacity in
which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an "UNDERTAKING"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "FINAL ADJUDICATION") that such
indemnitee is not entitled to be indemnified for such expenses under this
paragraph or otherwise.
2. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim for indemnification
(including the advancement of expenses) under paragraph 1 of this subdivision is
not paid in full by the Corporation within 45 days after a written claim has
been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be 20 days,
the indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that the indemnitee has not met
the applicable standard of conduct set forth in the General Corporation Law of
the State of Delaware. In any suit by the Corporation to recover an advancement
of expenses pursuant to the terms of an undertaking the Corporation shall be
entitled to recover such expenses upon a final adjudication that the indemnitee
has not met the applicable standard of conduct set forth in the General
Corporation Law of the State of Delaware. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
shareholders) to have made a determination that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the General Corporation Law of the
State of Delaware, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its shareholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this paragraph or
otherwise shall be on the Corporation.
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3. SERVICE FOR SUBSIDIARIES. Any person serving as a director, officer,
employee or agent of another corporation, partnership, joint venture or other
enterprise, at least 50% of whose equity interests are owned by the Corporation
(hereinafter a "SUBSIDIARY"), shall be conclusively presumed to be serving in
such capacity at the request of the Corporation.
4. RELIANCE. Persons who after the date of the adoption of this
provision become or remain directors or officers of the Corporation or who,
while a director or officer of the Corporation, become or remain a director,
officer, employee or agent of a subsidiary, shall be conclusively presumed to
have relied on the rights to indemnity and advancement of expenses contained in
this Article Fifth in entering into or continuing such service. The rights to
indemnification and to the advancement of expenses conferred in this subdivision
shall apply to claims made against an indemnitee arising out of acts or
omissions which occurred or occur both prior and subsequent to the adoption
hereof.
5. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and to the
advancement of expenses conferred in this subdivision shall not be exclusive of
any other right which any person may have or hereafter acquire under this
Certificate of Incorporation or under any statute, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
6. INSURANCE. The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of the State of Delaware.
7. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses,
to any employee or agent of the Corporation to the fullest extent of the
provisions of this subdivision with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
SIXTH: The following provisions are inserted for the regulation and
conduct of the business and affairs of the Corporation and are in furtherance of
and not in limitation or exclusion of any powers conferred upon it by statute:
1. PREEMPTIVE RIGHTS. No shareholder shall have pursuant to this
Certificate of Incorporation preemptive rights to acquire unissued shares of
capital stock of the Corporation.
2. CUMULATIVE VOTING. There shall be no cumulative voting in election of
directors.
3. BOARD OF DIRECTORS POWER AS TO BYLAWS; ELECTION. The Board of
Directors, by vote of a majority of the whole Board, shall have the power to
adopt, make, amend, alter or repeal the Bylaws of the Corporation, but any bylaw
adopted by the Board may be amended or repealed by the shareholders. Election of
Directors need not be by written ballot unless the Bylaws of the Corporation so
provide.
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4. MEETINGS OF SHAREHOLDERS, PRESENCE. Participation in meetings of
shareholders by means of a conference telephone or similar communication
equipment by means of which all persons participating in the meeting can hear
each other at the same time, shall constitute presence in person at a meeting. A
special meeting of the shareholders of the Corporation may be called, in
accordance with the notice provisions of the Corporation's Bylaws, by any
shareholder or group of shareholders holding shares of the Corporation that
represent not less than 30% of the votes that will be entitled to be cast at the
meeting so called.
SEVENTH: The number of directors constituting the Corporation's Board of
Directors shall be determined as set forth in the Bylaws of the Corporation.
EIGHTH: Any provision which is required or permitted by any section of
Title 8 of the General Corporation Law of the State of Delaware to be stated in
the ByLaws may instead be stated in the Certificate of Incorporation.
NINTH: The Corporation is to have perpetual existence.
TENTH: The Corporation elects not to be governed by the provisions of
Section 203 of the General Corporation Law of the State of Delaware.
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<PAGE> 10
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed by Charles E. Fenton, its authorized officer, this
___ day of September, 1998.
TRUE TEMPER SPORTS, INC.
By:_________________________________
Name: Charles E. Fenton
Title: Vice-President
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<PAGE> 1
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
TRUE TEMPER CORPORATION
ARTICLE I
Stockholders
SECTION l. Annual Meeting.
The annual meeting of the stockholders for the election of directors
and for the transaction of general business shall be held each year on a date
and at a time fixed by resolution of the Board of Directors. The annual meeting
shall be open for the transaction of any business within the powers of the
Corporation without special notice of such business, except when special notice
is specifically required by statute or by the Certificate of Incorporation.
Failure to hold an annual meeting at the designated time shall not invalidate
the Corporation's existence or affect any otherwise valid corporate acts.
SECTION 2. Special Meetings.
Special meetings of the stockholders may be called at any time for
any purpose or purposes by the Chairman of the Board, by the President, or by a
majority of the Board of Directors, and shall be called forthwith by the
President, by the Secretary, or by any director of the Corporation upon the
written request of the holders of at least 30% of all the shares of stock
outstanding and entitled to vote on the business to be transacted at the special
meeting. Such written request shall state the purpose or purposes of the meeting
and the matters proposed to be acted on at the meeting. However called, notice
of the meeting shall be given to each stockholder in accordance with Section 4
of this Article I and shall also state the purpose or purposes of the meeting.
No business other than that stated in such notice shall be transacted at any
special meeting.
SECTION 3. Place of Meetings.
All meetings of stockholders shall be held at the principal offices
of the Corporation, or at such other location within or without the State of
Delaware as the Board of Directors may provide in the notice of the meeting.
SECTION 4. Notice of Meetings.
Written or printed notice of each meeting of the stockholders shall
be delivered to each stockholder by leaving such notice with the stockholder or
at the stockholder's residence or usual place of business, or by mailing it,
postage prepaid and addressed to the stockholder at the
<PAGE> 2
stockholder's address as it appears upon the records of the Corporation. Such
notice shall be delivered or mailed not more than 60 nor less than 10 days
before the meeting, and shall state the place, day, and hour at which the
meeting is to be held. No notice of any meeting of the stockholders, or the
purpose thereof, need be given to any stockholder who attends the meeting in
person or by proxy, or to any stockholder who, in writing executed and filed
with the records of the meeting either before or after the holding thereof,
waives such notice.
SECTION 5. Quorum.
At any meeting of stockholders, the presence in person or by proxy of
the holders of record of a majority of the shares of stock having voting power
upon the matter in question shall constitute a quorum with respect to such
matter. In the absence of a quorum, the stockholders entitled to vote who shall
be present in person or by proxy at any meeting (or adjournment thereof) may, by
a majority vote of those present and without further notice, adjourn the meeting
from time to time, but not for a period of more than 30 days at any one time,
until a quorum shall attend. At any adjourned meeting at which a quorum shall be
present, any business may be transacted that could have been transacted if the
meeting had been held as originally scheduled. Participation in meetings by
means of a conference telephone or similar communication equipment by means of
which all persons participating in the meeting can hear each other at the same
time shall constitute presence in person at the meeting.
SECTION 6. Conduct of Meetings.
Meetings of stockholders shall be presided over by the Chairman of
the Board or, in his or her absence, by the President, or, if none of such
officers is present, by a chairman to be elected at the meeting by the vote of
stockholders holding a majority of the voting power of the shares of stock
present in person or by proxy at such meeting. The Secretary of the Corporation
shall act as secretary of any meetings of the stockholders, and in his or her
absence, the records of the proceedings shall be kept and authenticated by such
other officer as may be appointed for that purpose at the meeting by the
presiding officer.
SECTION 7. Proxies.
Stockholders may vote either in person or by proxy, but no proxy
which is dated more than three years before the meeting at which it is offered
shall be accepted unless such proxy shall on its face name a longer period for
which it is to remain in force. Such proxy need not be sealed, witnessed or
acknowledged. Proxies shall be filed with the Secretary of the Corporation at or
before the meeting.
SECTION 8. Voting.
At all meetings of stockholders, each stockholder entitled to vote
shall be entitled, unless otherwise provided in the Certificate of
Incorporation, to one vote for each share of stock having voting power upon the
matter in question and registered in such stockholder's name upon the books of
the Corporation on the date fixed as the date of record for the determination of
stockholders
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entitled to vote at such meeting. However, no share shall be entitled to be
voted if any installment payable thereon is overdue and unpaid. Except as
otherwise provided by statute, the Certificate of Incorporation or these bylaws,
(1) the affirmative vote of the majority of shares present in person or by proxy
and entitled to vote on the matter in question shall be the act of the
stockholders in all matters other than the election of directors; (2) directors
shall be elected by a plurality of the votes of the shares present in person or
by proxy and entitled to vote on the election of directors; and (3) where a
separate vote by a class or classes of stock is required, the affirmative vote
of the majority of shares of such class or classes present, in person or by
proxy, shall be the act of such class. If the officer of the Corporation
presiding over such meeting shall so determine, a vote by ballot may be taken
upon any election or matter, and the vote shall be so taken upon the request of
the holders of 25% of the stock present and entitled to vote on such election or
matter.
SECTION 9. Informal Action by Stockholders.
Any action required or permitted to be taken at a meeting of the
stockholders may be taken without a meeting 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.
SECTION 10. List of Stockholders.
Prior to each meeting of the stockholders, the Secretary of the
Corporation shall prepare, as of the record date fixed by the Board of Directors
with respect to such meeting, a full and accurate list of all the stockholders
entitled to vote at such meeting, arranged in alphabetical order, showing the
address of each stockholder and indicating the number of shares registered in
the name of each. The Secretary shall be responsible for the production of that
list at the meeting, and the list shall be open to the examination of any
stockholder as required by statute.
ARTICLE II
Board of Directors
SECTION l. Powers.
The property, business, and affairs of the Corporation shall be
managed by the Board of Directors of the Corporation. The Board of Directors may
exercise all the powers of the Corporation, except those conferred upon or
reserved to the stockholders by statute, by the Certificate of Incorporation or
by these bylaws. The Board of Directors shall keep minutes of each of its
meetings and a full account of all of its transactions.
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SECTION 2. Number of Directors.
The number of directors of the Corporation shall be three or such
other number not less than three nor more than fifteen as may from time to time
be determined by a vote of a majority of the entire Board of Directors. The
tenure of office of a director may not be affected by any change in the number
of directors. Directors need not be stockholders.
SECTION 3. Election.
Except as hereinafter provided, the members of the Board of Directors
shall be elected each year at the annual meeting of stockholders by the vote of
the holders of record of a plurality of the shares of stock present in person or
by proxy and entitled to vote for the election of directors. Each director shall
hold office until the next annual meeting of stockholders held after his or her
election and until his or her death, or until he or she shall have resigned, or
shall have been removed as hereinafter provided.
SECTION 4. Removal.
At a duly called meeting of the stockholders at which a quorum is
present, the stockholders may, by vote of the holders of a majority of the votes
entitled to elect directors, remove with or without cause any director or
directors from office, and may elect a successor or successors to fill any
resulting vacancy for the remainder of the term of the director so removed.
SECTION 5. Vacancies.
If any director shall die or resign, or if the stockholders shall
remove any director without appointing a successor to fill the remaining term,
that vacancy may be filled by the vote of a majority of the remaining members of
the Board of Directors, although such majority may be less than a quorum.
Vacancies in the Board of Directors created by an increase in the number of
directors may be filled by the vote of a majority of the entire Board of
Directors as constituted prior to such increase. Subject to Section 4 of this
Article II, a director elected by the Board of Directors to fill any vacancy,
however created, shall hold office until the next annual meeting of stockholders
and until his or her successor shall have been duly elected and qualified.
SECTION 6. Meetings.
Immediately after each meeting of stockholders at which a Board of
Directors shall have been elected, the Board of Directors shall meet, without
notice, for the election of officers of the Corporation and for the transaction
of other business. Other regular meetings of the Board of Directors shall be
held at such times as may be designated by the Chairman of the Board. Special
meetings of the Board of Directors may be called at any time by the Chairman of
the Board or by any two or more directors. Regular and special meetings of the
Board of Directors may be held at such place, in or out of the State of
Delaware, as the Board may from time to time determine. Any one or more of the
directors may attend any meeting of the Board of Directors by means of
teleconference, telephone or other automated conference device or equipment by
means of which
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all persons participating at the meeting can hear each other at the same time
and such participants shall constitute attendees at the meeting in person.
SECTION 7. Notice of Meetings.
Except for the meeting immediately following the annual meeting of
stockholders, notice of the place, day and hour of a regular meeting of the
Board of Directors shall be given in writing to each director not less than
three days prior to such meeting and delivered to the director or to his or her
residence or usual place of business, or by mailing it, postage prepaid and
addressed to the director at his or her address as it appears upon the records
of the Corporation. Notice of special meetings may be given the same way, or may
be given personally, by telephone, or by telegraph message addressed to the
director at his or her address as it appears upon the records of the
Corporation, not less than one day prior to the meeting. Unless required by
statute, these bylaws, or by resolution of the Board of Directors, no notice of
any meeting of the Board of Directors need state the business to be transacted
at the meeting. No notice of any meeting of the Board of Directors need be given
to any director who attends, or to any director who, in writing executed and
filed with the records of the meeting either before or after the holding
thereof, waives such notice.
SECTION 8. Quorum.
A majority of the Board of Directors shall constitute a quorum for
the transaction of business at meetings of the Board of Directors. Except as
otherwise provided by statute, by the Certificate of Incorporation, or by these
bylaws, the vote of a majority of such quorum at a duly constituted meeting
shall be sufficient to pass any measure, and such decision shall be the decision
of the Board of Directors. In the absence of a quorum, the directors present, by
majority vote and without further notice, may adjourn the meeting from time to
time until a quorum shall be present. The Board of Directors may also take
action or make decisions by any other method which may be permitted by statute,
by the Certificate of Incorporation, or by these bylaws, including by a written
consent executed by all directors.
SECTION 9. Presumption of Assent.
A director of the Corporation who is present at a meeting of the
Board of Directors at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless such director announces his
or her dissent at the meeting, and the dissent is entered in the minutes of the
meeting, or he or she files the written dissent to such action before the
meeting adjourns with the person acting as the secretary of the meeting, or he
or she forwards the written dissent within 24 hours after the meeting is
adjourned by registered or certified mail to the Secretary of the Corporation.
The right to dissent does not apply to a director who voted in favor of the
action or who failed to make his or her dissent known at the meeting. A director
may abstain from voting on any matter before the meeting by stating that he or
she is so abstaining at the time the vote is taken and by causing the abstention
to be recorded or stated in writing in the same manner as provided above for a
dissent.
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SECTION 10. Informal Action by Directors.
Any action required or permitted to be taken at a meeting of the
directors may be taken without a meeting if a consent in writing, setting forth
the action, shall be signed by all of the directors entitled to vote on the
matter.
SECTION 11. Compensation.
Each director shall be entitled to receive such remuneration as may
be fixed from time to time by the Board of Directors. However, no director who
receives a salary as an officer or employee of the Corporation shall receive any
remuneration as a director or as a member of any committee of the Board of
Directors. Each director may also receive reimbursement for the reasonable
expenses he or she incurs in attending the meetings of the Board of Directors,
the meetings of any committee thereof, or otherwise in connection with his
attention to the affairs of the Corporation.
SECTION 12. Boards of Subsidiaries.
The number of directors and the persons who shall serve as directors
with respect to each subsidiary of the Corporation shall be determined by the
vote of a majority of all serving directors.
ARTICLE III
Committees
SECTION 1. Executive Committee.
The Board of Directors, by resolution adopted by a majority of the
entire Board of Directors, may provide for an Executive Committee. If provision
is made for an Executive Committee, the members thereof shall be elected by the
Board of Directors from their own members to serve during the pleasure of the
Board of Directors. The Executive Committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
over business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but the Executive
Committee shall not have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation
under Sections 251, 252, 254, 255, 256, 257, 258, 263 or 264 of the Delaware
General Corporation Law, recommending to the stockholders the sale, lease or
exchange of all or substantially all the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending
these bylaws; and unless the resolution so provides, the Executive Committee
shall not have the power or authority to declare a dividend, to authorize the
issuance of stock, or to adopt a certificate of ownership and merger pursuant to
Section 253 of the Delaware General Corporation Law. All meetings of the
Executive
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Committee shall be held at such place in or out of the State of Delaware as the
Executive Committee may from time to time determine. All action taken by the
Executive Committee shall be reported to the Board of Directors at its meeting
next succeeding such action, and shall be subject to revision and alteration by
the Board, provided that no rights of third parties shall be affected by any
such revision or alteration. Such delegation of authority to the Executive
Committee shall not relieve the Board of Directors or any director of any
responsibility imposed by law or by the Certificate of Incorporation.
SECTION 2. Other Committees.
From time to time the Board of Directors by the affirmative vote of a
majority of the members of the entire Board of Directors may by resolution
provide for and appoint any other committee or committees to have such powers
and perform such duties as may be assigned to it by the Board of Directors. The
appointment of a committee of the Board of Directors and the delegation of
authority to such committee shall not relieve the Board of Directors or any
director of any responsibility imposed by law or by the Certificate of
Incorporation.
ARTICLE IV
Officers
SECTION l. Election, Tenure, and Compensation.
The Board of Directors shall elect annually at its first meeting
following the annual meeting of stockholders a Chairman of the Board from among
the members of the Board of Directors, and a President, a Secretary, and a
Treasurer, who need not be directors. The Board of Directors may also elect one
or more Vice Presidents, and such other officers with such powers and duties as
the Board may from time to time designate for the proper conduct of the business
of the Corporation, none of whom need be directors. Each officer shall be
elected by a majority vote of the entire Board of Directors and shall hold
office until the first Board of Directors meeting following the next annual
meeting of stockholders and thereafter until his or her successor is duly
elected and qualified, or until his or her death, resignation, or removal. The
Board of Directors shall have power to fix the compensation of all officers of
the Corporation.
SECTION 2. Chairman of the Board.
The Chairman of the Board shall preside at all meetings of
stockholders and of the Board of Directors at which he or she shall be present.
The Chairman of the Board shall serve on the Executive Committee if one is
provided, and have such other powers and perform such other duties as from time
to time may be assigned by the Board of Directors.
SECTION 3. President; Chief Executive Officer.
Unless otherwise determined by the Board of Directors, the President
shall be the Chief Executive Officer of the Corporation and, subject to the
control of the Board of Directors, shall
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<PAGE> 8
have general charge and supervision of the Corporation's business, affairs, and
properties. The President, or the Chief Executive Officer if they shall not be
the same person, shall have authority to sign and execute, in the name of the
Corporation, all authorized deeds, mortgages, bonds, contracts or other
instruments. The President, or the Chief Executive Officer if they shall not be
the same person, may sign, with the Secretary, an Assistant Secretary, the
Treasurer or an Assistant Treasurer, certificates of stock of the Corporation.
In the absence of the Chairman of the Board, the President shall preside at
meetings of stockholders and, if he or she is a director, at meetings of the
Board of Directors. In general, the President shall perform all the duties
ordinarily incident to the office of a president of a corporation, and such
other duties as, from time to time, may be assigned by the Board of Directors.
SECTION 4. Vice Presidents.
Each Vice President, which shall include any Executive Vice President
or Senior Vice President, shall have the power to sign and execute, unless
otherwise provided by resolution of the Board of Directors, all authorized
contracts or other obligations in the name of the Corporation in the ordinary
course of business, and, with the Secretary, an Assistant Secretary, the
Treasurer, or an Assistant Treasurer, may sign certificates of stock of the
Corporation. At the request of the President or in his or her absence or during
his or her inability to act, the Vice President or Vice Presidents shall perform
the duties and exercise the functions of the President, and when so acting shall
have the powers of the President. If there be more than one Vice President, the
Board of Directors may determine which one or more of the Vice Presidents shall
perform any of such duties or exercise any of such functions, or if such
determination is not made by the Board of Directors, the President may make such
determination. The Vice President or Vice Presidents shall have such other
powers and perform such other duties as may be assigned by the Board of
Directors or the President.
SECTION 5. Secretary.
The Secretary shall keep the minutes of the meetings of the
stockholders and of the Board of Directors, including all the votes taken at
such meetings, and record them in books provided for that purpose. The Secretary
shall see that all notices are duly given in accordance with the provisions of
these bylaws or as required by statute. The Secretary shall be the custodian of
the records and of the corporate seal of the Corporation, and shall see that the
corporate seal is affixed to all documents, the execution of which on behalf of
the Corporation under its seal is duly authorized, and when so affixed may
attest the same. The Secretary may sign with the President or a Vice President,
certificates of stock of the Corporation. In general, he or she shall perform
all duties ordinarily incident to the office of a secretary of a corporation,
and such other duties as, from time to time, may be assigned by the Board of
Directors or by the President.
SECTION 6. Treasurer.
The Treasurer shall have charge of and be responsible for all funds,
securities, receipts and disbursements of the Corporation, and shall deposit or
cause to be deposited, in the name of the Corporation, all moneys or other
valuable effects in such banks, trust companies, or
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<PAGE> 9
depositories as may be designated by the Board of Directors. The Treasurer shall
maintain full and accurate accounts of all assets, liabilities and transactions
of the Corporation and shall render to the President and the members of the
Board of Directors at regular meetings of the Board, or whenever they may
require it, an account of all his or her transactions as Treasurer and of the
financial condition of the Corporation. In general, the Treasurer shall perform
all the duties ordinarily incident to the office of a treasurer of a
corporation, and such other duties as, from time to time, may be assigned by the
Board of Directors or by the President. The Treasurer shall give the Corporation
a bond, if required by the Board of Directors, in a sum, and with one or more
sureties, satisfactory to the Board of Directors, for the faithful performance
of the duties of his or her office and for the restoration to the Corporation in
case of his or her death, resignation, retirement or removal from office of all
Corporation books, papers, vouchers, moneys, and other properties of whatever
kind in his or her possession or under his or her control.
SECTION 7. Subordinate Officers.
The subordinate officers shall consist of such assistant officers as
may be deemed desirable and as may be elected by a majority of the members of
the Board of Directors. Each such subordinate officer shall hold office for such
duties as the Board of Directors may prescribe.
SECTION 8. Officers Holding Two or More Offices.
Any two or more of the above named offices, except those of President
and Vice President, may be held by the same person, but no officer shall
execute, acknowledge or verify any instrument in more than one capacity, if such
instrument be required by statute, by the Certificate of Incorporation, by these
bylaws, or by resolution of the Board of Directors, to be executed,
acknowledged, or verified by two or more officers.
SECTION 9. Removal and Vacancies.
Any officer of the Corporation may be removed, with or without cause,
by a vote of a majority of the entire Board of Directors. A vacancy in any
office because of removal, resignation, death, or any other cause may be filled
for the unexpired portion of the term by election of the Board of Directors at
any regular or special meeting.
ARTICLE V
Stock
SECTION l. Certificates.
Each stockholder shall be entitled to a certificate or certificates
which shall represent and certify the number and kind of shares of stock owned
by the stockholder in the Corporation for which full payment has been made. Such
certificates shall be signed by the Chairman of the Board, the President or a
Vice President and countersigned by the Secretary or Treasurer or any Assistant
Secretary or Assistant Treasurer of the Corporation, and there shall be
impressed thereon the seal
-9-
<PAGE> 10
of the Corporation. A certificate shall be deemed to be so signed and sealed
whether the required signatures be manual or facsimile signatures and whether
the seal be a facsimile seal or any other form of seal. In case any officer of
the Corporation who has signed any certificate ceases to be an officer of the
Corporation, whether because of death, resignation or otherwise, before such
certificate is issued, the certificate may nevertheless be issued and delivered
by the Corporation as if the officer had not ceased to be such officer as of the
date of its issue.
SECTION 2. Transfer of Shares.
Shares of stock shall be transferable only on the books of the
Corporation by the holder thereof, in person or by duly authorized agent, upon
the surrender of the certificate representing the shares to be transferred,
properly endorsed. The Board of Directors shall have power and authority to make
such other rules and regulations concerning the issue, transfer and registration
of certificates of stock as it may deem expedient.
SECTION 3. New Certificates.
In case any certificate of stock is alleged to have been lost,
stolen, mutilated or destroyed, the Board of Directors may authorize the issue
of a new certificate in place thereof upon such terms and conditions as it may
deem advisable. The Board of Directors may, in its discretion, further require
the owner of such certificate or the owner's duly authorized agent to give bond
with sufficient surety to the Corporation to indemnify it against any loss or
claim which may arise by reason of the issue of a certificate in the place of
one reportedly lost, stolen, or destroyed.
SECTION 4. Record Dates.
The Board of Directors may fix, in advance, a date as the record date
for the purpose of determining those stockholders who shall be entitled to
notice of, or to vote at, any meeting of stockholders, or for the purpose of
determining those stockholders who shall be entitled to receive payment of any
dividend or the allotment of any rights, or for the purpose of making any other
proper determination with respect to stockholders. Such date, in any case, shall
be not more than 40 days, and in the case of a meeting of stockholders, not less
than 10 days, prior to the date on which the particular action, requiring such
determination of stockholders, is to be taken. In lieu of fixing a record date,
the applicable provisions of Section 213(b) of the Delaware General Corporation
Law or any successor provision shall govern.
SECTION 5. Annual Reports.
The President of the Corporation shall annually cause to be prepared
a full and correct statement of the affairs of the Corporation, including a
balance sheet and a financial statement of operations for the preceding fiscal
year. These statements shall be submitted at the annual meeting of stockholders
and, within 20 days after the meeting, shall be placed on file at the
Corporation's principal offices.
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<PAGE> 11
ARTICLE VI
Dividends and Finance
SECTION l. Dividends.
Subject to any conditions and limitations contained in the
Certificate of Incorporation or statute, including the rights, if any, of
holders of preferred stock, the Board of Directors may in its discretion declare
what, if any, dividends shall be paid from the surplus or from the net profits
of the Corporation, the date when such dividends shall be payable, and the date
for the determination of holders of record to whom such dividends shall be
payable.
SECTION 2. Depositories.
The Board of Directors from time to time shall designate one or more
banks or trust companies as depositories of the Corporation and shall designate
those officers and agents who shall have the authority to deposit corporate
funds in such depositories. It shall also designate those officers and agents
who shall have authority to withdraw from time to time any or all of the funds
of the Corporation so deposited upon checks, drafts, or orders for the payment
of money, notices and other evidences of indebtedness, drawn against the account
and issued in the name of the Corporation. The signatures of such officers or
agents may be made by manual or facsimile signature. No check or order for the
payment of money shall be invalidated because a person whose signature appears
thereon has ceased to be an officer or agent of the Corporation prior to the
time of payment of such check or order by any such depository.
SECTION 3. Corporate Obligations.
No loans shall be contracted on behalf of the Corporation and no
evidences of indebtedness or guaranties of the obligations of others shall be
issued in the name of the Corporation unless authorized by a resolution of the
Board of Directors. Such authority may be either general or specific. When duly
authorized, all loans, promissory notes, acceptances, other evidences of
indebtedness and guaranties shall be signed by the Chairman, the Chief Executive
Officer, the President or a Vice President and countersigned by the Secretary or
an Assistant Secretary or by the Treasurer or an Assistant Treasurer.
SECTION 4. Fiscal Year.
Unless otherwise determined by the Board of Directors, the fiscal
year of the Corporation shall begin on the first day of January in each year and
end at the close of business on the last day of December in each year.
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<PAGE> 12
ARTICLE VII
Books and Records
SECTION 1. Books and Records.
The Corporation shall maintain a stock ledger which shall contain the
name and address of each stockholder and the number of shares of stock of the
Corporation which the stockholder holds. The ledger shall be kept at the
principal offices of the Corporation. Except to the extent required by law to be
kept at the principal offices of the Corporation in Delaware, all books,
accounts, and records of the Corporation shall be kept and maintained by the
Secretary at the principal offices of the Corporation.
SECTION 2. Inspection Right.
Except as otherwise provided by statute or by the Certificate of
Incorporation, the Board of Directors shall determine whether and to what extent
the books, accounts, and records of the Corporation, or any of them, shall be
open to the inspection of stockholders. No stockholder shall have any right to
inspect any book, account, document or record of the Corporation except as
conferred by statute, by the Certificate of Incorporation, or by resolution of
the stockholders or the Board of Directors.
ARTICLE VIII
Seal
The seal of the Corporation shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed, affixed, reproduced or otherwise.
ARTICLE IX
Indemnification
The Corporation shall indemnify the directors and officers of the
Corporation to the extent provided in the Certificate of Incorporation.
ARTICLE X
Amendment of Bylaws
The Board of Directors, by vote of a majority of the whole Board,
shall have the power to adopt, make, amend, alter and repeal these bylaws or any
provision thereof, but any bylaw adopted by the Board of Directors may be
amended or repealed by the stockholders.
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<PAGE> 1
Exhibit 4.1
EXECUTION COPY
TRUE TEMPER SPORTS, INC.
SERIES A AND SERIES B
10 7/8% SENIOR SUBORDINATED NOTES DUE 2008
INDENTURE
Dated as of November 23, 1998
United States Trust Company of New York
Trustee
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
<S> <C>
310(a)(1)...............................................................................................7.10
(a)(2) .................................................................................................7.10
(a)(3)...................................................................................................N.A.
(a)(4)...................................................................................................N.A.
(a)(5)..................................................................................................7.10
(i)(b)..................................................................................................7.10
(ii)(c)..................................................................................................N.A.
311(a)..................................................................................................7.11
(b) ....................................................................................................7.11
(iii)(c).................................................................................................N.A.
312(a)..................................................................................................2.05
(b).................................................................................................. 11.03
(iv)(c)................................................................................................11.03
313(a)..................................................................................................7.06
(b)(1).................................................................................................10.03
(b)(2)..................................................................................................7.07
(v)(c)..................................................................................................7.06; 11.02
(vi)(d).................................................................................................7.06
314(a)..................................................................................................4.03; 11.02
(c)(1).................................................................................................11.04
(c)(2).................................................................................................11.04
(c)(3)..................................................................................................N.A.
(vii)(e)...............................................................................................11.05
(f) ....................................................................................................NA
315(a)..................................................................................................7.01
(b) ....................................................................................................7.05, 11.02
(A)(c)..................................................................................................7.01
(d) ....................................................................................................7.01
(e) ....................................................................................................6.11
316(a)(last sentence)...................................................................................2.09
(a)(1)(A)...............................................................................................6.05
(a)(1)(B)...............................................................................................6.04
(a)(2)..................................................................................................N.A.
(b) ....................................................................................................6.07
(B)(c)..................................................................................................2.12
317(a)(1)...............................................................................................6.08
(a)(2)..................................................................................................6.09
(b) ....................................................................................................2.04
318(a).................................................................................................11.01
(b) .....................................................................................................N.A.
(c) ...................................................................................................11.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE..........................................................1
SECTION 1.01. DEFINITIONS.........................................................................................1
SECTION 1.02. OTHER DEFINITIONS..................................................................................18
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT..................................................19
SECTION 1.04. RULES OF CONSTRUCTION..............................................................................19
ARTICLE 2. THE NOTES..........................................................................................20
SECTION 2.01. FORM AND DATING....................................................................................20
SECTION 2.02. EXECUTION AND AUTHENTICATION.......................................................................20
SECTION 2.03. REGISTRAR AND PAYING AGENT.........................................................................21
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST................................................................21
SECTION 2.05. HOLDER LISTS.......................................................................................22
SECTION 2.06. TRANSFER AND EXCHANGE..............................................................................22
SECTION 2.07. REPLACEMENT NOTES..................................................................................34
SECTION 2.08. OUTSTANDING NOTES..................................................................................34
SECTION 2.09. TREASURY NOTES.....................................................................................34
SECTION 2.10. TEMPORARY NOTES....................................................................................35
SECTION 2.11. CANCELLATION.......................................................................................35
SECTION 2.12. DEFAULTED INTEREST.................................................................................35
SECTION 2.13. CUSIP NUMBERS......................................................................................35
ARTICLE 3. REDEMPTION AND PREPAYMENT..........................................................................36
SECTION 3.01. NOTICES TO TRUSTEE.................................................................................36
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED..................................................................36
SECTION 3.03. NOTICE OF REDEMPTION...............................................................................36
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.....................................................................37
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE........................................................................37
SECTION 3.06. NOTES REDEEMED IN PART.............................................................................38
SECTION 3.07. OPTIONAL REDEMPTION................................................................................38
SECTION 3.08. MANDATORY REDEMPTION...............................................................................39
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS................................................39
ARTICLE 4. COVENANTS..........................................................................................41
SECTION 4.01. PAYMENT OF NOTES...................................................................................41
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY....................................................................41
SECTION 4.03. REPORTS............................................................................................42
SECTION 4.04. COMPLIANCE CERTIFICATE.............................................................................42
SECTION 4.05. TAXES..............................................................................................43
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.....................................................................43
</TABLE>
i
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<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 4.07. RESTRICTED PAYMENTS................................................................................43
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.....................................46
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.........................................47
SECTION 4.10. ASSET SALES........................................................................................49
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.......................................................................50
SECTION 4.12. LIENS..............................................................................................51
SECTION 4.13. CORPORATE EXISTENCE................................................................................51
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.........................................................52
SECTION 4.15. ANTI-LAYERING......................................................................................53
SECTION 4.16. SALE AND LEASEBACK TRANSACTIONS....................................................................53
SECTION 4.17. LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS.............................................53
SECTION 4.18. ADDITIONAL GUARANTEES..............................................................................54
SECTION 4.19. BUSINESS ACTIVITIES................................................................................54
ARTICLE 5. SUCCESSORS.........................................................................................54
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS...........................................................54
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED..................................................................55
ARTICLE 6. DEFAULTS AND REMEDIES..............................................................................55
SECTION 6.01. EVENTS OF DEFAULT..................................................................................55
SECTION 6.02. ACCELERATION.......................................................................................57
SECTION 6.03. OTHER REMEDIES.....................................................................................58
SECTION 6.04. WAIVER OF PAST DEFAULTS............................................................................58
SECTION 6.05. CONTROL BY MAJORITY................................................................................58
SECTION 6.06. LIMITATION ON SUITS................................................................................59
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT......................................................59
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.........................................................................59
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM...................................................................60
SECTION 6.10. PRIORITIES.........................................................................................60
SECTION 6.11. UNDERTAKING FOR COSTS..............................................................................61
ARTICLE 7. TRUSTEE ...........................................................................................61
SECTION 7.01. DUTIES OF TRUSTEE..................................................................................61
SECTION 7.02. RIGHTS OF TRUSTEE..................................................................................62
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.......................................................................63
SECTION 7.04. TRUSTEE'S DISCLAIMER...............................................................................63
SECTION 7.05. NOTICE OF DEFAULTS.................................................................................63
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.........................................................63
SECTION 7.07. COMPENSATION AND INDEMNITY.........................................................................64
SECTION 7.08. REPLACEMENT OF TRUSTEE.............................................................................64
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC...................................................................65
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION......................................................................66
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY..................................................66
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE...........................................................66
</TABLE>
ii
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<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE...........................................66
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.....................................................................66
SECTION 8.03. COVENANT DEFEASANCE................................................................................67
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.........................................................67
SECTION 8.05. DEPOSITED MONEY AND CASH EQUIVALENTS TO BE HELD IN TRUST; OTHER MISCELLANEOUS
PROVISIONS...................................................................................68
SECTION 8.06. REPAYMENT TO COMPANY...............................................................................69
SECTION 8.07. REINSTATEMENT......................................................................................69
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER...................................................................70
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES................................................................70
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES...................................................................70
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT................................................................72
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS..................................................................72
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES...................................................................72
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC....................................................................72
ARTICLE 10. SUBORDINATION.....................................................................................73
SECTION 10.01. AGREEMENT TO SUBORDINATE..........................................................................73
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY..............................................................73
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR DEBT.................................................................73
SECTION 10.04. ACCELERATION OF SECURITIES........................................................................74
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER...............................................................75
SECTION 10.06. NOTICE BY COMPANY.................................................................................75
SECTION 10.07. SUBROGATION.......................................................................................75
SECTION 10.08. RELATIVE RIGHTS...................................................................................75
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY......................................................76
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE..........................................................76
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT................................................................76
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.............................................................77
SECTION 10.13. AMENDMENTS........................................................................................77
ARTICLE 11. MISCELLANEOUS.....................................................................................77
SECTION 11.01. TRUST INDENTURE ACT CONTROLS......................................................................77
SECTION 11.02. NOTICES...........................................................................................77
SECTION 11.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.....................................79
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT................................................79
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.....................................................79
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.......................................................................79
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS..........................80
SECTION 11.08. GOVERNING LAW.....................................................................................80
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.....................................................80
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 11.10. SUCCESSORS........................................................................................80
SECTION 11.11. SEVERABILITY......................................................................................80
SECTION 11.12. COUNTERPART ORIGINALS.............................................................................80
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC..................................................................80
</TABLE>
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF IAI CERTIFICATE
Exhibit E FORM OF SUPPLEMENTAL INDENTURE
iv
<PAGE> 7
INDENTURE dated as of November 23, 1998 between True Temper
Sports, Inc., a Delaware corporation (the "Company"), and United States Trust
Company of New York, a bank and trust company organized under the New York
Banking Law, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit
of each other and for the equal and ratable benefit of the Holders of the 10
7/8% Series A Senior Subordinated Notes due 2008 (the "Series A Notes") and the
10 7/8% Series B Senior Subordinated Notes due 2008 (the "Series B Notes" and,
together with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit
A hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Notes" means up to $70.0 million in aggregate
principal amount of Notes (other than the Initial Notes) issued under this
Indenture in accordance with Sections 2.02 and 4.09 hereof.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Premium" means, with respect to any Note on any
Redemption Date, the greater of (i) 1.0% of the principal amount of such Note or
(ii) the excess of (A) the present value at such Redemption Date of (1) the
redemption price of such Note at December 1, 2003 (such redemption price being
set forth in the table in Section 3.07) plus (2) all required interest payments
due on such Note
<PAGE> 8
through December 1, 2003 (excluding accrued but unpaid interest), computed using
a discount rate equal to the Treasury Rate plus 50 basis points over (B) the
principal amount of such Note, if greater.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition (a "Disposition") of any assets or rights (including, without
limitation, by way of a sale and leaseback) (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole shall be governed by
the provisions of this Indenture described in Section 4.14 and/or the provisions
in 5.01 and not by the provisions of Section 4.10), and (ii) the issue or sale
by the Company or any of its Restricted Subsidiaries of Equity Interests of any
of the Company's Restricted Subsidiaries, in the case of either clause (i) or
(ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $3.0 million or (b) for net proceeds
in excess of $3.0 million. Notwithstanding the foregoing the following items
shall not be deemed to be Asset Sales: (i) a disposition of assets by the
Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company
or to another Restricted Subsidiary; (ii) an issuance of Equity Interests by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary; (iii)
a Restricted Payment that is permitted by Section 4.07; (iv) a disposition in
the ordinary course of business; (v) the sale and leaseback of any assets within
90 days of the acquisition thereof; (vi) foreclosures on assets; (vii) any
exchange of property pursuant to Section 1031 on the Internal Revenue Code of
1986, as amended, for use in a Related Business; and (vii) the licensing of
intellectual property.
"Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the
Company, or any authorized committee of the Board of Directors.
"Borrowing Base" means, as of any date, an amount equal to the
sum of (a) 85% of the face amount of all accounts receivable owned by the
Company and its Restricted Subsidiaries as of such date that are not more than
90 days past due, plus (b) 50% of the book value of all inventory (excluding
work in progress) owned by the Company and its Restricted Subsidiaries as of
such date, plus (c) 25% of the book value of all inventory owned by the Company
and its Restricted Subsidiaries as of such date that is work in progress, all
calculated on a consolidated basis and in accordance with GAAP. To the extent
that information is not available as to the amount of accounts receivable or
inventory or trade payables as of a specific date, the Company may utilize the
most recent available information for purposes of calculating the Borrowing
Base.
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<PAGE> 9
"Broker-Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on a balance
sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii)
Government Securities having maturities of not more than six months from the
date of acquisition, (iii) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any lender party to the Senior Credit Facilities or
with any domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the rating of "P-2" (or higher) from Moody's
Investors Service, Inc. or "A-3" (or higher) from Standard & Poor's Corporation
and in each case maturing within six months after the date of acquisition and
(vi) any fund investing exclusively in investments of the type described in
clauses (i) through (v) above.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than the Principals or their Related Parties
(as defined below); (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company; (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), other than the Principals and their
Related Parties, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, directly or indirectly, of more
than 50% of the Voting Stock of the Company (measured by voting power rather
than number of shares); or (iv) the first day on which a majority of the members
of the Board of Directors of the Company are not Continuing Directors.
"Company" means True Temper Sports, Inc. and any and all
successors thereto.
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<PAGE> 10
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus (i)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of such Person and its Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated Net
Income, plus (iv) depreciation, amortization (including amortization of goodwill
and other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash charges (excluding any such
non-cash charge to the extent that it represents an accrual of or reserve for
cash expenses in any future period or amortization of a prepaid cash expense
that was paid in a prior period) of such Person and its Subsidiaries for such
period to the extent that such depreciation, amortization and other non-cash
expenses were deducted in computing such Consolidated Net Income, plus (v)
expenses and charges of the Company related to the Transactions which are paid,
taken or otherwise accounted for within 90 days of the consummation of the
Transactions, plus (vi) any non-capitalized transaction costs incurred in
connection with actual or proposed financings, acquisitions or divestitures
(including, but not limited to, financing and refinancing fees and costs
incurred in connection with the Transactions), plus (vii) any extraordinary and
non-recurring charges for such period to the extent that such charges were
deducted in computing such Consolidated Net Income, plus (viii) amounts paid
pursuant to the Management Services Agreement to the extent such amounts were
deducted in computing such Consolidated Net Income. Notwithstanding the
foregoing, the provision for taxes on the income or profits of, and the
depreciation and amortization and other non-cash charges of, a Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same proportion) that Net
Income of such Subsidiary was included in calculating Consolidated Net Income of
such Person.
"Consolidated Interest Expense" means, with respect to any
Person for any period, the sum of, without duplication, (a) the interest expense
of such Person and its Restricted Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP (including amortization
of original issue discount, non-cash interest payments, the interest component
of all payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments, if any, pursuant to Hedging Obligations; provided that in no event
shall any amortization of deferred financing costs be included in Consolidated
Interest Expense); and (b) the consolidated capitalized interest of such Person
and its Restricted Subsidiaries for such period, whether paid or accrued.
Notwithstanding the foregoing, the Consolidated Interest Expense with respect to
any Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary shall
be included only to the extent (and in the same proportion) that the net income
of such Restricted Subsidiary was included in calculating Consolidated Net
Income.
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<PAGE> 11
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that (i) the Net Income (but not loss) of any
Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the referent Person or a
Restricted Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary
shall be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded and (v) the Net Income of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the Company or one of its Restricted
Subsidiaries for purposes of the covenant set forth in Section 4.09 and shall be
included for purposes of the covenant set forth in Section 4.07 only to the
extent of the amount of dividends or distributions paid in cash to the Company
or one of its Restricted Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common stockholders
of such Person and its consolidated Restricted Subsidiaries as of such date plus
(ii) the respective amounts reported on such Person's balance sheet as of such
date with respect to any series of preferred stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the date of this Indenture
in the book value of any asset owned by such Person or a consolidated Restricted
Subsidiary of such Person, (y) all investments as of such date in unconsolidated
Restricted Subsidiaries and in Persons that are not Restricted Subsidiaries
(except, in each case, Permitted Investments), and (z) all unamortized debt
discount and expense and unamortized deferred charges as of such date, all of
the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture, (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election or (iii) was nominated by the Principals pursuant to the
Stockholders Agreement.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 11.02 hereof or such other address
as to which the Trustee may give notice to the Company.
"Credit Agent" means The First National Bank of Chicago, in
its capacity as Administrative Agent for the lenders party to the Senior Credit
Facilities, or any successor thereto or any person otherwise appointed.
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<PAGE> 12
"Credit Facilities" means, with respect to the Company, one or
more debt facilities (including, without limitation, the Revolving Credit
Facility) or commercial paper facilities, in each case with banks or other
institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"Custodian" means the Trustee, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof, in
the form of Exhibit A hereto, except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Notes, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Senior Debt" means (i) any Indebtedness
outstanding under the Senior Credit Facilities and (ii) any other Senior Debt
permitted under this Indenture the principal amount of which is $25.0 million or
more and that has been designated by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the Holder thereof, in whole or in part, on or prior
to the date that is 91 days after the date on which the Notes mature; provided,
however, that any Capital Stock that would not qualify as Disqualified Stock but
for change of control provisions shall not constitute Disqualified Stock if the
provisions are not more favorable to the holders of such Capital Stock than the
provisions of Section 4.14 applicable to the Holders of the Notes.
"Domestic Restricted Subsidiary" means, with respect to the
Company, any Subsidiary of the Company that was formed under the laws of the
United States of America.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
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<PAGE> 13
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set
forth in the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and
its Subsidiaries (other than Indebtedness under the Senior Credit Facilities) in
existence on the date of this Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) the Consolidated Interest Expense
of such Person for such period, (ii) any interest expense on Indebtedness of
another Person that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon)
and (iii) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be calculated to include the Consolidated Cash Flow of the acquired
entities on a pro forma basis after giving effect to cost savings resulting from
employee terminations, facilities consolidations and closings, standardization
of employee benefits and compensation policies, consolidation of property,
casualty and other insurance coverage and policies, standardization of sales
7
<PAGE> 14
and distribution methods, reductions in taxes other than income taxes and other
cost savings reasonably expected to be realized from such acquisition, shall be
deemed to have occurred on the first day of the four-quarter reference period
and Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges shall not be obligations of the referent
Person or any of its Restricted Subsidiaries following the Calculation Date.
"Foreign Subsidiary" means any Subsidiary of the Company that
is not organized under the laws of a state or territory of the United States or
the District of Columbia.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the date of this Indenture,
except that calculations made for purposes of determining compliance with the
terms of the covenants and with other provisions of this Indenture shall be made
without giving effect to depreciation, amortization or other expenses recorded
as a result of the application of purchase accounting in accordance with
Accounting Principles Board Opinion Nos. 16 and 17.
"Global Notes" means, individually and collectively, each of
the Restricted Global Notes and the Unrestricted Global Notes, substantially in
the form of Exhibit A hereto issued in accordance with Section 2.01,
2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States is
pledged.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Guarantor" means each Subsidiary of the Company, if any, that
executes a Guarantee of the obligations of the Company under this Indenture and
the Notes in accordance with Sections 4.17 and 4.18 hereof and their successors
and assigns.
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<PAGE> 15
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates or currency exchange rates.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note substantially in the
form of Exhibit A hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee that will be issued in a denomination equal to
the outstanding principal amount of the Notes sold to Institutional Accredited
Investors.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or bankers' acceptances or representing Capital
Lease Obligations or the balance deferred and unpaid of the purchase price of
any property or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable, if and to the extent any
of the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person; provided that
Indebtedness shall not include the pledge by the Company of the Capital Stock of
an Unrestricted Subsidiary of the Company to secure Non-Recourse Debt of such
Unrestricted Subsidiary. The amount of any Indebtedness outstanding as of any
date shall be (i) the accreted value thereof, in the case of any Indebtedness
that does not require current payments of interest, and (ii) the principal
amount thereof, together with any interest thereon that is more than 30 days
past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Notes" means $100.0 million in aggregate principal
amount of Notes issued under this Indenture on the date hereof.
"Insolvency or Liquidation Proceedings" means (i) any
insolvency or bankruptcy case or proceeding, or any receivership, liquidation,
reorganization or other similar case or proceeding, relative to the Company or
to the creditors of the Company, as such, or to the assets of the Company, or
(ii) any liquidation, dissolution, reorganization or winding up of the Company,
whether voluntary or involuntary, and involving insolvency or bankruptcy, or
(iii) any assignment for the benefit of creditors or any other marshaling of
assets and liabilities of the Company.
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<PAGE> 16
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including guarantees of Indebtedness or other
obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Restricted 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 Equity Interests of
such Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of Section 4.07 hereof.
"Issue Date" means the date on which the initial $100.0
million in aggregate principal amount of the Notes were originally issued under
the Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which
commercial banks in the City of New York, in Hartford, Connecticut or at a place
of payment are authorized or required by law, regulation or executive order to
remain closed. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidated Damages" means the additional amounts (if any)
payable by the Company in the event of a Registration Default under, and as
defined in, the Registration Rights Agreement.
"Management Services Agreement" means the Management Services
Agreement dated on the date of this Indenture, between TTC, the Company and
Cornerstone.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions
10
<PAGE> 17
pursuant to sale and leaseback transactions) or (b) the disposition of any
securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), the amounts required to be applied
to the payment of Indebtedness (other than Indebtedness incurred pursuant to the
Senior Credit Facilities), secured by a Lien on the asset or assets that were
the subject of the Asset Sale, and any reserve for adjustment in respect of the
sale price of such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither
the Company nor any of its Restricted Subsidiaries (a) provides credit support
of any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock (other than stock of an Unrestricted Subsidiary
pledged by the Company to secure debt of such Unrestricted Subsidiary) or assets
of the Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to
this Indenture. The Initial Notes and the Additional Notes shall be treated as a
single class for all purposes under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company and
TTC.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial
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<PAGE> 18
officer, the treasurer, or the principal accounting officer of the Company, that
meets the requirements of Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of Section
11.05 hereof. The counsel may be an employee of or counsel to the Company.
"Participant" means, with respect to the Depositary, Euroclear
or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Permitted Business" means any business in which the Company
and its Restricted Subsidiaries are engaged on the date of this Indenture or any
business reasonably related, incidental or ancillary thereto.
"Permitted Investments" means (a) any Investment in the
Company or in a Restricted Subsidiary of the Company, (b) any Investment in Cash
Equivalents, (c) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment (i) such Person
becomes a Restricted Subsidiary of the Company or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company, (d) any Restricted Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the covenant set forth in Section 4.10, (e) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Company, and (f) other Investments made
after the date of this Indenture in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (f) that are at the time outstanding,
not to exceed $7.5 million.
"Permitted Junior Securities" means Equity Interests in the
Company or debt securities that are subordinated to all Senior Debt (and any
debt securities issued in exchange for Senior Debt) to substantially the same
extent as, or to a greater extent than, the Notes are subordinated to Senior
Debt pursuant to this Article 10.
"Permitted Liens" means (i) Liens securing Senior Debt
(including, without limitation, Indebtedness under the Senior Credit Facilities)
that was permitted by the terms of this Indenture to be incurred or other
Indebtedness allowed to be incurred under clause (i) of the covenant set forth
in Section 4.09, (ii) Liens in favor of the Company or any Restricted
Subsidiary; (iii) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Company or any Restricted Subsidiary of
the Company, provided that such Liens were not incurred in contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company or any Restricted
Subsidiary; (iv) Liens on property existing at the time of acquisition thereof
by the Company or any Restricted Subsidiary of the Company, provided such Liens
were not incurred in contemplation of such acquisition; (v) Liens to secure the
performance of statutory obligations, surety or appeal bonds, performance bonds
or other obligations of a like nature
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<PAGE> 19
incurred in the ordinary course of business; (vi) Liens existing on the date of
this Indenture; (vii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (viii) Liens to secure
Indebtedness (including Capital Lease Obligations) permitted by clause (iv) of
the second paragraph of Section 4.09; (ix) Liens securing Permitted Refinancing
Indebtedness where the Liens securing the Indebtedness being refinanced were
permitted under this Indenture; (x) Liens incurred in the ordinary course of
business of the Company or any Restricted Subsidiary of the Company with respect
to obligations that do not exceed $5.0 million at any one time outstanding and
that (a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary course
of business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Restricted Subsidiary; (xi) Liens on assets of
Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted
Subsidiaries; (xii) easements, rights-of-way, zoning and similar restrictions
and other similar encumbrances or title defects incurred or imposed, as
applicable, in the ordinary course of business and consistent with industry
practices; (xiii) any interest or title of a lessor under any Capital Lease
Obligation; (xiv) 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; (xv) Liens
encumbering deposits made to secure obligations arising from statutory,
regulatory, contractual or warranty requirements of the Company or any of its
Restricted Subsidiaries, including rights of offset and set-off; (xvi) Liens
securing Hedging Obligations which Hedging Obligations relate to Indebtedness
that is otherwise permitted under this Indenture; (xvii) leases or subleases
granted to others that do not materially interfere with the ordinary course of
business of the Company and its Restricted Subsidiaries; (xviii) Liens arising
from filing Uniform Commercial Code financing statements regarding leases; and
(xiv) Liens in favor of customs and revenue authorities arising as a matter of
law to secure payment of customer duties in connection with the importation of
goods.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (ii) such
Permitted Refinancing Indebtedness has a final maturity date no earlier than the
final maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
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<PAGE> 20
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Principals" means Cornerstone Equity Investors and its
affiliates.
"Private Placement Legend" means the legend set forth in
Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"Public Equity Offering" means a public offering of Equity
Interests (other than Disqualified Stock) of (i) the Company or (ii) TTC to the
extent the net proceeds thereof are contributed to the Company as a capital
contribution.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of November 23, 1998, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time and, with respect to any Additional
Notes, one or more registration rights agreements between the Company and the
other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes under the
Securities Act.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Regulation S Global Note" means a global Note bearing the
Global Note Legend and the Private Placement Legend and deposited with or on
behalf of and registered in the name of the Depositary or its nominee, issued in
a denomination equal to the outstanding principal amount of the Notes resold in
reliance on Rule 904 of Regulation S.
"Related Party" with respect to any Principal means (A) any
controlling stockholder or partner, 80% (or more) owned Subsidiary, or spouse or
immediate family member (in the case of an individual) of such Principal or (B)
any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding (directly or
through one or more Subsidiaries) a 51% or more controlling interest of which
consist of the Principals and/or such other Persons referred to in the
immediately preceding clause (A).
"Reorganization Securities" means securities distributed to
Holders of the Notes in an Insolvency or Liquidation Proceeding pursuant to a
plan of reorganization consented to by each class of the Senior Debt, but only
if all of the terms and conditions of such securities (including, without
limitation, term, tenor, interest, amortization, subordination, standstills,
covenants and defaults) are at least as favorable (and provide the same relative
benefits) to the holders of Senior Debt and to the holders of any security
distributed in such Insolvency or Liquidation Proceeding on account of any such
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<PAGE> 21
Senior Debt as the terms and conditions of the Notes and this Indenture are, and
provide to the holders of Senior Debt.
"Representative" means the Trustee, agent or representative
for any Senior Debt.
"Responsible Officer" when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing
the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the
Private Placement Legend.
"Restricted Investment" means any Investment other than a
Permitted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of
the referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities
Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Rule 903" means Rule 903 promulgated under the Securities
Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facilities" means that certain Senior Credit
Facilities, dated as of September 30, 1998, between the Company and Donaldson,
Lufkin & Jenrette Securities Corporation, as arranger, DLJ Capital Funding,
Inc., as syndication agent and The First National Bank of Chicago, as
administrative agent, providing for revolving credit borrowings and term loans,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time (including
increases in principal amount).
"Senior Debt" means (i) all Indebtedness outstanding under the
Senior Credit Facilities, including any Guarantees thereof and all Hedging
Obligations with respect thereto, (ii) any other Indebtedness permitted to be
incurred by the Company under the terms of this Indenture, unless the instrument
under which such Indebtedness in incurred expressly provides that it is on a
parity with or subordinated in right of payment to the Notes and (iii) all
Obligations with respect to the foregoing.
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<PAGE> 22
Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not
include (w) any liability for federal, state, local or other taxes owed or owing
by the Company, (x) any Indebtedness of the Company to any of its Subsidiaries
or other Affiliates, (y) any trade payables or (z) any Indebtedness that is
incurred in violation of this Indenture.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership or limited liability company (a)
the sole general partner or the managing general partner or managing member of
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or of one or more Subsidiaries of such Person
(or any combination thereof).
"Subsidiary Guarantor" means (i) any Domestic Restricted
Subsidiary that executes a supplemental indenture providing for the Guarantee of
the payment of the Notes by such Domestic Restricted Subsidiary and (ii) any
other Subsidiary of the Company that executes a Guarantee in accordance with the
provisions of this Indenture, and their respective successors and assigns.
"Tax Sharing Agreement" means any tax allocation agreement
between the Company or any of its Restricted Subsidiaries with the Company or
any direct or indirect shareholder of the Company with respect to consolidated
or combined tax returns including the Company or any of its Restricted
Subsidiaries, but, in each case, only to the extent that amounts payable from
time to time by the Company or any such Restricted Subsidiary under any such
agreement do not exceed the corresponding tax payments that the Company or such
Restricted Subsidiary would have been required to make to any relevant taxing
authority had the Company or such Restricted Subsidiary not joined in such
consolidated or combined returns, but instead had filed returns including only
the Company and its Restricted Subsidiaries.
"TIA" means the Trust Indenture Act of 1939, as amended (15
U.S.C. Section 77aaa-77bbbb) as in effect on the date on which this Indenture
is qualified under the TIA.
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<PAGE> 23
"Treasury Rate" means, as of any Redemption Date, the yield to
maturity as of such Redemption Date of United States Treasury securities with a
constant maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the Redemption Date to December 1, 2003;
provided, however, that if the period from the Redemption Date to December 1,
2003 is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
"Trustee" means the party named as such in the preamble to
this Indenture until a successor replaces it in accordance with the applicable
provisions of this Indenture and thereafter means the successor serving
hereunder.
"TTC" means True Temper Corporation and any and all successors
thereto.
"Unrestricted Global Note" means a permanent global Note in
the form of Exhibit A attached hereto that bears the Global Note Legend and that
has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
"Unrestricted Subsidiary" means any Subsidiary that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; and (d) has not guaranteed
or otherwise directly or indirectly provided credit support for any Indebtedness
of the Company or any of its Restricted Subsidiaries. Any such designation by
the Board of Directors shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant set
forth in Section 4.07. If, at any time, any Unrestricted Subsidiary would fail
to meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture
and any Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of the Company as of such date (and, if such Indebtedness
is not permitted to be incurred as of such date under the covenant set forth in
Section 4.09, the Company shall be in default of such covenant). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed to
be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any
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<PAGE> 24
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall be permitted only if (i) such Indebtedness is permitted under the covenant
set forth in Section 4.09, and (ii) no Default or Event of Default would be in
existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that shall elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction"......................................................4.11
"Asset Sale Offer"...........................................................3.09
"Authentication Order".......................................................2.02
"Change of Control Offer"....................................................4.14
"Change of Control Payment"..................................................4.14
"Change of Control Payment Date" ............................................4.14
"Covenant Defeasance"........................................................8.03
"Event of Default"...........................................................6.01
"Excess Proceeds"............................................................4.10
"incur"......................................................................4.09
"Legal Defeasance" ..........................................................8.02
"Offer Amount"...............................................................3.09
"Offer Period"...............................................................3.09
"Paying Agent"...............................................................2.03
"Permitted Debt".............................................................4.09
"Purchase Date"..............................................................3.09
"Registrar"..................................................................2.03
"Restricted Payments"........................................................4.07
</TABLE>
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<PAGE> 25
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Notes means the Company and any successor
obligor upon the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) references to sections of or rules under the
Securities Act shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to time.
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<PAGE> 26
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and 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. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes. Notes issued in global form shall be substantially
in the form of Exhibit A attached hereto (including the Global Note Legend
thereon and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee, in
accordance with instructions given by the Holder thereof as required by Section
2.06 hereof.
(c) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Global Notes that are held by
Participants through Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer shall sign the Notes for the Company by manual
or facsimile signature.
If the Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
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<PAGE> 27
The Trustee shall, upon a written order of the Company signed
by one Officer (an "Authentication Order"), authenticate Notes for original
issue up to the aggregate principal amount of $100.0 million. The aggregate
principal amount of Notes outstanding at any time may not exceed such amount
except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Restricted Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Custodian with respect to the Global
Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes, and shall notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Restricted Subsidiary acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Notes.
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<PAGE> 28
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA Section 312(a). If
the Trustee is not the Registrar, the Company shall furnish to the Trustee at
least seven Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of the
Holders of Notes and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, by the Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary. All Global Notes shall be exchanged by the
Company for Definitive Notes if (i) the Company delivers to the Trustee notice
from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee. Upon the occurrence of either of
the preceding events in (i) or (ii) above, Definitive Notes shall be issued in
such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend. Beneficial
interests in any Unrestricted Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers described
in this Section 2.06(b)(i).
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(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in the
Global Note in an amount equal to the beneficial interest to be transferred
or exchanged and (2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to be
credited with such increase or (B) (1) a written order from a Participant
or an Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary to
the Registrar containing information regarding the Person in whose name
such Definitive Note shall be registered to effect the transfer or exchange
referred to in (1) above. Upon consummation of an Exchange Offer by the
Company in accordance with Section 2.06(f) hereof, the requirements of this
Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by
the Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted
Global Notes. Upon satisfaction of all of the requirements for transfer or
exchange of beneficial interests in Global Notes contained in this
Indenture and the Notes or otherwise applicable under the Securities Act,
the Trustee shall adjust the principal amount of the relevant Global
Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee shall take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof; and
(B) if the transferee shall take delivery in the form of a
beneficial interest in the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
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participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a beneficial interest in an Unrestricted Global Note, a certificate
from such holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest to
a Person who shall take delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note, a certificate from such holder
in the form of Exhibit B hereto, including the certifications in item
(4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
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<PAGE> 31
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than
those listed in subparagraphs (B) through (D) above, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by
item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in
item (3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes
to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear
the Private Placement Legend and shall be subject to all restrictions
on transfer contained therein.
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(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the case
of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not
(1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Definitive Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest to
a Person who shall take delivery thereof in the form of a Definitive
Note that does not bear the Private Placement Legend, a certificate
from such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall
execute and the Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall be registered in such
name or names and
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in such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions from
the Depositary and the Participant or Indirect Participant. The Trustee
shall deliver such Definitive Notes to the Persons in whose names such
Notes are so registered. Any Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear
the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or
to transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted
Global Note, a certificate from such Holder in the form of Exhibit
C hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to
an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other
than those listed in subparagraphs (B) through (D) above, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications, certificates and Opinion of Counsel required
by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(c) thereof,
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<PAGE> 34
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case
of clause (B) above, the 144A Global Note, in the case of clause (C)
above, the Regulation S Global Note, and in all other cases, the IAI
Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or
(3) a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
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(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Note if the Registrar receives the following:
(A) if the transfer shall be made pursuant to Rule 144A under
the Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications in
item (1) thereof;
(B) if the transfer shall be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2)
thereof; and
(C) if the transfer shall be made pursuant to any other
exemption from the registration requirements of the Securities
Act, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
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<PAGE> 36
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or
(3) a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C hereto, including
the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Note, a certificate
from such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A
Holder of Unrestricted Definitive Notes may transfer such Notes to a Person
who takes delivery thereof in the form of an Unrestricted Definitive Note.
Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions
from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable
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<PAGE> 37
Restricted Global Notes to be reduced accordingly, and the Company shall execute
and the Trustee shall authenticate and deliver to the Persons designated by the
Holders of Definitive Notes so accepted Definitive Notes in the appropriate
principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS,
EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A
"QIB");
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7) OR REGULATION
D UNDER THE SECURITIES ACT (AN "IAI") THAT, PRIOR TO SUCH
TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM
THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN
AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN $250,000,
AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN
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EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND
"UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF
REGULATION S UNDER THE SECURITIES ACT. THIS INDENTURE CONTAINS
A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this
Section 2.06 (and all Notes issued in exchange therefor or
substitution thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THIS
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE
SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF
THIS INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT
IN PART PURSUANT TO SECTION 2.06(a) OF THIS INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THIS INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY."
(h) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who shall take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who shall take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be
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made on such Global Note by the Trustee or by the Depositary at the direction of
the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.14 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration
of transfer or exchange of Global Notes or Definitive Notes shall be the
valid obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Global Notes or Definitive
Notes surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part or (c) to register the transfer
of or to exchange a Note between a record date and the next succeeding
Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person
in whose name any Note is registered as the absolute owner of such Note for
the purpose of receiving payment of principal of and interest on such Notes
and for all other purposes, and none of the Trustee, any Agent or the
Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes
in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by facsimile
with the original to follow by first class mail.
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SECTION 2.07. REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the Trustee,
upon receipt of an Authentication Order, shall authenticate a replacement Note
if the Trustee's requirements are met. If required by the Trustee or the
Company, an indemnity bond must be supplied by the Holder that is sufficient in
the judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss that any of them may suffer
if a Note is replaced. The Company may charge for its expenses in replacing a
Note.
Every replacement Note issued pursuant to this Section 2.07 is
an additional obligation of the Company and shall be entitled to all of the
benefits of this Indenture equally and proportionately with all other Notes duly
issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Note; however, Notes held by the Company or a
Subsidiary of the Company shall not be deemed to be outstanding for purposes of
Section 3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so owned
shall be so disregarded.
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SECTION 2.10. TEMPORARY NOTES
Until certificates representing Notes are ready for delivery,
the Company may prepare and the Trustee, upon receipt of an Authentication
Order, shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of certificated Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes in exchange for temporary
Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. Subject to Section 2.07, the Company may not issue new Notes to
replace Notes that it has paid or that have been delivered to the Trustee for
cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
SECTION 2.13. CUSIP NUMBERS.
The Company in issuing the Notes may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Notes or as contained in any notice of redemption and
that reliance may be placed only on the other identification numbers printed on
the Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company shall promptly notify the Trustee of any
change in the "CUSIP" numbers.
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ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 75 days before a redemption date ( unless a
shorter notice period shall be satisfactory to the Trustee), an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed at any time,
selection of Notes for redemption shall be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any, on
which the Notes are listed, or, if the Notes are not so listed, on a pro rata
basis, by lot or by such method as the Trustee shall deem fair and appropriate.
In the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 45 nor more
than 75 days prior to the redemption date by the Trustee (unless a shorter time
period shall be satisfactory to the Trustee) from the outstanding Notes not
previously called for redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued upon cancellation of the original Note;
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<PAGE> 43
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered 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 preceding paragraph. The notice, if mailed in the manner provided herein
shall be presumed to have been given, whether or not the Holder receives such
notice.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE
One Business Day prior to the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
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SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clauses (b) and (c) of this Section
3.07, the Notes shall not be redeemable at the Company's option prior to
December 1, 2003. Thereafter, the Notes shall be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on December 1 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C> <C>
2003......................................................105.438%
2004......................................................103.625%
2005......................................................101.813%
2006 and thereafter.......................................100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to
December 1, 2001, the Company may on one or more occasions redeem up to 35% of
the original aggregate principal amount of Notes at a redemption price of
110.875% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the redemption date, with the net cash
proceeds of one or more Public Equity Offerings; provided that at least 65% of
the original aggregate principal amount of Notes remains outstanding immediately
after the occurrence of such redemption; and provided, further, that such
redemption shall occur within 90 days of the date of the closing of such Public
Equity Offering.
(c) At any time prior to December 1, 2003, the Notes may also
be redeemed, as a whole but not in part, at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event may any such redemption occur more than 90 days
after the occurrence of such Change of Control) mailed by first-class mail to
each Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest and Liquidated Damages, if any, to, the date of redemption (the
"Redemption Date").
(d) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
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SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth below in Section 4.14, the Company is not
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Sections 4.10 and 4.14 hereof,
the Company shall be required to commence an offer to all Holders to purchase
Notes (an "Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice,
which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
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<PAGE> 46
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, the Depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.09. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a new
Note, and the Trustee, upon written request from the Company shall authenticate
and mail or deliver such new Note to such Holder, in a principal amount equal to
any unpurchased portion of the Note surrendered. Any Note not so accepted shall
be promptly mailed or delivered by the Company to the Holder thereof. The
Company shall publicly announce the results of the Asset Sale Offer on the
Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
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ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 12:00 p.m. (noon) Eastern Time on the due date money deposited by
the Company in immediately available funds and designated for and sufficient to
pay all principal, premium, if any, and interest then due. The Company shall pay
all Liquidated Damages, if any, in the same manner on the dates and in the
amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; 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 Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall furnish to the Holders of
Notes (i) all quarterly and annual financial
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information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the SEC on Form 8-K if the Company were
required to file such reports, in each case, within the time periods specified
in the SEC's rules and regulations. In addition, following consummation of the
Exchange Offer, whether or not required by the rules and regulations of the SEC,
the Company shall file a copy of all such information and reports with the SEC
for public availability within the time periods specified in the SEC's rules and
regulations (unless the SEC shall not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. The Company shall at all times comply with TIA Section 314(a).
(b) For so long as any Notes remain outstanding, the Company shall
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate
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specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, that may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment on such Equity Interests in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of the Company's or
any of its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise acquire
or retire for value (including without limitation, in connection with any merger
or consolidation involving the Company) any Equity Interests of the Company or
any direct or indirect parent of the Company (other than any such Equity
Interests owned by the Company or any Restricted Subsidiary of the Company);
(iii) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to
the Notes, except scheduled payments of interest or principal at Stated Maturity
of such Indebtedness; or (iv) make any Restricted Investment (all such payments
and other actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) the Company would, after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the applicable four-quarter
period, have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.09; and
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(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of this Indenture (excluding Restricted Payments permitted by
clauses (i), (ii), (iii), (iv), (viii) (other than those permitted by clause (f)
of the definition of "Permitted Investments"), (ix), (xii), (xiii), (xiv) and
(xv) of the next succeeding paragraph), is less than the sum of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one accounting
period) from the beginning of the first full fiscal quarter commencing after the
date of this Indenture to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the time of
such Restricted Payment (or, if such Consolidated Net Income for such period is
a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds received by the Company as a contribution to the Company's capital or
received by the Company from the issue or sale since the date of this Indenture
of Equity Interests of the Company (other than Disqualified Stock) or of
Disqualified Stock or debt securities of the Company that have been converted
into such Equity Interests (other than Equity Interests (or Disqualified Stock
or debt securities) sold to a Restricted Subsidiary of the Company and other
than Disqualified Stock or convertible debt securities that have been converted
into Disqualified Stock), plus (iii) to the extent that any Restricted
Investment that was made after the date of this Indenture is sold for cash or
otherwise liquidated or repaid for cash, the lesser of (A) the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted Investment,
plus (iv) if any Unrestricted Subsidiary (A) is redesignated as a Restricted
Subsidiary, the fair market value of such redesignated Subsidiary (as determined
in good faith by the Board of Directors) as of the date of its redesignation or
(B) pays any cash dividends or cash distributions to the Company or any of its
Restricted Subsidiaries, 100% of any such cash dividends or cash distributions
made after the date of this Indenture.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale or issuance (other than to a Restricted Subsidiary of the Company) of,
other Equity Interests of the Company (other than Disqualified Stock); provided
that the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (c)(ii) of the preceding paragraph; (iii) the defeasance,
redemption, repurchase or other acquisition of subordinated Indebtedness with
the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(iv) the payment of any dividend by a Restricted Subsidiary of the Company to
the holders of its Equity Interests on a pro rata basis; (v) the declaration or
payment of dividends to TTC for expenses incurred by TTC in its capacity as a
holding company or for services rendered on behalf of the Company, including,
without limitation, (a) customary salary, bonus and other benefits payable to
officers, employees and consultants of TTC, (b) fees and expenses paid to
members of the Board of Directors of TTC, (c) general corporate overhead
expenses of TTC, (d) management, consulting or advisory fees paid to TTC or to
permit TTC to pay management, consulting or advisory fees, in each case, not to
exceed $1.5 million in any fiscal year, and (e) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of TTC or the
Company held by any member or former member of TTC's or the Company's (or any of
their Restricted Subsidiaries') management pursuant to any management equity
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subscription agreement, stockholders agreement or stock option agreement in
effect as of the date of this Indenture; provided, however, (A) with respect to
clauses (a) through (c) above, the aggregate amount paid does not exceed $2.0
million in any fiscal year and (B) with respect to clause (e) above, the
aggregate price paid shall not exceed (x) $1.0 million in any calendar year
(with unused amounts in any calendar year being carried over to succeeding
calendar years subject to a maximum (without giving effect to clause (y)) of
$2.0 million in any calendar year, plus (y) the aggregate cash proceeds received
by the Company from any issuance or reissuance of Equity Interests by TTC to
members of management of the Company and its Restricted Subsidiaries and the
proceeds to the Company of any "key-man" life insurance policies; provided that
the cancellation of Indebtedness owing to the Company from members of management
of the Company or any Restricted Subsidiary in connection with such repurchase
of Equity Interests shall not be deemed to be a Restricted Payment; (vi)
Investments in any Person (other than the Company or a Restricted Subsidiary)
engaged in a Permitted Business in an amount not to exceed $5.0 million; (vii)
other Investments in Unrestricted Subsidiaries having an aggregate fair market
value, taken together with all other Investments made pursuant to this clause
(vii) that are at that time outstanding, not to exceed $3.0 million; (viii)
Permitted Investments; (ix) the declaration or payment of dividends or other
payments to TTC pursuant to any tax sharing agreement or other arrangement among
TTC or other members of the affiliated corporations of which TTC is the common
parent; (x) other Restricted Payments in an aggregate amount not to exceed $7.5
million; (xi) so long as no Default or Event of Default has occurred and is
continuing, the declaration and payment of dividends on Disqualified Stock
issued or after the date of this Indenture, the incurrence of which satisfied
the first paragraph of Section 4.09; (xii) the declaration or payment of
dividends to TTC to satisfy any required purchase price adjustment payment
arising out of the Recapitalization; (xiii) the declaration or payment of
dividends or other payments to TTC in an amount not to exceed $1.0 million to
satisfy redemption obligations in respect of Equity Interests of TTC that are
held by management of TTC or the Company; provided that such amount shall not be
applied against expenses incurred pursuant to clause (v)(e) above; (xiv)
repurchases of Equity Interests deemed to occur upon the exercise of stock
options if such Equity Interests represent a portion of the exercise price
thereof; and (xv) distributions to TTC to fund the Transactions.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated shall be deemed to be Restricted Payments at the
time of such designation and shall reduce the amount available for Restricted
Payments under the first paragraph of Section 4.07. All such outstanding
Investments shall be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation (as
determined in good faith by the Board of Directors). Such designation shall only
be permitted if such Restricted Payment would be permitted at such time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined in good
faith by the Board of Directors whose resolution with respect thereto shall be
delivered to the Trustee; such determination shall be based
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upon an opinion or appraisal issued by an accounting, appraisal or investment
banking firm of national standing if such fair market value exceeds $10.0
million. Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by Section 4.07 were computed, together with a copy of any
fairness opinion or appraisal required by this Indenture.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries, except for such encumbrances
or restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the date of this Indenture, (b) the Senior Credit Facilities as in
effect as of the date of this Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are no more restrictive in the aggregate (as determined in the good
faith judgment of the Company's Board of Directors) with respect to such
dividend and other payment restrictions than those contained in the Senior
Credit Facilities as in effect on the date of this Indenture, (c) this Indenture
and the Notes, (d) any applicable law, rule, regulation or order, (e) any
instrument of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of this Indenture to be incurred, (f) by
reason of customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (h) Permitted Refinancing Indebtedness, provided that the
material restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, in the good faith judgment of
the Company's board of directors, taken as a whole, to the Holders of Notes than
those contained in the agreements governing the Indebtedness being refinanced,
(i) contracts for the sale of assets, including without limitation customary
restrictions with respect to a Subsidiary pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary, (j) restrictions on cash or other
deposits or net worth imposed by customers under contracts entered into in the
ordinary course of business and (k) other Indebtedness or Disqualified Stock of
Restricted Subsidiaries permitted to be incurred subsequent to the Issuance Date
pursuant to the provisions of Section 4.09.
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SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and that the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock or preferred stock and the Company's Restricted Subsidiaries
may incur Indebtedness (including Acquired Debt) and issue Disqualified Stock or
preferred stock if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock or preferred stock had been issued,
as the case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of Section 4.09 shall not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness and letters of credit pursuant to the Senior Credit Facilities;
(ii) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes on the Issue Date;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Company or such
Restricted Subsidiary (whether through the direct purchase of assets or the
Capital Stock of any Person owning such Assets), in an aggregate principal
amount or accreted value, as applicable, not to exceed $10.0 million;
(v) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness in connection with the acquisition of assets or a new Restricted
Subsidiary; provided that such Indebtedness was incurred by the prior owner of
such assets or such Restricted Subsidiary prior to such acquisition by the
Company or one of its Subsidiaries and was not incurred in connection with, or
in contemplation of, such acquisition by the Company or one of its Subsidiaries;
provided further that the principal amount (or accreted value, as applicable) of
such Indebtedness, together with any other outstanding Indebtedness incurred
pursuant to this clause (v), does not exceed $7.5 million;
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(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness that was permitted
by this Indenture to be incurred;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries; provided, however, that (i) if the Company is the
obligor on such Indebtedness, such Indebtedness is expressly subordinated to the
prior payment in full in cash of all Obligations with respect to the Notes and
(ii)(A) any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Restricted
Subsidiary shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Restricted Subsidiary, as the case may be;
(viii) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or hedging:
(i) interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding; (ii) exchange rate
risk with respect to any agreement or Indebtedness of such Person payable in a
currency other than U.S. dollars; or (iii) commodities risk relating to
commodities agreements, entered into in the ordinary course of business, for the
purchase of raw material used by the Company and its Restricted Subsidiaries;
(ix) the Guarantee by the Company or any of its Restricted Subsidiaries of
Indebtedness of the Company or a Restricted Subsidiary of the Company that was
permitted to be incurred by another provision of Section 4.09;
(x) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt; provided, however, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company;
(xi) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters of
credit issued in the ordinary course of business, including without limitation
to letters of credit in respect to workers' compensation claims or self-
insurance, or other Indebtedness with respect to reimbursement type obligations
regarding workers' compensation claims; provided, however, that upon the drawing
of such letters of credit or the incurrence of such Indebtedness, such
obligations are reimbursed within 30 days following such drawing or incurrence;
(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 or assumed in connection with the
disposition of any business, asset or Subsidiary, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Subsidiary for the purpose of financing such acquisition;
provided that (x) such Indebtedness is not reflected on the balance sheet of the
Company or any Restricted Subsidiary (contingent obligations referred to in a
footnote or footnotes to financial statements and not otherwise reflected on the
balance sheet shall not be
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deemed to be reflected on such balance sheet for purposes of this clause (x))
and (y) the maximum assumable liability in respect of such Indebtedness shall at
no time exceed the gross proceeds including non-cash proceeds (the fair market
value of such non-cash proceeds being measured at the time received and without
giving effect to any such subsequent changes in value) actually received by the
Company and/or such Restricted Subsidiary in connection with such disposition;
(xiii) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary in
the ordinary course of business;
(xiv) guarantees incurred in the ordinary course of business in an
aggregate principal amount not to exceed $5.0 million at any time outstanding;
and
(xv) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness, including Attributable Debt incurred after the date
of this Indenture, in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (xv), not to exceed $10.0 million.
For purposes of determining compliance with Section 4.09, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xv) above or is
entitled to be incurred pursuant to the first paragraph of Section 4.09, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with Section 4.09 and such item of Indebtedness shall be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. In addition, the Company may, at any time, change
the classification of an item of Indebtedness (or any portion thereof) to any
other clause or to the first paragraph hereof provided that the Company would be
permitted to incur such item of Indebtedness (or portion thereof) pursuant to
such other clause or the first paragraph hereof, as the case may be, at such
time of reclassification. Accrual of interest, accretion or amortization of
original issue discount and the accretion of accreted value shall not be deemed
to be an incurrence of Indebtedness for purposes of this Section 4.09.
SECTION 4.10. ASSET SALES
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash or
Cash Equivalents; provided that the amount of (x) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Restricted
Subsidiary from further liability and (y) any securities, notes or other
obligations received by the Company or any such Restricted Subsidiary from
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such transferee that are converted by the Company or such Restricted Subsidiary
into cash or Cash Equivalents within 180 days (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision; and
provided further that the 75% limitation referred to in clause (ii) above shall
not apply to any Asset Sale in which the cash or Cash Equivalents portion of the
consideration received therefrom, determined in accordance with the foregoing
proviso, is equal to or greater than what the after-tax proceeds would have been
had such Asset Sale complied with the aforementioned 75% limitation.
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or any such Restricted Subsidiary may apply such Net Proceeds,
at its option, (a) to repay or repurchase Senior Debt of the Company or any
Restricted Subsidiary or (b) to the acquisition of a controlling interest in
another business, the making of a capital expenditure or the acquisition of
other assets, in each case, in a Permitted Business. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce the
revolving Indebtedness under the Senior Credit Facilities or otherwise invest
such Net Proceeds in any manner that is not prohibited by this Indenture. Any
Net Proceeds from Asset Sales that are not applied or invested as provided in
the first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million,
the Company shall be required to make an offer to all Holders of Notes (an
"Asset Sale Offer") to purchase the maximum principal amount of Notes that may
be purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set forth in this Indenture. To the extent that the
aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Indenture relating to such
Asset Sale Offer, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations
described in this Indenture by virtue thereof.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction") unless (i)
such Affiliate Transaction is on terms that are no less favorable to the Company
or the relevant Restricted Subsidiary than those that would have been obtained
in a comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies
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with clause (i) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors and (b) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $7.5 million, an opinion as to
the fairness to the Holders of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment banking firm of
national standing; provided that the following shall not be deemed Affiliate
Transactions: (a) customary directors' fees, indemnification or similar
arrangements or any employment agreement or other compensation plan or
arrangement entered into by the Company or any of its Restricted Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Restricted Subsidiary; (b) transactions between or among the
Company and/or its Restricted Subsidiaries; (c) Permitted Investments and
Restricted Payments that are permitted by the provisions of Section 4.07 hereof;
(d) customary loans, advances, fees and compensation paid to, and indemnity
provided on behalf of, officers, directors, employees or consultants of the
Company or any of its Restricted Subsidiaries; (e) transactions pursuant to any
contract or agreement in effect on the date of this Indenture as the same may be
amended, modified or replaced from time to time so long as any such amendment,
modification or replacement is no less favorable to the Company and its
Restricted Subsidiaries than the contract or agreement as in effect on the Issue
Date; (f) insurance arrangements among TTC and its Subsidiaries that are not
less favorable to the Company or any of its Subsidiaries than those that are in
effect on the date hereof provided such arrangements are conducted in the
ordinary course of business consistent with past practices; (g) payments under
any tax sharing agreement or other arrangement among TTC and other members of
the affiliated group of corporations of which either is the common parent; and
(h) payments in connection with the Transactions (including the payment of fees
and expenses with respect thereto).
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien of any kind securing trade payables or Indebtedness
that does not constitute Senior Debt (other than Permitted Liens) upon any of
their property or assets, now owned or hereafter acquired unless (i) in the case
of Liens securing Indebtedness that is expressly subordinated or junior in right
of payment to the Notes, the Notes are secured on a senior basis to the
obligations so secured until such time as such obligations are no longer secured
by a Lien and (ii) in all other cases, the Notes are secured on an equal and
ratable basis with the obligations so secured until such time as such
obligations are no longer secured by a Lien.
SECTION 4.13. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of
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the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the Notes.
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
shall have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within 60 days following any Change of
Control, the Company shall mail a notice to each Holder stating: (1) that the
Change of Control Offer is being made pursuant to this Section 4.14 and that all
Notes tendered will be accepted for payment; (2) the purchase price and the
purchase date, which shall be no later than 30 days and no later than 60 days
from the date such notice is mailed (the "Change of Control Payment Date"); (3)
that any Note not tendered will continue to accrue interest; (4) that, unless
the Company defaults in the payment of the Change of Control Payment, all Notes
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Payment Date; (5) that Holders
electing to have any Notes purchased pursuant to a Change of Control Offer will
be required to surrender the Notes, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date; (6) that Holders will
be entitled to withdraw their election if the Paying Agent receives, not later
than the close of business on the second Business Day preceding the Change of
Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Notes delivered
for purchase, and a statement that such Holder is withdrawing his election to
have the Notes purchased; and (7) that Holders whose Notes are being purchased
only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, which unpurchased portion must be
equal to $1,000 in principal amount or an integral multiple thereof. The Company
shall comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this Indenture
relating to such Change of Control Offer, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations described in this Indenture by virtue thereof.
(b) By 12:00 p.m. (noon) Eastern Time on the Change of Control
Payment Date, the Company shall, to the extent lawful, (1) accept for payment
all Notes or portions thereof properly tendered pursuant to the Change of
Control Offer, (2) deposit with the Paying Agent an amount equal to the Change
of Control Payment in respect of all Notes or portions thereof so tendered and
(3) deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate stating the aggregate principal amount of
Notes or portions thereof being purchased by the Company. The Paying Agent shall
promptly mail to each Holder of Notes so tendered the Change of Control Payment
for such Notes, and the Trustee shall promptly authenticate and mail (or cause
to be transferred by book entry) to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided
that each such new Note shall be in a principal amount of $1,000 or an
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integral multiple thereof. The Company shall publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.14,
the Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Section 4.14 and Section 3.09 hereof and all other provisions of this
Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
SECTION 4.15. ANTI-LAYERING.
The Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is both (a) subordinate or
junior in right of payment to any Senior Debt and (b) senior in any respect in
right of payment to the Notes.
SECTION 4.16. SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company or any Restricted Subsidiary may enter into a sale and leaseback
transaction if (i) the Company or such Restricted Subsidiary could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt relating to
such sale and leaseback transaction pursuant to Section 4.09 and (b) incurred a
Lien to secure such Indebtedness pursuant to Section 4.12, (ii) the gross cash
proceeds of such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors and set
forth in an Officers' Certificate delivered to the Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and the Company
applies the proceeds of such transaction in compliance with Section 4.10.
SECTION 4.17. LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS.
The Company shall not permit any Domestic Restricted Subsidiary,
directly or indirectly, to incur Indebtedness or Guarantee or pledge any assets
to secure the payment of any other Indebtedness of the Company or any Restricted
Subsidiary unless either such Restricted Subsidiary (x) is a Subsidiary
Guarantor or (y) simultaneously executes and delivers a Supplemental Indenture
in the form of Exhibit E hereto and becomes a Subsidiary Guarantor, which
Guarantee shall (x) with respect to any Guarantee of Senior Debt, be
subordinated in right of payment on the same terms as the Notes are subordinated
to such Senior Debt and (y) with respect to any Guarantee of any other
Indebtedness, be senior to or pari passu with such Restricted Subsidiary's other
Indebtedness or Guarantee of or pledge to secure such other Indebtedness.
Notwithstanding the foregoing, any such Guarantee by a Restricted Subsidiary of
the Notes shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon any sale, exchange or transfer, to
any Person not an Affiliate of the Company, of all of the Company's stock in, or
all or substantially all the assets of, such Restricted Subsidiary, which sale,
exchange or transfer is made in compliance with the applicable provisions of
this Indenture.
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SECTION 4.18. ADDITIONAL GUARANTEES.
If the Company shall acquire or create a Domestic Restricted
Subsidiary after the date of this Indenture, or if any Subsidiary of the Company
becomes a Domestic Restricted Subsidiary, then such newly acquired or created
Domestic Restricted Subsidiary shall become a Guarantor and execute a
Supplemental Indenture in the form of Exhibit E hereto and deliver an opinion of
counsel, in accordance with terms of this Indenture.
SECTION 4.19. BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any business other than a Permitted Business, except to
such extent as would not be material to the Company and its Restricted
Subsidiaries taken as a whole.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company may not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another Person unless (i) the Company is
the surviving corporation or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and this Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) the Company or the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (a) shall, after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09 or (b) would (together with its
Restricted Subsidiaries) have a higher Fixed Charge Coverage Ratio immediately
after such transaction (after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period)
than the Fixed Charge Coverage Ratio of the Company and its subsidiaries
immediately prior to the transaction. The foregoing clause (iv) shall not
prohibit (a) a merger between the Company and a Wholly Owned Subsidiary of TTC
created for the purpose of holding the Capital Stock of the Company, (b) a
merger between the Company and a Wholly Owned Subsidiary or (c) a merger between
the Company and an Affiliate incorporated solely for the purpose of
reincorporating the Company in another state of the United States so long as, in
each case, the amount of Indebtedness of the Company and its Restricted
Subsidiaries is not increased thereby. Also, the Company may not, directly or
indirectly, lease all or substantially all of its properties or assets, in one
or more related transactions, to any other Person. The
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provisions of this Section 5.01 shall not be applicable to a sale, assignment,
transfer, conveyance or other disposition of assets between or among the Company
and its Wholly Owned Restricted Subsidiaries.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not permitted by
Article 10 hereof) and such default continues for a period of 30 days;
(b) the Company defaults in payment of the principal of or premium, if
any, on the Notes when the same becomes due and payable at maturity, upon
redemption (including in connection with an offer to purchase) or otherwise
(whether or not permitted by Article 10 hereof);
(c) the Company fails to comply with the provisions of Section 4.14
hereof;
(d) the Company fails for 30 days after notice from the Trustee or at
least 25% in principal amount of the Notes then outstanding to comply with the
provisions of Section 4.07, 4.09 or 4.10 hereof;
(e) the Company fails for 60 days after notice from the Trustee or holders
of at least 25% in principal amount of the Notes then outstanding voting as a
single class to comply with any of its other agreements in this Indenture or the
Notes;
(f) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or
is created after the date of this Indenture, which default (i) is caused by a
failure to pay principal of or premium, if any,
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or interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (ii) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more;
(g) the Company or any of its Subsidiaries fails to pay final judgments
aggregating in excess of $5.0 million, which judgments are not paid, discharged
or stayed for a period of 60 days; and
(h) the Company or any of its Restricted Subsidiaries that are Significant
Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary pursuant to or within the meaning of
Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due; or
(i) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its Restricted
Subsidiaries that are Significant Subsidiaries or any group of Restricted
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary
in an involuntary case;
(ii) appoints a custodian of the Company or any of its Restricted
Subsidiaries that are Significant Subsidiaries or any group of Restricted
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary or for all or substantially all of the property of the Company
or any of its Restricted Subsidiaries that are Significant Subsidiaries or
any group of Restricted Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its Restricted
Subsidiaries that are Significant Subsidiaries or any group of Restricted
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days.
In the event of a declaration of acceleration of the Notes because an
Event of Default has occurred and is continuing as a result of the acceleration
of any Indebtedness described in clause (f) of
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the preceding paragraph, the declaration of acceleration of the Notes shall be
automatically annulled if the holders of any Indebtedness described in clause
(f) of the preceding paragraph have rescinded the declaration of acceleration in
respect of such Indebtedness within 30 days of the date of such declaration and
if (i) the annulment of the acceleration of Notes would not conflict with any
judgment or decree of a court of competent jurisdiction and (ii) all existing
Events of Default, except nonpayment of principal or interest on the Notes that
became due solely because of the acceleration of the Notes have been cured or
waived.
SECTION 6.02. ACCELERATION.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the principal, premium, if any, accrued interest and Liquidated
Damages, if any, of the Notes to be due and payable immediately; provided, that
so long as any Indebtedness permitted to be incurred pursuant to the Senior
Credit Facilities shall be outstanding, such acceleration shall not be effective
until the earlier of (i) an acceleration of any such Indebtedness under the
Senior Credit Facilities or (ii) five Business Days after receipt by the Company
of written notice of such acceleration. Notwithstanding the foregoing, in the
case of an Event of Default described in clause (h) or (i) of Section 6.01, with
respect to the Company or any of its Subsidiaries all outstanding Notes shall
become due and payable without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or premium that has become due solely because of the
acceleration) have been cured or waived.
In the case of any Event of Default occurs on or after December 1,
2003 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding payment of the premium that
the Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to Section 3.07 hereof, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. If an Event of Default occurs prior to December 1,
2003 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then, an additional premium shall
also become immediately due and payable to the extent permitted by law upon
acceleration of the Notes in an amount, for each of the years beginning on
December 1 of the years set forth below, as set forth below (expressed as a
percentage of the principal amount of the Notes on the date of payment that
would otherwise be due but for the provisions of this sentence):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1998.......................................... 110.875%
1999.......................................... 109.788%
2000.......................................... 108.700%
2001.......................................... 107.613%
2002.......................................... 106.525%
</TABLE>
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SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase) (provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration). 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. In case of any such waiver, the Company, the Trustee
and the Holders shall be restored to their former positions and rights hereunder
and under the Notes, respectively. This Section 6.04 shall be in lieu of Section
316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) of the TIA is hereby
expressly excluded from this Indenture and the Notes, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Subject to Section 2.09, holders of a majority in principal amount
of the then outstanding Notes may direct in writing the time, method and place
of conducting any proceeding for exercising any remedy available to the Trustee
or exercising any trust or power conferred on it. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture that
the Trustee determines may be unduly prejudicial to the rights of Holders of
Notes not taking part in such direction, and the Trustee shall have the right to
decline to follow any such direction, if the Trustee, being advised by counsel,
determines that such action so directed may not be lawfully taken or if the
Trustee, in good faith shall by a Responsible Officer, determine that the
proceedings so directed may involve the Trustee in personal liability; provided
that the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction. In the event the Trustee takes any action
or follows any
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direction pursuant to this Indenture, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against any loss or
expense caused by taking such action or following such direction. This Section
6.05 shall be in lieu of Section 316(a)(1)(A) of the TIA, and such Section
316(a)(1)(A) of the TIA is hereby expressly excluded from this Indenture and the
Notes, as permitted by the TIA.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
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SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
securities or property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment
to Holders of Notes pursuant to this Section 6.10.
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SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, 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 a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those duties that
are specifically set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture against the Trustee;
and
(ii) in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the Trustee shall
examine the 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 purported to be stated
therein).
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05 hereof.
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(d) Whether or not therein expressly so provided, 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) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money or assets
held in trust by the Trustee need not be segregated from other funds or assets
except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult with
counsel and may require an Officers' Certificate or an Opinion of Counsel or
both. The Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such Officers' Certificate or Opinion of Counsel.
The Trustee may consult with counsel and the written advice of such counsel or
any Opinion of Counsel shall be full and complete authorization and protection
from liability in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent or attorney appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
(g) The Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring pursuant to Section
6.01(a) or 6.01(b) or (ii) any Event of Default of which the Trustee shall have
received written notification or otherwise obtained actual knowledge.
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SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of
the Default or Event of Default within 90 days after it occurs. Except in the
case of a Default or Event of Default in payment of principal of, premium, if
any, or interest on any Note, the Trustee may withhold the notice if and so long
as the board of directors, the executive committee or a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of the Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA Section 313(a) (but if no event described
in TIA Section 313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports
as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA Section 313(d).
The Company shall promptly notify the Trustee when the Notes are listed on any
securities exchange or of any delisting thereof.
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SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. 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 promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel and any taxes or other expenses incurred by a trust created
pursuant to Section 8.04 hereof.
The Company shall indemnify the Trustee and its agents against any
and all losses, liabilities or expenses (including compensation, fees,
disbursements and expenses of Trustee's agents and counsel) incurred by it
arising out of or in connection with the acceptance or administration of its
duties under this Indenture, including the costs and expenses of enforcing this
Indenture against the Company (including this Section 7.07) and defending itself
against any claim (whether asserted by the Company or any Holder or any other
person) or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except to the extent any such loss, liability or
expense may be attributable to its negligence or bad faith. 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
shall cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
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, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture. The Trustee's right to receive payment of any
amounts due under this Section 7.07 shall not be subordinated to any other
liability or Indebtedness of the Company.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
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The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing.
The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who
has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to 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 Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
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SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $50 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other securities, of
the Company are outstanding, if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, elect to
have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that 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 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, interest and Liquidated Damages, if any, on
such Notes when such payments are due, (b) the Company's obligations with
respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights,
powers, trusts, duties and immunities of the Trustee hereunder
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and the Company's obligations in connection therewith and (d) this Article
Eight. Subject to compliance with this Article Eight, the Company may exercise
its option under this Section 8.02 notwithstanding the prior exercise of its
option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants set forth in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.14, 4.15, 4.16, 4.17, 4.18 and 4.19 hereof with respect to the
outstanding Notes on and after the date the conditions set forth in Section 8.04
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 deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
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 reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01 hereof, but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under Section
8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(c) through 6.01(g) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as shall be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages, if any,
and interest on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, subject
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to customary assumptions and exclusions, the Holders of the outstanding Notes
shall not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and shall 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;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that, subject to customary
assumptions and exclusions, the Holders of the outstanding Notes shall not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and shall be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit);
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Notes over the other creditors of the Company with the
intent of defeating, hindering, delaying or defrauding creditors of the Company
or others; and
(g) the Company must deliver to the Trustee an Officers' Certificate and
an Opinion of Counsel (which opinion may be subject to customary assumptions and
exclusions), each stating that all conditions precedent provided for relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND CASH EQUIVALENTS TO BE HELD IN TRUST; OTHER
MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Cash
Equivalents (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable Cash
Equivalents deposited pursuant to
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Section 8.04 hereof or the principal and interest received in respect thereof
other than any such tax, fee or other charge which by law is for the account of
the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Cash Equivalents held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, interest, or Liquidated Damages, if any, on any Note and remaining
unclaimed for two years after such principal, and premium, if any, interest, or
Liquidated Damages, if any, has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Note shall thereafter, as a secured creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in the New York
Times and The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining shall be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following 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 held by the
Trustee or Paying Agent.
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ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, without the consent
of any Holder of Notes, the Company and the Trustee may amend or supplement this
Indenture or the Notes:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's obligations to Holders
of Notes in the case of a merger or consolidation or the sale of all or
substantially all of the assets of the Company;
(d) to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the legal
rights under this Indenture of any such Holder;
(e) to comply with requirements of the Commission in order to effect or
maintain the qualification of this Indenture under the Trust Indenture Act; or
(f) to provide for the issuance of Additional Notes in accordance with the
limitations set forth in this Indenture as of the date hereof; or
(g) to allow any Subsidiary to guarantee the Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02(b) hereof stating that such amended or supplemental Indenture complies with
this Section 9.01, the Trustee shall join with the Company in the execution of
any amended or supplemental Indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and stipulations
that may be therein contained, but the Trustee shall not be obligated to enter
into such amended or supplemental Indenture that affects its own rights, duties
or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Section 3.09, 4.10 and
4.14 hereof) and the Notes with the consent of the Holders of at least a
majority in principal amount of the Notes (including Additional Notes, if any)
then outstanding voting as a single class (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any
existing Default or Event of Default or compliance with any provision of this
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including Additional
Notes, if any) voting as a single class (including, without limitation, consents
obtained in connection with a tender offer or exchange offer for,
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the Notes). Without the consent of at least 75% in aggregate principal amount of
the Notes then outstanding (including Additional Notes, if any) voting as a
single class (including consents obtained in connection with a purchase of, or
tender offer or exchange offer for, the Notes), no waiver or amendment to this
Indenture may make any change in the provisions of Article 10 hereof that
adversely affects the rights of any Holder of Notes. Section 2.08 hereof shall
determine which Notes are considered to be "outstanding" for purposes of this
Section 9.02.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02(b) hereof stating that
any such amended or supplemental Indenture complies with this Section 9.02, the
Trustee shall join with the Company in the execution of such amended or
supplemental Indenture unless such amended or supplemental Indenture directly
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes (including Additional Notes,
if any) then outstanding voting as a single class may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Notes. However, without the consent of each Holder affected, an amendment or
waiver under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes except as
provided in the first paragraph of this Section 9.02 with respect to Sections
3.09, 4.10 and 4.14 hereof;
(c) reduce the rate of or change the time for payment of interest on any
Note;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
of the Notes and a waiver of the payment default that resulted from such
acceleration);
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(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of (i) past Defaults or (ii) the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Sections 3.09, 4.10 and 4.14 hereof);
(h) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions; or
(i) release any guarantor from any of its obligations under its Guarantee
of these Notes or this Indenture, except in accordance with the terms of this
Indenture.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall
be set forth in a amended or supplemental Indenture that complies with the TIA
as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee
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shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, in addition to the documents required by Section
11.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
execute any such amendment, supplement or waiver which affects the Trustee's
rights, duties or immunities under this Indenture or otherwise. In signing any
amendment, supplement or waiver, the Trustee shall be entitled to receive an
indemnity reasonably satisfactory to it.
ARTICLE 10.
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder 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 10, to the prior payment
in full of all Senior Debt (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Debt.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors in any
Insolvency or Liquidation Proceeding with respect to the Company all amounts due
or to become due under or with respect to all Senior Debt shall first be paid in
full in cash before any payment is made on account of the Notes, except that the
Holders of Notes may receive Reorganization Securities. Upon any such Insolvency
or Liquidation Proceeding, any payment or distribution of assets of the Company
of any kind or character, whether in cash, property or securities (other than
Reorganization Securities), to which the Holders of the Notes or the Trustee
would be entitled shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, or by the Holders of the Notes or by the Trustee if received by
them, directly to the holders of Senior Debt (pro rata to such holders on the
basis of the amounts of Senior Debt held by such holders) or their
Representative or Representatives, as their interests may appear, for
application to the payment of the Senior Debt remaining unpaid until all such
Senior Debt has been paid in full in cash, after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of Senior
Debt.
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR DEBT.
(a) in the event of and during the continuation of any default in
the payment of principal of, interest or premium, if any, on any Senior Debt, or
any Obligation owing from time to time under or in respect of Senior Debt, or in
the event that any event of default (other than a payment default) with respect
to any Senior Debt shall have occurred and be continuing and shall have resulted
in such Senior Debt becoming or being declared due and payable prior to the date
on which it would otherwise have become due and payable; or
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(b) if any event of default other than as described in clause (a)
above with respect to any Designated Senior Debt shall have occurred and be
continuing permitting the holders of such Designated Senior Debt (or their
Representative or Representatives) to declare such Designated Senior Debt due
and payable prior to the date on which it would otherwise have become due and
payable, then no payment shall be made by or on behalf of the Company on account
of the Notes (other than payments in the form of Reorganization Securities).
(x) in case of any payment or nonpayment default specified in
(a), unless and until such default shall have been cured or waived in writing
in accordance with the instruments governing such Senior Debt or such
acceleration shall have been rescinded or annulled, or
(y) in case of any nonpayment event of default specified in
(b), during the period (a "Payment Blockage Period") commencing on the date
the Company or the Trustee receives written notice (a "Payment Notice") of
such event of default (which notice shall be binding on the Trustee and the
Holders of Notes as to the occurrence of such a payment default or nonpayment
event of default) from the Credit Agent (or other holders of Designated
Senior Debt or their Representative or Representatives) and ending on the
earliest of:
(A) 179 days after such date;
(B) the date, if any, on which such Designated Senior Debt
to which such default relates is paid in full in cash or such default
is cured or waived in writing in accordance with the instruments
governing such Designated Senior Debt by the holders of such
Designated Senior Debt; and
(C) the date on which the Trustee receives written notice
from the Credit Agent (or other holders of Designated Senior Debt or
their Representative or Representatives), as the case may be,
terminating the Payment Blockage Period.
(c) During any consecutive 360-day period, the aggregate of all
Payment Blockage Periods shall not exceed 179 days and there shall be a period
of at least 181 consecutive days in each consecutive 360-day period when no
Payment Blockage Period is in effect. No event of default which existed or was
continuing with respect to the Senior Debt for which notice commencing a Payment
Blockage Period was given on the date such Payment Blockage Period commenced
shall be or be made the basis for the commencement of any subsequent Payment
Blockage Period unless such event of default is cured or waived for a period of
not less than 90 consecutive days.
SECTION 10.04. ACCELERATION OF SECURITIES.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.
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SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes at a time when the Trustee or such Holder,
as applicable, has actual knowledge that such payment is prohibited by Section
10.04 hereof, such payment shall be held by the Trustee or such Holder, in trust
for the benefit of, and shall be paid forthwith over and delivered, upon written
request, to, the holders of Senior Debt as their interests may appear or their
Representative under this Indenture or other agreement (if any) pursuant to
which Senior Debt may have been issued, as their respective interests may
appear, for application to the payment of all Obligations with respect to Senior
Debt remaining unpaid to the extent necessary to pay such Obligations in full in
accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt, and shall not be liable to any
such holders if the Trustee shall pay over or distribute to or on behalf of
Holders or the Company or any other Person money or assets to which any holders
of Senior Debt shall be entitled by virtue of this Article 10, except if such
payment is made as a result of the willful misconduct or gross negligence of the
Trustee.
SECTION 10.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying
Agent in writing of any facts known to the Company that would cause a payment of
any Obligations with respect to the Notes to violate this Article 10, but
failure to give such notice shall not affect the subordination of the Notes to
the Senior Debt as provided in this Article 10.
SECTION 10.07. SUBROGATION.
After all Senior Debt is paid in full and until the Notes are
paid in full, Holders of Notes shall be subrogated (equally and ratably with all
other Indebtedness pari passu with the Notes) to the rights of holders of Senior
Debt to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders of Notes have been applied to the
payment of Senior Debt. A distribution made under this Article 10 to holders of
Senior Debt that otherwise would have been made to Holders of Notes is not, as
between the Company and Holders, a payment by the Company on the Notes.
SECTION 10.08. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of
Notes and holders of Senior Debt. Nothing in this Indenture shall:
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(1) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay principal
of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and
creditors of the Company other than their rights in relation to holders of
Senior Debt; or
(3) prevent the Trustee or any Holder of Notes from exercising
its available remedies upon a Default or Event of Default, subject to the rights
of holders and owners of Senior Debt to receive distributions and payments
otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay
principal of or interest on a Note on the due date, the failure is still a
Default or Event of Default.
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to
holders of Senior Debt, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee and the Holders of Notes shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders of Notes for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior Debt and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10.
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold
Senior Debt with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights.
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SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Notes, by the Holder's acceptance thereof,
authorizes and directs the Trustee on such Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination as provided
in this Article 10, and appoints the Trustee to act as such Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of the
time to file such claim, the lenders under the Revolving Credit Facility are
hereby authorized to file an appropriate claim for and on behalf of the Holders
of the Notes.
SECTION 10.13. AMENDMENTS.
The provisions of this Article 10 shall not be amended or
modified without the written consent of the holders of all Designated Senior
Debt.
ARTICLE 11.
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
This Indenture is subject to the provisions of the TIA that
are required to be a part of this Indenture, and shall, to the extent
applicable, be governed by such provisions. If any provision of this Indenture
modifies any TIA provision that may be so modified, such TIA provision shall be
deemed to apply to this Indenture as so modified. If any provision of this
Indenture excludes any TIA provision that may be so excluded, such TIA provision
shall be excluded from this Indenture.
The provisions of TIA Section 310 through 317 that impose
duties on any Person (including the provisions automatically deemed included
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
SECTION 11.02. NOTICES.
Any notice or communication by the Company or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address
If to the Company:
True Temper Sports, Inc.
8275 Tournament Drive, Suite 200
Memphis, Tennessee 38125
Telecopier No.: (901) 746-2162
Attention: Fred H. Geyer
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With a copy to:
Kirkland & Ellis
153 E. 53rd Street
New York, New York 10022
Telecopier No.: (212) 446-4900
Attention: Frederick Tanne, Esq.
If to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
Telecopier No.: (212) 852-1627
Attention: Pat Stermer
with a copy to:
Olshan Grundman, Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
Telecopier No.: (212) 755-1467
Attention: Jeff Spindler
The Company or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA Section 313(c), to the extent required by
the TIA. Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
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SECTION 11.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied;
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied; and
(c) where applicable, a certificate or opinion by an
independent certified public accountant satisfactory to the Trustee that
complies with TIA Section 314(c).
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
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SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of
the Company, as such, shall have any liability for any obligations of the
Company under the Notes, this Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
SECTION 11.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 11.12. COUNTERPART 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.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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<PAGE> 87
SIGNATURES
Dated as of November 23, 1998
TRUE TEMPER SPORTS, INC.
BY:
----------------------------
Name:
Title:
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
BY:
----------------------------
Name:
Title:
Indenture Signature Pages
<PAGE> 88
EXHIBIT A
(Face of Note)
================================================================================
CUSIP/CINS_________
10 7/8% Series A Senior Subordinated Notes due 2008
No.____ $________________
TRUE TEMPER SPORTS, INC.
promises to pay to Cede & Co., or registered assigns, the principal sum of
___ Dollars on December 1, 2008.
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and November 15
DATED: NOVEMBER 23, 1998
TRUE TEMPER SPORTS, INC.
BY:
---------------------
Name:
Title:
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
By:
-----------------------------
(Authorized Signatory)
===============================================================================
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<PAGE> 89
(Back of Note)
10 7/8% Series A Senior Subordinated Notes due 2008
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY.
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT
AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB");
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C)
IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(A) (1), (2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT (AN
"IAI"), THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF
THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION; AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED
STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER
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<PAGE> 90
THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. True Temper Sports, Inc., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 10 7/8% per annum from the date hereof until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company shall pay interest and Liquidated
Damages semi-annually on June 1 and December 1 of each year, or if any such day
is not a Business Day, on the next succeeding Business Day (each an "Interest
Payment Date"). Interest on the Notes shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be June 1, 1999. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest shall be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company shall pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the May 15 or November
15 next preceding the Interest Payment Date, even if such Notes are cancelled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes shall be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds shall
be required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, United States Trust
Company of New York, the Trustee under the Indenture, shall act as Paying Agent
and Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture
dated as of November 23, 1998 (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, as
amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all
such
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<PAGE> 91
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. This Note is an obligation of the Company limited to $100.0 million
in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraphs (b) and (c) of this
Paragraph 5, the Notes shall not be redeemable at the Company's option prior to
December 1, 2003. Thereafter, the Notes shall be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on December 1 of the
years indicated below:
YEAR PERCENTAGE
2003 ......................................................... 105.348%
2004 ......................................................... 103.625%
2005 ......................................................... 101.813%
2006 and thereafter .......................................... 100.000%
(b) Notwithstanding the provisions of clause (a) of this
paragraph 5, at any time prior to December 1, 2001, the Company may on one or
more occasions redeem up to 35% of the original aggregate principal amount of
Notes at a redemption price of 110.875% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds of one or more Public Equity
Offerings; provided that at least 65% of the original aggregate principal amount
of Notes remains outstanding immediately after the occurrence of such
redemption; and provided, further, that such redemption shall occur within 90
days of the date of the closing of such Public Equity Offering.
(c) At any time prior to December 1, 2003, the Notes may also
be redeemed, as a whole but not in part, at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event may any such redemption occur more than 90 days
after the occurrence of such Change of Control) mailed by first-class mail to
each Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest and Liquidated Damages, if any, to, the date of redemption (the
"Redemption Date").
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall
not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
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<PAGE> 92
(a) Upon the occurrence of a Change of Control, each Holder of
Notes will have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 60 days following any
Change of Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by the Indenture and described in such notice.
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales, within five days of each date on which the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Company will be required to make an
offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis. Holders of Notes that are the subject of an offer to purchase shall
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may
be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Notes and Additional Notes, if any, voting as
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a single class, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes and Additional Notes,
if any, voting as a single class. Without the consent of any Holder of a Note,
the Indenture or the Notes may be amended or supplemented to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Company's
obligations to Holders of the Notes in case of a merger or consolidation or sale
of all or substantially all of the assets of the Company, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act or to allow any Subsidiary to guarantee the Notes, to provide for the
Issuance of Additional Notes in accordance with the limitations set forth in the
Indenture, or to allow any Guarantor to execute a supplemental indenture to the
Indenture with respect to the Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (a)
default for 30 days in the payment when due of interest on, or Liquidated
Damages with respect to, the Notes (whether or not permitted by Article 10 of
the Indenture); (b) default in payment of the principal of or premium, if any,
on the Notes when the same becomes due and payable at maturity, upon redemption
(including in connection with an offer to purchase) or otherwise (whether or not
permitted by Article 10 of the Indenture); (c) failure by the Company to comply
with the provisions of Section 4.14; (d) failure by the Company for 30 days
after notice from the Trustee or at least 25% in principal amount of the Notes
then outstanding to comply with the provisions of Section 4.07, 4.09 or 4.10;
(e) failure by the Company for 60 days after notice from the Trustee or holders
of at least 25% in principal amount of the Notes then outstanding voting as a
single class to comply with any of its other agreements in the Indenture or the
Notes; (f) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created
after the date of the Indenture, which default (i) is caused by a failure to pay
principal of or premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of such
default (a "Payment Default") or (ii) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (g) failure
by the Company or any of its Subsidiaries to pay final judgments aggregating in
excess of $5.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days; and (h) certain events of bankruptcy or insolvency with
respect to the Company or any of its Restricted Subsidiaries that are
Significant Subsidiaries. In the event of a declaration of acceleration of the
Notes because an Event of Default has occurred and is continuing as a result of
the acceleration of any Indebtedness described in clause (f) above, the
declaration of acceleration of the Notes shall be automatically annulled if the
holders of any Indebtedness described in clause (f) above have rescinded the
declaration of acceleration in respect of such Indebtedness within 30 days of
the date of such declaration and if (i) the annulment of the acceleration of
Notes would not conflict with any judgment or decree of a court of competent
jurisdiction and (ii) all existing Events of Default, except nonpayment of
principal or interest on the Notes that became due solely because of the
acceleration of the Notes have been cured or waived. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency,
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with respect to the Company or any of its Subsidiaries all outstanding Notes
shall become due and payable without further action or notice. Holders of the
Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. No director, officer,
employee, incorporator or stockholder of the Company, as such, shall have any
liability for any obligations of the Company under the Notes, the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Notes. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the Commission that such
a waiver is against public policy.
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement, dated as of November 23, 1998, between the Company and the parties
named on the signature pages thereof (the "Registration Rights Agreement").
18. 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 the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company shall furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
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True Temper Sports, Inc.
8275 Tournament Drive, Suite 200
Memphis, Tennessee 38125
Attention: Fred H. Geyer
A2-8
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ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint --------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date: ---------------------
Your Signature:
---------------------------------------------
(Sign exactly as your name appears on the face of this Note)
SIGNATURE GUARANTEE.
A2-9
<PAGE> 97
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 Section 4.14 [ ]
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $----------
Date: Your Signature:
---------- -----------------------------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No: ------------------------------
SIGNATURE GUARANTEE.
A2-10
<PAGE> 98
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
True Temper Sports, Inc.
8275 Tournament Drive, Suite 200
Memphis, Tennessee 38125
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Re: 10 7/8% Senior Subordinated Notes due 2008
Reference is hereby made to the Indenture, dated as of
November 23, 1998 (the "Indenture"), between True Temper Sports, Inc., as issuer
(the "Company"), and United States Trust Company of New York, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
______________, (the "Transferor") owns and proposes to
transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in
the principal amount of $___________ in such Note[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore
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securities market and neither such Transferor nor any Person acting on its
behalf knows that the transaction was prearranged with a buyer in the United
States, (ii) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities
Act, (iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is not being made to a U.S. Person or for the account or benefit of a
U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
Transfer enumerated in the Private Placement Legend printed on the Regulation S
Global Note and/or the Definitive Note and in the Indenture and the Securities
Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION
OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in compliance with
the prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive Notes
and the requirements of the exemption claimed, which certification is supported
by (1) a certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) if such Transfer is in respect of a principal amount of Notes
at the time of transfer of less than $250,000, an Opinion of Counsel provided by
the Transferor or the Transferee (a copy of which the Transferor has attached to
this certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the
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Private Placement Legend printed on the IAI Global Note and/or the Definitive
Notes and in the Indenture and the Securities Act.
4. [ ] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i)
The Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky securities
laws of any state of the United States and (ii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i)
The Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule 144,
Rule 903 or Rule 904 and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
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This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
[Insert Name of Transferor]
By:
------------------------
Name:
Title:
Dated: ,
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<PAGE> 102
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ), or
(ii) [ ] Regulation S Global Note (CUSIP ), or
(iii) [ ] IAI Global Note (CUSIP ); or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ), or
(ii) [ ] Regulation S Global Note (CUSIP ), or
(iii) [ ] IAI Global Note (CUSIP ); or
(iv) [ ] Unrestricted Global Note (CUSIP ); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
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<PAGE> 103
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
True Temper Sports, Inc.
8275 Tournament Drive, Suite 200
Memphis, Tennessee 38125
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Re: 10 7/8% Senior Subordinated Notes due 2008
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of
November 23, 1998 (the "Indenture"), between True Temper Sports, Inc., as issuer
(the "Company"), and United States Trust Company of New York, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with
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<PAGE> 104
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED
GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the [CHECK ONE] [ ] 144A Global Note, [ ] Regulation S Global Note, [ ] IAI
Global Note with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any applicable
blue sky securities laws of any state of the United States. Upon consummation of
the proposed Exchange in accordance with the terms of the Indenture, the
beneficial interest issued will be subject to the
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restrictions on transfer enumerated in the Private Placement Legend printed on
the relevant Restricted Global Note and in the Indenture and the Securities Act.
C-3
<PAGE> 106
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
-----------------------------------
[Insert Name of Owner]
By:
-------------------------------
Name:
Title:
Dated: ,
C-4
<PAGE> 107
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
True Temper Sports, Inc.
8275 Tournament Drive, Suite 200
Memphis, Tennessee 38125
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Re: 10 7/8% Senior Subordinated Notes due 2008
Reference is hereby made to the Indenture, dated as of
November 23, 1998 (the "Indenture"), between True Temper Sports, Inc., as issuer
(the "Company"), and United States Trust Company of New York, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) / / a beneficial interest in a Global Note, or
(b) / / a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or
any interest therein is subject to certain restrictions and conditions set forth
in the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes and any interest
therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter and, if such
transfer is in respect of a principal amount of Notes, at the time of transfer
of less than $250,000, an Opinion of Counsel in form reasonably acceptable to
the Company to
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<PAGE> 108
the effect that such transfer is in compliance with the Securities Act, (D)
outside the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the provisions of Rule 144(k) under the
Securities Act or (F) pursuant to an effective registration statement under the
Securities Act, and we further agree to provide to any person purchasing the
Definitive Note or beneficial interest in a Global Note from us in a transaction
meeting the requirements of clauses (A) through (E) of this paragraph a notice
advising such purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect. We further understand that any
subsequent transfer by us of the Notes or beneficial interest therein acquired
by us must be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
____________________________________
[Insert Name of Accredited Investor]
By: _______________________________
Name:
Title:
Dated: __________________, ____
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<PAGE> 109
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated
as of ________________, among __________________ (the "Guaranteeing
Subsidiary"), a subsidiary of True Temper Sports, Inc. (or its permitted
successor), a Delaware corporation (the "Company"), the Company, the other
Guarantors (as defined in the Indenture referred to herein) and United States
Trust Company of New York, as trustee under the Indenture referred to below (the
"Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture (the "Indenture"), dated as of November 23, 1998
providing for the issuance of an aggregate principal amount of up to $150.0
million of 10 7/8% Senior Subordinated Notes due 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain
circumstances the Guaranteeing Subsidiary shall execute and deliver to the
Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary
shall unconditionally guarantee all of the Company's Obligations under the Notes
and the Indenture on the terms and conditions set forth herein (the "Note
Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby
agrees as follows:
(a) Along with all other Guarantors, to jointly and
severally Guarantee to each Holder of a Note
authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective
of the validity and enforceability of the Indenture,
the Notes or the obligations of the Company hereunder
or thereunder, that:
(i) the principal of and interest on the Notes
will be promptly paid in full when due,
whether at maturity, by acceleration,
redemption or otherwise, and interest on the
overdue principal of and interest on the
Notes, if any, if lawful, and all other
obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be
promptly paid in full or performed, all in
accordance with the terms hereof and
thereof; and
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(ii) in case of any extension of time of payment
or renewal of any Notes or any of such other
obligations, that same will be promptly paid
in full when due or performed in accordance
with the terms of the extension or renewal,
whether at stated maturity, by acceleration
or otherwise. Failing payment when due of
any amount so guaranteed or any performance
so guaranteed for whatever reason, the
Guarantors shall be jointly and severally
obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or
enforceability of the Notes or the Indenture, the
absence of any action to enforce the same, any waiver
or consent by any Holder of the Notes with respect to
any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce
the same or any other circumstance which might
otherwise constitute a legal or equitable discharge
or defense of a guarantor.
(c) The following is hereby waived: diligence
presentment, demand of payment, filing of claims with
a court in the event of insolvency or bankruptcy of
the Company, any right to require a proceeding first
against the Company, protest, notice and all demands
whatsoever.
(d) This Note Guarantee shall not be discharged except by
complete performance of the obligations contained in
the Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court
or otherwise to return to the Company, the
Guarantors, or any Custodian, Trustee, liquidator or
other similar official acting in relation to either
the Company or the Guarantors, any amount paid by
either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to
any right of subrogation in relation to the Holders
in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the
maturity of the obligations guaranteed hereby may be
accelerated as provided in Article 6 of the Indenture
for the purposes of this Note Guarantee,
notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect
of the obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such
obligations as provided in Article 6 of the
Indenture, such obligations (whether or not due and
payable) shall forthwith become due and payable by
the Guarantors for the purpose of this Note
Guarantee.
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(h) The Guarantors shall have the right to seek
contribution from any non-paying Guarantor so long as
the exercise of such right does not impair the rights
of the Holders under the Guarantee.
(i) Pursuant to Section 10.02 of the Indenture, after
giving effect to any maximum amount and any other
contingent and fixed liabilities that are relevant
under any applicable Bankruptcy or fraudulent
conveyance laws, and after giving effect to any
collections from, rights to receive contribution from
or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other
Guarantor under Article 10 of the Indenture shall
result in the obligations of such Guarantor under its
Note Guarantee not constituting a fraudulent transfer
or conveyance.
3 EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees
that the Note Guarantees shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Note Guarantee.
4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN
TERMS.
(a) No Guarantor may consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person) or sell, assign,
transfer convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless:
(i) the Company or a Guarantor is the surviving
corporation or the entity or the Person formed by or surviving
any such consolidation or merger (if other than a Guarantor or
the Company) or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made is
a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any
such consolidation or merger (if other than a Guarantor or the
Company) or the entity or Person to which such sale, transfer,
conveyance or other disposition assumes all the obligations of
such Guarantor under the Notes, the Indenture and the Note
Guarantee, pursuant to a supplemental indenture in the form of
Exhibit E to the Indenture;
(iii) immediately after giving effect to such
transaction, no Default or Event of Default exists; and
(iv) the Company (i) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding
the transaction and (ii) will, at the time of such transaction
and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of Section 4.09 of
the Indenture;
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<PAGE> 112
(b) In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in form to the
Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of the Indenture 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. Such successor corporation thereupon may cause to be
signed any or all of the Note Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Note Guarantees so issued shall in all
respects have the same legal rank and benefit under the Indenture as the Note
Guarantees theretofore and thereafter issued in accordance with the terms of the
Indenture as though all of such Note Guarantees had been issued at the date of
the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture,
and notwithstanding clauses (a) and (b) above, nothing contained in the
Indenture or in any of the Notes shall prevent any consolidation or merger of a
Guarantor with or into the Company 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 Company or another Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale
or other disposition of all to the capital stock of any Guarantor, then such
Guarantor (in the event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its Note Guarantee; provided that
the Net Proceeds of such sale or other disposition are applied in accordance
with the applicable provisions of the Indenture, including without limitation
Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an
Officers' Certificate and an Opinion of Counsel to the effect that such sale or
other disposition was made by the Company in accordance with the provisions of
the Indenture, including without limitation Section 4.10 of the Indenture, the
Trustee shall execute any documents reasonably required in order to evidence the
release of any Guarantor from its obligations under its Note Guarantee.
(b) Any Guarantor not released from its obligations under its
Note Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor under the
Indenture as provided in Article 10 of the Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future
director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Notes, any Note
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of the Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL
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<PAGE> 113
INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
8. COUNTERPARTS. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10. THE TRUSTEE. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
Company.
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<PAGE> 114
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
Dated: _______________, ____
[Guaranteeing Subsidiary]
By: ________________________________
Name:
Title:
TRUE TEMPER SPORTS, INC.
By: ________________________________
Name:
Title:
[EXISTING GUARANTORS]
By: ________________________________
Name:
Title
UNITED STATES TRUST COMPANY OF NEW
YORK, as Trustee
By: ________________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 4.2
EXECUTION COPY
================================================================================
TRUE TEMPER SPORTS, INC.
$100,000,000
10 7/8% Series A Senior Subordinated Notes due 2008
Purchase Agreement
November 18, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
================================================================================
<PAGE> 2
$100,000,000
10 7/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
OF TRUE TEMPER SPORTS, INC.
PURCHASE AGREEMENT
November 18, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
True Temper Sports, Inc., a Delaware corporation (the
"COMPANY"), proposes to issue and sell to Donaldson, Lufkin & Jenrette
Securities Corporation (the "INITIAL PURCHASER") an aggregate of $100,000,000 in
principal amount of its 10 7/8% Series A Senior Subordinated Notes due 2008 (the
"SERIES A NOTES"), subject to the terms and conditions set forth herein. The
Series A Notes are to be issued pursuant to the provisions of an indenture (the
"INDENTURE"), to be dated as of the Closing Date (as defined below), among the
Company and United States Trust Company of New York, as trustee (the "TRUSTEE").
The Series A Notes and the Series B Notes (as defined below) issuable in
exchange therefor are collectively referred to herein as the "NOTES."
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Indenture.
1. OFFERING MEMORANDUM. The Series A Notes will be offered and
sold to the Initial Purchaser pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"ACT"). The Company has prepared a preliminary offering memorandum, dated July
31, 1998 relating to the Series A Notes (the "PRELIMINARY OFFERING MEMORANDUM")
and a final offering memorandum, dated November 18, 1998 relating to the Series
A Notes (the "OFFERING MEMORANDUM").
Upon original issuance thereof, and until such time as the
same is no longer required pursuant to the Indenture, the Series A Notes (and
all securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
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<PAGE> 3
THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)(A "QIB");
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B)
TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904
OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)
(1), (2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT
(AN "IAI"), THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF
WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS
IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE
OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF
THE FOREGOING."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company, an aggregate principal amount of $100,000,000 of
Series A Notes at a purchase price equal to 97.0% of the principal amount
thereof (the "PURCHASE PRICE").
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<PAGE> 4
3. TERMS OF OFFERING. The Initial Purchaser has advised the
Company that the Initial Purchaser will make offers (the "EXEMPT RESALES") of
the Series A Notes purchased hereunder on the terms set forth in the Offering
Memorandum, as amended or supplemented, solely to persons whom the Initial
Purchaser reasonably believes to be "qualified institutional buyers" as defined
in Rule 144A under the Act ("QIBS"), such persons being referred to herein as
the "ELIGIBLE PURCHASERS." The Initial Purchaser will offer the Series A Notes
to Eligible Purchasers initially at a price equal to 100.0% of the principal
amount thereof. Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Series A
Notes will have the registration rights set forth in the registration rights
agreement (the "REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date,
in substantially the form of Exhibit A hereto, for so long as such Series A
Notes constitute "TRANSFER RESTRICTED SECURITIES" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights Agreement,
the Company will agree to file with the Securities and Exchange Commission (the
"COMMISSION") under the circumstances set forth therein, (i) a registration
statement under the Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating
to the Company's 10 7/8% Series B Senior Subordinated Notes due 2008 (the
"SERIES B NOTES"), to be offered in exchange for the Series A Notes (such offer
to exchange being referred to as the "EXCHANGE OFFER") and (ii) a shelf
registration statement pursuant to Rule 415 under the Act (the "SHELF
REGISTRATION STATEMENT" and, together with the Exchange Offer Registration
Statement, the "REGISTRATION STATEMENTS") relating to the resale by certain
holders of the Series A Notes and to use its best efforts to cause such
Registration Statements to be declared and remain effective and usable for the
periods specified in the Registration Rights Agreement and to consummate the
Exchange Offer. This Agreement, the Indenture, the Notes, and the Registration
Rights Agreement are hereinafter sometimes referred to collectively as the
"OPERATIVE DOCUMENTS."
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the
Series A Notes shall be made at the offices of Latham & Watkins, 885 Third
Avenue, Suite 1000, New York, New York 10022 or such other location as may be
mutually acceptable. Such delivery and payment shall be made at 9:00 a.m. New
York City time, on November 23, 1998 or at such other time on the same date or
such other date as shall be agreed upon by the Initial Purchaser and the Company
in writing. The time and date of such delivery and the payment for the Series A
Notes are herein called the "CLOSING DATE."
(b) One or more of the Series A Notes in definitive global
form, registered in the name of Cede & Co., as nominee of the Depository Trust
Company ("DTC"), having an aggregate principal amount corresponding to the
aggregate principal amount of the Series A Notes sold pursuant to Exempt Resales
(collectively, the "GLOBAL NOTE"), shall be delivered by the Company to the
Initial Purchaser (or as the Initial Purchaser directs) in each case with any
transfer taxes thereon duly paid by the Company against payment by the Initial
Purchaser of the Purchase Price thereof by wire transfer in same day funds to
the order of the Company. The Global Note shall be made available to the Initial
Purchaser for inspection not
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<PAGE> 5
later than 9:30 a.m., New York City time, on the business day immediately
preceding the Closing Date.
5. AGREEMENTS OF THE COMPANY. The Company hereby agrees with
the Initial Purchaser as follows:
(a) To advise the Initial Purchaser promptly and, if requested
by the Initial Purchaser, confirm such advice in writing, (i) of the issuance by
any state securities commission of any stop order suspending the qualification
or exemption from qualification of any Series A Notes for offering or sale in
any jurisdiction designated by the Initial Purchaser pursuant to Section 5(e)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose and (ii) of
the happening of any event during the period referred to in Section 5(c) below
that makes any statement of a material fact made in the Preliminary Offering
Memorandum or the Offering Memorandum untrue or that requires any additions to
or changes in the Preliminary Offering Memorandum or the Offering Memorandum in
order to make the statements therein not misleading. The Company shall use its
best efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption of any Series A Notes under any state securities or
Blue Sky laws and, if at any time any state securities commission or other
federal or state regulatory authority shall issue an order suspending the
qualification or exemption of any Series A Notes under any state securities or
Blue Sky laws, the Company shall use its best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchaser and those persons
identified by the Initial Purchaser to the Company as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
or supplements thereto, as the Initial Purchaser may reasonably request for the
time period specified in Section 5(c). Subject to the Initial Purchaser's
compliance with its representations and warranties and agreements set forth in
Section 7 hereof, the Company consents to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto required pursuant hereto, by the Initial Purchaser in connection with
Exempt Resales.
(c) During such period as in the opinion of counsel for the
Initial Purchaser an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchaser (i) not to make any
amendment or supplement to the Offering Memorandum of which the Initial
Purchaser shall not previously have been advised or to which the Initial
Purchaser shall reasonably object after being so advised and (ii) to prepare
promptly upon the Initial Purchaser's reasonable request, any amendment or
supplement to the Offering Memorandum which may be necessary or advisable in
connection with such Exempt Resales.
(d) If, during the period referred to in Section 5(c) above,
any event shall occur or condition shall exist as a result of which, in the
opinion of counsel to the Initial Purchaser, it becomes necessary to amend or
supplement the Offering Memorandum in order to make the statements therein, in
the light of the circumstances when such Offering Memorandum
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<PAGE> 6
is delivered to an Eligible Purchaser, not misleading, or if, in the opinion of
counsel to the Initial Purchaser, it is necessary to amend or supplement the
Offering Memorandum to comply with any applicable law, forthwith to prepare an
appropriate amendment or supplement to such Offering Memorandum so that the
statements therein, as so amended or supplemented, will not, in the light of the
circumstances when it is so delivered, be misleading, or so that such Offering
Memorandum will comply with applicable law, and to furnish to the Initial
Purchaser and such other persons as the Initial Purchaser may designate such
number of copies thereof as the Initial Purchaser may reasonably request.
(e) Prior to the sale of all Series A Notes pursuant to Exempt
Resales as contemplated hereby, to cooperate with the Initial Purchaser and
counsel to the Initial Purchaser in connection with the registration or
qualification of the Series A Notes for offer and sale to the Initial Purchaser
and pursuant to Exempt Resales under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchaser may request and to continue such
registration or qualification in effect so long as required for Exempt Resales
and to file such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification; provided,
however, that the Company shall not be required in connection therewith to
qualify as a foreign corporation in any jurisdiction in which it is not now so
qualified or to take any action that would subject it to general consent to
service of process or taxation other than as to matters and transactions
relating to the Preliminary Offering Memorandum, the Offering Memorandum or
Exempt Resales, in any jurisdiction in which it is not now so subject.
(f) So long as any of the Series A Notes remain outstanding
and during any period in which the Company is not subject to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to make
available to any holder of Series A Notes in connection with any sale thereof
and any prospective purchaser of such Series A Notes from such holder, the
information ("RULE 144A INFORMATION") required by Rule 144A(d)(4) under the Act.
(g) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of the obligations of the Company
under this Agreement, including: (i) the fees, disbursements and expenses of
counsel to the Company and accountants of the Company in connection with the
sale and delivery of the Series A Notes to the Initial Purchaser and pursuant to
Exempt Resales, and all other fees and expenses in connection with the
preparation, printing, filing and distribution of the Preliminary Offering
Memorandum, the Offering Memorandum and all amendments and supplements to any of
the foregoing (including financial statements), including the mailing and
delivering of copies thereof to the Initial Purchaser and persons designated by
it in the quantities specified herein, (ii) all costs and expenses related to
the transfer and delivery of the Series A Notes to the Initial Purchaser and
pursuant to Exempt Resales, including any transfer or other taxes payable
thereon, (iii) all costs of printing or producing this Agreement, the other
Operative Documents and any other agreements or documents in connection with the
offering, purchase, sale or delivery of the Series A Notes, (iv) all expenses in
connection with the registration or qualification of the Series A Notes for
offer and sale under the securities or Blue Sky laws of the several states and
all costs of
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<PAGE> 7
printing or producing any preliminary and supplemental Blue Sky memoranda in
connection therewith (including the filing fees and fees and disbursements of
counsel for the Initial Purchaser in connection with such registration or
qualification and memoranda relating thereto), (v) the cost of printing
certificates representing the Series A Notes, (vi) all expenses and listing fees
in connection with the application for quotation of the Series A Notes in the
National Association of Securities Dealers, Inc. ("NASD") Automated Quotation
System - PORTAL ("PORTAL"), (vii) the fees and expenses of the Trustee and the
Trustee's counsel in connection with the Indenture and the Notes, (viii) the
costs and charges of any transfer agent, registrar and/or depositary (including
DTC), (ix) any fees charged by rating agencies for the rating of the Notes, (x)
all costs and expenses of the Exchange Offer and any Registration Statement, as
set forth in the Registration Rights Agreement, and (xi) and all other costs and
expenses incident to the performance of the obligations of the Company hereunder
for which provision is not otherwise made in this Section.
(h) To use its best efforts to effect the inclusion of the
Series A Notes in PORTAL and to maintain the listing of the Series A Notes on
PORTAL for so long as the Series A Notes are outstanding.
(i) To obtain the approval of DTC for "book-entry" transfer of
the Notes, and to comply with all of its agreements set forth in the
representation letters of the Company to DTC relating to the approval of the
Notes by DTC for "book-entry" transfer.
(j) During the period beginning on the date hereof and
continuing to and including the Closing Date, not to offer, sell, contract to
sell or otherwise transfer or dispose of any debt securities of the Company or
any warrants, rights or options to purchase or otherwise acquire debt securities
of the Company substantially similar to the Notes (other than (i) the Notes and
(ii) commercial paper issued in the ordinary course of business), without the
prior written consent of the Initial Purchaser.
(k) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Series A Notes to the Initial Purchaser
or pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Series A Notes under the Act.
(l) Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of any
Notes.
(m) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(n) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by it prior
to the Closing Date and to satisfy all conditions precedent to the delivery of
the Series A Notes.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
As of the date hereof, the Company represents and warrants to, and agrees with,
the Initial Purchaser
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that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum do not, and any supplement or amendment to them will not, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchaser furnished to the Company in
writing by the Initial Purchaser expressly for use therein. No stop order
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting that
any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(b) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Preliminary Offering
Memorandum and the Offering Memorandum and to own, lease and operate its
properties, and each is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole (a
"MATERIAL ADVERSE EFFECT").
(c) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights.
(d) The entities listed on Schedule A hereto are the only
subsidiaries, direct or indirect, of the Company. All of the outstanding shares
of capital stock of each of the Company's subsidiaries have been duly authorized
and validly issued and are fully paid and non-assessable, and are owned by the
Company, directly or indirectly, through one or more subsidiaries, free and
clear of any security interest, claim, lien, encumbrance or adverse interest of
any nature (each, a "LIEN").
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) The Indenture has been duly authorized by the Company and,
on the Closing Date, will have been validly executed and delivered by the
Company. When the Indenture has been duly executed and delivered by the Company,
the Indenture will be a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of
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<PAGE> 9
equitable remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act of 1939, as amended (the
"TIA" or "TRUST INDENTURE ACT"), and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder.
(g) The Series A Notes have been duly authorized and, on the
Closing Date, will have been validly executed and delivered by the Company. When
the Series A Notes have been issued, executed and authenticated in accordance
with the provisions of the Indenture and delivered to and paid for by the
Initial Purchaser in accordance with the terms of this Agreement, the Series A
Notes will be entitled to the benefits of the Indenture and will be valid and
binding obligations of the Company, enforceable in accordance with their terms
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the Series A
Notes will conform as to legal matters to the description thereof contained in
the Offering Memorandum.
(h) On the Closing Date, the Series B Notes will have been
duly authorized by the Company. When the Series B Notes are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Series B Notes will be entitled to the benefits of the Indenture
and will be the valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability.
(i) The Registration Rights Agreement has been duly authorized
by the Company and, on the Closing Date, will have been duly executed and
delivered by the Company. When the Registration Rights Agreement has been duly
executed and delivered, the Registration Rights Agreement will be a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
(ii) rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability. On the Closing Date,
the Registration Rights Agreement will conform as to legal matters to the
description thereof in the Offering Memorandum.
(j) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws or in default in the performance
of any obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument, to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or their respective property is bound, except for any defaults
under such indenture, loan agreement, mortgage, lease or other agreement or
instrument that would not have a Material Adverse Effect.
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<PAGE> 10
(k) The execution, delivery and performance of this Agreement
and the other Operative Documents by the Company, compliance by the Company with
all provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the securities
or Blue Sky laws of the various states), (ii) conflict with or constitute a
breach of any of the terms or provisions of, or a default under, (A) the charter
or by-laws of the Company or any of its subsidiaries or (B) any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material to
the Company and its subsidiaries, taken as a whole, to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound, (iii) violate or conflict
with any applicable law or any rule, regulation, judgment, order or decree of
any court or any governmental body or agency having jurisdiction over the
Company, any of its subsidiaries or their respective property, (iv) result in
the imposition or creation of (or the obligation to create or impose) a Lien
under, any agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
their respective property is bound, or (v) result in the termination, suspension
or revocation of any Authorization (as defined below) of the Company or any of
its subsidiaries result in any other impairment of the rights of the holder of
any such Authorization, except in the case of the foregoing clauses (i),
(ii)(B), (iii) and (iv) for such violations or defaults which, singly or in the
aggregate, would not have a Material Adverse Effect.
(l) There are no legal or governmental proceedings pending or
to the Company's knowledge threatened to which the Company or any of its
subsidiaries is or could be a party or to which any of their respective property
is or could be subject, which might result, singly or in the aggregate, in a
Material Adverse Effect.
(m) Neither the Company nor any of its subsidiaries has
violated any foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), any
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any provisions of the Foreign Corrupt Practices Act or the rules
and regulations promulgated thereunder, except for such violations which, singly
or in the aggregate, would not have a Material Adverse Effect.
(n) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a Material Adverse Effect.
(o) Each of the Company and its subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "AUTHORIZATION") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including without
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<PAGE> 11
limitation, under any applicable Environmental Laws, as are necessary to own,
lease, license and operate its respective properties and to conduct its
business, except where the failure to have any such Authorization or to make any
such filing or notice would not, singly or in the aggregate, have a Material
Adverse Effect. Each such Authorization is valid and in full force and effect
and each of the Company and its subsidiaries is in compliance with all the terms
and conditions thereof and with the rules and regulations of the authorities and
governing bodies having jurisdiction with respect thereto; and no event has
occurred (including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of time or
both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would result
in any other impairment of the rights of the holder of any such Authorization;
and such Authorizations contain no restrictions that are burdensome to the
Company or any of its subsidiaries; except where such failure to be valid and in
full force and effect or to be in compliance, the occurrence of any such event
or the presence of any such restriction would not, singly or in the aggregate,
have a Material Adverse Effect.
(p) The accountants, Ernst & Young LLP, that have certified
the financial statements and supporting schedules included in the Preliminary
Offering Memorandum and the Offering Memorandum are independent public
accountants with respect to the Company, as required by the Act and the Exchange
Act. The historical financial statements, together with related schedules and
notes, set forth in the Preliminary Offering Memorandum and the Offering
Memorandum comply as to form in all material respects with the requirements
applicable to registration statements on Form S-1 under the Act.
(q) The historical financial statements, together with related
schedules and notes forming part of the Offering Memorandum (and any amendment
or supplement thereto), present fairly the consolidated financial position,
results of operations and changes in financial position of the Company and its
subsidiaries on the basis stated in the Offering Memorandum at the respective
dates or for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and statistical
information and data set forth in the Offering Memorandum (and any amendment or
supplement thereto) are, in all material respects, accurately presented and
prepared on a basis consistent with such financial statements and the books and
records of the Company.
(r) The pro forma financial statements included in the
Preliminary Offering Memorandum and the Offering Memorandum have been prepared
on a basis consistent with the historical financial statements of the Company
and its subsidiaries and give effect to assumptions used in the preparation
thereof on a reasonable basis and in good faith and present fairly the
historical and proposed transactions contemplated by the Preliminary Offering
Memorandum and the Offering Memorandum; and such pro forma financial statements
comply as to form in all material respects with the requirements applicable to
pro forma financial statements included in registration statements on Form S-1
under the Act. The other pro forma financial and statistical information and
data included in the Offering Memorandum are, in all
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<PAGE> 12
material respects, accurately presented and prepared on a basis consistent with
the pro forma financial statements.
(s) The Company is not and, after giving effect to the
offering and sale of the Series A Notes and the application of the net proceeds
thereof as described in the Offering Memorandum, will not be, an "investment
company," as such term is defined in the Investment Company Act of 1940, as
amended.
(t) Except as set forth in the Offering Memorandum, there are
no contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company or to
require the Company to include such securities with the Notes registered
pursuant to any Registration Statement.
(u) Neither the Company nor any of its subsidiaries nor any
agent thereof acting on the behalf of them has taken, and none of them will
take, any action that might cause this Agreement or the issuance or sale of the
Series A Notes to violate Regulation G (12 C.F.R. Part 207), Regulation T (12
C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R.
Part 224) of the Board of Governors of the Federal Reserve System.
(v) No "nationally recognized statistical rating organization"
as such term is defined for purposes of Rule 436(g)(2) under the Act (i) has
imposed (or has informed the Company that it is considering imposing) any
condition (financial or otherwise) on the Company's retaining any rating
assigned to the Company, any securities of the Company or (ii) has indicated to
the Company that it is considering (a) the downgrading, suspension, or
withdrawal of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (b) any change in
the outlook for any rating of the Company or any securities of the Company.
(w) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there has not occurred any material adverse change
or any development involving a prospective material adverse change in the
condition, financial or otherwise, or the earnings, business, management or
operations of the Company and its subsidiaries, taken as a whole, (ii) there has
not been any material adverse change or any development involving a prospective
material adverse change in the capital stock or in the long-term debt of the
Company or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries has incurred any material liability or obligation, direct or
contingent.
(x) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, contains all the information specified in,
and meeting the requirements of, Rule 144A(d)(4) under the Act.
(y) When the Series A Notes are issued and delivered pursuant
to this Agreement, the Series A Notes will not be of the same class (within the
meaning of Rule 144A
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under the Act) as any security of the Company that is listed on a national
securities exchange registered under Section 6 of the Exchange Act or that is
quoted in a United States automated inter-dealer quotation system.
(z) No form of general solicitation or general advertising (as
defined in Regulation D under the Act) was used by the Company or any of its
representatives (other than the Initial Purchaser, as to whom the Company make
no representation) in connection with the offer and sale of the Series A Notes
contemplated hereby, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same class as the Series A Notes have been issued and sold by
the Company within the six-month period immediately prior to the date hereof.
(aa) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the TIA.
(bb) The sale of the Series A Notes pursuant to Regulation S
is not part of a plan or scheme to evade the registration provisions of the Act.
(cc) No registration under the Act of the Series A Notes is
required for the sale of the Series A Notes to the Initial Purchaser as
contemplated hereby or for the Exempt Resales assuming the accuracy of the
Initial Purchaser's representations and warranties and agreements set forth in
Section 7 hereof.
(dd) Each certificate signed by any officer of the Company and
delivered to the Initial Purchaser or counsel for the Initial Purchaser shall be
deemed to be a representation and warranty by the Company to the Initial
Purchaser as to the matters covered thereby.
The Company acknowledges that the Initial Purchaser and, for
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 9 hereof, counsel to the Company and counsel to the Initial Purchaser
will rely upon the accuracy and truth of the foregoing representations and
hereby consents to such reliance.
7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES. The
Initial Purchaser represents and warrants to, and agrees with, the Company:
(a) The Initial Purchaser is a QIB or an "accredited investor"
as defined in Rule 501(a) (1), (2), (3) or (7) under the Act (an "ACCREDITED
INSTITUTION"), in either case, with such knowledge and experience in financial
and business matters as is necessary in order to evaluate the merits and risks
of an investment in the Series A Notes.
(b) The Initial Purchaser (A) is not acquiring the Series A
Notes with a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Notes in a transaction that would
violate the Act or the securities laws of any state of
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<PAGE> 14
the United States or any other applicable jurisdiction and (B) will be
reoffering and reselling the Series A Notes only to QIBs in reliance on the
exemption from the registration requirements of the Act provided by Rule 144A.
(c) The Initial Purchaser agrees that no form of general
solicitation or general advertising (within the meaning of Regulation D under
the Act) has been or will be used by the Initial Purchaser or any of its
representatives in connection with the offer and sale of the Series A Notes
pursuant hereto, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
(d) The Initial Purchaser agrees that, in connection with
Exempt Resales, the Initial Purchaser will solicit offers to buy the Series A
Notes only from, and will offer to sell the Series A Notes only to, Eligible
Purchasers. The Initial Purchaser further agrees that it will offer to sell the
Series A Notes only to, and will solicit offers to buy the Series A Notes only
from Eligible Purchasers that the Initial Purchaser reasonably believes are QIBs
that agree that (i) the Series A Notes purchased by them may be resold, pledged
or otherwise transferred within the time period referred to under Rule 144(k)
(taking into account the provisions of Rule 144(d) under the Act, if applicable)
under the Act, as in effect on the date of the transfer of such Series A Notes,
only (I) to the Company or any of its subsidiaries, (II) to a person whom the
seller reasonably believes is a QIB purchasing for its own account or for the
account of a QIB in a transaction meeting the requirements of Rule 144A under
the Act, (III) in an offshore transaction (as defined in Rule 902 under the Act)
meeting the requirements of Rule 904 of the Act, (IV) in a transaction meeting
the requirements of Rule 144 under the Act, (V) to an Accredited Institution
that, prior to such transfer, furnishes the Trustee a signed letter containing
certain representations and agreements relating to the registration of transfer
of such Series A Notes (the form of which is substantially the same as Annex D
to the Indenture) and, if such transfer is in respect of an aggregate principal
amount of Series A Notes less than $250,000, an opinion of counsel acceptable to
the Company that such transfer is in compliance with the Act, (VI) in accordance
with another exemption from the registration requirements of the Act (and based
upon an opinion of counsel acceptable to the Company) or (VII) pursuant to an
effective registration statement and, in each case, in accordance with the
applicable securities laws of any state of the United States or any other
applicable jurisdiction and (ii) they will deliver to each person to whom such
Series A Notes or an interest therein is transferred a notice substantially to
the effect of the foregoing.
The Initial Purchaser acknowledges that the Company and, for
purposes of the opinions to be delivered to each Initial Purchaser pursuant to
Section 9 hereof, counsel to the Company and counsel to the Initial Purchaser
will rely upon the accuracy and truth of the foregoing representations and the
Initial Purchaser hereby consents to such reliance.
8. INDEMNIFICATION.
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(a) The Company agrees to indemnify and hold harmless the
Initial Purchaser, its directors, its officers and each person, if any, who
controls such Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and judgments (including, without limitation, any legal or
other expenses incurred in connection with investigating or defending any
matter, including any action, that could give rise to any such losses, claims,
damages, liabilities or judgments) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Offering Memorandum (or any
amendment or supplement thereto), the Preliminary Offering Memorandum or any
Rule 144A Information provided by the Company to any holder or prospective
purchaser of Series A Notes pursuant to Section 5(f) or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or judgments are caused by
any such untrue statement or omission or alleged untrue statement or omission
based upon information relating to the Initial Purchaser furnished in writing to
the Company by such Initial Purchaser; provided, however, that the foregoing
indemnity agreement with respect to any Preliminary Offering Memorandum shall
not inure to the benefit of the Initial Purchaser if it failed to deliver a
Final Offering Memorandum, as then amended or supplemented, (so long as the
Final Offering Memorandum and any amendment or supplement thereto was provided
by the Company to the Initial Purchaser in the requisite quantity and on a
timely basis to permit proper delivery on or prior to the Closing Date) to the
person asserting any losses, claims, damages, liabilities or judgments caused by
any untrue statement or alleged untrue statement of a material fact contained in
any Preliminary Offering Memorandum, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such material
misstatement or omission or alleged material misstatement or omission was cured
in the Final Offering Memorandum, as so amended or supplemented.
(b) The Initial Purchaser agrees to indemnify and hold
harmless the Company, and its directors and officers and each person, if any,
who controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) the Company, to the same extent as the foregoing indemnity from
the Company to the Initial Purchaser but only with reference to information
relating to the Initial Purchaser furnished in writing to the Company by the
Initial Purchaser expressly for use in the Preliminary Offering Memorandum or
the Offering Memorandum.
(c) In case any action shall be commenced involving any person
in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), the Initial Purchaser shall not
be required to assume the defense of such action pursuant to this Section 8(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at
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<PAGE> 16
the expense of the Initial Purchaser). Any indemnified party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party unless (i) the employment of such counsel shall
have been specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred. Such
firm shall be designated in writing by Donaldson, Lufkin & Jenrette Securities
Corporation, in the case of the parties indemnified pursuant to Section 8(a),
and by the Company, in the case of parties indemnified pursuant to Section 8(b).
The indemnifying party shall indemnify and hold harmless the indemnified party
from and against any and all losses, claims, damages, liabilities and judgments
by reason of any settlement of any action (i) effected with its written consent
or (ii) effected without its written consent if the settlement is entered into
more than twenty business days after the indemnifying party shall have received
a request from the indemnified party for reimbursement for the fees and expenses
of counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this
Section 8 is unavailable to an indemnified party or insufficient in respect of
any losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Initial Purchaser on the other hand from the
offering of the Series A Notes or (ii) if the allocation provided by clause
8(d)(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company, on the one hand, and
the Initial Purchaser, on the other hand, in
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connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company, on the
one hand and the Initial Purchaser, on the other hand, shall be deemed to be in
the same proportion as the total net proceeds from the offering of the Series A
Notes (after underwriting discounts and commissions, but before deducting
expenses) received by the Company, and the total discounts and commissions
received by the Initial Purchaser bear to the total price to investors of the
Series A Notes, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault of the Company, on the one hand, and the
Initial Purchaser, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or the Initial Purchaser,
on the other hand, 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 pursuant to this Section 8(d) were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, the Initial
Purchaser shall not be required to contribute any amount in excess of the amount
by which the total discounts and commissions received by such Initial Purchasers
exceeds the amount of any damages which the Initial Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The
obligations of the Initial Purchaser to purchase the Series A Notes under this
Agreement are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing Date with
the same force and effect as if made on and as of the Closing Date.
(b) On or after the date hereof, (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any notice have
been given of any potential
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or intended downgrading, suspension or withdrawal of, or of any review (or of
any potential or intended review) for a possible change that does not indicate
the direction of the possible change in, any rating of the Company or any
securities of the Company (including, without limitation, the placing of any of
the foregoing ratings on credit watch with negative or developing implications
or under review with an uncertain direction) by any "nationally recognized
statistical rating organization" as such term is defined for purposes of Rule
436(g)(2) under the Act, (ii) there shall not have occurred any change, nor
shall any notice have been given of any potential or intended change, in the
outlook for any rating of the Company or any securities of the Company by any
such rating organization and (iii) no such rating organization shall have given
notice that it has assigned (or is considering assigning) a lower rating to the
Notes than that on which the Notes were marketed.
(c) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there shall not have occurred any change or any
development in the condition, financial or otherwise, or the earnings, business,
prospects, management or operations of the Company, and its subsidiaries taken
as a whole, (ii) there shall not have been any change or any development
involving a prospective change in the capital stock or in the long-term debt of
the Company or any of its subsidiaries, except as disclosed or otherwise
contemplated in the Offering Memorandum and (iii) neither the Company nor any of
its subsidiaries shall have incurred any liability or obligation, direct or
contingent, the effect of which, in any such case described in clause 9(c)(i),
9(c)(ii) or 9(c)(iii), in your judgment, is material and adverse and, in your
judgment, makes it impracticable to market the Series A Notes on the terms and
in the manner contemplated in the Offering Memorandum.
(d) You shall have received on the Closing Date a certificate
dated the Closing Date, signed by the President and the Chief Financial Officer
of the Company, confirming the matters set forth in Sections 6(w), 9(a) and 9(b)
and stating that the Company has complied with all the agreements and satisfied
all of the conditions herein contained and required to be complied with or
satisfied on or prior to the Closing Date.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Initial Purchaser), dated the Closing
Date, of Kirkland & Ellis, New York, New York, counsel for the Company, to the
effect that:
(i) the Company is a corporation validly existing
and in good standing under the laws of its jurisdiction of
incorporation;
(ii) as of the date of the opinion, ____ shares of
the Company's common stock are outstanding. The issuance of
all those outstanding shares was duly authorized and all of
the outstanding shares have been validly issued and are
fully paid and non-assessable. Counsel for the Company may
assume for purpose of the opinion in this clause (ii) that
in the case of each share issuance and transfer, the shares
were represented
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<PAGE> 19
by a share certificate which complied with all applicable
requirements imposed by law, by the Company's Certificate
of Incorporation and Bylaws and by any applicable
resolutions by the Company's board of directors and that
such certificate was properly signed and authenticated;
(iii) each of this Agreement and the Registration
Rights Agreement has been duly authorized, executed and
delivered by the Company. Assuming due authorization,
execution and delivery by the Initial Purchaser, the
Registration Rights Agreement constitutes a valid and
legally binding obligation of the Company, enforceable in
accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws affecting creditors'
rights generally and to general principles of equity
(regardless of whether enforcement is sought in a
proceeding at law or in equity);
(iv) the Notes and the Indenture have been duly
authorized, executed, authenticated, issued and delivered
by the Company; assuming due authorization, execution and
delivery, to the extent applicable, by the Trustee, the
Indenture constitutes and the Notes, when authenticated in
accordance with the terms of the Indenture and delivered to
and paid for by the Initial Purchaser in accordance with
the terms of this Agreement, will constitute valid and
legally binding obligations of the Company, enforceable in
accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws affecting creditors'
rights generally and to general principles of equity
(regardless of whether enforcement is sought in a
proceeding at law or in equity); the Series B Notes have
been duly authorized by the Company;
(v) the execution and delivery by the Company of
this Agreement, the Registration Rights Agreement and the
Indenture and the performance of its agreements therein and
the consummation of the sale of the Notes to the Initial
Purchaser in accordance with the terms of this Agreement do
not (i) constitute a violation by the Company of any
applicable provision of any law, statute or regulation
(except that such counsel expresses no opinion in this
clause (v) as to compliance with any disclosure requirement
or any prohibition against fraud or misrepresentation or as
to whether performance of the indemnification and
contribution provisions in this Agreement would be
permitted) or (ii) breach or result in a default under, any
existing obligation of the Company under any agreements
listed on Schedule B hereto (provided that such counsel
expresses no opinion as to compliance with any financial
test or cross default provision in any such agreement); the
execution and delivery by the Company of this Agreement,
the Registration Rights Agreement and the Indenture and the
performance of its agreement therein and the
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<PAGE> 20
consummation of the sale of the Notes to the Initial
Purchaser in accordance with this Agreement do not, based
on our review of the Company's Certificate of Incorporation
and Bylaws, violate such Certificate of Incorporation or
Bylaws;
(vi) to such counsel's knowledge, the Company was
not required to obtain any consent, approval, authorization
or order of governmental agency for the issuance, delivery
and sale of the Notes being issued and sold by it under
this Agreement and the Indenture except for any such
consent, approval, authorization or order which may be
required under the so-called "Blue Sky" or securities laws
of any states (as to which such counsel expresses no
opinion or advice);
(vii) to such counsel's knowledge, there is no
action, suit, proceeding or investigation before or by any
court or governmental agency or body, domestic or foreign,
pending or threatened against, the Company or any of its
subsidiaries that (i) has caused such counsel to conclude
that such action, suit, proceeding or investigation is
required to be described in the Offering Memorandum but is
not so described or (ii) would be reasonably likely to
adversely affect the consummation of any of the
transactions contemplated by this Agreement or the
Indenture, including, without limitation, the issuance and
sale of the Notes;
(viii) the Company is not an "investment company" as
defined in the Investment Company Act of 1940;
(ix) it is not necessary in connection with (i) the
offer, sale and delivery of the Notes to the Initial
Purchaser pursuant to this Agreement or (ii) the Exempt
Resales by the Initial Purchaser in the manner contemplated
in the Offering Memorandum to register the Notes under the
Act or to qualify an indenture in respect thereof under the
TIA; and
(x) the Notes and the Indenture conform in all
material respects to the descriptions thereof contained in
the Offering Memorandum.
The opinion of Kirkland & Ellis described in Section 9(e) above
shall be rendered to you at the request of the Company and shall so state
therein.
(f) The Initial Purchaser shall have received on the Closing
Date an opinion, dated the Closing Date, of Latham & Watkins, counsel for the
Initial Purchaser, in form and substance reasonably satisfactory to the Initial
Purchaser.
(g) The Initial Purchaser shall have received, at the time
this Agreement is executed and at the Closing Date, letters dated the date
hereof or the Closing Date, as the case may be, in form and substance
satisfactory to the Initial Purchaser from Ernst & Young LLP, independent public
accountants, containing the information and statements of the
19
<PAGE> 21
type ordinarily included in accountants' "comfort letters" to the Initial
Purchaser with respect to the financial statements and certain financial
information contained in the Offering Memorandum.
(h) The Series A Notes shall have been approved by the NASD
for trading and duly listed in PORTAL.
(i) The Initial Purchaser shall have received a counterpart,
conformed as executed, of the Indenture which shall have been entered into by
the Company and the Trustee.
(j) The Company shall have executed the Registration Rights
Agreement and the Initial Purchaser shall have received an original copy
thereof, duly executed by the Company.
(k) The Company shall not have failed at or prior to the
Closing Date to perform or comply with any of the agreements herein contained
and required to be performed or complied with by the Company, as the case may
be, at or prior to the Closing Date.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the
Closing Date by the Initial Purchaser by written notice to the Company if any of
the following has occurred: (i) any outbreak or escalation of hostilities or
other national or international calamity or crisis or change in economic
conditions or in the financial markets of the United States or elsewhere that,
in the Initial Purchaser's judgment, is material and adverse and, in the Initial
Purchaser's judgment, makes it impracticable to market the Series A Notes on the
terms and in the manner contemplated in the Offering Memorandum, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
11. INITIAL PURCHASER'S INFORMATION. The Company and the
Initial Purchaser severally acknowledge and agree for all purposes under this
Agreement that the statements with respect to the offering of the Notes set
forth in the last paragraph of the outside front cover page;
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<PAGE> 22
the stabilization language on the inside front cover; and the third paragraph,
the fourth sentence of the fourth paragraph and the seventh paragraph under the
caption "Plan of Distribution" in such Offering Memorandum constitute the only
information furnished to the Company in writing by the Initial Purchaser
expressly for use in the Offering Memorandum.
12. MISCELLANEOUS. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to, True
Temper Sports, Inc., 8275 Tournament Drive, Suite 200, Memphis, TN 38125 and
(ii) if to the Initial Purchaser, to, Donaldson, Lufkin & Jenrette Securities
Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, or in any case to such other address as the person to be notified
may have requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company and the Initial
Purchaser set forth in or made pursuant to this Agreement shall remain operative
and in full force and effect, and will survive delivery of and payment for the
Series A Notes, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of the Initial Purchaser, the officers or
directors of the Initial Purchaser, any person controlling the Initial
Purchaser, the Company, the officers or directors of the Company, or any person
controlling the Company, (ii) acceptance of the Series A Notes and payment for
them hereunder and (iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on
behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10), the Company agrees to
reimburse the Initial Purchaser for all out-of-pocket expenses (including the
fees and disbursements of counsel) incurred by them. Notwithstanding any
termination of this Agreement, the Company shall be liable for all expenses
which it has agreed to pay pursuant to Section 5(g) hereof. The Company also
agrees to reimburse the Initial Purchaser and its officers, directors and each
person, if any, who controls such Initial Purchaser within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act for any and all fees and
expenses (including without limitation the fees and expenses of counsel)
incurred by them in connection with enforcing their rights under this Agreement
(including without limitation its rights under Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Initial
Purchaser, the Initial Purchaser's directors and officers, any controlling
persons referred to herein, the directors of the Company and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Series A Notes from the Initial Purchaser merely because of such
purchase.
This Agreement shall be governed and construed in accordance with
the laws of the State of New York.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
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<PAGE> 23
Please confirm that the foregoing correctly sets forth the
agreement among the Company and the Initial Purchaser.
Very truly yours,
TRUE TEMPER SPORTS, INC.
By: /s/ Scott Hennessy
-----------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ William Abrams
----------------------------
Name: William Abrams
Title: Vice President
Purchase Agreement Signiture Pages
<PAGE> 24
SCHEDULE A
SUBSIDIARIES
Purchase Agreement Schedule A
<PAGE> 25
SCHEDULE B
[1. To represent all material contracts that would be required to be filed as
exhibits if the Offering were to be made pursuant to a registration statement on
Form S-1.]
Purchase Agreement Schedule B
<PAGE> 26
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
Purchase Agreement Exhibit A
<PAGE> 1
EXECUTION COPY
Exhibit 4.3
TRUE TEMPER SPORTS, INC.
$100,000,000
107/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
of True Temper Sports, Inc.
REGISTRATION RIGHTS AGREEMENT
DATED AS OF NOVEMBER 23, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of November 23,1998, by and between True Temper Sports, Inc., a
Delaware corporation (the "COMPANY"), and Donaldson, Lufkin & Jenrette
Securities Corporation (the "INITIAL PURCHASER"), who has agreed to purchase the
Company's 107/8% Series A Senior Subordinated Notes due 2008 (the "SERIES A
NOTES"), pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
November 18, 1998, (the "PURCHASE AGREEMENT"), by and between the Company and
the Initial Purchaser. In order to induce the Initial Purchaser to purchase the
Series A Notes, the Company has agreed to provide the registration rights
relating to the Series A Notes set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the obligations of the Initial
Purchaser set forth in Section 3 of the Purchase Agreement. Capitalized terms
used herein and not otherwise defined shall have the meaning assigned to them in
the Indenture, dated the Closing Date, between the Company and United States
Trust Company of New York, as Trustee, relating to the Series A Notes and the
Series B Notes, as such indenture is amended or supplemented from time to time
(the "INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
BUSINESS DAY: Any day other than a Saturday, Sunday or day on which
commercial banks in the City of New York are authorized or required by law,
regulation or executive order to remain closed.
CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously effective
and the keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of
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<PAGE> 3
Series B Notes in the same aggregate principal amount as the aggregate principal
amount of Series A Notes tendered by Holders thereof pursuant to the Exchange
Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
EFFECTIVENESS DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The exchange and issuance by the Company of a principal
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchaser proposes to sell
the Series A Notes to certain "qualified institutional buyers," as such term is
defined in Rule 144A under the Act.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
NOTES: The Series A Notes and the Series B Notes.
PERSON: An individual, partnership, limited liability company,
corporation, trust, unincorporated organization, or a government or agency or
political subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, in each case, (i) that is filed pursuant to
the provisions of this Agreement and (ii) including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.
RULE 144: Rule 144 promulgated under the Act.
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<PAGE> 4
SERIES B NOTES: The Company's 10 7/8% Series B Senior Subordinated
Notes due 2008 to be issued pursuant to the Indenture: (i) in the Exchange Offer
or (ii) as contemplated by Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each (A) Series A Note, until the
earliest to occur of (i) the date on which such Series A Note is exchanged in
the Exchange Offer for a Series B Note which is entitled to be resold to the
public by the Holder thereof without complying with the prospectus delivery
requirements of the Act, (ii) the date on which such Series A Note has been
disposed of in accordance with a Shelf Registration Statement (and the
purchasers thereof have been issued Series B Notes), or (iii) the date on which
such Series A Note is distributed to the public pursuant to Rule 144 under the
Act and each (B) Series B Note held by a Broker-Dealer until the date on which
such Series B Note is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law or policy of the Commission (after the procedures set forth in
Section 6(a)(i) below have been complied with), the Company shall (i) cause the
Exchange Offer Registration Statement to be filed with the Commission as soon as
practicable after the Closing Date, but in no event later than 90 days after the
Closing Date (such 90th day being the "FILING DEADLINE"), (ii) use its best
efforts to cause such Exchange Offer Registration Statement to become effective
at the earliest possible time, but in no event later than 180 days after the
Closing Date (such 180th day being the "EFFECTIVENESS DEADLINE"), (iii) in
connection with the foregoing, (A) file all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause it
to become effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings, if any, in connection with the registration and
qualification of the Series B Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement, use
its best efforts to commence and Consummate the Exchange Offer. The Exchange
Offer shall be on the appropriate form permitting (i) registration of the Series
B Notes to be offered in exchange for the Series A Notes that are Transfer
Restricted Securities and (ii) resales of Series B Notes by Broker-
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<PAGE> 5
Dealers that tendered into the Exchange Offer Series A Notes that such
Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its Affiliates) as contemplated by Section
3(c) below.
(b) The Company shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously, and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 20 Business
Days. The Company shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Series B Notes
shall be included in the Exchange Offer Registration Statement. The Company
shall use its best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 45 business days thereafter (such
45th day being the "CONSUMMATION DEADLINE").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any Affiliate of the Company), may exchange such
Transfer Restricted Securities pursuant to the Exchange Offer; however, such
Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act
and must, therefore, deliver a prospectus meeting the requirements of the Act in
connection with its initial sale of any Series B Notes received by such
Broker-Dealer in the Exchange Offer, and the Company shall permit the use of the
Prospectus contained in the Exchange Offer Registration Statement by such
Broker-Dealer to satisfy such prospectus delivery requirement. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission as a result of a change in policy, rules or regulations after the
date of this Agreement. See the Shearman & Sterling no-action letter (available
July 2, 1993).
To the extent necessary to ensure that the prospectus contained in the
Exchange Offer Registration Statement is available for sales of Series B Notes
by Broker-Dealers, the Company agrees to use its best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented,
amended and current as required by and subject to the provisions of Section 6(a)
and (c) hereof and in conformity with the requirements of this Agreement, the
Act and the policies, rules and regulations of the Commission as announced from
time to time, for a period of one year from the Consummation Deadline or such
shorter period as will terminate when all Transfer Restricted Securities covered
by such Registration Statement have been sold pursuant thereto. The Company
shall provide sufficient copies of the latest version of such Prospectus to such
Broker-Dealers, promptly upon request, and in no event later than one day after
such request, at any time during such period.
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<PAGE> 6
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law or policy of the Commission (after the Company has complied with
the procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of
Transfer Restricted Securities shall notify the Company within 20 Business Days
following the Consummation of the Exchange Offer that (A) such Holder was
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) such Holder may not resell the Series B Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder or (C) such Holder is a Broker-Dealer
and holds Series A Notes acquired directly from the Company or any of its
Affiliates, then the Company shall:
(x) cause to be filed, on or prior to 45 days after the earlier of (i) the
date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a)(ii) above,
(such earlier date, the "FILING DEADLINE"), a shelf registration statement
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "SHELF REGISTRATION STATEMENT")), relating to
all Transfer Restricted Securities, and
(y) shall use its best efforts to cause such Shelf Registration Statement
to become effective on or prior to 180 days after the Filing Deadline (such
180th day the "EFFECTIVENESS DEADLINE").
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law or
policy of the Commission (i.e., clause (a)(i) above), then the filing of the
Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above; provided that, in such event, the Company
shall remain obligated to meet the Effectiveness Deadline set forth in clause
(y).
To the extent necessary to ensure that the Shelf Registration Statement
is available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company shall
use its best efforts to keep any Shelf Registration Statement required by this
Section 4(a) continuously effective, supplemented, amended and current as
required by and subject to the provisions of Sections 6(b) and (c) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section 6(c)(i)) following
the Closing Date, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Shelf Registration Statement have been
sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a
5
<PAGE> 7
request therefor, the information specified in Item 507 or 508 of Regulation
S-K, as applicable, of the Act for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. No Holder of
Transfer Restricted Securities shall be entitled to liquidated damages pursuant
to Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation Deadline
or (iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within 2 days by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective within 5 days of filing such
post-effective amendment to such Registration Statement (each such event
referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the
Company hereby agrees to pay to each Holder of Transfer Restricted Securities
affected thereby liquidated damages in an amount equal to $.05 per week per
$1,000 in principal amount of Transfer Restricted Securities held by such Holder
for each week or portion thereof that the Registration Default continues for the
first 90-day period immediately following the occurrence of such Registration
Default. The amount of the liquidated damages shall increase by an additional
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of liquidated damages of $.25 per week
per $1,000 in principal amount of Transfer Restricted Securities; provided that
the Company shall in no event be required to pay liquidated damages for more
than one Registration Default at any given time. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (i) above, (2) upon the effectiveness of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, the
liquidated damages payable with respect to the Transfer Restricted Securities as
a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any securities for which liquidated damages
are due cease to be Transfer Restricted Securities, all obligations of the
Company to pay liquidated damages with respect to such securities shall survive
until such time as such obligations with respect to such securities shall have
been satisfied in full.
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SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall (x) comply with all applicable provisions of
Section 6(c) below, (y) use its best efforts to effect such exchange and to
permit the resale of Series B Notes by Broker-Dealers that tendered in the
Exchange Offer Series A Notes that such Broker-Dealer acquired for its own
account as a result of its market making activities or other trading activities
(other than Series A Notes acquired directly from the Company or any of its
Affiliates) being sold in accordance with the intended method or methods of
distribution thereof, and (z) comply with all of the following provisions:
(i) If, following the date hereof there has been announced a
change in Commission policy with respect to exchange offers such as the
Exchange Offer, that in the reasonable opinion of counsel to the
Company raises a substantial question as to whether the Exchange Offer
is permitted by applicable federal law, the Company hereby agrees to
seek a no-action letter or other favorable decision from the Commission
allowing the Company to Consummate an Exchange Offer for such Transfer
Restricted Securities. The Company hereby agrees to pursue the issuance
of such a decision to the Commission staff level. In connection with
the foregoing, the Company hereby agrees to take all such other actions
as may be requested by the Commission or otherwise required in
connection with the issuance of such decision, including without
limitation (A) participating in telephonic conferences with the
Commission, (B) delivering to the Commission staff an analysis prepared
by counsel to the Company setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange
Offer, each Holder of Transfer Restricted Securities (including,
without limitation, any Holder who is a Broker-Dealer) shall furnish,
upon the request of the Company, prior to the Consummation of the
Exchange Offer, a written representation to the Company (which may be
contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an
Affiliate of the Company, (B) it is not engaged in, and does not intend
to engage in, and has no arrangement or understanding with any person
to participate in, a distribution of the Series B Notes to be issued in
the Exchange Offer and (C) it is acquiring the Series B Notes in its
ordinary course of business. As a condition to its participation in the
Exchange Offer each Holder using the Exchange Offer to participate in a
distribution of the Series B Notes shall acknowledge and agree that, if
the resales are of Series B Notes obtained by such Holder in exchange
for Series A Notes acquired directly from the Company or an Affiliate
thereof, it (1) could not, under Commission policy as in effect on the
date of this Agreement, rely on the position of the Commission
enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and
Exxon Capital Holdings Corporation (available May 13, 1988), as
interpreted in the Commission's letter to Shearman & Sterling dated
July 2, 1993, and similar no-action letters (including, if applicable,
any no-action letter obtained pursuant to clause (i) above), and (2)
must comply with the registration and prospectus delivery requirements
of the Act in connection with a
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<PAGE> 9
secondary resale transaction and that such a secondary resale
transaction must be covered by an effective registration statement
containing the selling security holder information required by Item 507
or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company shall provide a supplemental letter
to the Commission (A) stating that the Company is registering the
Exchange Offer in reliance on the position of the Commission enunciated
in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan
Stanley and Co., Inc. (available June 5, 1991) as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and, if
applicable, any no-action letter obtained pursuant to clause (i) above,
(B) including a representation that the Company has not entered into
any arrangement or understanding with any Person to distribute the
Series B Notes to be received in the Exchange Offer and that, to the
best of the Company's information and belief, each Holder participating
in the Exchange Offer is acquiring the Series B Notes in its ordinary
course of business and has no arrangement or understanding with any
Person to participate in the distribution of the Series B Notes
received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall (i) comply with all the provisions of
Section 6(c) below and use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof, and
(ii) issue, upon the request of any Holder or purchaser of
Series A Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to the
aggregate principal amount of Series A Notes sold pursuant to the Shelf
Registration Statement and surrendered to the Company for cancellation; the
Company shall register Series B Notes on the Shelf Registration Statement for
this purpose and issue the Series B Notes to the purchaser(s) of securities
subject to the Shelf Registration Statement in the names as such purchaser(s)
shall designate.
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
for the period specified in Section 3 or 4 of this Agreement, as
applicable. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to
contain an untrue
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<PAGE> 10
statement of material fact or omit to state any material fact necessary
to make the statements therein not misleading or (B) not to be
effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company shall file
promptly an appropriate amendment to such Registration Statement curing
such defect, and, if Commission review is required, use its best
efforts to cause such amendment to be declared effective as soon as
practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as
may be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may
be; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement
to the Prospectus;
(iii) advise each selling Holder promptly and, if requested by
such Holder, confirm such advice in writing, (A) when the Prospectus or
any Prospectus supplement or post-effective amendment has been filed,
and, with respect to any applicable Registration Statement or any
post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Registration Statement in order
to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification
or exemption from qualification of the Transfer Restricted Securities
under state securities or Blue Sky laws, the Company shall use its best
efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter
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<PAGE> 11
delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(v) furnish to each selling Holder in connection with such
exchange or sale, if any, before filing with the Commission, copies of
any Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such Holders in connection with
such sale, if any, for a period of at least five Business Days, and the
Company will not file any such Registration Statement or Prospectus or
any amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to
which such selling Holders of the Transfer Restricted Securities
covered by such Registration Statement in connection with such exchange
or sale, if any, shall reasonably object within five Business Days
after the receipt thereof. A Holder shall be deemed to have reasonably
objected to such filing if such Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed,
contains an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading
or fails to comply with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to
be incorporated by reference into a Registration Statement or
Prospectus, provide copies of such document to each selling Holder in
connection with such exchange or sale, if any, make the Company's
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders may
reasonably request;
(vii) make available, at reasonable times, for inspection by
each selling Holder and any attorney or accountant retained by such
selling Holders, all financial and other records, pertinent corporate
documents of the Company and cause the Company's officers, directors
and employees to supply all information reasonably requested by any
such selling Holder, attorney or accountant in connection with such
Registration Statement or any post-effective amendment thereto
subsequent to the filing thereof and prior to its effectiveness;
(viii) if requested by any selling Holders in connection with
such exchange or sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders may
reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities, and make all required filings of such
Prospectus supplement or post-effective amendment as soon as
practicable after the Company is notified of the matters to be included
in such Prospectus supplement or post-effective amendment;
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<PAGE> 12
(ix) furnish to each selling Holder in connection with such
exchange or sale, if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(x) deliver to each selling Holder, without charge, as many
copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as such Persons reasonably may
request; the Company hereby consent to the use (in accordance with law)
of the Prospectus and any amendment or supplement thereto by each
selling Holder in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(xi) upon the request of any selling Holder, make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to any applicable
Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder in connection with any sale or
resale pursuant to any applicable Registration Statement. In such
connection, the Company shall, upon request of any selling Holder,
furnish (or in the case of paragraphs (2) and (3), use its best efforts
to cause to be furnished) to each selling Holder, upon Consummation of
the Exchange Offer or upon the effectiveness of the Shelf Registration
Statement, as the case may be, a certificate, dated such date, signed
on behalf of the Company by (x) the President or any Vice President and
(y) a principal financial or accounting officer of the Company,
confirming, as of the date thereof, the matters set forth in Sections
6(w), 9(a) and 9(b) of the Purchase Agreement and such other similar
matters as such Holders may reasonably request;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by
the applicable Registration Statement; provided, however, that the
Company shall not be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders to facilitate
the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted
Securities in such denominations and such names as the selling Holders
may request at least two Business Days prior to such sale of Transfer
Restricted Securities;
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<PAGE> 13
(xiv) use its best efforts to cause the disposition of the
Transfer Restricted Securities covered by the Registration Statement to
be registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof
to consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (xii) above;
(xv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depository Trust Company;
(xvi) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be
audited) covering a twelve-month period beginning after the effective
date of the Registration Statement (as such term is defined in
paragraph (c) of Rule 158 under the Act);
(xvii) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with
the Trustee and the Holders to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in accordance
with the terms of the TIA; and execute and use its best efforts to
cause the Trustee to execute, all documents that may be required to
effect such changes and all other forms and documents required to be
filed with the Commission to enable such Indenture to be so qualified
in a timely manner; and
(xviii)provide promptly to each Holder, upon request, each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT
DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such Holder's
possession of the
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<PAGE> 14
Prospectus covering such Transfer Restricted Securities that was current at the
time of receipt of the Suspension Notice. The time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by a number of days equal to the number of days
in the period from and including the date of delivery of the Suspension Notice
to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Series B Notes
to be issued in the Exchange Offer and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Company and the Holders of Transfer Restricted Securities; (v) all
application and filing fees in connection with listing the Series B Notes on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company (including the expenses of any
special audit and comfort letters required by or incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchaser and the Holders of Transfer Restricted Securities who are
tendering Series A Notes into in the Exchange Offer and/or selling or reselling
Series A Notes or Series B Notes pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be Latham & Watkins, unless another firm shall be
chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared. Such Holders shall be responsible for any and all other out-of-pocket
expenses of the Holders incurred in connection with the registration of the
Notes.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder, its
directors, officers and each Person, if any, who controls such Holder (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from
and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action that
could give rise to any such losses, claims, damages, liabilities or judgments)
caused by any untrue statement or
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<PAGE> 15
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Company to any Holder or any prospective purchaser of
Series B Notes, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or judgments are caused by an untrue statement or omission or
alleged untrue statement or omission that is based upon information relating to
any of the Holders furnished in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and its directors and
officers, and each person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Company, to the same extent
as the foregoing indemnity from the Company set forth in section (a) above, but
only with reference to information relating to such Holder furnished in writing
to the Company by such Holder expressly for use in any Registration Statement.
In no event shall any Holder, its directors, officers or any Person who controls
such Holder be liable or responsible for any amount in excess of the amount by
which the total amount received by such Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Transfer Restricted Securities and (ii)
the amount of any damages that such Holder, its directors, officers or any
Person who controls such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general
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<PAGE> 16
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) for all
indemnified parties and all such fees and expenses shall be reimbursed as they
are incurred. Such firm shall be designated in writing by a majority of the
Holders, in the case of the parties indemnified pursuant to Section 8(a), and by
the Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action (i) effected with its written consent or
(ii) effected without its written consent if the settlement is entered into more
than twenty business days after the indemnifying party shall have received a
request from the indemnified party for reimbursement for the fees and expenses
of counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Holders, on the other hand, from their sale of Transfer Restricted
Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 8(d)(i) above but also the relative
fault of the Company, on the one hand, and of the Holder, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company, on the one hand,
and of the Holder, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by the Holder, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and judgments referred to above shall be deemed to include, subject
to the limitations set forth in the second paragraph of Section 8(a), any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Holders were
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<PAGE> 17
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any matter, including any action that could have given rise to such
losses, claims, damages, liabilities or judgments. Notwithstanding the
provisions of this Section 8, no Holder, its directors, its officers or any
Person, if any, who controls such Holder shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the total received by
such Holder with respect to the sale of Transfer Restricted Securities pursuant
to a Registration Statement exceeds (i) the amount paid by such Holder for such
Transfer Restricted Securities plus (ii) the amount of any damages which such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 8(c) are several in proportion to the respective principal amount of
Transfer Restricted Securities held by each Holder hereunder and not joint.
SECTION 9. RULE 144A AND RULE 144
The Company agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder, to such Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the
Exchange Act, to make all filings required thereby in a timely manner in order
to permit resales of such Transfer Restricted Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company acknowledges and agrees that any failure by
the Company to comply with its obligations under Sections 3 and 4 hereof may
result in material irreparable injury to the Initial Purchaser or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchaser or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 3 and
4 hereof. The Company further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The
16
<PAGE> 18
Company has not previously entered into any agreement granting any registration
rights with respect to its securities to any Person. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's securities under any
agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchaser, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii) if to the Company:
True Temper Sports, Inc.
8275 Tournament Drive
Suite 200
Memphis, TN 38125
Telecopier No.: (901) 746-2162
Attention: Fred H. Geyer
17
<PAGE> 19
With a copy to:
Kirkland & Ellis
153 E. 53rd Street
New York, NY 10022
Telecopier No.: (212) 446-4900
Attention: Frederick Tanne, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders; provided, that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Transfer Restricted Securities in
violation of the terms hereof or of the Purchase Agreement or the Indenture. If
any transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and
18
<PAGE> 20
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein with respect to the registration
rights granted with respect to the Transfer Restricted Securities. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
19
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TRUE TEMPER SPORTS, INC.
By:___________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:___________________________
Name:
Title:
Registration Rights Agreement Signature Pages
<PAGE> 1
Exhibit 5.1
To Call Writer Direct:
212 446-4800
February 10, 1999
True Temper Sports, Inc.
8275 Tournament Drive
Suite 200
Memphis, Tennessee 38125
Re: Series B 107/8% Senior Subordinated Notes due 2008
Ladies and Gentlemen:
We are acting as special counsel to the Registrant, in connection with
the proposed registration by the Registrant of up to $100,000,000 in aggregate
principal amount of the Registrant's Series B 107/8% Senior Subordinated Notes
due 2008 (the "Exchange Notes"), pursuant to a Registration Statement on Form
S-4 filed with the Securities and Exchange Commission (the "Commission") on the
date hereof under the Securities Act of 1933, as amended (the "Securities Act")
(such Registration Statement, as amended or supplemented, is hereinafter
referred to as the "Registration Statement"), for the purposes of effecting an
exchange offer (the "Exchange Offer") for the Registrant's 107/8% Senior
Subordinated Notes due 2008 (the "Old Notes"). The Exchange Notes are to be
issued pursuant to the Indenture (the "Indenture"), dated as of November 18,
1998, among the Registrant and United States Trust Company of New York, as
Trustee, in exchange for and in replacement of the Registrant's outstanding Old
Notes, of which $100,000,000 in aggregate principal amount is outstanding.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including (i) the corporate and organizational documents of the
Registrant, (ii) minutes and records of the corporate proceedings of the
Registrant with respect to the issuance of the Exchange Notes, (iii) the
Registration Statement and exhibits thereto and (iv) the Registration Rights
Agreement, dated as of November 23, 1998, between the Registrant and Donaldson,
Lufkin & Jenrette.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have also assumed the genuineness of the
signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the
parties thereto other than the Registrant, and the due authorization, execution
and delivery of all documents by the parties thereto other than the Registrant.
As to any facts material to the
<PAGE> 2
True Temper Sports, Inc.
February 10, 1999
Page 2
opinions expressed herein which we have not independently established or
verified, we have relied upon statements and representations of officers and
other representatives of the Registrant and others.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, we are of the opinion
that:
(1) The Company is a corporation existing and in good standing under
the General Corporation Law of the State of Delaware.
(2) The sale and issuance of the Exchange Notes has been validly
authorized by the Registrant.
(3) When, as and if (i) the Registration Statement shall have become
effective pursuant to the provisions of the Securities Act, (ii) the Indenture
shall have been qualified pursuant to the provisions of the Trust Indenture Act
of 1939, as amended, (iii) the Old Notes shall have been validly tendered to the
Company and (iv) the Exchange Notes shall have been issued in the form and
containing the terms described in the Registration Statement, the Indenture, the
resolutions of the Registrant's Board of Directors (or authorized committee
thereof) authorizing the foregoing and any legally required consents, approvals,
authorizations and other order of the Commission and any other regulatory
authorities to be obtained, the Exchange Notes when issued pursuant to the
Exchange Offer will be legally issued, fully paid and nonassessable and will
constitute valid and binding obligations of the Registrant.
Our opinions expressed above are subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of (i)
any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), (iii)
public policy considerations which may limit the rights of parties to obtain
certain remedies and (iv) any laws except the laws of the State of New York and
the General Corporation Law of the State of Delaware in addition to applicable
state corporate law. For purposes of the opinions in paragraph 1, we have
relied exclusively upon recent certificates issued by the Secretary of State of
Delaware and such opinions are not intended to provide any conclusion or
assurance beyond that conveyed by such certificates. We have assumed without
investigation that there has been no relevant change or development between the
respective dates of such certificates and the date of this letter.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration
<PAGE> 3
True Temper Sports, Inc.
February 10, 1999
Page 3
Statement. We also consent to the reference to our firm under the heading
"Legal Matters" in the Registration Statement. In giving this consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations of the
Commission.
We do not find it necessary for the purposes of this opinion, and
accordingly we do no purport to cover herein, the application of the securities
or "Blue Sky" laws of the various states to the issuance of the Exchange Notes.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the present
laws of the States of Delaware or New York be changed by legislative action,
judicial decision or otherwise.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose.
Very truly yours,
KIRKLAND & ELLIS
<PAGE> 1
Exhibit 10.1
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (the "Agreement") dated as of
September 30, 1998 is between True Temper Sports, Inc. (the "Company") and
Cornerstone Equity Investors, LLC ("Cornerstone").
WHEREAS, the Company desires to retain Cornerstone and Cornerstone
desires to perform for the Company certain services;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
1. Term. This Agreement shall be in effect for an initial term of
seven (7) years commencing on the date hereof (the "Term"), and shall be
automatically extended thereafter on a year to year basis unless the Company or
Cornerstone gives written notice of its desire to terminate this Agreement to
the other party 90 days prior to the expiration of the Term or any extension
thereof.
2. Services. Cornerstone shall perform or cause to be performed such
services for the Company and its direct and indirect subsidiaries as directed by
the Company's board of directors and agreed to by Cornerstone, which may
include, without limitation, the following:
(a) general management services;
(b) identification, support, negotiation and analysis of acquisitions
and dispositions;
(c) support, negotiation and analysis of financing alternatives,
including, without limitation, in connection with acquisitions, capital
expenditures and refinancing of existing indebtedness;
(d) finance functions, including assistance in the preparation of
financial projections, and monitoring of compliance with financing agreements;
(e) strategic planning functions, including evaluating major
strategic alternatives; and
(f) other services for the Company and its subsidiaries upon which
the Company's board of directors and Cornerstone agree.
3. Advisory Fees and Transaction Fees.
(a) Payment to Cornerstone for services rendered in connection with
the performance of services pursuant to this Agreement shall be $500,000 per
year or such other amount as the parties hereto shall agree ("Advisory Fees")
plus reasonable out-of-pocket expenses of
<PAGE> 2
Cornerstone. The Advisory Fees shall be payable quarterly in advance by the
Company in immediately available funds, the first such payment to be made
promptly after the date hereof.
(b) During the term of this Agreement, Cornerstone shall be entitled
to receive from the Company a transaction fee in connection with the
consummation by the Company or any of its subsidiaries of (i) each material
acquisition of an additional business (ii) each material divestiture and (iii)
each material financing or refinancing, in each case, in an amount equal to 1%
of the aggregate value of such transaction (each such payment, a "Transaction
Fee").
(c) Upon the consummation of the recapitalization of the Company
contemplated by that certain Reorganization, Recapitalization and Stock Purchase
Agreement by and between The Black & Decker Corporation, True Temper Sports,
Inc. and TTSI LLC, dated as of June 29, 1998, the Company shall pay to
Cornerstone a transaction fee of $3,000,000 (the "Closing Fee") in immediately
available funds, to an account designated by Cornerstone; it being understood
that the Closing Fee shall be in lieu of the Transaction Fee with respect to
such recapitalization.
(d) In the event that during the term of this Agreement the Company
and Cornerstone agree, in their respective sole discretion, that all or a
portion of the Advisory Fees to be paid by the Company to Cornerstone can be
advantageously applied directly by the Company for purposes that are beneficial
to the Company and to Cornerstone in connection with services provided by
Cornerstone hereunder or that may facilitate the provision of such services by
Cornerstone, then the Advisory Fees payable hereunder will be reduced and the
Company will apply such agreed amounts directly for such other purposes.
4. Subordination. Cornerstone covenants and agrees that the payment
to Cornerstone of any Advisory Fees and Transaction Fees as contemplated in this
Agreement shall be subordinate and junior in right to payment for any
indebtedness incurred by the Company related to or arising out of the issuance
by the Company of the Senior Subordinated Increasing Rate Notes (the "Notes")
pursuant to that certain Securities Purchase Agreement, dated as of September
30,1998, among the Company, the Guarantors thereto and the Purchaser Party
thereto (the "Bridge Agreement"). No payment shall be made by the Company
hereunder, whether with respect to any Advisory Fees or Transaction Fees, at any
time when there shall have occurred and be continuing (i) any default in the
payment of all or any part of the principal or premium, if any, on any of the
Notes as and when the same shall become due and payable either at maturity, upon
any redemption, by declaration or otherwise or (ii) any default in the payment
of any installment of interest upon any of the Notes or any fees payable under
the Bridge Agreement or any taxes payable thereunder as and when the same shall
become due and payable; provided, however, that following the earlier of (a) the
cure, waiver or other resolution of such default or (ii) the payment in full in
cash of all obligations under the Notes then outstanding, all amounts that have
not been paid to Cornerstone due to the application of the provisions of this
Section 4 shall be promptly paid to Cornerstone without requiring any demand,
notice to the Company or other action on the part of Cornerstone.
5. Personnel. Cornerstone shall provide and devote to the performance
of this Agreement such employees, affiliates and agents of Cornerstone as
Cornerstone shall deem appropriate to the furnishing of the services required.
2
<PAGE> 3
6. Liability. Neither Cornerstone nor any of its affiliates, members,
partners, employees or agents shall be liable to the Company or any of its
subsidiaries or affiliates for any loss, liability, damage or expense arising
out of or in connection with the performance of services contemplated by this
Agreement, unless such loss, liability, damage or expense shall be proven to
result directly from gross negligence, willful misconduct or bad faith on the
part of Cornerstone, its affiliates, members, partners, employees or agents
acting within the scope of their employment or authority.
7. Indemnity. The Company and its subsidiaries shall defend,
indemnify and hold harmless Cornerstone, its affiliates, members, partners,
employees and agents from and against any and all loss, liability, damage, or
expenses arising from any claim (a "Claim") by any person with respect to, or in
any way related to, the performance of services contemplated by this Agreement
(including attorneys' fees) (collectively, "Claims") resulting from any act or
omission of Cornerstone, its affiliates, members, partners, employees or agents,
other than for Claims which shall be proven to be the direct result of gross
negligence, bad faith or willful misconduct by Cornerstone, its affiliates,
members, partners, employees or agents. The Company and its subsidiaries shall
defend at its own cost and expense any and all suits or actions (just or unjust)
which may be brought against the Company, and/or any of its subsidiaries and any
of Cornerstone, its officers, directors, affiliates, members, partners,
employees or agents or in which any of Cornerstone, its affiliates, members,
partners, employees or agents may be impleaded with others upon any Claim or
Claims, or upon any matter, directly or indirectly, related to or arising out of
this Agreement or the performance hereof by Cornerstone, its affiliates,
members, partners, employees or agents, except that if such damage shall be
proven to be the direct result of gross negligence, bad faith or willful
misconduct by Cornerstone, its affiliates, members, partners, employees or
agents, then Cornerstone shall reimburse the Company for the costs of defense
and other costs incurred by the Company.
8. Notices. All notices or other communications required or permitted
by this Agreement shall be effective upon receipt and shall be in writing and
delivered personally or by overnight courier, or sent by facsimile, as follows:
To the Company:
True Temper Sports, Inc.
8275 Tournament Drive
Suite 200
Memphis, Tennessee 38125
Attention: President
Telecopy No.: (901) 746-2162
To Cornerstone:
Cornerstone Equity Investors, LLC
717 Fifth Avenue, Suite 1100
New York, NY 10022
Attention: Mark Rossi & Tyler Wolfram
Telecopy No.: (212) 826-6798
3
<PAGE> 4
9. Assignment. No party hereto may assign any obligations hereunder
to any other party without the prior written consent of the other party hereto,
which consent shall not be unreasonably withheld; provided, however, that,
notwithstanding the foregoing, Cornerstone may assign its rights and obligations
under this Agreement to any of its affiliates without the consent of the
Company.
10. Successors. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and assigns of the parties hereto.
11. Counterparts. This Agreement may be executed and delivered by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and both of which taken together shall
constitute but one and the same agreement.
12. Entire Agreement; Modification; Governing Law. The terms and
conditions hereof constitute the entire agreement between the parties hereto
with respect to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of this
Agreement nor waiver of the terms or conditions hereof shall be binding upon any
party hereto unless approved in writing by an authorized representative of such
party. All issues concerning this Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of New York.
* * * * *
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Management
Services Agreement as of the date first written above.
TRUE TEMPER SPORTS, INC.
By:_______________________________
Name: Charles E. Fenton
Title: Vice-President
CORNERSTONE EQUITY INVESTORS, LLC
By:_______________________________
Name:
Title:
5
<PAGE> 6
AMENDMENT TO MANAGEMENT SERVICES AGREEMENT
THIS AMENDMENT (this "Amendment") to the Management Services
Agreement (the "Agreement") is made as of the 23rd day of November, 1998, by and
among True Temper Sports, Inc. (the "Company") and Cornerstone Equity Investors,
LLC ("Cornerstone").
WHEREAS, the Company and Cornerstone entered into the
Agreement as of September 30, 1998; and
WHEREAS, the Company and Cornerstone desire to amend Section 4
of the Agreement as more fully set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties contained herein, the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used in but not defined in
this Amendment shall have the meanings specified in the Agreement.
Section 2. Amendment to Section 4. Section 4 of the Agreement is hereby
amended by deleting Section 4 thereof in its entirety and replacing it with the
following:
"4. Subordination. Cornerstone covenants and agrees that the
payment to Cornerstone of any Advisory Fees and Transaction Fees as contemplated
in this Agreement shall be subordinate and junior in right to payment for any
indebtedness incurred by the Company related to or arising out of the issuance
by the Company of the 10"% Senior Subordinated Notes due 2008 (the "Notes")
pursuant to that certain indenture between the Company and United States Trust
Company of new York, as trustee, dated November 23, 1998 (the "Indenture"). No
payment shall be made by the Company hereunder, whether with respect to any
Advisory Fees or Transaction Fees, at any time when there shall have occurred
and be continuing (i) any default in the payment of all or any part of the
principal or premium, if any, on any of the Notes as and when the same shall
become due and payable either at maturity, upon any redemption, by declaration
or otherwise or (ii) any default in the payment of any installment of interest
upon any of the Notes or any fees payable under the Indenture or any taxes
payable thereunder as and when the same shall become due and payable; provided,
however, that following the earlier of (a) the cure, waiver or other resolution
of such default or (ii) the payment in full in cash of all obligations under the
Notes then outstanding, all amounts that have not been paid to Cornerstone due
to the application of the provisions of this Section 4 shall be promptly paid to
Cornerstone without requiring any demand, notice to the Company or other action
on the part of Cornerstone."
Section 3. Limited Amendment. Except as amended by this Amendment and
as the context may otherwise require to give effect to the intent and purposes
of this Amendment, the Agreement shall remain in full force and effect without
any other amendments or modifications.
Section 4. Notices. All notices, requests and other communications to
any party hereunder shall be in writing and shall be given,
<PAGE> 7
if to the Company:
True Temper Sports, Inc.
8275 Tournament Drive
Suite 200
Memphis, Tennessee 38125
Attention: President
Telecopy No.: (901) 746-2162
if to Cornerstone:
Cornerstone Equity Investors, LLC
717 Fifth Avenue, Suite 1100
New York, NY 10022
Attention: Mark Rossi & Tyler Wolfram
Telecopy No.: (212) 826-6798
Section 5. Assignment. No party hereto may assign any
obligations hereunder to any other party without the prior written consent of
the other party hereto, which consent shall not be unreasonably withheld;
provided, however, that, notwithstanding the foregoing, Cornerstone may assign
its rights and obligations under this Agreement to any of its affiliates without
the consent of the Company.
Section 6. Successors. This Amendment and all the obligations
and benefits hereunder shall inure to the successors and assigns of the parties
hereto.
Section 7. Counterparts. This Amendment may be executed and
delivered by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original and both of which taken
together shall constitute but one and the same agreement.
Section 8. Entire Agreement; Modification; Governing Law. The
terms and conditions of the Agreement as amended by this Amendment constitute
the entire agreement among the parties with respect to the subject matter of the
Agreement and supersede all prior agreements, understandings and negotiations,
both written and oral, between the parties with respect to the subject matter
thereof.
* * * * *
2
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Management
Services Agreement as of the date first written above.
TRUE TEMPER SPORTS, INC.
By: ________________________________
Name: Fred H. Geyer
Title: Chief Financial Officer
CORNERSTONE EQUITY INVESTORS, LLC
By:_________________________________
Name:
Title:
3
<PAGE> 9
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (the "Agreement") dated as of
September 30, 1998 is between True Temper Sports, Inc. (the "Company") and
Cornerstone Equity Investors, LLC ("Cornerstone").
WHEREAS, the Company desires to retain Cornerstone and Cornerstone desires
to perform for the Company certain services;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. Term. This Agreement shall be in effect for an initial term of seven
(7) years commencing on the date hereof (the "Term"), and shall be automatically
extended thereafter on a year to year basis unless the Company or Cornerstone
gives written notice of its desire to terminate this Agreement to the other
party 90 days prior to the expiration of the Term or any extension thereof.
2. Services. Cornerstone shall perform or cause to be performed such
services for the Company and its direct and indirect subsidiaries as directed
by the Company's board of directors and agreed to by Cornerstone, which may
include, without limitation, the following:
(a) general management services;
(b) identification, support, negotiation and analysis of acquisitions and
dispositions;
(c) support, negotiation and analysis of financing alternatives, including,
without limitation, in connection with acquisitions, capital expenditures and
refinancing of existing indebtedness;
(d) finance functions, including assistance in the preparation of
financial projections, and monitoring of compliance with financing agreements;
(e) strategic planning functions, including evaluating major strategic
alternatives; and
(f) other services for the Company and its subsidiaries upon which the
Company's board of directors and Cornerstone agree.
3. Advisory Fees and Transaction Fees.
(a) Payment to Cornerstone for services rendered in connection with the
performance of services pursuant to this Agreement shall be $500,000 per year
or such other amount as the parties hereto shall agree ("Advisory Fees") plus
reasonable out-of-pocket expenses of
<PAGE> 10
Cornerstone. The Advisory Fees shall be payable quarterly in advance by the
Company in immediately available funds, the first such payment to be made
promptly after the date hereof.
(b) During the term of this Agreement, Cornerstone shall be entitled to
receive from the Company a transaction fee in connection with the consummation
by the Company or any of its subsidiaries of (i) each material acquisition of an
additional business (ii) each material divestiture and (iii) each material
financing or refinancing, in each case, in an amount equal to 1% of the
aggregate value of such transaction (each such payment, a "Transaction Fee").
(c) Upon the consummation of the recapitalization of the Company
contemplated by that certain Reorganization, Recapitalization and Stock Purchase
Agreement by and between The Black & Decker Corporation, True Temper Sports,
Inc. and TTSI LLC, dated as of June 29, 1998, the Company shall pay to
Cornerstone a transaction fee of $3,000,000 (the "Closing Fee") in immediately
available funds, to an account designated by Cornerstone; it being understood
that the Closing Fee shall be in lieu of the Transaction Fee with respect to
such recapitalization.
(d) In the event that during the term of this Agreement the Company and
Cornerstone agree, in their respective sole discretion, that all or a portion of
the Advisory Fees to be paid by the Company to Cornerstone can be advantageously
applied directly by the Company for purposes that are beneficial to the Company
and to Cornerstone in connection with services provided by Cornerstone hereunder
or that may facilitate the provision of such services by Cornerstone, then the
Advisory Fees payable hereunder will be reduced and the Company will apply such
agreed amounts directly for such other purposes.
4. Subordination. Cornerstone covenants and agrees that the payment to
Cornerstone of any Advisory Fees and Transaction Fees as contemplated in this
Agreement shall be subordinate and junior in right to payment for any
indebtedness incurred by the Company related to or arising out of the issuance
by the Company of the Senior Subordinated Increasing Rate Notes (the "Notes")
pursuant to that certain Securities Purchase Agreement, dated as of September
30, 1998, among the Company, the Guarantors thereto and the Purchaser Party
thereto (the "Bridge Agreement"). No payment shall be made by the Company
hereunder, whether with respect to any Advisory Fees or Transaction Fees, at any
time when there shall have occurred and be continuing (i) any default in the
payment of all or any part of the principal or premium, if any, on any of the
Notes as and when the same shall become due and payable either at maturity, upon
any redemption, by declaration or otherwise or (ii) any default in the payment
of any installment of interest upon any of the Notes or any fees payable under
the Bridge Agreement or any taxes payable thereunder as and when the same shall
become due and payable; provided, however, that following the earlier of (a) the
cure, waiver or other resolution of such default or (ii) the payment in full in
cash of all obligations under the Notes then outstanding, all amounts that have
not been paid to Cornerstone due to the application of the provisions of this
Section 4 shall be promptly paid to Cornerstone without requiring any demand,
notice to the Company or other action on the part of Cornerstone.
5. Personnel. Cornerstone shall provide and devote to the performance of
this Agreement such employees, affiliates and agents of Cornerstone as
Cornerstone shall deem appropriate to the furnishing of the services required.
2
<PAGE> 11
6. Liability. Neither Cornerstone nor any of its affiliates, members,
partners, employees or agents shall be liable to the Company or any of its
subsidiaries or affiliates for any loss, liability, damage or expense arising
out of or in connection with the performance of services contemplated by this
Agreement, unless such loss, liability, damage or expense shall be proven to
result directly from gross negligence, willful misconduct or bad faith on the
part of Cornerstone, its affiliates, members, partners, employees or agents
acting within the scope of their employment or authority.
7. Indemnity. The Company and its subsidiaries shall defend, indemnify
and hold harmless Cornerstone, its affiliates, members, partners, employees and
agents from and against any and all loss, liability, damage, or expenses
arising from any claim (a "Claim") by any person with respect to, or in any way
related to, the performance of services contemplated by this Agreement (includ-
ing attorneys' fees) (collectively, "Claims") resulting from any act or omission
of Cornerstone, its affiliates, members, partners, employees or agents, other
than for Claims which shall be proven to be the direct result of gross
negligence, bad faith or willful misconduct by Cornerstone, its affiliates,
members, partners, employees or agents. The Company and its subsidiaries shall
defend at its own cost and expense any and all suits or actions (just or unjust)
which may be brought against the Company, and/or any of its subsidiaries and any
of Cornerstone, its officers, directors, affiliates, members, partners,
employees or agents or in which any of Cornerstone, its affiliates, members,
partners, employees or agents may be impleaded with others upon any Claim or
Claims, or upon any matter, directly or indirectly, related to or arising out
of this Agreement or the performance hereof by Cornerstone, its affiliates,
members, partners, employees or agents, except that if such damage shall be
proven to be the direct result of gross negligence, bad faith or willful
misconduct by Cornerstone, its affiliates, members, partners, employees or
agents, then Cornerstone shall reimburse the Company for the costs of defense
and other costs incurred by the Company.
8. Notices. All notices or other communications required or permitted by
this Agreement shall be effective upon receipt and shall be in writing and
delivered personally or by overnight courier, or sent by facsimile, as follows:
To the Company:
True Temper Sports, Inc.
8275 Tournament Drive
Suite 200
Memphis, Tennessee 38125
Attention: President
Telecopy No.: (901) 746-2162
To Cornerstone:
Cornerstone Equity Investors, LLC
717 Fifth Avenue, Suite 1100
New York, NY 10022
Attention: Mark Rossi & Tyler Wolfram
Telecopy No.: (212) 826-6798
3
<PAGE> 12
9. Assignment. No party hereto may assign any obligations hereunder to any
other party without the prior written consent of the other party hereto, which
consent shall not be unreasonably withheld; provided, however, that,
notwithstanding the foregoing, Cornerstone may assign its rights and
obligations under this Agreement to any of its affiliates without the consent
of the Company.
10. Successors. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and assigns of the parties hereto.
11. Counterparts. This Agreement may be executed and delivered by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and both of which taken together shall
constitute but one and the same agreement.
12. Entire Agreement; Modification; Governing Law. The terms and
conditions hereof constitute the entire agreement between the parties hereto
with respect to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modification of this
Agreement nor waiver of the terms or conditions hereof shall be binding upon
any party hereto unless approved in writing by an authorized representative of
such party. All issues concerning this Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of
the State of New York or any other jurisdiction) that would cause the
application of the law of any jurisdiction other than the State of New York.
* * * * *
4
<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Management
Services Agreement as of the date first written above.
TRUE TEMPER SPORTS, INC.
By: ________________________________
Name: Charles E. Fenton
Title: Vice-President
CORNERSTONE EQUITY INVESTORS, LLC
By:_________________________________
Name:
Title:
5
<PAGE> 1
IN WITNESS WHEREOF, the parties have executed this Management Services
Agreement as of the date first written above.
TRUE TEMPER SPORTS, INC.
By: _____________________________________
Name: Fred H. Geyer
Title: Chief Financial Officer
CORNERSTONE EQUITY INVESTORS, LLC
By: _____________________________________
Name:
Title:
3
<PAGE> 1
EXHIBIT 10.3
[FINAL EXECUTION COPY]
U.S. $57,500,000
CREDIT AGREEMENT,
dated as of September 30, 1998
among
TRUE TEMPER SPORTS, INC.,
as the Borrower,
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders,
DLJ CAPITAL FUNDING, INC.,
as the Syndication Agent for the Lenders,
and
THE FIRST NATIONAL BANK OF CHICAGO,
as the Administrative Agent for the Lenders.
ARRANGED BY
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
<PAGE> 2
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of September 30, 1998, is made by and
among TRUE TEMPER SPORTS, INC., a Delaware corporation (the "Borrower"), the
various financial institutions as are or may become parties hereto
(collectively, the "Lenders"), DLJ CAPITAL FUNDING, INC. ("DLJ"), as syndication
agent (the "Syndication Agent") for the Lenders, THE FIRST NATIONAL BANK OF
CHICAGO ("First Chicago"), as administrative agent (the "Administrative Agent")
for the Lenders (the Syndication Agent and the Administrative Agent are
sometimes referred to herein as the "Agents" and each as an "Agent") and
Donaldson, Lufkin & Jenrette Securities Corporation, as Lead Arranger.
W I T N E S S E T H:
WHEREAS, pursuant to a Reorganization, Recapitalization and Stock
Purchase Agreement, dated as of June 29, 1998 (as amended by Amendment No. 1
dated as of August 1, 1998 and Amendment No. 2 dated as of the date hereof and
as further amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof, the "Stock Purchase Agreement"),
among True Temper Sports, Inc. (which was renamed "True Temper Corporation")
("True Temper" or "Holdco"), The Black & Decker Corporation ("Black & Decker")
and TTS LLC, a Delaware limited liability company ("TTS LLC"), Cornerstone
Equity Investors IV, L.P. ("Cornerstone"), certain other equity investors in TTS
LLC on the Closing Date (such investors, together with Cornerstone, the "New
Investors") and certain other equity owners and employees of True Temper (such
owners, employees and the New Investors, collectively, the "Purchasers") intend
to consummate a recapitalization of True Temper, whereby, among other things,
(i) Black & Decker will cause its wholly-owned Subsidiaries, Emhart Industries,
Inc. ("EII") and Emhart Inc. ("Emhart"), to contribute to True Temper certain
assets used exclusively in, or which relate exclusively to, the True Temper
Business (this and other defined terms having the meanings set forth below), in
exchange for (x) shares of the common stock, $.01 par value, of Holdco (the
"Common Stock") and (y) shares of preferred stock, $.01 par value, of Holdco
(the "Preferred Stock"; the shares of Common Stock and Preferred Stock issued to
EII are collectively referred to herein as the "EII Equity Interest", the shares
of Common Stock and Preferred Stock issued to Emhart are collectively referred
to herein as the "Emhart Equity Interest" and the issuance by Holdco of the EII
Equity Interest and the Emhart Equity Interest is referred to herein as the
"Reorganization"), (ii) Black & Decker will cause True Temper to establish a
branch in each of the United Kingdom, Australia and Japan and will cause each of
Tucker Fasteners Limited ("Tucker"), Black & Decker (Australasia) Pty. Limited
("B&D Australia") and Nippon Pop Rivets & Fasteners, Ltd. ("Nippon") to
contribute the assets and liabilities relating exclusively to the True Temper
Business operations in the United Kingdom, Australia and Japan, respectively, to
True Temper in exchange for promissory notes to be issued to each of Tucker, B&D
Australia and Nippon with a fixed interest rate equal to 7.5% per annum, payable
in full on the Closing Date, with principal amounts equal to $3,860,000,
$1,936,024.05 and $406,000, respectively (collectively, the "Foreign Branch
Notes"), (iii) Black & Decker will cause certain of its other Subsidiaries to
contribute to True
<PAGE> 3
Temper certain assets used exclusively in the True Temper Business (such asset
contributions, together with the asset contributions by EII, Emhart, Tucker, B&D
Australia and Nippon, are collectively referred to herein as the "Asset
Contribution" and all such assets are collectively referred to herein as the
"Contributed Assets"), in exchange for (x) promissory notes issued by Holdco
which are to be paid in full on the Closing Date and (y) the assumption by True
Temper of certain liabilities, (iv) Holdco will redeem a portion of the EII
Equity Interest issued to EII and a portion of the Emhart Equity Interest for
promissory notes which are to be paid in full on the Closing Date, and the New
Investors will purchase a portion of the EII Equity Interest, such that, after
giving effect to such redemptions and purchases, the New Investors will own
approximately 89% of the voting Capital Stock of Holdco, (v) Holdco will issue
to Black & Decker not more than $25,000,000 in principal amount of its senior
discount notes (the "Discount Notes", with the issuance thereof being herein
referred to as the "Discount Notes Issuance"), and (vi) Holdco will transfer to
Borrower the Contributed Assets (other than certain leased properties) in
exchange for (A) Borrower's assumption of all liabilities arising under or
associated with the Contributed Assets, (B) 100 shares of Borrower's common
stock and (C) a promissory note in the amount of $125,916,000 (the "Intercompany
Loan") which is to be paid in full on the Closing Date (such redemptions,
purchases and issuance, collectively, the "Recapitalization");
WHEREAS, in connection with the Recapitalization, and pursuant to the
Transaction Documents (as defined below), the following capital-raising and
contribution transactions will occur prior to or contemporaneously with the
consummation of the Recapitalization and the making of the initial Credit
Extensions hereunder:
(a) (x) Holdco shall receive a cash equity contribution from
the New Investors in an amount of not less than $58,700,000 (the
"Holdco Equity Contribution"), (y) Holdco shall receive a cash equity
contribution from management of the Borrower in an amount of not less
than $300,000 and (z) EII shall receive exchanges of Rollover Stock
having a fair market value of, in the aggregate, approximately
$3,700,000;
(b) the Borrower shall receive gross cash proceeds of not more
than $100,000,000 from the issuance of its senior subordinated notes
(or, alternatively, its senior subordinated increasing rate bridge
notes) (the "Subordinated Notes", with the issuance thereof being
herein referred to as the "Subordinated Debt Issuance"; the Asset
Contribution, the Reorganization, the Recapitalization, the Holdco
Equity Contribution, the Discount Notes Issuance, the Subordinated Debt
Issuance, the financings contemplated hereunder and all transactions
related thereto, including those described in the recitals hereto,
being herein collectively referred to as the "Transaction"); and
(c) all net proceeds from the Subordinated Debt Issuance and
the Holdco Equity Contribution, together with all proceeds from the
initial Borrowing of the Term Loans, shall be applied by the Borrower
or Holdco (as the case may be) to consummate the Transaction;
-2-
<PAGE> 4
WHEREAS, in connection with the Transaction and the ongoing working
capital and general corporate needs of the Borrower and its Subsidiaries, the
Borrower desires to obtain the following financing facilities from the Lenders:
(a) a Term-A Loan Commitment and a Term-B Loan Commitment
pursuant to which Borrowings of Term-A Loans and Term-B Loans will be
made to the Borrower on the Closing Date in a maximum, original
principal amount of $10,000,000 (in the case of Term-A Loans) and
$27,500,000 (in the case of Term-B Loans);
(b) a Revolving Loan Commitment (to include availability for
Revolving Loans, Swing Line Loans and Letters of Credit) pursuant to
which Borrowings of Revolving Loans in a maximum aggregate principal
amount (together with all Swing Line Loans and Letter of Credit
Outstandings) not to exceed $20,000,000 will be made to the Borrower
from time to time subsequent to the Closing Date but prior to the
Revolving Loan Commitment Termination Date;
(c) a Letter of Credit Commitment pursuant to which the Issuer
will issue Letters of Credit for the account of the Borrower and its
Subsidiaries from time to time subsequent to the Closing Date but prior
to the Revolving Loan Commitment Termination Date in a maximum
aggregate Stated Amount at any one time outstanding not to exceed
$10,000,000 (provided, that the aggregate outstanding principal amount
of Revolving Loans, Swing Line Loans and Letter of Credit Outstandings
at any time shall not exceed the then existing Revolving Loan
Commitment Amount); and
(d) a Swing Line Loan Commitment pursuant to which Borrowings
of Swing Line Loans in an aggregate outstanding principal amount not to
exceed $5,000,000 will be made subsequent to the Closing Date but prior
to the Revolving Loan Commitment Termination Date (provided, that the
aggregate outstanding principal amount of such Swing Line Loans,
together with Revolving Loans and Letter of Credit Outstandings, at any
time shall not exceed the then existing Revolving Loan Commitment
Amount);
WHEREAS, on the Closing Date, contemporaneously with the consummation
of the Transaction, the Discount Notes Issuance, the Subordinated Debt Issuance
and the initial Borrowing of Term Loans hereunder, the Borrower shall repay the
Intercompany Loan in full in cash an amount equal to all the net proceeds of the
Subordinated Debt Issuance and the initial Borrowing of Term Loans (other than
approximately $7,500,000 in proceeds of Term B Loans that are necessary to
effect the Grafalloy Acquisition and any proceeds which are used to pay fees and
expenses of the Borrower related to the Transaction) for purposes of
consummating the Transaction; and
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions hereinafter set forth (including Article V), to extend such
Commitments, make such Loans to the Borrower and issue and participate in such
Letters of Credit;
NOW, THEREFORE, the parties hereto agree as follows:
-3-
<PAGE> 5
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Administrative Agent" is defined in the preamble and includes each
other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 9.4.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power (i)
to vote 10% or more of the Capital Stock (on a fully diluted basis) having
ordinary voting power for the election of directors or managing general
partners, or (ii) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Agents" is defined in the preamble.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Closing Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Corporate Base Rate for such day, and (ii) the
sum of the Federal Funds Effective Rate plus 1/2 of 1% per annum.
"Annualized" means (i) with respect to the end of the first full Fiscal
Quarter of the Borrower ending after the Closing Date, the applicable amount for
such Fiscal Quarter multiplied by four, (ii) with respect to the second full
Fiscal Quarter of the Borrower ending after the Closing Date, the sum of the
applicable amount for such Fiscal Quarter and the immediately preceding Fiscal
Quarter multiplied by two, and (iii) with respect to the third full Fiscal
Quarter of the Borrower ending after the Closing Date, the sum of the applicable
amount for such Fiscal Quarter and the immediately preceding two Fiscal
Quarters, multiplied by one and one-third.
"Applicable Commitment Fee" means, (i) in respect of the Revolving Loan
Commitment, for each day from the Closing Date through (but excluding) the date
upon which the Compliance Certificate for the Fiscal Quarter ending March 31,
1999 is delivered or required to be delivered by the Borrower to the
Administrative Agent pursuant to clause (c) of Section 7.1.1, a fee which shall
accrue at a rate of 1/2 of 1% per annum, and (ii) in respect of the Revolving
Loan
-4-
<PAGE> 6
Commitment, for each day from and after the date of such delivery of the
Compliance Certificate, a fee which shall accrue at the applicable rate per
annum set forth below under the column entitled "Applicable Commitment Fee",
determined by reference to the Leverage Ratio as in effect for the Fiscal
Quarter last ended as of such time of determination:
APPLICABLE
LEVERAGE RATIO COMMITMENT FEE
-------------- --------------
GREATER THAN OR
EQUAL TO 5.0:1 0.500%
GREATER THAN OR
EQUAL TO 4.0:1 AND
LESS THAN 5.0:1 0.375%
GREATER THAN OR
EQUAL TO 3.0:1 AND
LESS THAN 4.0:1 0.300%
LESS THAN 3.0:1 0.250%
The Leverage Ratio used to compute the Applicable Commitment Fee for
any day referred to in clause (ii) above shall be the Leverage Ratio set forth
in the Compliance Certificate most recently delivered by the Borrower to the
Administrative Agent on or prior to such day pursuant to clause (c) of Section
7.1.1. Changes in the Applicable Commitment Fee resulting from a change in the
Leverage Ratio shall become effective (as of the first day following the Fiscal
Quarter in respect of which such Compliance Certificate was required to be
delivered) upon delivery by the Borrower to the Administrative Agent of a new
Compliance Certificate pursuant to clause (c) of Section 7.1.1. If the Borrower
shall fail to deliver a Compliance Certificate within the number of days after
the end of any Fiscal Quarter as required pursuant to clause (c) of Section
7.1.1 (without giving effect to any grace period), the Applicable Commitment Fee
from and including the first day after the date on which such Compliance
Certificate was required to be delivered to but not including the date the
Borrower delivers to the Administrative Agent a Compliance Certificate shall
conclusively equal the highest Applicable Commitment Fee set forth above.
Notwithstanding the foregoing, the Borrower may, in its sole discretion,
following the end of any Fiscal Quarter, deliver to the Administrative Agent a
written estimate (the "Leverage Ratio Estimate") setting forth the Borrower's
good faith estimate of the Leverage Ratio (based on calculations contained in a
Compliance Certificate) that will be set forth in the next Compliance
Certificate required to be delivered by the Borrower to the Administrative Agent
pursuant to clause (c) of Section 7.1.1. In the event that the Leverage Ratio
Estimate indicates that there would be a change in the Applicable Commitment Fee
resulting from a change in the Leverage Ratio, such change will become effective
on the first day following delivery of the Leverage Ratio Estimate. In the event
that, once the next Compliance Certificate is delivered, the Leverage Ratio as
set forth in such Compliance Certificate differs
-5-
<PAGE> 7
from that calculated in the Leverage Ratio Estimate delivered for the Fiscal
Quarter with respect to which such Compliance Certificate has been delivered,
and such difference results in an Applicable Commitment Fee which is greater or
lesser than the Applicable Commitment Fee theretofore in effect, then (A) such
greater or lesser Applicable Commitment Fee shall be deemed to be in effect for
all purposes of this Agreement from the first day following the delivery of the
Leverage Ratio Estimate, and (B) if the Borrower shall have theretofore made any
payment of Commitment Fees in respect of the period from the first day following
the delivery of the Leverage Ratio Estimate to the actual date of delivery of
the Compliance Certificate, then, on the next Quarterly Payment Date, either (x)
if the new Applicable Commitment Fee is greater than the Applicable Commitment
Fee theretofore in effect, the Borrower shall promptly pay as a supplemental
payment of Commitment Fees, an amount which equals the difference between the
amount of Commitment Fees that would otherwise have been paid based on such new
Leverage Ratio and the amount of such Commitment Fees actually so paid, or (y)
if the new Applicable Commitment Fee is less than the Applicable Commitment Fee
theretofore in effect, an amount shall be deducted from the interest on
Revolving Loans and Commitment Fees and Letter of Credit Fees under the first
sentence of Section 3.3.3 then otherwise payable in an amount which equals the
difference between the amount of Commitment Fees so paid and the amount of
Commitment Fees that would otherwise have been paid based on such new Leverage
Ratio (or, if no such payment is owed by the Borrower to the applicable Lenders
on such next Quarterly Payment Date, or if such amount owed by the Borrower is
less than such difference, the applicable Lenders shall pay to the Borrower on
such next Quarterly Payment Date the amount of such difference less the amount,
if any, owed by the Borrower to such Lenders on such Quarterly Payment Date).
"Applicable Margin" means at all times during the applicable periods
set forth below,
(a) with respect to the unpaid principal amount of each Term-B
Loan maintained as a (i) Base Rate Loan, 1.25% per annum and (ii)
Eurodollar Loan, 2.50% per annum;
(b) from the Closing Date through (but excluding) the date
upon which the Compliance Certificate for the Fiscal Quarter ending
March 31, 1999 is delivered by the Borrower to the Administrative Agent
pursuant to clause (c) of Section 7.1.1, with respect to the unpaid
principal amount of (i) each Swing Line Loan (each of which shall be
borrowed and maintained only as a Base Rate Loan) and each Revolving
Loan and Term-A Loan maintained as a Base Rate Loan, 1.00% per annum,
and (ii) each Revolving Loan and Term-A Loan maintained as a Eurodollar
Loan, 2.25% per annum; and
(c) at all times from and after the date of such delivery of
the Compliance Certificate described in clause (b) above, with respect
to the unpaid principal amount of each Swing Line Loan (each of which
shall be borrowed and maintained only as a Base Rate Loan) and each
Revolving Loan and Term-A Loan, by reference to the applicable Leverage
Ratio and at the applicable percentage per annum set forth below under
the column entitled "Applicable Margin for Base Rate Loans", in the
case of Base Rate Loans, or by reference to the applicable Leverage
Ratio and at the applicable percentage
-6-
<PAGE> 8
per annum set forth below under the column entitled "Applicable Margin
for Eurodollar Loans", in the case of Eurodollar Loans:
APPLICABLE MARGIN FOR REVOLVING LOANS AND TERM-A LOANS
<TABLE>
<CAPTION>
APPLICABLE APPLICABLE
MARGIN FOR BASE MARGIN FOR
LEVERAGE RATIO RATE LOANS EURODOLLAR LOANS
-------------- ---------- ----------------
<S> <C> <C>
GREATER THAN OR EQUAL TO 5.0:1 1.00% 2.25%
GREATER THAN OR EQUAL TO 4.0:1 AND
LESS THAN 5.0:1 0.75% 2.00%
GREATER THAN OR EQUAL TO 3.0:1 AND
LESS THAN 4.0:1 0.25% 1.50%
LESS THAN 3.0:1 0.00% 1.00%
</TABLE>
The Leverage Ratio used to compute the Applicable Margin for Swing Line
Loans, Revolving Loans and Term-A Loans for any day shall be the Leverage Ratio
set forth in the Compliance Certificate most recently delivered by the Borrower
to the Administrative Agent on or prior to such day pursuant to clause (c) of
Section 7.1.1. Changes in the Applicable Margin for Swing Line Loans, Revolving
Loans and Term-A Loans resulting from a change in the Leverage Ratio shall
become effective (as of the first day following the Fiscal Quarter in respect of
which such Compliance Certificate was required to be delivered) upon delivery by
the Borrower to the Administrative Agent of a new Compliance Certificate
pursuant to clause (c) of Section 7.1.1. If the Borrower shall fail to deliver a
Compliance Certificate within the number of days after the end of any Fiscal
Quarter as required pursuant to clause (c) of Section 7.1.1 (without giving
effect to any grace period), the Applicable Margin for Swing Line Loans,
Revolving Loans and Term-A Loans from and including the first day after the date
on which such Compliance Certificate was required to be delivered to but not
including the date the Borrower delivers to the Administrative Agent a
Compliance Certificate shall conclusively equal the highest Applicable Margin
for Swing Line Loans, Revolving Loans and Term-A Loans set forth above.
Notwithstanding the foregoing, the Borrower may, in its sole discretion,
following the end of any Fiscal Quarter, deliver to the Administrative Agent a
Leverage Ratio Estimate setting forth the Borrower's good faith estimate of the
Leverage Ratio (based on calculations set forth in a Compliance Certificate)
that will be set forth in the next Compliance Certificate required to be
delivered by the Borrower to the Administrative Agent pursuant to clause (c) of
Section 7.1.1. In the event that the Leverage Ratio Estimate indicates that
there would be a change in the Applicable Margin resulting from a change in the
Leverage Ratio, such change will become effective on the first day following
delivery of the Leverage Ratio Estimate. In the event that, once the next
Compliance Certificate is delivered, the Leverage Ratio as set forth in such
-7-
<PAGE> 9
Compliance Certificate differs from that calculated in the Leverage Ratio
Estimate delivered for the Fiscal Quarter with respect to which such Compliance
Certificate has been delivered, and such difference results in an Applicable
Margin which is greater or lesser than the Applicable Margin theretofore in
effect, then (A) such greater or lesser Applicable Margin shall be deemed to be
in effect for all purposes of this Agreement from the first day following the
delivery of the Leverage Ratio Estimate, and (B) if the Borrower shall have
theretofore made any payment of interest in respect of Swing Line Loans,
Revolving Loans or Term-A Loans, or of Letter of Credit Fees pursuant to the
first sentence of Section 3.3.3, in any such case in respect of the period from
the first day following the delivery of the Leverage Ratio Estimate to the
actual date of delivery of the Compliance Certificate, then, on the next
Quarterly Payment Date, either (x) if the new Applicable Margin is greater than
the Applicable Margin theretofore in effect, the Borrower shall promptly pay as
a supplemental payment of interest and/or Letter of Credit Fees, an amount which
equals the difference between the amount of interest and Letter of Credit Fees
that would otherwise have been paid based on such new Leverage Ratio and the
amount of such interest and Letter of Credit Fees actually so paid, or (y) if
the new Applicable Margin is less than the Applicable Margin theretofore in
effect, an amount shall be deducted from the interest on Revolving Loans,
Commitment Fees and Letter of Credit Fees (in the case of differences in respect
of interest on Revolving Loans and Letter of Credit Fees) or from the interest
on Term-A Loans (in the case of differences in respect of interest on Term-A
Loans) thereafter payable by the Borrower in an amount which equals the
difference between the amount of interest and Letter of Credit Fees so paid and
the amount of interest and Letter of Credit Fees that would otherwise have been
paid based on such new Leverage Ratio (or, if no such payment by the Borrower to
the applicable Lenders will thereafter accrue hereunder, or if the amount that
so accrues is less than such difference, the applicable Lenders will promptly
pay to the Borrower an amount equal to such difference less the amount, if any,
of such accrued and unpaid payments).
"Arranger" means Donaldson, Lufkin & Jenrette Securities Corporation, a
Delaware corporation.
"Asset Contribution" is defined in the first recital.
"Assignee Lender" is defined in Section 10.11.1.
"Assignor Lender" is defined in Section 10.11.1.
"Assumed Indebtedness" means Indebtedness of a Person (or Indebtedness
assumed at the time of the acquisition of an asset securing such Indebtedness)
which (i) is in existence at the time such Person becomes a Subsidiary of the
Borrower or such asset is acquired or (ii) is assumed in connection with an
Investment in or acquisition of such Person or asset, and has not been incurred
or created by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Subsidiary of the Borrower or such
asset being acquired.
"Authorized Officer" means, relative to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the
Administrative Agent and the Lenders pursuant to Section 5.1.1.
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"Base Financial Statements" is defined in clause (a) of Section 5.1.11.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Black & Decker" is defined in the first recital.
"Borrower" is defined in the preamble.
"Borrower Pledge Agreement" means the Pledge Agreement executed and
delivered by an Authorized Officer of the Borrower pursuant to clause (b) of
Section 5.1.8, substantially in the form of Exhibit F-1 hereto, as amended,
supplemented, amended and restated or otherwise modified from time to time.
"Borrower Security Agreement" means the Security Agreement executed and
delivered by an Authorized Officer of the Borrower pursuant to Section 5.1.9,
substantially in the form of Exhibit G-1 hereto, as amended, supplemented,
amended and restated or otherwise modified from time to time.
"Borrowing" means the Loans of the same type and, in the case of
Eurodollar Loans, having the same Interest Period made by all Lenders on the
same Business Day and pursuant to the same Borrowing Request in accordance with
Section 2.1.
"Borrowing Request" means a loan request and certificate duly executed
by an Authorized Officer of the Borrower, substantially in the form of Exhibit
B-1 hereto.
"Bridge Note Agreement" means the Securities Purchase Agreement dated
as of September 30, 1998, among the Borrower and the guarantors and purchaser
party thereto, as amended, supplemented, amended and restated or otherwise
modified from time to time in accordance with the terms hereof.
"Business Day" means any day which is neither a Saturday or Sunday nor
a legal holiday on which banks are authorized or required to be closed in
Memphis, Tennessee, New York, New York or Chicago, Illinois and, with respect to
Borrowings of, Interest Periods with respect to, payments of principal and
interest in respect of, and conversions of Base Rate Loans into, Eurodollar
Loans, on which dealings in Dollars are carried on in the London interbank
market.
"Capital Expenditures" means, for any period, the sum, without
duplication, of (i) the aggregate amount of all expenditures of the Borrower and
its Subsidiaries for fixed or capital assets made during such period which, in
accordance with GAAP, would be classified as capital expenditures, and (ii) the
aggregate amount of all Capitalized Lease Liabilities incurred during such
period by the Borrower and its Subsidiaries; provided that Capital Expenditures
shall not include (i) any such expenditures funded with (x) any Net Casualty
Proceeds, as permitted under clause (e) of Section 3.1.1, or (y) any Net
Disposition Proceeds of any asset sale permitted under
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Section 7.2.9 or (ii) any Investment made under Section 7.2.5 (other than
pursuant to clause (e) thereof).
"Capital Stock" means, with respect to any Person, (i) any and all
shares, interests, participations, rights or other equivalents of or interests
in (however designated) corporate or capital stock, including, without
limitation, shares of preferred or preference stock of such Person, (ii) all
partnership interests (whether general or limited) in such Person, (iii) all
membership interests or limited liability company interests in such Person, and
(iv) all other equity or ownership interests in such Person of any other type.
"Capitalized Lease Liabilities" means all monetary obligations of the
Borrower or any of its Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, would be classified as capitalized leases, and,
for purposes of this Agreement and each other Loan Document, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP, and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a penalty.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one
year after such time, issued or guaranteed by the United States of
America or any agency thereof;
(b) commercial paper, maturing not more than nine months from
the date of issue, which is issued or guaranteed by (i) a corporation
(other than an Affiliate of any Obligor) organized under the laws of
any state of the United States or of the District of Columbia and with
a short-term commercial paper rating of at least A-l by S&P's or P-l by
Moody's, (ii) any Lender (or its holding company) or (iii) any other
bank with a short-term commercial paper rating of at least A-l by S&P's
or P-l by Moody's;
(c) any time deposit, certificate of deposit or bankers
acceptance, maturing not more than one year after such time, which is
issued by either (i) a commercial banking institution that is a member
of the Federal Reserve System and has a combined capital and surplus
and undivided profits of not less than $500,000,000, or (ii) any
Lender;
(d) any repurchase agreement entered into with any Lender (or
other commercial banking institution of the stature referred to in
clause (c)(i)) which (i) is secured by a fully perfected security
interest in any obligation of the type described in any of clauses (a)
through (c), and (ii) has a market value at the time such repurchase
agreement is entered into of not less than 100% of the repurchase
obligation of such Lender (or other commercial banking institution)
thereunder;
(e) any money market or similar fund not less than 95% of the
assets of which are comprised of any of the items specified in clauses
(a) through (d) above and as to which withdrawals are permitted at
least every 90 days; or
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(f) in the case of any Non-U.S. Subsidiary, investments
denominated in the currency of the jurisdiction in which such Non-U.S.
Subsidiary is organized or has its principal place of business which
are similar to the items specified in clauses (a) through (e) above.
"Casualty Event" means the damage, destruction or condemnation, as the
case may be, of any property of the Borrower or any of its Subsidiaries.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System list.
"Change in Control" means
(a) at any time subsequent to an initial Public Offering by
Holdco, the acquisition by any Person, or two or more Persons acting in
concert (other than the New Investors and their controlled Affiliates),
of beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of
1934) of 30% or more of the outstanding shares of voting Capital Stock
of Holdco; or
(b) the failure of the Cornerstone Investors to own, free and
clear of all Liens or other encumbrances, directly or indirectly, at
all times prior to an initial Public Offering by Holdco, at least 45%
of the outstanding shares of voting Capital Stock of Holdco on a fully
diluted basis; or
(c) the failure of the New Investors at any time to have the
right, directly or indirectly, to elect a majority of the Boards of
Directors of Holdco and the Borrower; or
(d) the failure of Holdco to own, free and clear of all Liens
or other encumbrances (other than Liens permitted to exist under
clauses (a), (e), (g) or (h) of Section 7.2.3), 100% of the outstanding
shares of voting Capital Stock of the Borrower on a fully diluted
basis.
"Closing Date" means the date of the initial Borrowing, not to be later
than September 30, 1998.
"Closing Date Certificate" means a certificate of an Authorized Officer
of each of the Borrower and Holdco substantially in the form of Exhibit D
hereto, delivered pursuant to Section 5.1.5.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Commitment" means, as the context may require, (i) a Lender's Term-A
Loan Commitment, Term-B Loan Commitment, Revolving Loan Commitment or Letter of
Credit Commitment or (ii) the Swing Line Lender's Swing Line Loan Commitment.
"Commitment Amount" means, as the context may require, the Term-A Loan
Commitment Amount, the Term-B Loan Commitment Amount, the Revolving Loan
Commitment Amount, the Letter of Credit Commitment Amount or the Swing Line Loan
Commitment Amount.
"Commitment Fee" is defined in Section 3.3.1.
"Commitment Termination Date" means, as the context may require, the
Revolving Loan Commitment Termination Date or any Term Loan Commitment
Termination Date.
"Commitment Termination Event" means (i) the occurrence of any Event of
Default described in clauses (a) through (d) of Section 8.1.9 with respect to
any Obligor (other than an Immaterial Subsidiary), or (ii) the occurrence and
continuance of any other Event of Default and either (x) the declaration of the
Loans to be due and payable pursuant to Section 8.3, or (y) in the absence of
such declaration, the giving of notice to the Borrower by the Administrative
Agent, acting at the direction of the Required Lenders, that the Commitments
have been terminated.
"Common Stock" is defined in the first recital.
"Compliance Certificate" means a certificate duly completed and
executed by the president, chief executive officer, treasurer, assistant
treasurer, controller or chief financial Authorized Officer of the Borrower,
substantially in the form of Exhibit E hereto.
"Contingent Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation under any Contingent Liability shall
(subject to any limitation set forth therein) be deemed to be the outstanding
principal amount (or maximum principal amount, if larger) of the debt,
obligation or other liability guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit C hereto.
"Contributed Assets" is defined in the first recital.
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"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414(b) or 414(c) of the
Code or section 4001 of ERISA.
"Cornerstone" is defined in the first recital.
"Cornerstone Investors" means Cornerstone and its control Affiliates.
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate of interest announced by the Administrative Agent from time to time,
changing when and as said corporate base rate changes.
"Credit Extension" means, as the context may require, (i) the making of
a Loan by a Lender, or (ii) the issuance of any Letter of Credit, or the
extension of any Stated Expiry Date of any previously issued Letter of Credit,
by the Issuer.
"Credit Extension Request" means, as the context may require, any
Borrowing Request or Issuance Request.
"Current Assets" means, on any date, without duplication, all assets
which, in accordance with GAAP, would be included as current assets on a
consolidated balance sheet of the Borrower and its Subsidiaries at such date as
current assets (excluding, however, amounts due and to become due from
Affiliates of the Borrower which have arisen from transactions which are other
than arm's-length and in the ordinary course of its business).
"Current Liabilities" means, on any date, without duplication, all
amounts which, in accordance with GAAP, would be included as current liabilities
on a consolidated balance sheet of the Borrower and its Subsidiaries at such
date, excluding current maturities of Indebtedness.
"Debt`" means the outstanding principal amount of all Indebtedness of
the Borrower and its Subsidiaries of the nature referred to in clauses (a), (b),
(c) or (e) of the definition of "Indebtedness".
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event of
Default.
"Disbursement" is defined in Section 2.6.2.
"Disbursement Date" is defined in Section 2.6.2.
"Disbursement Due Date" is defined in Section 2.6.2.
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"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Required Lenders.
"Discount Notes" is defined in the first recital, and includes the
Discount Notes as amended, supplemented, amended and restated or otherwise
modified from time to time in accordance with the terms hereof and thereof.
"Discount Notes Issuance" is defined in the first recital.
"DLJ" is defined in the preamble.
"Dollar" and the sign "$" mean lawful money of the United States.
"EBITDA" means, for any applicable period, the sum (without
duplication) for the Borrower and its Subsidiaries on a consolidated basis of
(a) Net Income,
plus
(b) the amount deducted in determining Net Income representing
(i) non-cash charges or expenses, including without limitation
depreciation and amortization, and (ii) any net loss in connection with
any sale, lease, conveyance or other disposition of any asset (other
than in the ordinary course of business from the Borrower or any of its
Subsidiaries to the Borrower or any of its Subsidiaries),
plus
(c) the amount deducted in determining Net Income representing
all federal, state and foreign taxes assessed by a governmental taxing
authority (whether paid or deferred),
plus
(d) the amount deducted in determining Net Income representing
(i) Interest Expense, (ii) fees, expenses and financing costs incurred
in connection with the Transaction, the Grafalloy Acquisition or the
refinancing of the Subordinated Notes and the Discount Notes originally
issued on the Closing Date, (iii) non-recurring integration expenses
incurred in connection with the Transaction and the Grafalloy
Acquisition on or prior to the first anniversary of the Closing Date in
an amount not to exceed $1,000,000 in the aggregate, (iv) any
extraordinary or non-recurring loss and (v) non-recurring charges in an
amount not to exceed $500,000 in the aggregate,
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plus
(e) the amount deducted in determining Net Income representing
payments in respect of the Thiokol Earn-Out,
minus
(f) the amount included in determining Net Income representing
(i) any extraordinary or non-recurring gain or (ii) any gain in
connection with any sale, lease, conveyance or other disposition of any
asset (other than in the ordinary course of business or from the
Borrower or any of its Subsidiaries to the Borrower or any of its
Subsidiaries),
minus
(g) to the extent not already deducted in determining Net
Income, amounts paid pursuant to clause (c)(i) of Section 7.2.6.
"EII" is defined in the first recital.
"EII Equity Interest" is defined in the first recital.
"Emhart" is defined in the first recital.
"Emhart Equity Interest" is defined in the first recital.
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eurodollar Base Rate" means, with respect to a Eurodollar Loan for the
relevant Interest Period, the applicable London interbank offered rate for
deposits in U.S. dollars appearing on Dow Jones Markets (Telerate Page 3750) as
of 11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period, and having a maturity equal to such Interest Period; provided
that, if Dow Jones Markets (Telerate Page 3750) is not available for any reason,
the applicable Eurodollar Base Rate for the relevant Interest Period shall
instead be the applicable London interbank offered rate for deposits in U.S.
Dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period, and having a
maturity equal to such Interest Period.
"Eurodollar Loan" means a Loan which, except as otherwise provided in
Section 3.2.2, bears interest at the applicable Eurodollar Rate.
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"Eurodollar Office" means, relative to any Lender, the office of such
Lender designated as such on Schedule II hereto or designated in the Lender
Assignment Agreement pursuant to which such Lender became a Lender hereunder or
such other office of a Lender as shall be so designated from time to time by
notice from such Lender to the Borrower and the Administrative Agent, which
shall be making or maintaining Eurodollar Loans of such Lender hereunder.
"Eurodollar Rate" means, with respect to a Eurodollar Loan for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base
Rate applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, plus
the Applicable Margin. The Eurodollar Rate shall be rounded to the next higher
multiple of 1/16 of 1% if the rate is not such a multiple.
"Event of Default" is defined in Section 8.1.
"Excess Cash Flow" means, for any applicable period, the excess (if
any), of
(a) EBITDA for such applicable period;
over
(b) the sum, without duplication (for such applicable period)
of
(i) the cash portion of Interest Expense actually
paid during such applicable period;
plus
(ii) scheduled payments and optional prepayments, to
the extent actually made, of the principal amount of the Term
Loans or any other funded Debt (including Capitalized Lease
Liabilities) and mandatory prepayments of the principal amount
of (x) other funded Debt or (y) the Revolving Loans or Swing
Line Loans pursuant to clause (f) of Section 3.1.1 in
connection with a reduction of the Revolving Loan Commitment
Amount, in each case during such applicable period;
plus
(iii) all federal, state and foreign taxes assessed
by a governmental taxing authority and actually paid or
payable in cash by the Borrower and its Subsidiaries during
such applicable period (but excluding the amount of any such
taxes included in calculating Excess Cash Flow in a prior
period);
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<PAGE> 18
plus
(iv) the amount of Capital Expenditures actually made
during the period from the first day following the end of such
applicable period to the ninetieth day following the end of
such applicable period so long as each such Capital
Expenditure (A) was permitted to have been made not only when
made but also would have been permitted to have been made
during such applicable period, in each case pursuant to clause
(a) of Section 7.2.7, (B) has a total cost of at least
$50,000, (C) has had a deposit or installment paid in cash in
respect thereof no later than the end of such applicable
period, (D) was not made by way of the incurrence of any
Indebtedness (other than the Revolving Loans and/or the Swing
Line Loans) and (E) has been certified by the chief financial
Authorized Officer of the Borrower to the Agents and the
Lenders as meeting each of the foregoing requirements;
plus
(v) Capital Expenditures actually made during such
applicable period pursuant to clause (a) of Section 7.2.7
(excluding any Capital Expenditures that (A) were made by way
of the incurrence of Indebtedness (other than the Revolving
Loans and/or the Swing Line Loans) and (B) were included in
the calculation of clause (b)(iv) of the definition hereof for
the period immediately preceding such applicable period);
plus
(vi) the amount of the net increase (or minus, in the
case of a net decrease) of Current Assets, other than cash and
Cash Equivalent Investments, over Current Liabilities of the
Borrower and its Subsidiaries for such applicable period;
plus
(vii) Investments permitted and actually made
pursuant to clauses (h) and (n) of Section 7.2.5 during such
applicable period;
plus
(viii) without duplication, Restricted Payments
actually made in cash pursuant to clauses (c)(ii), (c)(iii) or
(d) of Section 7.2.6 during such period;
plus
(ix) payments made in cash during such period in
respect of the items described in clauses (d)(ii), (d)(iii),
(d)(iv), (d)(v) and (e) of the definition of the term
"EBITDA";
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plus
(x) payments made in cash during such period against
non-current liabilities;
minus
(xi) extraordinary or non-recurring gains actually
received in cash by the Borrower and its Subsidiaries.
"Excluded Equity Proceeds" means any proceeds received by Holdco or the
Borrower from the sale or issuance by such Person of its Capital Stock or any
warrants or options in respect of any such Capital Stock or the exercise of any
such warrants or options, which proceeds are (a) received pursuant to any such
sale, issuance or exercise constituting or resulting from (i) capital
contributions to, or Capital Stock issuances by, Holdco or the Borrower
(exclusive of any such contribution or issuance resulting from a Public Offering
or a widely distributed private offering exempted from the registration
requirements of Section 5 of the Securities Act of 1933, as amended), (ii) the
sale of any Capital Stock of Holdco to any officer, director or employee of such
Person or any of its Subsidiaries pursuant to any subscription agreement,
incentive plan or similar arrangement with any officer, employee or director of
such Person or any of its Subsidiaries, provided such proceeds do not exceed
$5,000,000 in the aggregate, (iii) any loan made by Holdco, the Borrower or any
of their respective Subsidiaries pursuant to clause (h) of Section 7.2.5, (iv)
the Holdco Equity Contribution or (v) the exercise of the Warrants or any
options or warrants issued to any officer, employee or director described in
clause (ii) above or (b) concurrently applied upon the receipt thereof to
refinance the Subordinated Notes or the Discount Notes, in each case, originally
issued on the Closing Date.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately 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 at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Administrative Agent from
three federal funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion.
"Fee Letter" means the confidential fee letter, dated September 30,
1998, between the Borrower and the Administrative Agent.
"First Chicago" is defined in the preamble.
"Fiscal Quarter" means any quarter of any Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months
ending on December 31st of any calendar year.
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"Fixed Charge Coverage Ratio" means, at the end of any Fiscal Quarter,
the ratio computed for the period consisting of such Fiscal Quarter and each of
the three immediately prior Fiscal Quarters of
(a) EBITDA for all such Fiscal Quarters
to
(b) the sum (without duplication) of
(i) Capital Expenditures actually made after the
Closing Date and during all such Fiscal Quarters pursuant to
clause (a) of Section 7.2.7 (excluding Capital Expenditures
constituting Capitalized Lease Liabilities and by way of the
incurrence of Indebtedness other than with the proceeds of the
Revolving Loans and/or Swing Line Loans);
plus
(ii) the cash portion of Interest Expense (net of
cash interest income) for all such Fiscal Quarters, provided
that for the first three Fiscal Quarters ending after the
Closing Date, Interest Expense shall be determined on an
Annualized basis;
plus
(iii) all scheduled payments of principal of the Term
Loans and other funded Debt (including the principal portion
of any Capitalized Lease Liabilities) during all such Fiscal
Quarters, provided that for the first three Fiscal Quarters
ending after the Closing Date, such payments shall be
determined on an Annualized basis.
"Foreign Branch Notes" is defined in the first recital.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in Section 1.4.
"Grafalloy" means Grafalloy Corporation, a Delaware corporation.
"Grafalloy Acquisition" means the acquisition of the business conducted
by Grafalloy, a designer, manufacturer and marketer of premium graphite golf
shafts (including the Attach Lite, Pro-Lite and So Lite lines of
ultra-lightweight graphite shafts), which, according to its management, had
revenues of approximately $10,000,000 for the year ended December 31, 1997.
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"Hazardous Material" means (i) any "hazardous substance", as defined by
CERCLA, (ii) any "hazardous waste", as defined by the Resource Conservation and
Recovery Act, as amended, (iii) any petroleum product, or (iv) any pollutant or
contaminant or hazardous, dangerous or toxic chemical, material or substance
within the meaning of any other applicable federal, state or local law,
regulation, ordinance or requirement (including consent decrees and
administrative orders) relating to or imposing liability or standards of conduct
concerning any hazardous, toxic or dangerous waste, substance or material, all
as amended or hereafter amended.
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under foreign exchange agreements, interest rate or
currency swap agreements, interest rate cap agreements and interest rate collar
agreements, commodity agreements, and all other agreements or arrangements
designed to protect such Person against fluctuations in interest rates or
currency exchange rates or commodities risk.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph or provision of this Agreement or such other Loan Document.
"Holdco" is defined in the first recital.
"Holdco Discount Note Agreement" means the Securities Purchase
Agreement, dated as of September 30, 1998, between Holdco and the purchaser
party thereto, as amended, supplemented, amended and restated or otherwise
modified from time to time in accordance with the terms hereof.
"Holdco Equity Contribution" is defined in the second recital.
"Holdco Guaranty and Pledge Agreement" means the Guaranty and Pledge
Agreement executed and delivered by an Authorized Officer of Holdco pursuant to
clause (a) of Section 5.1.8, substantially in the form of Exhibit F-2 hereto, as
amended, supplemented, amended and restated or otherwise modified from time to
time.
"Immaterial Subsidiary" means, with respect to Subsidiaries of the
Borrower, (a) is a Subsidiary that (i) accounted for no more than 3% of the
consolidated gross revenues of the Borrower and its Subsidiaries for the most
recently completed Fiscal Quarter with respect to which, pursuant to clause (a)
of Section 7.1.1 or clause (b) of Section 7.1.1, financial statements have been,
or are required to have been, delivered by the Borrower on or before the date as
of which any such determination is made, as reflected in such financial
statements, and (ii) has assets which represent no more than 3% of the
consolidated gross assets of the Borrower and its Subsidiaries as of the last
day of the most recently completed Fiscal Quarter with respect to which,
pursuant to clause (a) of Section 7.1.1 or clause (b) of Section 7.1.1,
financial statements have been, or are required to have been, delivered by the
Borrower on or before the date as of which any such determination is made, as
reflected in such financial statements and (b) is a Subsidiary that (i) when
taken together with all other Immaterial Subsidiaries of the Borrower,
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<PAGE> 22
accounted for an aggregate of no more than 10% of the consolidated gross
revenues of the Borrower and its Subsidiaries for the most recently completed
Fiscal Quarter with respect to which, pursuant to clause (a) of Section 7.1.1 or
clause (b) of Section 7.1.1, financial statements have been, or are required to
have been, delivered by the Borrower on or before the date as of which any such
determination is made, as reflected in such financial statements, and (ii) has
assets which represent, when taken together with all other Immaterial
Subsidiaries of the Borrower, an aggregate of no more than 10% of the
consolidated gross assets of the Borrower and its Subsidiaries as of the last
day of the most recently completed Fiscal Quarter with respect to which,
pursuant to clause (a) of Section 7.1.1 or clause (b) of Section 7.1.1,
financial statements have been, or are required to have been, delivered by the
Borrower on or before the date as of which any such determination is made, as
reflected in such financial statements.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of any Obligor, any qualification or exception to such opinion or certification
(i) which is of a "going concern" or similar nature, (ii) which relates to the
limited scope of examination of matters relevant to such financial statement, or
(iii) which relates to the treatment or classification of any item in such
financial statement and which, as a condition to its removal, would require an
adjustment to such item the effect of which would be to cause such Obligor to be
in default of any of its obligations under Section 7.2.4.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money or for
the deferred purchase price of property or services (exclusive of
purchase price adjustments related to working capital adjustments under
the Stock Purchase Agreement and amounts payable to Thiokol pursuant to
the Thiokol Earn-Out) and all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all Capitalized Lease Liabilities;
(d) net liabilities of such Person under all Hedging
Obligations;
(e) whether or not so included as liabilities in accordance
with GAAP, all Indebtedness of the types referred to in clauses (a)
through (d) above (excluding prepaid
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interest thereon) secured by a Lien on property owned or being
purchased by such Person (including Indebtedness arising under
conditional sales or other title retention agreements), whether or not
such Indebtedness shall have been assumed by such Person or is limited
in recourse; and
(f) all Contingent Liabilities of such Person in respect of
any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer (to the extent such Person is liable for
such Indebtedness).
"Indemnified Liabilities" is defined in Section 10.4.
"Indemnified Parties" is defined in Section 10.4.
"Interest Coverage Ratio" means, at the end of any Fiscal Quarter, the
ratio computed for the period consisting of such Fiscal Quarter and each of the
three immediately prior Fiscal Quarters of:
(a) EBITDA (for all such Fiscal Quarters);
to
(b) the cash portion of Interest Expense (for all such Fiscal
Quarters; provided that for the first three Fiscal Quarters ending
after the Closing Date, Interest Expense shall be determined on an
Annualized basis).
"Interest Expense" means, for any applicable period, the aggregate
consolidated interest expense of the Borrower and its Subsidiaries for such
applicable period, as determined in accordance with GAAP, including the portion
of any payments made in respect of Capitalized Lease Liabilities allocable to
interest expense.
"Interest Period" means, as to any Eurodollar Loan, the period
commencing on the Borrowing date of such Loan or on the date on which the Loan
is converted into or continued as a Eurodollar Loan, and ending on the date one,
two, three, six or, if available in the Administrative Agent's reasonable
determination, nine or twelve months thereafter as selected by the Borrower in
its Borrowing Request or its Conversion/Continuation Notice; provided, however,
that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless the result of
such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period
shall end on the preceding Business Day;
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<PAGE> 24
(ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest
Period;
(iii) no Interest Period for any Loan shall extend
beyond the Stated Maturity Date for such Loan;
(iv) no Interest Period applicable to a Term Loan or
portion thereof shall extend beyond any date upon which is due
any scheduled principal payment in respect of such Term Loans
unless the aggregate principal amount of such Term Loans
represented by Base Rate Loans, or by Eurodollar Loans having
Interest Periods that will expire on or before such date,
equals or exceeds the amount of such principal payment; and
(v) there shall be no more than 12 Interest Periods
in effect at any one time.
"Investment" means, relative to any Person, (i) any loan or advance
made by such Person to any other Person (excluding commission, travel,
relocation and similar advances to officers, directors and employees made in the
ordinary course of business), or (ii) any investment, contribution or similar
transfer made by such Person for purposes of acquiring or maintaining any
ownership or similar interest in another Person or a business of another Person
(whether through the ownership or acquisition of Capital Stock, revenues or
profits or otherwise, including by way of merger, consolidation or otherwise).
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property at the time of such transfer or exchange.
"Issuance Request" means a Letter of Credit request and certificate
duly executed by an Authorized Officer of the Borrower, in substantially the
form of Exhibit B-2 attached hereto.
"Issuer" means the Administrative Agent, in its capacity as Issuer of
Letters of Credit and any other Lender as may be designated by the Borrower (and
consented to by the Administrative Agent and such Lender, such consent by the
Administrative Agent not to be unreasonably withheld) in its capacity as Issuer
of Letters of Credit.
"Lender Assignment Agreement" means a Lender Assignment Agreement
substantially in the form of Exhibit J hereto.
"Lenders" is defined in the preamble.
"Letter of Credit" is defined in Section 2.1.3.
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"Letter of Credit Commitment" means, with respect to an Issuer, such
Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.3 and,
with respect to each of the other Lenders that has a Revolving Loan Commitment,
the obligation of each such Lender to participate in such Letters of Credit
pursuant to Section 2.6.1.
"Letter of Credit Commitment Amount" means, on any date, a maximum
amount of $10,000,000, as such amount may be reduced from time to time pursuant
to Section 2.2.
"Letter of Credit Outstandings" means, on any date, an amount equal to
the sum of
(a) the then aggregate amount which is undrawn and available
under all issued and outstanding Letters of Credit (whether or not the
conditions to drawing thereunder could be satisfied on such date);
plus (without duplication)
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations in respect of such Letters of Credit.
"Leverage Ratio" means, at the end of any Fiscal Quarter, the ratio of
(a) total Debt less cash and Cash Equivalent Investments of
the Borrower and its Subsidiaries on a consolidated basis outstanding
at such time;
to
(b) EBITDA for the period of four consecutive Fiscal Quarters
ended on such date.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"Loan" means, as the context may require, a Revolving Loan, a Term-A
Loan, a Term-B Loan or a Swing Line Loan, of any type.
"Loan Document" means this Agreement, the Notes, the Letters of Credit,
each Rate Protection Agreement under which the counterparty to such agreement is
(or at the time such Rate Protection Agreement was entered into, was) a Lender
or an Affiliate of a Lender relating to Hedging Obligations of the Borrower or
any of its Subsidiaries, each Borrowing Request, each Issuance Request, each
Continuation/Conversion Notice, the Fee Letter, each Pledge Agreement, the
Holdco Guaranty and Pledge Agreement, the Subsidiary Guaranty, each Mortgage
(upon execution and delivery thereof), each Security Agreement and each other
agreement, document or
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<PAGE> 26
instrument delivered in connection with this Agreement or any other Loan
Document, whether or not specifically mentioned herein or therein.
"Management Services Agreement" means the Management Services Agreement
dated as of September 30, 1998, between the Borrower and Cornerstone, as
amended, supplemented, amended and restated or otherwise modified from time to
time in accordance with the terms hereof.
"Material Adverse Effect" means (i) a material adverse effect on the
financial condition, operations, assets, business or properties of the Borrower
and its Subsidiaries, taken as a whole, (ii) a material impairment of the
ability of the Borrower or any other Obligor to perform its respective material
obligations under the Loan Documents to which it is or will be a party, or (iii)
an impairment of the validity or enforceability of, or a material impairment of
the rights, remedies or benefits available to the Issuer, the Agents, the
Arranger or the Lenders under, this Agreement or any other Loan Document.
"Material Documents" means the Stock Purchase Agreement, the
Subordinated Notes, the Holdco Discount Note Agreement, the Discount Notes, the
Management Services Agreement, the Transition Services Agreement, the Bridge
Note Agreement, the Thiokol Contract and the articles of incorporation of the
Borrower, each as amended or otherwise modified from time to time as permitted
in accordance with the terms hereof or of any other Loan Document.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means, collectively, each Mortgage or Deed of Trust executed
and delivered pursuant to the terms of this Agreement, including clause (b) of
Section 7.1.8 or Section 5.1.10, in form and substance reasonably satisfactory
to the Agents.
"Net Casualty Proceeds" means, with respect to any Casualty Event, the
amount of any insurance proceeds or condemnation awards received by the Borrower
or any of its Subsidiaries in connection therewith, but excluding any proceeds
or awards required to be paid to a creditor (other than the Lenders) which holds
a first-priority Lien permitted by Section 7.2.3 on the property which is the
subject of such Casualty Event and net of reasonable and customary fees and
expenses (including reasonable attorneys fees and expenses) actually incurred in
connection therewith and net of taxes and other governmental costs and expenses
actually paid or estimated by the Borrower (in good faith) to be payable in cash
in connection therewith.
"Net Debt Proceeds" means, with respect to the incurrence, sale or
issuance by the Borrower or any of its Subsidiaries of any Debt (other than Debt
incurred as part of the Transaction and other Debt permitted by Section 7.2.2),
the excess of:
(a) the gross cash proceeds received by the Borrower or any of
its Subsidiaries from such incurrence, sale or issuance,
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over
(b) all reasonable and customary underwriting commissions and
legal, investment banking, brokerage and accounting and other
professional fees, sales commissions and disbursements and all other
reasonable fees, expenses and charges, in each case actually incurred
in connection with such incurrence, sale or issuance.
"Net Disposition Proceeds" means, with respect to any sale, transfer or
other disposition of any assets of the Borrower or any of its Subsidiaries
(other than transfers made as part of the Transaction and other sales permitted
pursuant to Section 7.2.9), the excess of
(a) the gross cash proceeds received by the Borrower or any of
its Subsidiaries from any such sale, transfer or other disposition and
any cash payments received in respect of promissory notes or other
non-cash consideration delivered to the Borrower or such Subsidiary in
respect thereof,
over
(b) the sum (without duplication) of (i) all reasonable and
customary fees and expenses with respect to legal, investment banking,
brokerage, accounting and other professional fees, sales commissions
and disbursements and all other reasonable fees, expenses and charges,
in each case actually incurred in connection with such sale, transfer
or other disposition, (ii) all taxes and other governmental costs and
expenses actually paid or estimated by the Borrower (in good faith) to
be payable in cash in connection with such sale, transfer or other
disposition, (iii) payments made by the Borrower or any of its
Subsidiaries to pay a creditor (other than the Lenders) which holds a
Lien permitted pursuant to clause (c), (d), (e), (f), (h) or (n) on the
property which is the subject of such sale, transfer or disposition so
long as the payment of the Indebtedness owed to such creditor is
required in connection with such sale, transfer or other disposition
and (iv) to the extent included in clause (a) above, the amount of any
such gross cash proceeds deposited in escrow to secure, or reasonably
expected to be paid in connection with, indemnities, purchase price
adjustments and the like;
provided, however, that (x) if, after the payment of all taxes with respect to
such sale, transfer or other disposition, the amount of estimated taxes, if any,
pursuant to clause (b)(ii) above exceeded the tax amount actually paid in cash
in respect of such sale, transfer or other disposition or (y) if, after the
payment of all amounts to be paid from the amounts deposited in escrow pursuant
to clause (b)(iv) above, if any, the amounts deposited in escrow exceeded the
amounts actually paid in cash in respect of such sale, transfer or other
disposition, then in each case the aggregate amount of such excesses in clauses
(x) and (y) shall be immediately payable, pursuant to clause (c) of Section
3.1.1, as Net Disposition Proceeds.
"Net Equity Proceeds" means with respect to the sale or issuance by the
Borrower or Holdco to any Person of any of its Capital Stock or any warrants or
options with respect to its
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Capital Stock or the exercise of any such warrants or options after the Closing
Date (exclusive of any proceeds constituting Excluded Equity Proceeds), the
excess of:
(a) the gross cash proceeds received by Holdco, the Borrower
and the Borrower's Subsidiaries from such sale, exercise or issuance,
over
(b) all reasonable and customary underwriting commissions and
legal, investment banking, brokerage, accounting and other professional
fees, sales commissions and disbursements and all other reasonable
fees, expenses and charges, in each case actually incurred in
connection with such sale, exercise or issuance.
"Net Income" means, for any period, the net income (or loss) of the
Borrower and its Subsidiaries for such period on a consolidated basis, as
determined in accordance with GAAP, but (i) adding an amount equal to $275,000
for each of the Fiscal Quarters ended December 31, 1997, March 31, 1998, June
30, 1998 and September 30, 1998 (which amounts are in respect of charges
allocated to the Borrower and its Subsidiaries by Black & Decker, identified in
Attachment I to the Stock Purchase Agreement), and (ii) excluding extraordinary
or non-recurring gains or losses.
"New Investors" is defined in the first recital.
"Non-Consenting Lender" means any Lender that, in response to any
request by the Borrower or the Administrative Agent to a departure from, waiver
of or amendment to any provision of any Loan Document that requires the
agreement of all Lenders or all Lenders with respect to a particular Tranche,
which departure, waiver or amendment receives the consent of the Required
Lenders or the holders of a majority of the Commitments or (if the applicable
Commitments in respect of such Tranche shall have expired or been terminated)
outstanding Credit Extensions in respect of such Tranche, as the case may be,
shall not have given its consent to such departure, waiver or amendment.
"Non-Funding Lender" means any Lender that shall have failed to fund
any Loan hereunder that it was required to have funded in accordance with the
terms hereof, which Loan was included in any Borrowing in respect of which a
majority of the aggregate principal amount of all Loans included in such
Borrowing were funded by the Lenders party hereto.
"Non-U.S. Lender" means any Lender (including each Assignee Lender)
that is not (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any state thereof, (iii) an estate that is subject to U.S.
Federal income taxation regardless of the source of its income or (iv) a trust,
if and only if (A) a U.S. court is able to exercise primary supervision over its
administration and (B) one or more U.S. persons have the authority to control
all substantial decisions of the trust.
"Non-U.S. Subsidiary" means a Subsidiary of the Borrower that is not a
U.S. Subsidiary.
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"Note" means, as the context may require, a Revolving Note, a Term-A
Note, a Term-B Note or a Swing Line Note.
"Obligations" means all obligations (monetary or otherwise) of the
Borrower and each other Obligor arising under or in connection with this
Agreement, the Notes and each other Loan Document.
"Obligor" means the Borrower or any other Person (other than the
Agents, the Arranger or any Lender or any Affiliate thereof) obligated under, or
otherwise a party to, any Loan Document.
"Olive Branch Facility" means the real property located at 8706
Deerfield Drive, Olive Branch, Mississippi, including all buildings, fixtures,
improvements and appurtenances.
"Organic Document" means, relative to any Obligor, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of capital
stock.
"Participant" is defined in Section 10.11.2.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the
Borrower or any corporation, trade or business that is, along with the Borrower,
a member of a Controlled Group, may have liability, including any liability by
reason of having been a substantial employer within the meaning of section 4063
of ERISA at any time during the preceding five years, or by reason of being
deemed to be a contributing sponsor under section 4069 of ERISA.
"Percentage" means, relative to any Lender, the percentage of Term-A
Loans, Term-B Loans or Revolving Loans, as the case may be, set forth opposite
its name on Schedule II hereto under the applicable column heading or set forth
in the Lender Assignment Agreement(s) under the applicable column heading, as
such percentage may be adjusted from time to time pursuant to Lender Assignment
Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered
pursuant to Section 10.11.
"Perfection Certificate" means the Perfection Certificate executed and
delivered by an Authorized Officer of the Borrower pursuant to Section 5.1.17,
substantially in the form of Exhibit I hereto, as amended, supplemented, amended
and restated or otherwise modified from time to time.
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency, limited liability company
or any other entity (including a
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<PAGE> 30
foreign branch or similar entity, whether or not incorporated or similarly
organized), whether acting in an individual, fiduciary or other capacity;
provided, however, that each foreign branch and division of the Borrower shall
be deemed to be a separate Non-U.S. Subsidiary for purposes of Section 7.2 and
the definition of Cash Equivalent Investment.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreement" means, as the context may require, the Borrower
Pledge Agreement, the Holdco Guaranty and Pledge Agreement and/or the Subsidiary
Pledge Agreement.
"Preferred Stock" is defined in the first recital.
"Pro Forma Balance Sheet" is defined in clause (b) of Section 5.1.11.
"Public Offering" mean for any Person, any sale of the Capital Stock of
such Person to the public pursuant to a primary offering registered under the
Securities Act of 1933, as amended.
"Purchasers" is defined in the first recital.
"Quarterly Payment Date" means the last day of each March, June,
September, and December or, if any such day is not a Business Day, the next
succeeding Business Day, commencing December 31, 1998.
"Rate Protection Agreement" means, collectively, any interest rate
swap, cap, collar or similar agreement entered into by the Borrower pursuant to
the terms of this Agreement under which the counterparty to such agreement is
(or at the time such Rate Protection Agreement was entered into, was) a Lender
or an Affiliate of a Lender.
"Recapitalization" is defined in the first recital.
"Refunded Swing Line Loans" is defined in clause (b) of Section 2.3.2.
"Register" is defined in clause (b) of Section 2.7.
"Regulation D" means Regulation D of the F.R.S. Board as from time to
time in effect and any successor thereto or other regulation or official
interpretation of the F.R.S. Board relating to reserve requirements applicable
to member banks of the Federal Reserve System.
"Reimbursement Obligation" is defined in Section 2.6.3.
"Related Fund" means, with respect to any Lender which is a fund that
invests in loans, any other fund that invests in loans and is controlled by the
same investment advisor as such Lender or by an Affiliate of such investment
advisor.
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"Release" means a "release", as such term is defined in CERCLA.
"Reorganization" is defined in the first recital.
"Required Lenders" means, at any time, (i) prior to the date of the
making of the initial Credit Extension hereunder, Lenders having at least 51% of
the sum of the Revolving Loan Commitments, Term-A Loan Commitments and Term-B
Loan Commitments and (ii) on and after the date of the initial Credit Extension,
Lenders holding at least 51% of the Total Exposure Amount.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on
"Eurocurrency Liabilities" (as defined in Regulation D).
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect
from time to time.
"Restricted Payments" is defined in Section 7.2.6.
"Revolving Loan" is defined in Section 2.1.2.
"Revolving Loan Commitment" is defined in Section 2.1.2.
"Revolving Loan Commitment Amount" means, on any date, $20,000,000, as
such amount may be reduced from time to time pursuant to Section 2.2.
"Revolving Loan Commitment Termination Date" means the earliest of (i)
September 30, 1998 if the Closing Date shall not have occurred on or prior to
such date, (ii) the sixth anniversary of the Closing Date, (iii) the date on
which the Revolving Loan Commitment Amount is terminated in full or reduced to
zero pursuant to Section 2.2, and (iv) the date on which any Commitment
Termination Event occurs.
"Revolving Note" means a promissory note of the Borrower payable to any
Lender, substantially in the form of Exhibit A-1 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Revolving Loans, and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
"Rollover Stock" means the shares of common stock of True Temper held,
directly or indirectly, by certain of the Purchasers immediately prior to
Transaction that, pursuant to the Stock Purchase Agreement, are converted into
Common Stock of Holdco in the Transaction.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc.
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"Secured Parties" means, collectively, the Lenders, the Issuers, the
Agents and all Affiliates of the Lenders which may be party to any Loan Document
(including any Rate Protection Agreement).
"Security Agreement" means, as the context may require, the Borrower
Security Agreement or the Subsidiary Security Agreement.
"Solvency Certificate" means a certificate duly executed and delivered
by the chief financial Authorized Officer of the Borrower, substantially in the
form of Exhibit L hereto, delivered pursuant to Section 5.1.12.
"Solvent" means, with respect to any Person on a particular date, that
on such date (i) the fair value of the property of such Person is greater than
the total amount of liabilities, including contingent liabilities, of such
Person, (ii) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured (considering all
reasonably feasible financial alternatives and potential asset sales available
to such Person), (iii) such Person does not intend to, and does not believe that
it will, incur debts or liabilities beyond such Person's ability to pay as such
debts and liabilities mature (considering all reasonably feasible financial
alternatives and potential asset sales available to such Person), and (iv) such
Person is not engaged in business or a transaction, and such person is not about
to engage in business or a transaction, for which such Person's property would
constitute an unreasonably small capital. The amount of contingent liabilities
at any time shall be computed as the amount that, in light of all the facts and
circumstances existing at such time, can reasonably be expected to become an
actual or matured liability.
"Stated Amount" of each Letter of Credit means the total amount
available to be drawn under such Letter of Credit upon the issuance thereof.
"Stated Expiry Date" is defined in Section 2.6.
"Stated Maturity Date" means (i) in the case of any Revolving Loan or
Swing Line Loan, the sixth anniversary of the Closing Date, (ii) in the case of
any Term-A Loan, the sixth anniversary of the Closing Date, and (iii) in the
case of any Term-B Loan, the seventh anniversary of the Closing Date or, in the
case of any such day that is not a Business Day, the first Business Day
following such day.
"Stock Purchase Agreement" is defined in the first recital, as such
agreement may be amended, supplemented, amended and restated or otherwise
modified from time to time in accordance with the terms hereof.
"Subordinated Debt Issuance" is defined in the second recital.
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"Subordinated Notes" is defined in the second recital, and includes the
Subordinated Notes as amended, supplemented, amended and restated or otherwise
modified from time to time in accordance with the terms hereof and thereof.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other business entity of which more than 50% of the outstanding
Capital Stock (or other ownership interest) having ordinary voting power to
elect a majority of the board of directors, managers or other voting members of
the governing body of such entity (irrespective of whether at the time Capital
Stock (or other ownership interests) of any other class or classes of such
entity shall or might have voting power upon the occurrence of any contingency)
is at the time directly or indirectly owned by such Person, by such Person and
one or more other Subsidiaries of such Person, or by one or more other
Subsidiaries of such Person. For purposes of Section 7.2, "Subsidiary" shall
include, with respect to any Person, any foreign branch or division of such
Person, whether or not incorporated or similarly organized.
"Subsidiary Guarantor" means any U.S. Subsidiary of the Borrower on the
Closing Date and any other U.S. Subsidiary of the Borrower that is required,
pursuant to Section 7.1.7, to execute and deliver a supplement to a Subsidiary
Guaranty.
"Subsidiary Guaranty" means any Guaranty executed and delivered by an
Authorized Officer of a Subsidiary Guarantor pursuant to Section 5.1.7 or
Section 7.1.7, substantially in the form of Exhibit H hereto, as amended,
supplemented (pursuant to Section 7.1.7 or otherwise), amended and restated or
otherwise modified from time to time.
"Subsidiary Pledge Agreement" means any Pledge Agreement executed and
delivered by an Authorized Officer of a U.S. Subsidiary of the Borrower pursuant
to clause (c) of Section 5.1.8 or Section 7.1.7, substantially in the form of
Exhibit F-3 hereto, as amended, supplemented, amended and restated or otherwise
modified from time to time.
"Subsidiary Security Agreement" means any Security Agreement executed
and delivered by an Authorized Officer of a U.S. Subsidiary of the Borrower
pursuant to Section 5.1.9 or Section 7.1.7, substantially in the form of Exhibit
G-2 hereto, as amended, supplemented, amended and restated or otherwise modified
from time to time.
"Swing Line Lender" means the Administrative Agent, in its capacity as
Swing Line Lender hereunder.
"Swing Line Loan" is defined in clause (b) of Section 2.1.2.
"Swing Line Loan Commitment" is defined in clause (b) of Section 2.1.2.
"Swing Line Loan Commitment Amount" means, on any date, $5,000,000, as
such amount may be reduced from time to time pursuant to Section 2.2.
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"Swing Line Note" means a promissory note of the Borrower payable to
the Swing Line Lender, in the form of Exhibit A-4 hereto (as such promissory
note may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate Indebtedness of the Borrower to the Swing Line Lender
resulting from outstanding Swing Line Loans, and also means all other promissory
notes accepted from time to time in substitution therefor or renewal thereof.
"Syndication Agent" is defined in the preamble and includes each other
Person as shall have subsequently been appointed as the successor Syndication
Agent by the predecessor Syndication Agent and the Borrower.
"Taxes" is defined in Section 4.6.
"Term Loan Commitment Termination Date" means, as the context may
require, the Term-A Loan Commitment Termination Date or the Term-B Loan
Commitment Termination Date.
"Term Loans" means collectively, the Term-A Loans and the Term-B Loans.
"Term-A Loan" is defined in clause (a) of Section 2.1.1.
"Term-A Loan Commitment" is defined in clause (a) of Section 2.1.1.
"Term-A Loan Commitment Amount" means $10,000,000.
"Term-A Loan Commitment Termination Date" means the earliest of (i)
September 30, 1998, if the Term-A Loans have not been made on or prior to such
date, (ii) the Closing Date (immediately after the making of the Term-A Loans on
such date) and (iii) the date on which any Commitment Termination Event occurs.
"Term-A Note" means a promissory note of the Borrower payable to the
order of any Lender, in the form of Exhibit A-2 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Term-A Loans, and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
"Term-B Loan" is defined in clause (b) of Section 2.1.1.
"Term-B Loan Commitment" is defined in clause (b) of Section 2.1.1.
"Term-B Loan Commitment Amount" means $27,500,000.
"Term-B Loan Commitment Termination Date" means the earliest of (i)
September 30, 1998, if the Term-B Loans have not been made on or prior to such
date, (ii) the Closing Date (immediately after the making of the Term-B Loans on
such date) and (iii) the date on which any Commitment Termination Event occurs.
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"Term-B Note" means a promissory note of the Borrower payable to the
order of any Lender, in the form of Exhibit A-3 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Term-B Loans, and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
"Thiokol" means Thiokol Corporation.
"Thiokol Contract" means the Teaming Agreement between Thiokol and the
Borrower dated January 13, 1997 - March 9, 1997, Purchase Order No. 41125 dated
March 9, 1997, Purchase Order No. 36986 dated March 14, 1997, renewed December
2, 1997, together with the initial production contract relating thereto, as
amended, supplemented, amended and restated or otherwise modified from time to
time in accordance with the terms hereof.
"Thiokol Earn-Out" means the purchase price adjustment payable to
Thiokol pursuant to the Thiokol Contract calculated as 25% of revenues derived
from the Thiokol Contract, less (i) cost of sales of the Thiokol Contract, (ii)
direct selling, general and administrative costs of the Thiokol Contract, and
(iii) an amount equal to indirect non-promotional selling, general and
administrative costs of the Borrower times the ratio of revenues derived from
the Thiokol Contract to total revenues of the Borrower.
"Total Exposure Amount" means, on any date of determination, the then
outstanding principal amount of all Term Loans and the then effective Revolving
Loan Commitment Amount.
"Tranche" means, as the context may require, the Loans constituting
Term-A Loans, Term-B Loans, Revolving Loans or Swing Line Loans.
"Transaction" is defined in the second recital.
"Transaction Documents" means each of the Material Documents and all
other agreements, documents, instruments, certificates, filings, consents,
approvals, board of directors resolutions and opinions furnished pursuant to or
in connection with the Asset Contribution, the Holdco Equity Contribution, the
Discount Notes Issuance, the Subordinated Debt Issuance, and the transactions
contemplated hereby or thereby, each as amended, supplemented, amended and
restated or otherwise modified from time to time as permitted in accordance with
the terms hereof or of any other Loan Document.
"Transition Services Agreement" means the Services Agreement dated as
of September 28, 1998, between Emhart and Holdco, as amended, supplemented,
amended and restated or other modified from time to time in accordance with the
terms hereof.
"True Temper" is defined in the first recital.
"True Temper Business" is defined in Section 7.2.1.
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"type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a Eurodollar Loan.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of New York.
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"U.S. Subsidiary" means any Subsidiary of the Borrower that is
incorporated or organized in or under the laws of the United States or any state
thereof.
"Waiver" means an agreement in favor of the Administrative Agent for
the benefit of the Lenders in form and substance reasonably satisfactory to the
Administrative Agent.
"Welfare Plan" means a "welfare plan", as such term is defined in
section 3(1) of ERISA.
"wholly-owned Subsidiary" shall mean, with respect to any Person, any
Subsidiary of such Person all of the Capital Stock (and all rights and options
to purchase such Capital Stock) of which, other than directors' qualifying
shares, are owned, beneficially and of record, by such Person and/or one or more
wholly-owned Subsidiaries of such Person.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each other Loan Document, notice and other communication delivered from time to
time in connection with this Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references
in this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article, Section or definition to any clause are references to such clause of
such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. (a) Unless
otherwise specified, all accounting terms used herein or in any other Loan
Document shall be interpreted, all accounting determinations and computations
hereunder or thereunder (including under Section 7.2.4) shall be made in
accordance with those generally accepted accounting principles ("GAAP") as in
effect on December 31, 1997 and, unless otherwise expressly provided herein,
shall be computed or determined on a consolidated basis and without duplication.
All financial statements required to be delivered hereunder or under any other
Loan Document shall be prepared in accordance with GAAP as in effect as at the
date of such financial statements.
(b) For purposes of computing EBITDA, the Interest Coverage Ratio and
the Leverage Ratio (and any financial calculations required to be made or
included within such amount or
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ratios) as of the end of any Fiscal Quarter, all components of such amount or
ratios for the period of four Fiscal Quarters ending at the end of such Fiscal
Quarter shall include, without duplication, such components (including assumed
or incurred Indebtedness) of such amount or ratios attributable to any business
or assets that have been acquired or disposed of by the Borrower or any of its
Subsidiaries (including through mergers or consolidations) after the first day
of such period of four Fiscal Quarters and prior to the end of such period, as
determined in good faith by the Borrower and in a manner satisfactory to the
Administrative Agent or the Required Lenders and set forth (with adequate
supporting documentation) in the relevant Compliance Certificate on a pro forma
basis for such period of four Fiscal Quarters as if such acquisition or
disposition (including uses and applications of proceeds in respect thereof) had
occurred on such first day of such period (including cost savings that would
have been realized had such acquisition or disposition occurred on such day, if
such inclusion would (in the good faith determination of the chief financial
Authorized Officer of the Borrower) be permitted in accordance with Regulation
S-X of the Securities and Exchange Commission).
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES,
NOTES AND LETTERS OF CREDIT
SECTION 2.1. Commitments. On the terms and subject to the conditions of
this Agreement (including Sections 2.1.4, 2.1.5 and Article V),
(a) each Lender severally agrees to make Loans (other than
Swing Line Loans) pursuant to the Commitments and the Swing Line Lender
agrees to make Swing Line Loans pursuant to the Swing Line Loan
Commitment, in each case as described in this Section 2.1; and
(b) the Issuer agrees that it will issue Letters of Credit
pursuant to Section 2.1.3, and each other Lender that has a Revolving
Loan Commitment severally agrees that it will purchase participation
interests in such Letters of Credit pursuant to Section 2.6.1.
SECTION 2.1.1. Term Loan Commitments. Subject to compliance by the
Borrower with the terms of Sections 2.1.4, 5.1 and 5.2, each Lender severally
agrees to make Term Loans as follows:
(a) On (but solely on) the Closing Date (which shall be a
Business Day), each Lender that has a Percentage in excess of zero of
the Term-A Loan Commitment will make loans (relative to such Lender,
its "Term-A Loans") to the Borrower equal to such Lender's Percentage
of the aggregate amount of the Borrowing or Borrowings of Term-A Loans
requested by the Borrower to be made on the Closing Date (with the
commitment of each such Lender described in this clause (a) herein
referred to as its "Term-A Loan Commitment"); and
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(b) On (but solely on) the Closing Date (which shall be a
Business Day), each Lender that has a Percentage in excess of zero of
the Term-B Loan Commitment will make loans (relative to such Lender,
its "Term-B Loans") to the Borrower equal to such Lender's Percentage
of the aggregate amount of the Borrowing or Borrowings of Term-B Loans
requested by the Borrower to be made on the Closing Date (with the
commitment of each such Lender described in this clause (b) herein
referred to as its "Term-B Loan Commitment").
No amounts repaid or prepaid with respect to Term-A Loans or Term-B Loans may be
reborrowed.
SECTION 2.1.2. Revolving Loan Commitment and Swing Line Loan
Commitment. Subject to compliance by the Borrower with the terms of Sections
2.1.4, 5.1 and 5.2, from time to time on any Business Day occurring after the
making of the Term Loans but prior to the Revolving Loan Commitment Termination
Date,
(a) each Lender that has a Percentage of the Revolving Loan
Commitment in excess of zero will make loans (relative to such Lender,
its "Revolving Loans") to the Borrower equal to such Lender's
Percentage of the aggregate amount of the Borrowing or Borrowings of
Revolving Loans requested by the Borrower to be made on such day. The
Commitment of each Lender described in this Section 2.1.2 is herein
referred to as its "Revolving Loan Commitment". On the terms and
subject to the conditions hereof, the Borrower may from time to time
borrow, prepay and reborrow Revolving Loans; and
(b) the Swing Line Lender will make loans ("Swing Line Loans")
to the Borrower equal to the principal amount of the Swing Line Loan
requested by the Borrower to be made on such day. The Commitment of the
Swing Line Lender described in this clause (b) is herein referred to as
its "Swing Line Loan Commitment". On the terms and subject to the
conditions hereof, the Borrower may from time to time borrow, prepay
and reborrow Swing Line Loans.
SECTION 2.1.3. Letter of Credit Commitment. Subject to compliance by
the Borrower with the terms of Sections 2.1.5, 5.1 and 5.2, from time to time on
any Business Day occurring after the Closing Date but prior to the Revolving
Loan Commitment Termination Date, the Issuer will (i) issue one or more standby
or commercial letters of credit (each referred to as a "Letter of Credit") for
the account of the Borrower in the Stated Amount requested by the Borrower on
such day, or (ii) extend the Stated Expiry Date of an existing standby or
commercial Letter of Credit previously issued hereunder to a date not later than
the earlier of (x) the sixth anniversary of the Closing Date and (y) one year
from the date of such extension, subject to the proviso in the penultimate
sentence of Section 2.6.
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SECTION 2.1.4. Lenders Not Permitted or Required To Make Loans. No
Lender shall be permitted or required to, and the Borrower shall not request any
Lender to, make
(a) any Term-A Loan or Term-B Loan (as the case may be) if,
after giving effect thereto, the aggregate original principal amount of
all Term-A Loans or Term-B Loans (as the case may be) of such Lender
would exceed such Lender's Percentage of the Term-A Loan Commitment
Amount (in the case of Term-A Loans) or the Term-B Loan Commitment
Amount (in the case of Term-B Loans);
(b) any Revolving Loan if, after giving effect thereto, the
aggregate outstanding principal amount of all Revolving Loans of such
Lender, together with such Lender's Percentage of the aggregate amount
of all Letter of Credit Outstandings, and such Lender's Percentage of
the outstanding principal amount of all Swing Line Loans, would exceed
such Lender's Percentage of the Revolving Loan Commitment Amount; or
(c) any Swing Line Loan if, after giving effect thereto, (i)
the aggregate outstanding principal amount of all Swing Line Loans
would exceed the Swing Line Loan Commitment Amount, or (ii) the
aggregate outstanding principal amount of all Swing Line Loans together
with the aggregate amount of all Letter of Credit Outstandings and the
outstanding principal amount of all Revolving Loans, would exceed the
Revolving Loan Commitment Amount.
SECTION 2.1.5. Issuer Not Required to Issue Letters of Credit. No
Issuer shall be required to issue any Letter of Credit if, after giving effect
thereto, (a) the aggregate amount of all Letter of Credit Outstandings would
exceed the Letter of Credit Commitment Amount or (b) the sum of the aggregate
amount of all Letter of Credit Outstandings plus the aggregate principal amount
of all Revolving Loans and Swing Line Loans then outstanding would exceed the
Revolving Loan Commitment Amount.
SECTION 2.2. Reduction of Commitment Amounts. The Commitment Amounts
are subject to reduction from time to time pursuant to this Section 2.2.
SECTION 2.2.1. Optional. The Borrower may, from time to time on any
Business Day occurring after the date of the initial Credit Extension hereunder,
voluntarily reduce the Revolving Loan Commitment Amount; provided, however, that
all such reductions shall require at least five Business Days' prior notice to
the Administrative Agent and be permanent, and any partial reduction of the
Revolving Loan Commitment Amount shall be in a minimum amount of $500,000 and in
an integral multiple of $100,000. Any such reduction of the Revolving Loan
Commitment Amount which reduces the Revolving Loan Commitment Amount below the
Letter of Credit Commitment Amount or the Swing Line Loan Commitment Amount
shall result in an automatic and corresponding reduction of the Letter of Credit
Commitment Amount or the Swing Line Loan Commitment Amount, as the case may be,
to, in each case, an aggregate amount not in excess of the Revolving Loan
Commitment Amount, as so reduced, without any further action on the part of the
Issuer or the Swing Line Lender.
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SECTION 2.3. Borrowing Procedure and Funding Maintenance. Loans (other
than Swing Line Loans) shall be made by the Lenders in accordance with Section
2.3.1, and Swing Line Loans shall be made by the Swing Line Lender in accordance
with Section 2.3.2.
SECTION 2.3.1. Term Loans and Revolving Loans. By delivering a
Borrowing Request to the Administrative Agent on or before 10:00 a.m., Chicago
time, on a Business Day, the Borrower may from time to time irrevocably request,
on not less than one Business Day's notice (in the case of Base Rate Loans) or
three Business Days' notice (in the case of Eurodollar Loans) nor more than five
Business Days' notice (in the case of any Loans), that a Borrowing be made in an
aggregate amount of $500,000 or any larger integral multiple of $100,000 or in
the unused amount of the applicable Commitment. No Borrowing Request shall be
required, and the minimum aggregate amounts specified under this Section 2.3.1
shall not apply, in the case of Revolving Loans made under clause (b) of Section
2.3.2 to refund Refunded Swing Line Loans or deemed made under Section 2.6.2 in
respect of unreimbursed Disbursements. On the terms and subject to the
conditions of this Agreement, each Borrowing shall be comprised of the type of
Loans, and shall be made on the Business Day, specified in such Borrowing
Request. On or before 12:00 noon, Chicago time, on such Business Day each Lender
shall deposit with the Administrative Agent same day funds in an amount equal to
such Lender's Percentage of the requested Borrowing. Such deposit will be made
to an account which the Administrative Agent shall specify from time to time by
notice to the Lenders. To the extent funds are received from the Lenders, the
Administrative Agent shall promptly and in any event prior to 1:00 p.m., Chicago
time, make such funds available to the Borrower by wire transfer to the accounts
the Borrower shall have specified in its Borrowing Request. No Lender's
obligation to make any Loan shall be affected by any other Lender's failure to
make any Loan.
SECTION 2.3.2. Swing Line Loans. (a) By telephonic notice, promptly
followed (within one Business Day) by the delivery of a confirming Borrowing
Request, to the Swing Line Lender on or before 1:00 p.m., Chicago time, on the
Business Day the proposed Swing Line Loan is to be made, the Borrower may from
time to time irrevocably request that a Swing Line Loan be made by the Swing
Line Lender in a minimum principal amount of $100,000 or any larger integral
multiple of $25,000. All Swing Line Loans shall be made as Base Rate Loans and
shall not be entitled to be converted into Eurodollar Loans. The proceeds of
each Swing Line Loan shall be made available by the Swing Line Lender, by 2:00
p.m., Chicago time, on the Business Day telephonic notice is received by it as
provided in this clause (a), to the Borrower by wire transfer to the account the
Borrower shall have specified in its notice therefor.
(b) If (i) any Swing Line Loan shall be outstanding for more than four
Business Days or (ii) any Default shall occur and be continuing, each Lender
with a Revolving Loan Commitment (other than the Swing Line Lender) irrevocably
agrees that it will, at the request of the Swing Line Lender and upon notice
from the Administrative Agent, unless such Swing Line Loan shall have been
earlier repaid, make a Revolving Loan (which shall initially be funded as a Base
Rate Loan) in an amount equal to such Lender's Percentage of the aggregate
amount of outstanding principal and interest of all such Swing Line Loans then
outstanding (such outstanding Swing Line Loans hereinafter referred to as the
"Refunded Swing Line Loans"). On or before 12:00 noon, Chicago time, on the
first Business Day following receipt by each Lender of a
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request to make Revolving Loans as provided in the preceding sentence, each such
Lender with a Revolving Loan Commitment shall deposit in an account specified by
the Swing Line Lender the amount so requested in same day funds and such funds
shall be applied by the Swing Line Lender to repay the Refunded Swing Line
Loans. At the time the aforementioned Lenders make the above referenced
Revolving Loans, the Swing Line Lender shall be deemed to have made, in
consideration of the making of the Refunded Swing Line Loans, a Revolving Loan
in an amount equal to the Swing Line Lender's Percentage of the aggregate
principal amount of the Refunded Swing Line Loans. Upon the making (or deemed
making, in the case of the Swing Line Lender) of any Revolving Loans pursuant to
this clause (b), the amount so funded shall become outstanding under such
Lender's Revolving Note and shall no longer be owed under the Swing Line Note.
All interest payable with respect to any Revolving Loans made (or deemed made,
in the case of the Swing Line Lender) pursuant to this clause (b) shall be
appropriately adjusted to reflect the period of time during which the Swing Line
Lender had outstanding Swing Line Loans in respect of which such Revolving Loans
were made. Each Lender's obligation (in the case of Lenders with a Revolving
Loan Commitment) to make the Revolving Loans referred to in this clause (b)
shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the Swing
Line Lender, the Borrower or any other Person for any reason whatsoever; (ii)
the occurrence or continuance of any Default; (iii) any adverse change in the
condition (financial or otherwise) of the Borrower; (iv) the acceleration or
maturity of any Loans or the termination of any Commitment after the making of
any Swing Line Loan; (v) any breach of this Agreement or any other Loan Document
by the Borrower or any Lender; or (vi) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.
(c) In the event that the Borrower or any other Obligor is subject to
any bankruptcy or insolvency proceedings as provided in Section 8.1.9, or if for
any other reason Revolving Loans cannot be made or are unavailable, each Lender
with a Revolving Loan Commitment shall acquire without recourse or warranty an
undivided participation interest equal to such Lender's Percentage of any Swing
Line Loan otherwise required to be repaid by such Lender pursuant to the
preceding clause by paying to the Swing Line Lender on the date on which such
Lender would otherwise have been required to make a Revolving Loan in respect of
such Swing Line Loan pursuant to the preceding clause, in same day funds, an
amount equal to such Lender's Percentage of such Swing Line Loan plus accrued
interest, and no Revolving Loans shall be made by such Lender pursuant to the
preceding clause. From and after the date on which any Lender purchases an
undivided participation interest in a Swing Line Loan pursuant to this clause,
the Swing Line Lender shall promptly distribute to such Lender (appropriately
adjusted, in the case of interest payments, to reflect the period of time during
which such Lender's participation interest is outstanding and funded) its
ratable amount of all payments of principal and interest in respect of such
Swing Line Loan in like funds as received; provided, however, that in the event
such payment received by the Swing Line Lender is required to be returned to the
Borrower, such Lender shall return to the Swing Line Lender the portion of any
amounts which such Lender had received from the Swing Line Lender in like funds.
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SECTION 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 10:00
a.m., Chicago time, on a Business Day, the Borrower may from time to time
irrevocably elect, on not less than one Business Day's notice (in the case of a
conversion of Eurodollar Loans to Base Rate Loans) or three Business Days'
notice (in the case of a continuation of Eurodollar Loans or a conversion of
Base Rate Loans into Eurodollar Loans) nor more than five Business Days' notice
(in the case of any Loans) that all, or any portion in a minimum amount of
$500,000 or an integral multiple of $100,000, of any Loans be, in the case of
Base Rate Loans, converted into Eurodollar Loans or, in the case of Eurodollar
Loans, be converted into Base Rate Loans or continued as Eurodollar Loans (in
the absence of delivery of a Continuation/ Conversion Notice with respect to any
Eurodollar Loan at least three Business Days before the last day of the then
current Interest Period with respect thereto, such Eurodollar Loan shall, on
such last day, automatically convert to a Base Rate Loan); provided, however,
that (x) each such conversion or continuation shall be pro rated among the
applicable outstanding Loans of all Lenders, and (y) no portion of the
outstanding principal amount of any Loans may be continued as, or be converted
into, Eurodollar Loans when any Default has occurred and is continuing.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert Eurodollar Loans hereunder by causing
one of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such Eurodollar Loan; provided,
however, that such Eurodollar Loan shall nonetheless be deemed to have been made
and to be held by such Lender, and the obligation of the Borrower to repay such
Eurodollar Loan shall nevertheless be to such Lender for the account of such
foreign branch, Affiliate or international banking facility. In addition, the
Borrower hereby consents and agrees that, for purposes of any determination to
be made for purposes of Section 4.1, 4.2, 4.3 or 4.4, it shall be conclusively
assumed that each Lender elected to fund all Eurodollar Loans by purchasing
Dollar deposits in its Eurodollar Office's interbank eurodollar market.
SECTION 2.6. Issuance Procedures. By delivering to the Administrative
Agent an Issuance Request on or before 12:00 noon, Chicago time, on a Business
Day, the Borrower may, from time to time irrevocably request, on not less than
three nor more than ten Business Days' notice (or such shorter or longer notice
as may be acceptable to the Issuer), in the case of an initial issuance of a
Letter of Credit, and not less than three nor more than ten Business Days'
notice (unless a shorter or longer notice period is acceptable to the Issuer)
prior to the then existing Stated Expiry Date of a Letter of Credit, in the case
of a request for the extension of the Stated Expiry Date of a Letter of Credit,
that the Issuer issue, or extend the Stated Expiry Date of, as the case may be,
an irrevocable Letter of Credit on behalf of the Borrower (whether issued for
the account of or on behalf of the Borrower or any of its Subsidiaries) in such
form as may be requested by the Borrower and approved by the Issuer, for the
purposes described in clause (b) of Section 7.1.9. Notwithstanding anything to
the contrary contained herein or in any separate application for any Letter of
Credit, the Borrower hereby acknowledges and agrees that it shall be obligated
to reimburse the Issuer upon each Disbursement paid under a Letter of Credit,
and it shall be deemed to be the obligor for purposes of each such Letter of
Credit issued hereunder (whether the account party on such Letter of Credit is
the Borrower or a Subsidiary of the Borrower). Upon receipt of an Issuance
Request, the Administrative Agent shall promptly
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notify the Issuer and each Lender thereof. Each Letter of Credit shall by its
terms be stated to expire on a date (its "Stated Expiry Date") no later than the
earlier to occur of (i) the Revolving Loan Commitment Termination Date or (ii)
one year from the date of its issuance; provided, notwithstanding the terms of
clause (ii) above, that a Letter of Credit may, if required by the beneficiary
thereof, contain "evergreen" provisions pursuant to which the Stated Expiry Date
shall be automatically extended (in each case, to the date no later than the
earlier to occur of (x) the Revolving Loan Commitment Termination Date or (y)
one year from the date of such automatic extension), unless notice to the
contrary shall have been given to the beneficiary by the Issuer or the account
party more than a specified period prior to the then existing Stated Expiry
Date. The Issuer will make available to the beneficiary thereof the original of
each Letter of Credit which it issues hereunder.
SECTION 2.6.1. Other Lenders' Participation. Upon the issuance of each
Letter of Credit issued by the Issuer pursuant hereto, and without further
action, each Lender (other than the Issuer) that has a Revolving Loan Commitment
shall be deemed to have irrevocably purchased from the Issuer, to the extent of
its Percentage in respect of Revolving Loans, and the Issuer shall be deemed to
have irrevocably granted and sold to such Lender a participation interest in
such Letter of Credit (including the Contingent Liability and any Reimbursement
Obligation and all rights with respect thereto), and such Lender shall, to the
extent of its Percentage in respect of Revolving Loans, be responsible for
reimbursing promptly (and in any event within one Business Day) the Issuer for
Reimbursement Obligations which have not been reimbursed by the Borrower in
accordance with Section 2.6.3. In addition, such Lender shall, to the extent of
its Percentage in respect of Revolving Loans, be entitled to promptly receive a
ratable portion of the Letter of Credit fees payable pursuant to Section 3.3.3
with respect to each Letter of Credit and of interest payable pursuant to
Section 2.6.2 with respect to any Reimbursement Obligation. To the extent that
any Lender has reimbursed the Issuer for a Disbursement as required by this
Section, such Lender shall be entitled to receive its ratable portion of any
amounts subsequently received (from the Borrower or otherwise) in respect of
such Disbursement.
SECTION 2.6.2. Disbursements; Conversion to Revolving Loans. The Issuer
will notify the Borrower and the Administrative Agent promptly (but in any event
on the same Business Day) of the presentment for payment of any drawing under
any Letter of Credit issued by the Issuer, together with notice of the date (the
"Disbursement Date") such payment shall be made (each such payment, a
"Disbursement"). Subject to the terms and provisions of such Letter of Credit
and this Agreement, the Issuer shall make such payment to the beneficiary (or
its designee) of such Letter of Credit. Prior to 12:30 p.m., Chicago time, on
the Business Day following the Disbursement Date (the "Disbursement Due Date"),
the Borrower will reimburse the Administrative Agent, for the account of the
Issuer, for all amounts which the Issuer has disbursed under such Letter of
Credit, together with interest thereon at the rate per annum otherwise
applicable to Revolving Loans (made as Base Rate Loans) from and including the
Disbursement Date to but excluding the Disbursement Due Date and, thereafter
(unless such Disbursement is converted into a Base Rate Loan on the Disbursement
Due Date), at a rate per annum equal to the rate per annum then in effect with
respect to overdue Revolving Loans (made as Base Rate Loans) pursuant to Section
3.2.2 for the period from the Disbursement Due Date
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through but excluding the date of such reimbursement; provided, however, that,
if no Default shall have then occurred and be continuing, unless the Borrower
has notified the Administrative Agent no later than one Business Day prior to
the Disbursement Due Date that it will reimburse the Issuer for the applicable
Disbursement, then the amount of the Disbursement shall be deemed to be a
Borrowing of Revolving Loans constituting Base Rate Loans and following the
giving of notice thereof by the Administrative Agent to the Lenders, each Lender
with a Revolving Loan Commitment (other than the Issuer) will deliver to the
Issuer on the Disbursement Due Date immediately available funds in an amount
equal to such Lender's Percentage of such Borrowing. Each conversion of
Disbursement amounts into Revolving Loans shall constitute a representation and
warranty by the Borrower that on the date of the making of such Revolving Loans
all of the statements set forth in Section 5.2.1 are true and correct.
SECTION 2.6.3. Reimbursement. The obligation (a "Reimbursement
Obligation") of the Borrower under Section 2.6.2 to reimburse the Issuer with
respect to each Disbursement (including interest thereon) not converted into a
Base Rate Loan pursuant to Section 2.6.2, and, upon the Borrower failing or
electing not to reimburse the Issuer and the giving of notice thereof by the
Administrative Agent to the Lenders, each Lender's (to the extent it has a
Revolving Loan Commitment) obligation under Section 2.6.1 to reimburse the
Issuer or fund its Percentage of any Disbursement converted into a Base Rate
Loan, shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which the
Borrower or such Lender, as the case may be, may have or have had against the
Issuer or any such Lender, including any defense based upon the failure of any
Disbursement to conform to the terms of the applicable Letter of Credit (if, in
the Issuer's good faith opinion, such Disbursement is determined to be
appropriate) or any non-application or misapplication by the beneficiary of the
proceeds of such Letter of Credit; provided, however, that after paying in full
its Reimbursement Obligation hereunder, nothing herein shall adversely affect
the right of the Borrower or such Lender, as the case may be, to commence any
proceeding against the Issuer for any wrongful Disbursement made by the Issuer
under a Letter of Credit as a result of acts or omissions constituting gross
negligence or willful misconduct on the part of the Issuer.
SECTION 2.6.4. Deemed Disbursements. Upon the occurrence and during the
continuation of any Event of Default of the type described in clauses (a)
through (d) of Section 8.1.9 with respect to any Obligor (other than any
Immaterial Subsidiary) or, with notice from the Administrative Agent acting at
the direction of the Required Lenders, upon the occurrence and during the
continuation of any other Event of Default,
(a) an amount equal to that portion of all Letter of Credit
Outstandings attributable to the then aggregate amount which is undrawn
and available under all Letters of Credit issued and outstanding shall,
without demand upon or notice to the Borrower or any other Person, be
deemed to have been paid or disbursed by the Issuer under such Letters
of Credit (notwithstanding that such amount may not in fact have been
so paid or disbursed); and
(b) the Borrower shall be immediately obligated to reimburse
the Issuer for the amount deemed to have been so paid or disbursed by
the Issuer.
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Any amounts so payable by the Borrower pursuant to this Section shall be
deposited in cash with the Administrative Agent and held as collateral security
for the Obligations in connection with the Letters of Credit issued by the
Issuer. At such time as the Events of Default giving rise to the deemed
disbursements hereunder shall have been cured or waived, the Administrative
Agent shall return to the Borrower all amounts then on deposit with the
Administrative Agent pursuant to this Section, together with accrued interest at
the Federal Funds Effective Rate, which have not been applied to the
satisfaction of such Obligations.
SECTION 2.6.5. Nature of Reimbursement Obligations. The Borrower and,
to the extent set forth in Section 2.6.1, each Lender with a Revolving Loan
Commitment, shall assume all risks of the acts, omissions or misuse of any
Letter of Credit by the beneficiary thereof. The Issuer (except to the extent of
its own gross negligence or willful misconduct) shall not be responsible for (i)
the form, validity, sufficiency, accuracy, genuineness or legal effect of any
Letter of Credit or any document submitted by any party in connection with the
application for and issuance of a Letter of Credit, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged, (ii) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any instrument transferring or assigning or purporting to transfer or
assign a Letter of Credit or the rights or benefits thereunder or the proceeds
thereof in whole or in part, which may prove to be invalid or ineffective for
any reason, (iii) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit, (iv) errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, or (v) any loss or delay in the
transmission or otherwise of any document or draft required in order to make a
Disbursement under a Letter of Credit. None of the foregoing shall affect,
impair or prevent the vesting of any of the rights or powers granted to the
Issuer or any Lender with a Revolving Loan Commitment hereunder. In furtherance
and extension and not in limitation or derogation of any of the foregoing, any
action taken or omitted to be taken by the Issuer in good faith (and not
constituting gross negligence or willful misconduct) shall be binding upon the
Borrower, each Obligor and each such Lender, and shall not put the Issuer under
any resulting liability to the Borrower, any Obligor or any such Lender, as the
case may be.
SECTION 2.7. Register; Notes.
(a) Each Lender may maintain in accordance with its usual
practice an account or accounts evidencing the Indebtedness of the
Borrower to such Lender resulting from each Loan made by such Lender,
including the amounts of principal and interest payable and paid to
such Lender from time to time hereunder. In the case of a Lender that
does not request, pursuant to clause (b)(ii) below, execution and
delivery of a Note evidencing the Loans made by such Lender to the
Borrower, such account or accounts shall, to the extent not
inconsistent with the notations made by the Administrative Agent in the
Register, be conclusive and binding on the Borrower absent manifest
error; provided, however, that the failure of any Lender to maintain
such account or accounts shall not limit or otherwise affect any
Obligations of the Borrower or any other Obligor.
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<PAGE> 46
(b)(i) The Borrower hereby designates the Administrative Agent
to serve as the Borrower's agent, solely for the purpose of this clause
(b), to maintain a register (the "Register") on which the
Administrative Agent will record each Lender's Commitment, the Loans
made by each Lender and each repayment in respect of the principal
amount of the Loans of each Lender and annexed to which the
Administrative Agent shall retain a copy of each Lender Assignment
Agreement delivered to the Administrative Agent pursuant to Section
10.11.1. Failure to make any recordation, or any error in such
recordation, shall not affect the Borrower's obligation in respect of
such Loans. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Administrative Agent
and the Lenders shall treat each Person in whose name a Loan (and as
provided in clause (ii) the Note evidencing such Loan, if any) is
registered as the owner thereof for all purposes of this Agreement,
notwithstanding notice or any provision herein to the contrary. A
Lender's Commitment and the Loans made pursuant thereto may be assigned
or otherwise transferred in whole or in part only by registration of
such assignment or transfer in the Register. Any assignment or transfer
of a Lender's Commitment or the Loans made pursuant thereto shall be
registered in the Register only upon delivery to the Administrative
Agent of a Lender Assignment Agreement duly executed by the Assignor
thereof. No assignment or transfer of a Lender's Commitment or the
Loans made pursuant thereto shall be effective unless such assignment
or transfer shall have been recorded in the Register by the
Administrative Agent as provided in this Section 2.7.
(ii) The Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will execute and
deliver to such Lender, as applicable, a Note evidencing the Loans made
by such Lender. The Borrower hereby irrevocably authorizes each Lender
to make (or cause to be made) appropriate notations on the grid
attached to such Lender's Notes (or on any continuation of such grid),
which notations, if made, shall evidence, inter alia, the date of, the
outstanding principal amount of, and the interest rate and Interest
Period applicable to the Loans evidenced thereby. Such notations shall,
to the extent not inconsistent with the notations made by the
Administrative Agent in the Register, be conclusive and binding on the
Borrower absent manifest error; provided, however, that the failure of
any Lender to make any such notations shall not limit or otherwise
affect any Obligations of the Borrower or any other Obligor. The Loans
evidenced by any such Note and interest thereon shall at all times
(including after assignment pursuant to Section 10.11.1) be represented
by one or more Notes payable to the order of the payee named therein
and its registered assigns. Subject to the provisions of Section
10.11.1, a Note and the obligation evidenced thereby may be assigned or
otherwise transferred in whole or in part only by registration of such
assignment or transfer of such Note and the obligation evidenced
thereby in the Register (and each Note shall expressly so provide). Any
assignment or transfer of all or part of an obligation evidenced by a
Note shall be registered in the Register only upon surrender for
registration of assignment or transfer of the Note evidencing such
obligation, accompanied by a Lender Assignment Agreement duly executed
by the assignor thereof, and thereupon, if requested by the assignee,
one or more new Notes shall be issued to the designated assignee and
the old Note shall be returned by the Administrative Agent to
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<PAGE> 47
the Borrower marked "exchanged." No assignment of a Note and the
obligation evidenced thereby shall be effective unless it shall have
been recorded in the Register by the Administrative Agent as provided
in this Section.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments; Application.
SECTION 3.1.1. Repayments and Prepayments. The Borrower shall repay in
full the unpaid principal amount of each Loan no later than 12:00 noon, Chicago
time, upon the Stated Maturity Date therefor. Prior thereto, the Borrower
(a) may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding principal
amount of any
(i) Loans (other than Swing Line Loans); provided, however,
that
(A) any such prepayment of the Term-A Loans
or Term-B Loans (other than a single voluntary
prepayment of the Term-B Loans in an amount equal to
$7,500,000 made in connection with the delivery of a
certificate of an Authorized Officer of the Borrower,
in which such Authorized Officer certifies that the
Borrower no longer intends to consummate the
Grafalloy Acquisition) shall be made pro rata among
Term-A Loans and Term-B Loans, as applicable, of the
same type and, if applicable, having the same
Interest Period of all Lenders that have made such
Term-A Loans or Term-B Loans, and any such prepayment
of Revolving Loans shall be made pro rata among the
Revolving Loans of the same type and, if applicable,
having the same Interest Period of all Lenders that
have made such Revolving Loans;
(B) the Borrower shall comply with Section
4.4 in the event that any Eurodollar Loan is prepaid
on any day other than the last day of the Interest
Period for such Loan;
(C) all such voluntary prepayments shall
require at least one Business Day's notice in the
case of Base Rate Loans, three Business Days' notice
in the case of Eurodollar Loans, but no more than
five Business Days' notice in the case of any Loans,
in each case in writing to the Administrative Agent;
and
(D) all such voluntary partial prepayments
shall be in an aggregate amount of $500,000 or any
larger integral multiple of $100,000 or in the
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<PAGE> 48
aggregate principal amount of all Loans of the
applicable Tranche and type then outstanding; or
(ii) Swing Line Loans, provided that
(A) all such voluntary prepayments shall
require prior telephonic notice to the Swing Line
Lender on or before 1:00 p.m., Chicago time, on the
day of such prepayment (such notice to be confirmed
in writing by the Borrower within 24 hours
thereafter); and
(B) all such voluntary prepayments shall be
in an aggregate amount of $100,000 and integral
multiples of $25,000 or in the aggregate principal
amount of all Swing Line Loans then outstanding;
(b) shall, no later than five Business Days following the
delivery by the Borrower of its annual audited financial reports
required pursuant to clause (b) of Section 7.1.1 (commencing with the
financial reports delivered in respect of the 1999 Fiscal Year),
deliver to the Administrative Agent a calculation of the Excess Cash
Flow for the Fiscal Year last ended and, no later than five Business
Days following the delivery of such calculation, make a mandatory
prepayment of the Term Loans in an amount equal to 50% of the Excess
Cash Flow (if any) for such Fiscal Year, to be applied as set forth in
Section 3.1.2;
(c) shall, not later than 30 days following the receipt of any
Net Disposition Proceeds or not later than one Business Day following
the receipt of any Net Debt Proceeds by the Borrower or any of its
Subsidiaries, deliver to the Administrative Agent a calculation of the
amount of such Net Disposition Proceeds or Net Debt Proceeds, as the
case may be, and, subject to the following proviso, to the extent the
amount of such Net Disposition Proceeds or Net Debt Proceeds, as the
case may be, exceeds (in the aggregate in one or more transactions,
whether or not related) $500,000 in any Fiscal Year or $2,000,000 since
the Closing Date, make a mandatory prepayment of the Term Loans in an
amount equal to 100% of such Net Disposition Proceeds or Net Debt
Proceeds, as the case may be, to be applied as set forth in Section
3.1.2; provided that no mandatory prepayment on account of such Net
Disposition Proceeds shall be required under this clause if the
Borrower informs the Administrative Agent no later than 30 days
following the receipt of any Net Disposition Proceeds of its or its
Subsidiary's good faith intention to apply such Net Disposition
Proceeds to the acquisition of other assets or property consistent with
its permitted businesses (including by way of merger or investment)
within 365 days following the receipt of such Net Disposition Proceeds,
with the amount of such Net Disposition Proceeds unused after such 365
day period being applied to the Loans pursuant to Section 3.1.2;
provided, further, however that at any time when an Event of Default
shall have occurred and be continuing, such Net Disposition Proceeds
will be deposited in an account maintained with the Administrative
Agent for disbursement at the request of the Borrower to pay for such
acquisition;
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<PAGE> 49
(d) shall, concurrently with the receipt of any Net Equity
Proceeds by Holdco, the Borrower or any of its Subsidiaries, deliver to
the Administrative Agent a calculation of the amount of such Net Equity
Proceeds, and no later than five Business Days following the delivery
of such calculation, and, to the extent that the amount of such Net
Equity Proceeds exceeds $1,000,000 (in the aggregate), make a mandatory
prepayment of the Term Loans in an amount equal to 50% of such Net
Equity Proceeds, to be applied as set forth in Section 3.1.2;
(e) shall, concurrently with the receipt of any Net Casualty
Proceeds by the Borrower or any of its Subsidiaries in excess of
$500,000 (individually or in the aggregate over the course of a Fiscal
Year), and within 30 days following the receipt by the Borrower or any
of its Subsidiaries of such Net Casualty Proceeds, apply such Net
Casualty Proceeds to prepay the Term Loans in an amount equal to 100%
of such Net Casualty Proceeds, to be applied as set forth in Section
3.1.2; provided, that no mandatory prepayment on account of Net
Casualty Proceeds shall be required under this clause if the Borrower
informs the Administrative Agent no later than 30 days following the
occurrence of the Casualty Event resulting in such Net Casualty
Proceeds of its or its Subsidiary's good faith intention to apply such
Net Casualty Proceeds to the rebuilding or replacement of the damaged,
destroyed or condemned assets or property or the acquisition of other
assets or property consistent with the True Temper Business and in fact
uses such Net Casualty Proceeds to rebuild or replace the damaged,
destroyed or condemned assets or property or to acquire such other
property or assets within 365 days following the receipt of such Net
Casualty Proceeds, with the amount of such Net Casualty Proceeds unused
after such 365 day period being applied to the Loans pursuant to
Section 3.1.2;
(f) shall, on each date when any reduction in the Revolving
Loan Commitment Amount shall become effective, including pursuant to
Section 3.1.2, make a mandatory prepayment of Revolving Loans and (if
necessary) deposit with the Administrative Agent cash collateral for
Letter of Credit Outstandings, in an aggregate amount equal to the
excess, if any, of the sum of (i) the aggregate outstanding principal
amount of all Revolving Loans and Swing Line Loans and (ii) the
aggregate amount of all Letter of Credit Outstandings over the
Revolving Loan Commitment Amount as so reduced;
(g) shall, on March 31, 1999, make a mandatory prepayment of
the outstanding principal amount of Term-B Loans in an aggregate amount
equal to $7,500,000 if the Grafalloy Acquisition has not been
consummated on or prior to such date;
(h) shall, no later than 12:00 noon, Chicago time, on the
Stated Maturity Date and on each Quarterly Payment Date occurring
during any period set forth below, make a scheduled repayment of the
outstanding principal amount, if any, of Term-A Loans in an aggregate
amount equal to the amount set forth below opposite such Stated
Maturity Date or period, as applicable (in each case as such amounts
may have otherwise been reduced pursuant to this Agreement):
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<PAGE> 50
<TABLE>
<CAPTION>
SCHEDULED
PRINCIPAL
PERIOD REPAYMENT
------ ---------
<S> <C>
10/1/98 to 9/30/99 $125,000
10/1/99 to 9/30/00 $250,000
10/1/00 to 9/30/01 $375,000
10/1/01 to 9/30/02 $500,000
10/1/02 to 9/30/03 $500,000
10/1/03 to Stated $750,000
Maturity Date
</TABLE>
(i) shall, no later than 12:00 noon, Chicago time, on the
Stated Maturity Date and on each Quarterly Payment Date occurring
during any period set forth below, make a scheduled repayment of the
outstanding principal amount, if any, of Term-B Loans in an aggregate
amount equal to the amount set forth below opposite such Stated
Maturity Date or period, as applicable (in each case as such amounts
may have otherwise been reduced pursuant to this Agreement):
<TABLE>
<CAPTION>
SCHEDULED
PRINCIPAL
PERIOD REPAYMENT
------ ---------
<S> <C>
10/1/98 to 9/30/04 $68,750
10/1/04 to Stated $6,462,500
Maturity Date
</TABLE>
(j) shall, immediately upon any acceleration of the Stated
Maturity Date of any Loans or Obligations pursuant to Section 8.2 or
Section 8.3, repay all outstanding Loans and other Obligations, unless,
pursuant to Section 8.3, only a portion of all Loans and other
Obligations are so accelerated (in which case the portion so
accelerated shall be so prepaid);
Each prepayment of any Loans made pursuant to this Section shall be
without premium or penalty, except as may be required by Section 4.4. No
prepayment of principal of any Revolving Loans or Swing Line Loans pursuant to
clause (a) of this Section 3.1.1 shall cause a reduction in the Revolving Loan
Commitment Amount or the Swing Line Loan Commitment Amount, as the case may be.
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<PAGE> 51
SECTION 3.1.2. Application.
(a) Subject to clause (b) below, each prepayment or repayment
of principal of the Loans of any Tranche shall be applied, to the
extent of such prepayment or repayment, first, to the principal amount
thereof being maintained as Base Rate Loans, and second, to the
principal amount thereof being maintained as Eurodollar Loans.
(b) Each prepayment of Term Loans made pursuant to clauses (a)
(other than the single voluntary prepayment of Term-B Loans in an
amount of $7,500,000 referred to in the parenthetical in subclause
(i)(A) of such clause), (b), (c), (d) and (e) of Section 3.1.1 shall be
applied, (i) on a pro rata basis, to the outstanding principal amount
of all remaining Term-A Loans and Term-B Loans and (ii) in respect of
each Tranche of Term Loans, in direct order of maturity of the
remaining scheduled quarterly amortization payments in respect thereof,
until all such Term-A Loans and Term-B Loans have been paid in full;
provided, however, that if the Borrower at any time elects in writing,
in its sole discretion, to permit any Lender that has Term-B Loans to
decline to have such Term-B Loans prepaid, then any Lender having
Term-B Loans outstanding may, by delivering a notice to the
Administrative Agent at least two Business Days prior to the date that
such prepayment is to be made, decline to have such Term-B Loans
prepaid with the amounts set forth above, in which case 50% of the
amounts that would have been applied to a prepayment of such Lender's
Term-B Loans shall instead be applied to a prepayment of the Term-A
Loans (until paid in full), with the balance being retained by the
Borrower.
(c) Each voluntary prepayment of Term-B Loans made pursuant to
clause (a) (to the extent such voluntary prepayment consists of the
single voluntary prepayment of Term-B Loans in an amount of $7,500,000
referred to in the parenthetical in subclause (i)(A) of such clause)
and (g) of Section 3.1.1 with the proceeds of such Term-B Loans which
were initially borrowed by the Borrower on the Closing Date to effect
the Grafalloy Acquisition shall be applied to the outstanding principal
amount of all remaining Term-B Loans in inverse order of maturity of
the remaining scheduled quarterly amortization payments in respect
thereof until all such Term-B Loans have been paid in full; provided,
however, that the last four scheduled amortization payments in respect
of such Term-B Loans shall be treated as a single amortization payment
and such prepayment shall be applied pro rata among such four quarterly
amortization payments.
SECTION 3.2. Interest Provisions. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this Section 3.2.
SECTION 3.2.1. Rates. Each Base Rate Loan shall accrue interest on the
unpaid principal amount thereof for each day from and including the day upon
which such Loan was made or converted to a Base Rate Loan to but excluding the
date such Loan is repaid or converted to a Eurodollar Loan at a rate per annum
equal to the sum of the Alternate Base Rate for such day plus the Applicable
Margin for such Loan on such day. Each Swing Line Loan shall accrue interest on
the unpaid principal amount thereof for each day from and including the day
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upon which such Loan was made to but excluding the date such Loan is repaid at a
rate per annum equal to the sum of the then effective Alternate Base Rate plus
the Applicable Margin minus the Applicable Commitment Fee. Each Eurodollar Loan
shall accrue interest on the unpaid principal amount thereof for each day during
each Interest Period applicable thereto at a rate per annum equal to the sum of
the Eurodollar Rate for such Interest Period plus the Applicable Margin for such
Loan on such day. All Eurodollar Loans shall bear interest from and including
the first day of the applicable Interest Period to (but not including) the last
day of such Interest Period at the interest rate determined as applicable to
such Eurodollar Loan.
SECTION 3.2.2. Post-Maturity Rates. After the date any principal amount
of any Loan is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise), or after any interest or commitment fees payable
hereunder shall have become due and payable, the Borrower shall pay, but only to
the extent permitted by law, interest (after as well as before judgment) on such
amounts at a rate per annum equal to the rate that would otherwise be applicable
to Base Rate Loans under such Tranche pursuant to Section 3.2.1 plus 2%.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable no later than 12:00 noon, Chicago time, without duplication:
(a) on the Stated Maturity Date therefor;
(b) in the case of a Eurodollar Loan, on the date of any
payment or prepayment, in whole or in part, of principal outstanding on
such Loan, to the extent of the unpaid interest accrued through such
date on the principal amount so paid or prepaid;
(c) with respect to Base Rate Loans, on each Quarterly Payment
Date occurring after the date of the initial Borrowing hereunder;
(d) with respect to Eurodollar Loans, on the last day of each
applicable Interest Period (and, if such Interest Period shall exceed
three months, at intervals of three months after the first day of such
Interest Period);
(e) with respect to the principal amount of any Base Rate
Loans converted into Eurodollar Loans on a day when interest would not
otherwise have been payable pursuant to clause (c), on the date of such
conversion; and
(f) on that portion of any Loans the Stated Maturity Date of
which is accelerated pursuant to Section 8.2 or Section 8.3,
immediately upon such acceleration.
Interest accrued on Loans, Reimbursement Obligations or other monetary
Obligations arising under this Agreement or any other Loan Document after the
date such amount is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise) shall be payable upon demand.
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SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in
this Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Lender that has a Revolving Loan
Commitment, for each day during the period (including any portion thereof when
any of the Lenders' Revolving Loan Commitments are suspended by reason of the
Borrower's inability to satisfy any condition of Article V) commencing on the
Closing Date and continuing through the Revolving Loan Commitment Termination
Date, a commitment fee ("Commitment Fee") on such Lender's Percentage of the
unused portion, whether or not then available, of the Revolving Loan Commitment
Amount (net of Letter of Credit Outstandings), for such day at a rate per annum
equal to the Applicable Commitment Fee for such day. Such commitment fee shall
be payable by the Borrower in arrears on each Quarterly Payment Date, commencing
with the first such day following the Closing Date, and on the Revolving Loan
Commitment Termination Date. The making of Swing Line Loans shall not constitute
usage of the Revolving Loan Commitment with respect to the calculation of
commitment fees to be paid by the Borrower to the Lenders (other than the Swing
Line Lender).
SECTION 3.3.2. Administrative Agent's Fees. The Borrower agrees to pay
to the Administrative Agent, for its own account, fees in the amounts and at the
times set forth in the Fee Letter.
SECTION 3.3.3. Letter of Credit Fees. The Borrower agrees to pay to the
Administrative Agent, for the pro rata account of the Issuer and each other
Lender that has a Percentage of the Revolving Loan Commitment Amount of greater
than zero, a Letter of Credit fee for each day on which there shall be any
Letters of Credit outstanding, at a rate per annum equal to (i) with respect to
each standby Letter of Credit, the then Applicable Margin for Revolving Loans
maintained as Eurodollar Loans, multiplied by the Stated Amount of each such
Letter of Credit, and (ii) with respect to each documentary Letter of Credit,
1.25% per annum multiplied by the Stated Amount of each such Letter of Credit,
such fees to be payable by the Borrower quarterly in arrears on each Quarterly
Payment Date and on the Revolving Loan Commitment Termination Date for any
period then ending for which such fees shall not theretofore have been paid. The
Borrower further agrees to pay to the Issuer for its own account, quarterly in
arrears on each Quarterly Payment Date, a fronting fee equal to 1/4 of 1% per
annum, multiplied by the Stated Amount of the applicable Letter of Credit. In
addition, customary issuance costs, fees and expenses shall be payable to the
Issuer for its own account.
ARTICLE IV
CERTAIN EURODOLLAR BASE RATE AND OTHER PROVISIONS
SECTION 4.1. Eurodollar Base Rate Lending Unlawful. If any Lender shall
determine (which determination shall, upon notice thereof to the Borrower and
the Lenders, be conclusive and binding on the Borrower) that the introduction of
or any change in or in the interpretation of
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any law makes it unlawful, or any central bank or other governmental authority
asserts that it is unlawful, for such Lender to make, continue or maintain any
Loan as, or to convert any Loan into, a Eurodollar Loan of a certain type, the
obligations of such Lender to make, continue, maintain or convert into any such
Loans shall, upon such determination, forthwith be suspended until such Lender
shall notify the Administrative Agent that the circumstances causing such
suspension no longer exist, and all Eurodollar Loans of such type made by such
Lender shall automatically convert into Base Rate Loans at the end of the then
current Interest Periods with respect thereto or sooner, if required by such law
or assertion.
SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall
have determined that (i) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available in the relevant market, or (ii) by
reason of circumstances affecting the Administrative Agent's relevant market,
adequate means do not exist for ascertaining the interest rate applicable
hereunder to Eurodollar Loans in accordance with the definitions hereof, then,
upon notice from the Administrative Agent to the Borrower and the Lenders, the
obligations of all Lenders under Section 2.3 and Section 2.4 to make or continue
any Loans as, or to convert any Loans into, Eurodollar Loans shall forthwith be
suspended until the Administrative Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer exist.
SECTION 4.3. Increased Eurodollar Loan Costs, etc. The Borrower agrees
to reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in the amount of any sum receivable by such Lender in respect of,
making, continuing or maintaining (or of its obligation to make, continue or
maintain) any Loans as, or of converting (or of its obligation to convert) any
Loans into, Eurodollar Loans (except for any increased capital costs (other than
in respect of the Reserve Requirement) and Taxes which are governed by Sections
4.5 and 4.6, respectively) that arise in connection with any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in after the date hereof of, any law or regulation, directive, guideline,
decision or request (whether or not having the force of law) of any court,
central bank, regulator or other governmental authority. Such Lender shall
promptly notify the Administrative Agent and the Borrower in writing of the
occurrence of any such event, such notice to state, in reasonable detail, the
reasons therefor and the additional amount required fully to compensate such
Lender for such increased cost or reduced amount. Such additional amounts shall
be payable by the Borrower directly to such Lender within five days of its
receipt of such notice, and such notice shall, in the absence of manifest error,
be conclusive and binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, a
Eurodollar Loan but excluding any loss of margin after the date of any such
conversion, or failure to make, continue or convert) as a result of (i) any
conversion or repayment or prepayment of the principal amount of any Eurodollar
Loans on a date other than the scheduled last day of the Interest Period
applicable thereto, whether pursuant to Section 3.1 or otherwise, (ii) any Loans
not being made as Eurodollar Loans in accordance with the Borrowing Request
therefor, or (iii)
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any Loans not being continued as, or converted into, Eurodollar Loans in
accordance with the Continuation/ Conversion Notice therefor, then, upon the
written notice of such Lender to the Borrower (with a copy to the Administrative
Agent), the Borrower shall, within five days of its receipt thereof, pay
directly to such Lender such amount as will (in the reasonable determination of
such Lender) reimburse such Lender for such loss or expense. Such written notice
(which shall include calculations in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding on the Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender or any Person controlling
such Lender, and such Lender determines (in its sole and absolute discretion)
that the rate of return on its or such controlling Person's capital as a
consequence of its Commitments, issuance of or participation in Letters of
Credit or the Loans made by such Lender is reduced to a level below that which
such Lender or such controlling Person could have achieved but for the
occurrence of any such circumstance (taking into account such Lender's or such
controlling Person's policies with respect to capital adequacy), then, in any
such case upon notice from time to time by such Lender to the Borrower (subject
to the proviso below), the Borrower shall immediately pay directly to such
Lender additional amounts sufficient to compensate such Lender or such
controlling Person for such reduction in rate of return; provided, however, that
the Borrower shall not be responsible to pay such additional amounts to a Lender
unless the Borrower shall have been notified in accordance with this Section 4.5
not later than one year after the completion of the Lender's annual audit for
the fiscal year in which such additional amounts were incurred. A statement of
such Lender as to any such additional amount or amounts (including calculations
thereof in reasonable detail) shall, in the absence of manifest error, be
conclusive and binding on the Borrower. In determining such amount, such Lender
may use any method of averaging and attribution that it (in its sole and
absolute discretion) shall deem applicable; provided, that such Lender may not
impose materially greater costs on the Borrower than on other similarly situated
borrowers by virtue of any such averaging or attribution method.
SECTION 4.6. Taxes. (a) All payments by the Borrower of principal of,
and interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future withholding
taxes of any nature whatsoever imposed by any taxing authority, but excluding
franchise taxes and taxes imposed on or measured by any Lender's net income or
net receipts to the extent that they are not imposed as a result of such Lender
having executed, delivered or performed its obligations hereunder or received a
payment under, or taken any action to enforce, this Agreement or any other Loan
Document (such non-excluded items being called "Taxes"). In the event that any
withholding or deduction from any payment to be made by the Borrower hereunder
is required in respect of any Taxes pursuant to any applicable law, rule or
regulation, then the Borrower shall be obligated to (i) pay directly to the
relevant authority the full amount required to be so withheld or deducted, (ii)
promptly forward to the Administrative Agent an official receipt or other
documentation satisfactory to the Administrative Agent evidencing such payment
to such authority, and (iii) pay to the
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Administrative Agent for the account of the Lenders such additional amount or
amounts as is necessary to ensure that the net amount actually received by each
Lender will equal the full amount such Lender would have received had no such
withholding or deduction been required; provided, however, that the Borrower
shall not be required to pay any such additional amounts in respect of amounts
payable to any Lender that is not organized under the laws of the United States
to the extent that the related tax is imposed (or an exemption therefrom is not
available) as a result of such Lender failing to comply with the requirements of
clause (c) of this Section 4.6. Moreover, if any Taxes are directly asserted
against any Agent or any Lender with respect to any payment received by any such
Agent or such Lender hereunder, such Agent or such Lender may pay such Taxes and
the Borrower shall promptly pay such additional amounts (including any
penalties, interest or expenses) as is necessary in order that the net amount
received by such person after the payment of such Taxes (including any Taxes on
such additional amount) shall equal the amount such person would have received
had not such Taxes been asserted; provided, however, that the Borrower shall not
be required to pay any such additional amounts in respect of any amounts payable
to any Agent or Lender that is not organized under the laws of the United States
to the extent the related Tax is imposed as a result of such Agent or Lender
failing to comply with the requirements of clause (c) of this Section 4.6.
(b) If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent, for the account
of the respective Lenders, the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by any Lender as a result of any
such failure. For purposes of this Section 4.6, a distribution hereunder by the
Administrative Agent or any Lender to or for the account of any Lender shall be
deemed a payment by the Borrower.
(c) Upon the request of the Borrower, each Lender that is organized
under a jurisdiction other than the United States shall (i) prior to the due
date of any payments under the Notes, execute and deliver to the Borrower and
the Administrative Agent, one or more (as the Borrower or the Administrative
Agent may reasonably request) United States Internal Revenue Service Form 1001
or 4224 (or successor applicable form) or, if such Lender is claiming exemption
from United States withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest", United States Internal Revenue
Service Forms W-8 and a certificate signed by a duly authorized officer of such
Lender representing that such Lender is not a "bank" (within the meaning of
Section 881(c)(3)(A) of the Code), is not a 10 percent shareholder (within the
meaning of Section 871(h)(3)(B) of the Code) with respect to the Borrower and is
not a controlled foreign corporation with respect to which the Borrower is a
related person (within the meaning of Section 864(d)(4) of the Code) or such
other forms or documents (or successor forms or documents), appropriately
completed, establishing that payments to such Lender are exempt from withholding
or deduction of Taxes imposed by the United States; and (ii) copies of
replacements of any such forms on or before the date that any such forms expire
or after the occurrence of any event requiring a change in the most recent form
previously delivered by it hereunder. Each Person that shall become a Lender
shall, upon the effectiveness of the related transfer, be required to provide
all of the forms required pursuant to this Section 4.6.
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(d) If a Lender or an Agent shall receive a refund from a taxing
authority (as a result of any error in the imposition of Taxes by such taxing
authority) of any Taxes paid by any Borrower pursuant to clause (a) above, such
Lender or such Agent (as the case may be) shall promptly pay, to the extent so
received, to such Borrower, together with interest, if any, paid by such taxing
authority with respect to such refund, net of any tax liability incurred by such
Lender or such Agent that is attributable to the receipt of such refund and such
interest.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the Notes or
any other Loan Document shall be made by the Borrower to the Administrative
Agent for the pro rata account of the Lenders entitled to receive such payment.
All such payments required to be made to the Administrative Agent shall be made,
without setoff, deduction or counterclaim, not later than 12:00 noon, Chicago
time, on the date due, in same day or immediately available funds, to such
account as the Administrative Agent shall specify from time to time by notice to
the Borrower. Funds received after that time shall be deemed to have been
received by the Administrative Agent on the next succeeding Business Day. The
Administrative Agent shall promptly remit in same day funds to each Lender its
share, if any, of such payments received by the Administrative Agent for the
account of such Lender. All interest and fees shall be computed on the basis of
the actual number of days (including the first day but excluding the last day)
occurring during the period for which such interest or fee is payable over a
year comprised of 360 days (or, in the case of interest on a Base Rate Loan
(other than when calculated with respect to the Federal Funds Effective Rate),
365 days or, if appropriate, 366 days). Whenever any payment to be made shall
otherwise be due on a day which is not a Business Day, such payment shall
(except as otherwise required by clause (i) of the definition of the term
"Interest Period") be made on the next succeeding Business Day and such
extension of time shall be included in computing interest and fees, if any, in
connection with such payment.
SECTION 4.8. Sharing of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Loan or Reimbursement Obligation (other
than pursuant to the terms of Sections 4.3, 4.4, 4.5 and 4.6) or Hedging
Obligation in respect of any Rate Protection Agreement in excess of its pro rata
share of payments then or therewith obtained by all Lenders, such Lender shall
purchase from the other Lenders such participations in the Credit Extensions
made by them as shall be necessary to cause such purchasing Lender to share the
excess payment or other recovery ratably with each of them; provided, however,
that if all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing Lender, the purchase shall be rescinded and each
Lender which has sold a participation to the purchasing Lender shall repay to
the purchasing Lender the purchase price to the ratable extent of such recovery
together with an amount equal to such selling Lender's ratable share (according
to the proportion of (i) the amount of such selling Lender's required repayment
to the purchasing Lender, to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section may, to the fullest extent permitted by law, exercise
all its rights of payment (including pursuant to Section 4.9) with respect to
such participation as fully as if such Lender were the direct creditor of the
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Borrower in the amount of such participation. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured claim
in lieu of a setoff to which this Section applies, such Lender shall, to the
extent practicable, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Lenders entitled under this Section to
share in the benefits of any recovery on such secured claim.
SECTION 4.9. Setoff. Each Lender shall, upon the occurrence of any
Event of Default described in clauses (a) through (d) of Section 8.1.9 with
respect to any Obligor or, with the consent of the Required Lenders, upon the
occurrence of any other Event of Default, have the right to appropriate and
apply to the payment of the Obligations (other than Obligations consisting of
Hedging Obligations) and cash collateralization of such Hedging Obligations
owing to it (whether or not then due), and (as security for all such
Obligations) the Borrower hereby grants to each Lender a continuing security
interest in, any and all balances, credits, deposits, accounts or moneys of the
Borrower then or thereafter maintained with or otherwise held by such Lender;
provided, however, that any such appropriation and application shall be subject
to the provisions of Section 4.8. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such setoff and application made
by such Lender; provided, however, that the failure to give such notice shall
not affect the validity of such setoff and application. The rights of each
Lender under this Section are in addition to other rights and remedies
(including other rights of setoff under applicable law or otherwise) which such
Lender may have.
SECTION 4.10. Mitigation. Each Lender agrees that if it makes any
demand for payment under Section 4.3, 4.4, 4.5, or 4.6, or if any adoption or
change of the type described in Section 4.1 shall occur with respect to it, it
will use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions and so long as such efforts would not be disadvantageous
to it, as determined in its sole discretion) to designate a different lending
office if the making of such a designation would reduce or obviate the need for
the Borrower to make payments under Section 4.3, 4.4, 4.5, or 4.6, or would
eliminate or reduce the effect of any adoption or change described in Section
4.1.
SECTION 4.11. Replacement of Lenders. Each Lender hereby severally
agrees as set forth in this Section. If any Lender (a "Subject Lender") (i)
makes demand upon the Borrower for (or if the Borrower is otherwise required to
pay) amounts pursuant to Section 4.3, 4.5 or 4.6 and the payment of such
additional amounts are, and are likely to continue to be, more onerous in the
reasonable judgment of the Borrower than with respect to the other Lenders, (ii)
gives notice pursuant to Section 4.1 requiring a conversion of such Subject
Lender's Eurodollar Loans to Base Rate Loans or any change in the basis upon
which interest is to accrue in respect of such Subject Lender's Eurodollar Loans
or suspending such Lender's obligation to make Loans as, or to convert Loans
into, Eurodollar Loans at a time when a majority of the other Lenders are not
providing similar notice, (iii) becomes a Non-Consenting Lender or (iv) becomes
a Non-Funding Lender, the Borrower may, within 180 days of receipt by such
Borrower of such demand or notice (or the occurrence of such other event causing
any Borrower to be required to pay such compensation) so long as such Lender in
the reasonable determination of the Borrower continues to be affected in the
manner and to the extent set forth in such demand or notice, or within 180
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days of such Lender becoming a Non-Consenting Lender or a Non-Funding Lender, as
the case may be, give notice (a "Replacement Notice") in writing to the
Administrative Agent and such Subject Lender of its intention to replace such
Subject Lender with a financial institution (a "Replacement Lender") designated
in such Replacement Notice. If the Administrative Agent shall, in the exercise
of its reasonable discretion and within 30 days of its receipt of such
Replacement Notice, notify the Borrower and such Subject Lender in writing that
the designated financial institution is satisfactory to the Administrative Agent
(such consent not being required where the Replacement Lender is already a
Lender), then such Subject Lender shall, subject to the payment of any amounts
due pursuant to Section 4.4, assign, in accordance with Section 10.11.1, all of
its Commitments, Loans and other rights and obligations under this Agreement and
all other Loan Documents (including, without limitation, Reimbursement
Obligations) to such designated financial institution; provided, however, that
(i) such assignment shall be without recourse, representation or warranty and
shall be on terms and conditions reasonably satisfactory to such Subject Lender
and such designated financial institution and (ii) the purchase price paid by
such designated financial institution shall be in the amount of such Subject
Lender's Loans and its Percentage in respect of any Revolving Loan Commitment
under which there are outstanding Reimbursement Obligations of such
Reimbursement Obligation, together with all accrued and unpaid interest and fees
in respect thereof, plus all other amounts (including the amounts demanded and
unreimbursed under Sections 4.3, 4.5 and 4.6), owing to such Subject Lender
hereunder. Upon the effective date of an assignment described above, the
designated financial institution or Replacement Lender shall become a "Lender"
for all purposes under this Agreement and the other Loan Documents.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1. Initial Credit Extension. The obligations of the Lenders
to make and, if applicable, the Issuer to fund the initial Credit Extension
shall be subject to the prior or concurrent satisfaction of each of the
conditions precedent set forth in this Section 5.1.
SECTION 5.1.1. Resolutions, etc. The Agents shall have received from
each Obligor a certificate, dated the date of the initial Credit Extension, of
its Secretary or Assistant Secretary as to (i) resolutions of its Board of
Directors then in full force and effect authorizing the execution, delivery and
performance of each Loan Document to be executed by it, and (ii) the incumbency
and signatures of those of its officers authorized to act with respect to each
Loan Document executed by it, upon which certificate each Lender may
conclusively rely until it shall have received a further certificate of the
Secretary or Assistant Secretary of such Obligor canceling or amending such
prior certificate.
SECTION 5.1.2. Transaction Documents. The Agents shall have received
(with copies for each Lender that shall have expressly requested copies thereof)
copies of fully executed versions of the Transaction Documents, certified as of
the Closing Date to be true and complete copies thereof by an Authorized Officer
of the Borrower. The Stock Purchase Agreement shall
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be in full force and effect and shall not have been modified or waived in any
material respect, nor shall there have been any forbearance to exercise any
material rights with respect to any of the terms or provisions relating to the
conditions to the consummation of the Transaction as set forth in the Stock
Purchase Agreement unless otherwise agreed to by the Required Lenders.
SECTION 5.1.3. Consummation of the Transaction. The Agents shall have
received evidence satisfactory to each of them that all actions necessary to
consummate the Transaction shall have occurred, including, without limitation,
evidence that (i) all actions necessary to consummate the Asset Contribution
shall have been taken in accordance with the Delaware General Corporation Law,
(ii) the Purchasers shall have purchased the Common Stock of Holdco, (iii) the
Discount Notes Issuance shall have occurred, (iv) Holdco shall have received the
Holdco Equity Contribution in an amount of not less than $58,700,000 and shall
have received a cash equity contribution from management in an amount not less
than $300,000, (v) the Borrower shall have received not less than $100,000,000
in gross cash proceeds from the Subordinated Debt Issuance, (vi) Holdco shall
have applied the proceeds of the Intercompany Loan to pay in full the cash
portion of the consideration payable in connection with the Transaction and
related fees and expenses or, in each case, that arrangements reasonably
satisfactory to the Syndication Agent for the making and receipt of such
payments shall have been made, in each case pursuant to documentation in all
respects reasonably satisfactory to the Agents, and (vii) Holdco shall have
transferred the Contributed Assets in exchange for (A) the assumption of all
liabilities arising under or associated with the Contributed Assets, (B) 100
shares of Borrower's common stock and (C) a promissory note in the amount of
$125,916,000.
SECTION 5.1.4. Payment of Outstanding Indebtedness, etc. All
Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the
Disclosure Schedule, together with all interest, all prepayment premiums and
other amounts due and payable with respect thereto, shall have been paid in full
(including, to the extent necessary, from proceeds of the Term Loans); and all
Liens securing payment of any such Indebtedness shall have been released and the
Agents shall have received all Uniform Commercial Code Form UCC-3 termination
statements or other instruments as may be suitable or appropriate in connection
therewith (or arrangements satisfactory to the Agents shall have been entered
into relating to such release promptly following the making of the initial
Credit Extension).
SECTION 5.1.5. Closing Date Certificate. Each of the Agents shall have
received, with counterparts for each Lender, the Closing Date Certificate, dated
the date of the initial Credit Extension and duly executed and delivered by an
accounting Authorized Officer of each of the Borrower and Holdco, in which
certificate the Borrower shall agree and acknowledge that the statements made
therein shall be deemed to be true and correct representations and warranties in
all material respects of the Borrower made as of such date under this Agreement,
and, at the time such certificate is delivered, such statements shall in fact be
true and correct in all material respects.
SECTION 5.1.6. Delivery of Notes. The Administrative Agent shall have
received, for the account of each Lender that shall have requested a Note not
less than two Business Days prior
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to the Closing Date, a Note of each applicable Tranche duly executed and
delivered by the Borrower.
SECTION 5.1.7. [INTENTIONALLY OMITTED].
SECTION 5.1.8. Pledge Agreements. The Agents shall have received
executed counterparts of
(a) the Holdco Guaranty and Pledge Agreement, dated as of the
date hereof, duly executed by an Authorized Officer of Holdco, together
with the certificates evidencing all of the issued and outstanding
shares of Capital Stock of the Borrower (other than the Preferred
Stock) which shall be pledged pursuant to the Holdco Guaranty and
Pledge Agreement, which certificates shall in each case be accompanied
by undated stock powers duly executed in blank; and
(b) the Borrower Pledge Agreement, dated as of the date
hereof, duly executed by an Authorized Officer of the Borrower,
together with (i) the certificates evidencing all of the issued and
outstanding shares of Capital Stock of each Subsidiary of the Borrower
which shall be pledged pursuant to the Borrower Pledge Agreement, which
certificates shall in each case be accompanied by undated stock powers
duly executed in blank, and (ii) all Pledged Notes (as such term is
defined in the Borrower Pledge Agreement), evidencing Indebtedness
payable to the Borrower which shall be pledged pursuant to the Borrower
Pledge Agreement, duly endorsed to the order of the Administrative
Agent, together with Uniform Commercial Code financing statements (Form
UCC-1) (or similar instruments) in respect of such Pledged Notes
executed by each payee of a Pledged Note to be filed in such
jurisdictions as may be necessary or, in the opinion of the
Administrative Agent, desirable to perfect the security interest of the
Administrative Agent in such Pledged Notes.
If any securities pledged pursuant to a Pledge Agreement are uncertificated
securities or are held through a securities intermediary, the Administrative
Agent shall have received confirmation and evidence satisfactory to it that
appropriate book entries have been made in the relevant books or records of a
securities intermediary or the issuer of such securities, as the case may be, or
other appropriate steps have been taken under applicable law resulting in the
perfection of the security interest granted in favor of the Administrative Agent
in such securities pursuant to the terms of the applicable Pledge Agreement.
SECTION 5.1.9. Security Agreements. The Agents shall have received
executed counterparts of the Borrower Security Agreement, dated as of the date
hereof, duly executed by the Borrower, together with
(a) executed Uniform Commercial Code financing statements
(Form UCC-1) naming the Borrower as the debtor and the Administrative
Agent as the secured party, or other similar instruments or documents,
to be filed under the Uniform Commercial Code of all jurisdictions as
may be necessary or, in the opinion of the Administrative Agent,
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desirable to perfect the security interest of the Administrative Agent
pursuant to the Security Agreement (provided that perfection of
security interests in motor vehicles shall not be required); and
(b) certified copies of Uniform Commercial Code Requests for
Information or Copies (Form UCC-11), or a similar search report
certified by a party acceptable to the Agents, dated a date reasonably
near to the date of the initial Credit Extension, listing all effective
financing statements which name the Borrower (under its present name
and any previous names) as the debtor and which are filed in the
jurisdictions in which filings are to be made pursuant to clause (a)
above, together with copies of such financing statements.
SECTION 5.1.10. Mortgage. The Agents shall have received counterparts
of each Mortgage relating to each property listed on Item 5.1.10 ("Real
Property") of the Disclosure Schedule and designated as being the property to
which a Mortgage relates, each dated as of the date hereof, duly executed by
Holdco or the Borrower, together with
(a) evidence of the completion (or satisfactory arrangements
for the completion) of all recordings and filings of the Mortgage as
may be necessary or, in the opinion of the Agents, desirable
effectively to create a valid, perfected first priority Lien against
the properties purported to be covered thereby (other than Liens
permitted to exist under clauses (e), (f), (g), (h), (i), (j) and (k)
of Section 7.2.3);
(b) mortgagee's title insurance policies in favor of the
Administrative Agent and the Lenders in amounts and in form and
substance and issued by insurers reasonably satisfactory to the Agents,
with respect to the property purported to be covered by the Mortgage,
insuring that title to such property is marketable and that the
interests created by the Mortgage constitute valid first Liens thereon
free and clear of all defects and encumbrances other than as approved
by the Agents; and
(c) such other approvals, opinions, or documents as the Agents
may reasonably request.
SECTION 5.1.11. Financial Information, etc. The Agents shall have
received, with counterparts for each Lender,
(a) the (i) audited consolidated balance sheets of the
Borrower and its Subsidiaries as at December 31, 1996 and December 31,
1997 and the audited consolidated statements of operations, cash flows
and net invested capital for the fiscal years ended December 31, 1995,
December 31, 1996 and December 31, 1997 and (ii) unaudited consolidated
balance sheet of the Borrower and its Subsidiaries as at June 28, 1998
and unaudited consolidated statements of operations, cash flows and net
invested capital for the six months then ended (collectively, the "Base
Financial Statements"); and
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(b) a pro forma consolidated balance sheet of the Borrower and
its Subsidiaries, as of June 28, 1998 (the "Pro Forma Balance Sheet"),
certified by the chief financial or accounting Authorized Officer of
the Borrower, giving effect to the consummation of the Transaction, and
reflecting the proposed legal and capital structure of the Borrower,
which legal and capital structure shall be satisfactory in all respects
to the Arranger.
SECTION 5.1.12. Solvency, etc. (a) The Agents and Lenders shall have
received a letter from Valuation Research Corporation, dated the Closing Date
and addressed to Agents and Lenders, in form and substance reasonably
satisfactory to the Agents and with appropriate attachments, demonstrating that,
after giving effect to the consummation of the Recapitalization, the related
financings and the other Transactions contemplated by the Loan Documents and the
Material Documents, each of the Borrower and Holdco will be solvent.
(b) The Agents shall have received the Solvency Certificate from the
chief financial Authorized Officer of each of the Borrower and Holdco, dated the
Closing Date.
SECTION 5.1.13. Litigation. There shall exist no pending or threatened
material litigation, proceedings or investigations which (x) contests the
consummation of the Transaction or (y) could reasonably be expected to have a
Material Adverse Effect.
SECTION 5.1.14. Material Adverse Change. There shall have occurred no
material adverse change in the financial condition, operations, assets,
business, properties or prospects of the Borrower and its Subsidiaries, taken as
a whole, since December 31, 1997.
SECTION 5.1.15. Reliance Letters. The Agents shall, unless otherwise
agreed, have received reliance letters, dated the date of the making of the
initial Credit Extension and addressed to each Lender and each Agent, in respect
of each of the legal opinions (other than "disclosure" and other similar
opinions) delivered in connection with the Transaction.
SECTION 5.1.16. Opinions of Counsel. The Agents shall have received
opinions, dated the date of the initial Credit Extension and addressed to the
Agents and all Lenders, from
(a) Kirkland & Ellis, special New York counsel to each of the
Obligors, in substantially the form of Exhibit K-1 hereto; and
(b) Brunini, Grantham, Grower & Hewes, special Mississippi
counsel to the Obligors, in substantially the form of Exhibit K-2
hereto.
SECTION 5.1.17. Perfection Certificate. The Administrative Agent shall
have received the Perfection Certificate, dated as of the date of the initial
Credit Extension, duly executed and delivered by an Authorized Officer of the
Borrower.
SECTION 5.1.18. Insurance. The Agents shall have received satisfactory
evidence of the existence of insurance in compliance with Section 7.1.4
(including all endorsements included therein), and the Administrative Agent
shall be named additional insured or loss payee, on behalf
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of the Lenders, pursuant to documentation reasonably satisfactory to the Agents
and the Borrower.
SECTION 5.1.19. Closing Fees, Expenses, etc. The Agents and the
Arranger shall have received, each for its own respective account, or, in the
case of the Administrative Agent, for the account of each Lender, as the case
may be, all fees, costs and expenses due and payable pursuant to Sections 3.3
and 10.3, if then invoiced.
SECTION 5.1.20. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower or any other Obligor
shall be reasonably satisfactory in form and substance to the Agents and their
counsel; the Agents and their counsel shall have received all information,
approvals, opinions, documents or instruments as the Agents or their counsel may
reasonably request.
SECTION 5.2. All Credit Extensions. The obligation of each Lender to
make any Credit Extension (including the initial Credit Extension) shall be
subject to the satisfaction of each of the conditions precedent set forth in
this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both before
and after giving effect to any Credit Extension, the following statements shall
be true and correct:
(a) the representations and warranties set forth in Article VI
and in each other Loan Document shall, in each case, be true and
correct in all material respects with the same effect as if then made
(unless stated to relate solely to an earlier date, in which case such
representations and warranties shall be true and correct in all
material respects as of such earlier date);
(b) the sum of (A) the aggregate outstanding principal amount
of all Revolving Loans and Swing Line Loans and (B) the aggregate
amount of all Letter of Credit Outstandings does not (and following the
making of such Credit Extension will not) exceed the then existing
Revolving Loan Commitment Amount; and
(c) no Default shall have then occurred and be continuing.
SECTION 5.2.2. Credit Extension Request. The Administrative Agent shall
have received a Borrowing Request, Continuation/Conversion Notice or Issuance
Request, as the case may be, for such Credit Extension. Each of the delivery of
a Borrowing Request, Continuation/Conversion Notice or an Issuance Request and
the acceptance by the Borrower of the proceeds of the Borrowing, the
continuation or conversion of the Loans referred to in such
Continuation/Conversion Notice or the issuance of the Letter of Credit, as
applicable, shall constitute a representation and warranty by the Borrower that
on the date of (a) such Borrowing (both immediately before and after giving
effect to such Borrowing and the application of the proceeds thereof) or the
issuance of the Letter of Credit, as applicable, the statements made in Section
5.2.1 are true and correct, and (b) such continuation or conversion, the
statement made in clause (c) of Section 5.2.1 is true and correct.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, the Issuer and the Agents to enter into
this Agreement and to make Loans and issue Letters of Credit hereunder, the
Borrower represents and warrants unto the Agents, the Issuer and each Lender as
set forth in this Article VI.
SECTION 6.1. Organization, etc. The Borrower and each of its
Subsidiaries is validly organized and existing and in good standing under the
laws of the jurisdiction of its organization, is duly qualified to do business
and is in good standing as a foreign Person in each jurisdiction where the
nature of its business requires such qualification, except where the failure to
be so qualified could not reasonably be expected to have a Material Adverse
Effect, and has full power and authority and holds all requisite governmental
licenses, permits and other approvals to enter into and perform its Obligations
under this Agreement, the Notes and each other Loan Document to which it is a
party and to own and hold under lease its property and to conduct its business
substantially as currently conducted by it, except where the failure to hold
such governmental licenses, permits and approvals could not reasonably be
expected to have a Material Adverse Effect.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Borrower of this Agreement, the Notes and each
other Loan Document executed or to be executed by it, and the execution,
delivery and performance by each other Obligor of each Loan Document executed or
to be executed by it and the Borrower's and each such other Obligor's
participation in the consummation of the Transaction, are within the Borrower's
and each such Obligor's corporate or other organizational powers, have been duly
authorized by all necessary corporate or other organizational action, and do not
(a) contravene the Borrower's or any such Obligor's Organic
Documents;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting the Borrower or any such Obligor, except to the extent any
such contravention could not reasonably be expected to have a Material
Adverse Effect; or
(c) result in, or require the creation or imposition of, any
Lien on any of the Borrower's or any other Obligor's properties, except
in accordance with or as permitted by the Loan Documents.
SECTION 6.3. Government Approval, Regulation, etc. Except as disclosed
in Item 6.3 ("Approvals") of the Disclosure Schedule, no authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due execution,
delivery or performance by the Borrower or any other Obligor of this Agreement,
the Notes or any other Loan Document to which it is a party, except those which
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the failure to obtain or make could not reasonably be expected to have a
Material Adverse Effect, or for the Borrower's and each such other Obligor's
participation in the consummation of the Transaction (other than those which
have been duly obtained or made and are in full force and effect). Neither the
Borrower nor any of its Subsidiaries is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
SECTION 6.4. Validity, etc. This Agreement constitutes, and the Notes
and each other Loan Document executed by the Borrower will, on the due execution
and delivery thereof, constitute, the legal, valid and binding obligations of
the Borrower enforceable in accordance with their respective terms; and each
Loan Document executed pursuant hereto by each other Obligor will, on the due
execution and delivery thereof by such Obligor, be the legal, valid and binding
obligation of such Obligor enforceable in accordance with its terms, in each
case subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and general principles of equity.
SECTION 6.5. Financial Information. The Borrower has delivered to the
Agents and each Lender copies of (i) the Base Financial Statements and (ii) the
Pro Forma Balance Sheet. Each of the financial statements described above has
been prepared in accordance with GAAP consistently applied (in the case of
clause (i) except for the absence of footnotes and audit adjustments for
unaudited statements and as otherwise disclosed therein or by the accountants)
and (in the case of clause (ii)), on a basis substantially consistent with the
basis used to prepare the December 31, 1997 financial statements referred to in
clause (i), and (in the case of clause (i)) present fairly in all material
respects the consolidated financial condition of the corporations covered
thereby as at the date thereof and the results of their operations for the
periods then ended and (in the case of clause (ii)) include appropriate pro
forma adjustments to give pro forma effect to the Transaction.
SECTION 6.6. No Material Adverse Effect. Since December 31, 1997, there
has been no event, circumstance or condition which could reasonably be expected
to have a Material Adverse Effect.
SECTION 6.7. Litigation, Labor Controversies, etc. There is no pending
or, to the knowledge of the Borrower, threatened litigation, action, proceeding,
or labor controversy affecting the Borrower or any of its Subsidiaries, or any
of their respective properties, businesses, assets or revenues, which could
reasonably be expected to result in a Material Adverse Effect, except as
disclosed in Item 6.7 ("Litigation") of the Disclosure Schedule.
SECTION 6.8. Subsidiaries. The Borrower has no Subsidiaries, except
those Subsidiaries which are permitted to have been acquired or established in
accordance with Section 7.2.5.
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SECTION 6.9. Ownership of Properties. The Borrower and each of its
Subsidiaries has good and marketable title to, or leasehold interests in, all of
its properties and assets (other than insignificant properties or assets), real
and personal, tangible and intangible, of any nature whatsoever (including
patents, trademarks, trade names, service marks and copyrights), free and clear
of all Liens, charges or claims (including infringement claims with respect to
patents, trademarks, copyrights and the like), other than any Lien, charge or
claim which is permitted pursuant to Section 7.2.3.
SECTION 6.10. Taxes. The Borrower and each of its Subsidiaries has
filed all Federal, State and other material tax returns and reports required by
law to have been filed by it and has paid all material taxes and governmental
charges thereby shown to be owing, except any such taxes or charges which are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on its
books.
SECTION 6.11. Pension and Welfare Plans. During the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement, no steps have been taken to terminate any Pension Plan, and
no contribution failure has occurred with respect to any Pension Plan sufficient
to give rise to a Lien under section 302(f) of ERISA. No condition exists or
event or transaction has occurred with respect to any Pension Plan which might
result in the incurrence by the Borrower or any member of the Controlled Group
of any liability, fine or penalty which could reasonably be expected to have a
Material Adverse Effect. Except as disclosed in Item 6.11 ("Employee Benefit
Plans") of the Disclosure Schedule, neither the Borrower nor any member of the
Controlled Group has any contingent liability with respect to any
post-retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
SECTION 6.12. Environmental Warranties. Except as set forth in Item
6.12 ("Environmental Matters") of the Disclosure Schedule or as, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Borrower or any of its Subsidiaries
have been, and continue to be, owned or leased by the Borrower and its
Subsidiaries in compliance with all Environmental Laws;
(b) there have been no past, and there are no pending or
threatened
(i) claims, complaints, notices or requests for
information received by the Borrower or any of its
Subsidiaries with respect to any alleged violation of any
Environmental Law, or
(ii) complaints, notices or inquiries to the Borrower
or any of its Subsidiaries regarding potential liability under
any Environmental Law;
(c) there have been no Releases of Hazardous Materials at, on
or under any property now or previously owned or leased by the Borrower
or any of its Subsidiaries;
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(d) the Borrower and its Subsidiaries have been issued and are
in compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters and necessary or
desirable for their businesses;
(e) no property now or previously owned or leased by the
Borrower or any of its Subsidiaries is listed or proposed for listing
(with respect to owned property only) on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar state list of
sites requiring investigation or clean-up;
(f) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property
now or previously owned or leased by the Borrower or any of its
Subsidiaries;
(g) neither Borrower nor any Subsidiary of the Borrower has
directly transported or directly arranged for the transportation of any
Hazardous Material to any location which is listed or, to the knowledge
of the Borrower or any of its Subsidiaries, proposed for listing on the
National Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims
against the Borrower or such Subsidiary thereof for any remedial work,
damage to natural resources or personal injury, including claims under
CERCLA;
(h) there are no polychlorinated biphenyls or friable asbestos
present at any property now or previously owned or leased by the
Borrower or any Subsidiary of the Borrower; and
(i) no conditions exist at, on or under any property now or,
to the knowledge of the Borrower or any of its Subsidiaries, previously
owned or leased by the Borrower or any Subsidiary which, with the
passage of time, or the giving of notice or both, would give rise to
liability under any Environmental Law.
SECTION 6.13. Regulations U and X. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock, and no proceeds of any Loans will be used for a purpose which violates,
or would be inconsistent with, F.R.S. Board Regulation U or X. Terms for which
meanings are provided in F.R.S. Board Regulation U or X or any regulations
substituted therefor, as from time to time in effect, are used in this Section
with such meanings.
SECTION 6.14. Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of the Borrower in
writing to the Agents, the Arranger or any Lender for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all other such factual information hereafter furnished by or on behalf of the
Borrower to the Agents, the Arranger or any Lender will be, true and accurate in
every material respect, when taken as a whole and in light of the circumstances
under which such information was provided, on the date as of which such
information is dated or certified and,
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with respect to information heretofore provided in connection with the
structuring, negotiation, syndication and execution of the Loan Documents and
the financings contemplated hereunder, as of the date of execution and delivery
of this Agreement by the Agents and such Lender, and such information is not, or
shall not be, as the case may be, incomplete by omitting to state any material
fact necessary to make such information not materially misleading. Any term or
provision of this Section to the contrary notwithstanding, insofar as any of the
factual information described above includes assumptions, estimates, projections
or opinions, no representation or warranty is made herein with respect thereto;
provided, however, that to the extent any such assumptions, estimates,
projections or opinions are based on factual matters, the Borrower has reviewed
such factual matters and nothing has come to its attention in the context of
such review which would lead it to believe that such factual matters were not or
are not true and correct in all material respects or that such factual matters
omit to state any material fact necessary to make such assumptions, estimates,
projections or opinions not misleading in any material respect.
SECTION 6.15. Solvency. The Transaction (including the incurrence of
the initial Credit Extensions hereunder, the incurrence by the Borrower of the
Indebtedness represented by the Subordinated Notes, the execution and delivery
by the Subsidiary Guarantors of the Subsidiary Guaranty and the application of
the proceeds of the Credit Extensions) will not involve or result in any
fraudulent transfer or fraudulent conveyance under the provisions of Section 548
of the Bankruptcy Code (11 U.S.C. Section 101 et seq., as from time to time
hereafter amended, and any successor or similar statute) or any applicable state
law respecting fraudulent transfers or fraudulent conveyances. On the Closing
Date, after giving effect to the Transaction, the Borrower is Solvent.
SECTION 6.16. Year 2000 Problem. Each Obligor has reviewed the areas
within its business and operations which could be adversely affected by, and has
developed or is developing a program to address on a timely basis, the "Year
2000 Problem" (that is, the risk that computer applications used by such Obligor
may be unable to recognize and properly perform date-sensitive functions
involving certain dates prior to and any date after December 31, 1999). Based on
such review and program, no Obligor reasonably believes that the "Year 2000
Problem" could reasonably be expected to have a Material Adverse Effect. At the
request of the Administrative Agent, the Borrower shall provide the Agents
assurance reasonably acceptable to the Administrative Agent of the Borrower's
Year 2000 compatibility.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower agrees with the
Agents, each Lender and the Issuer that, until all Commitments have terminated
and all Obligations have been paid and performed in full (or, in the case of
Letter of Credit Outstandings, cash collateralized in
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a manner satisfactory to the Issuer), the Borrower will perform the obligations
set forth in this Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The
Borrower will furnish, or will cause to be furnished, to each Lender and each
Agent copies of the following financial statements, reports, notices and
information:
(a) 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
of the Borrower, consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such Fiscal Quarter and consolidated
statements of earnings and cash flow of the Borrower and its
Subsidiaries for such Fiscal Quarter and for the period commencing at
the end of the previous Fiscal Year and ending with the end of such
Fiscal Quarter, certified by the chief financial or chief accounting
Authorized Officer of the Borrower;
(b) as soon as available and in any event within 90 days after
the end of each Fiscal Year of the Borrower, a copy of the annual audit
report for such Fiscal Year for the Borrower and its Subsidiaries,
including therein consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such Fiscal Year and consolidated
statements of earnings and cash flow of the Borrower and its
Subsidiaries for such Fiscal Year, in each case certified (without any
Impermissible Qualification) in a manner acceptable to the Agents and
the Required Lenders by Ernst & Young LLP or other independent public
accountants acceptable to the Agents and the Required Lenders, together
with a report from such accountants containing a computation of, and
showing compliance with, each of the financial ratios and restrictions
contained in Section 7.2.4 and to the effect that, in making the
examination necessary for the signing of such annual report by such
accountants, they have not become aware of any Default that has
occurred and is continuing, or, if they have become aware of such
Default, describing such Default;
(c) together with the delivery of the financial information
required pursuant to clause (a) and clause (b), a Compliance
Certificate in substantially the form of Exhibit E hereto, executed by
the chief financial or chief accounting Authorized Officer of the
Borrower, showing (in reasonable detail and with appropriate
calculations and computations in all respects satisfactory to the
Administrative Agent) compliance with the financial covenants set forth
in Section 7.2.4;
(d) as soon as possible and in any event within five Business
Days after the occurrence of each Default, a statement of an Authorized
Officer of the Borrower setting forth details of such Default and the
action which the Borrower has taken and proposes to take with respect
thereto;
(e) as soon as possible and in any event within five Business
Days after (x) the occurrence of any adverse development with respect
to any litigation, action, proceeding, or labor controversy described
in Section 6.7 which could reasonably be expected to have
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a Material Adverse Effect or (y) the commencement of any labor
controversy, litigation, action, proceeding of the type described in
Section 6.7, notice thereof and copies of all material documentation
relating thereto;
(f) promptly after the sending or filing thereof, copies of
all reports which the Borrower sends to any of its security holders
generally in their capacity as security holders, and all reports and
registration statements which the Borrower or any of its Subsidiaries
files with the Securities and Exchange Commission or any national
securities exchange;
(g) promptly upon becoming aware of the institution of any
steps by the Borrower or any other Person to terminate any Pension
Plan, or the failure to make a required contribution to any Pension
Plan if such failure is sufficient to give rise to a Lien under section
302(f) of ERISA, or the taking of any action with respect to a Pension
Plan which could result in the requirement that the Borrower furnish a
bond or other security to the PBGC or such Pension Plan, or the
occurrence of any event with respect to any Pension Plan which could
result in the incurrence by the Borrower of any material liability,
fine or penalty, or any material increase in the contingent liability
of the Borrower with respect to any post-retirement Welfare Plan
benefit, notice thereof and copies of all material documentation
relating thereto; and
(h) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as any Lender through the Administrative Agent may from
time to time reasonably request.
SECTION 7.1.2. Compliance with Laws, etc. The Borrower will, and will
cause each of its Subsidiaries to, comply in all material respects with all
applicable laws, rules, regulations and orders, such compliance to include
(without limitation):
(a) the maintenance and preservation of its corporate
existence and qualification as a foreign corporation, except where the
failure to so qualify could not reasonably be expected to have a
Material Adverse Effect; and
(b) the payment, before the same become delinquent, of all
material taxes, assessments and governmental charges imposed upon it or
upon its property except to the extent being diligently contested in
good faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP shall have been set aside on its books.
SECTION 7.1.3. Maintenance of Properties. The Borrower will, and will
cause each of its Subsidiaries to, maintain, preserve, protect and keep its
properties in good repair, working order and condition (ordinary wear and tear
excepted), and make necessary and proper repairs, renewals and replacements so
that its business carried on in connection therewith may be properly conducted
at all times unless the Borrower determines in good faith that the continued
maintenance of any of its properties is no longer economically desirable, except
where the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
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SECTION 7.1.4. Insurance. The Borrower will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained with responsible insurance
companies insurance with respect to its properties and business against such
casualties and contingencies and of such types and in such amounts as is
customary in the case of similar businesses and will, upon request of the
Administrative Agent, furnish to each Lender at reasonable intervals a
certificate of an Authorized Officer of the Borrower setting forth the nature
and extent of all insurance maintained by the Borrower and its Subsidiaries in
accordance with this Section 7.1.4.
SECTION 7.1.5. Books and Records. The Borrower will, and will cause
each of its Subsidiaries to, keep books and records which accurately reflect all
of its business affairs and transactions and permit the Agents and each Lender
or any of their respective representatives, at reasonable times and intervals,
to discuss its financial matters with its officers and, after reasonable notice
to the Borrower and provision of an opportunity for the Borrower to participate
in such discussion, its independent public accountant (and the Borrower hereby
authorizes such independent public accountant to discuss the Borrower's
financial matters with each Lender or its representatives whether or not any
representative of the Borrower is present) and upon reasonable notice, but,
unless an Event of Default shall have occurred and be continuing, not more than
once in each Fiscal Year, to visit all of its offices and to examine (and, at
the expense of the Borrower, photocopy extracts from) any of its books or other
corporate records. The Borrower shall pay any fees of such independent public
accountant incurred in connection with any Agent's or any Lender's exercise of
its rights pursuant to this Section.
SECTION 7.1.6. Environmental Covenant. The Borrower will, and will
cause each of its Subsidiaries to,
(a) use and operate all of its facilities and properties in
compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in compliance therewith, and
handle all Hazardous Materials in compliance with all applicable
Environmental Laws, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect;
(b) promptly notify the Agents and provide copies upon receipt
of all written claims, complaints, notices or inquiries relating to the
condition of its facilities and properties or compliance with
Environmental Laws which, singularly or in the aggregate, could
reasonably be expected to have a Material Adverse Effect; and
(c) provide such information and certifications which the
Agents may reasonably request from time to time to evidence compliance
with this Section 7.1.6.
SECTION 7.1.7. Future Subsidiaries. Upon any Person becoming, after the
Closing Date, a Subsidiary of the Borrower, or upon the Borrower or any
Subsidiary of the Borrower acquiring additional Capital Stock of any existing
Subsidiary, the Borrower shall promptly notify the Administrative Agent of such
acquisition, and
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(a) the Borrower shall promptly cause such Subsidiary to
execute and deliver to the Administrative Agent, with counterparts for
each Lender, a supplement to the Subsidiary Guaranty and a supplement
to the Subsidiary Security Agreement (and, if such Subsidiary owns any
real property with a fair market value in excess of $500,000, a
Mortgage), together with acknowledgment copies of Uniform Commercial
Code financing statements (Form UCC-1) executed and delivered by the
Subsidiary naming the Subsidiary as the debtor and the Administrative
Agent as the secured party, or other similar instruments or documents,
filed under the Uniform Commercial Code and any other applicable
recording statutes, in the case of real property, of all jurisdictions
as may be necessary or, in the reasonable opinion of the Administrative
Agent, desirable to perfect the security interest of the Administrative
Agent pursuant to the Subsidiary Security Agreement or a Mortgage, as
the case may be (other than the perfection of security interests in
motor vehicles owned as of the date such entity becomes a Subsidiary);
and
(b) the Borrower shall promptly deliver, or cause to be
delivered, to the Administrative Agent under a Pledge Agreement
certificates (if any) representing all of the issued and outstanding
shares of Capital Stock of such Subsidiary owned by the Borrower or any
Subsidiary of the Borrower, as the case may be, along with undated
stock powers for such certificates, executed in blank, or, if any
securities subject thereto are uncertificated securities, confirmation
and evidence satisfactory to the Administrative Agent that appropriate
book entries have been made in the relevant books or records of a
securities intermediary or the issuer of such securities, as the case
may be, or other appropriate steps shall have been taken under
applicable law resulting in the perfection of the security interest
granted in favor of the Administrative Agent pursuant to the terms of a
Pledge Agreement;
together, in each case, with such opinions, in form and substance and from
counsel reasonably satisfactory to the Administrative Agent, as the
Administrative Agent may reasonably request; provided, however, that
notwithstanding the foregoing, no Non-U.S. Subsidiary shall be required to
execute and deliver a Mortgage, a supplement to the Subsidiary Guaranty or a
supplement to the Subsidiary Security Agreement, nor will the Borrower or any
Subsidiary of the Borrower be required to deliver in pledge pursuant to a Pledge
Agreement in excess of 65% of the total combined voting power of all classes of
Capital Stock of a Non-U.S. Subsidiary entitled to vote.
SECTION 7.1.8. Future Leased Property and Future Acquisitions of Real
Property; Future Acquisition of Other Property. (a) Prior to entering into any
new lease of real property or renewing any existing lease of real property
following the Closing Date, the Borrower shall, and shall cause each of its U.S.
Subsidiaries to, use all commercially reasonable efforts (which shall not
require the expenditure of cash or the making of material concessions under the
relevant lease) to deliver to the Administrative Agent a Waiver executed by the
lessor of any real property that is to be leased by the Borrower or such U.S.
Subsidiary for a term in excess of one year in any state which by statute grants
such lessor a "landlord's" (or similar) Lien which is superior to the
Administrative Agent's, to the extent the value of any personal property of the
Borrower or its U.S. Subsidiaries to be held at such leased property exceeds (or
it is anticipated that the value
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of such personal property will, at any point in time during the term of such
leasehold term, exceed) $1,000,000.
(b) In the event that the Borrower or any of its U.S.
Subsidiaries shall acquire any real property having a value as
determined in good faith by the Administrative Agent in excess of
$500,000 in the aggregate, the Borrower or the applicable U.S.
Subsidiary shall, promptly after such acquisition, execute a Mortgage
and provide the Administrative Agent with
(i) evidence of the completion (or satisfactory
arrangements for the completion) of all recordings and filings
of such Mortgage as may be necessary or, in the reasonable
opinion of the Administrative Agent, desirable effectively to
create a valid, perfected first priority Lien, subject to
Liens permitted by Section 7.2.3, against the properties
purported to be covered thereby;
(ii) mortgagee's title insurance policies in favor of
the Administrative Agent and the Lenders in amounts and in
form and substance and issued by insurers, reasonably
satisfactory to the Administrative Agent, with respect to the
property purported to be covered by such Mortgage, insuring
that title to such property is marketable and that the
interests created by the Mortgage constitute valid first Liens
thereon free and clear of all defects and encumbrances other
than as permitted under Section 7.2.3 or as approved by the
Administrative Agent, and such policies shall also include, to
the extent available, a revolving credit endorsement and such
other endorsements as the Administrative Agent shall
reasonably request and shall be accompanied by evidence of the
payment in full of all premiums thereon; and
(iii) such other approvals, opinions, or documents as
the Administrative Agent may reasonably request; and
(c) In accordance with the terms and provisions of this
Agreement and the other Loan Documents, provide the Administrative
Agent with evidence of all recordings and filings as may be necessary
or, in the reasonable opinion of the Administrative Agent, desirable to
create a valid, perfected first priority Lien, subject to the Liens
permitted by Section 7.2.3, against all property acquired after the
Closing Date (excluding motor vehicles, leases of motor vehicles and
leases of real property).
SECTION 7.1.9. Use of Proceeds, etc. The Borrower shall
(a) apply the proceeds of the Loans
(i) in the case of the Term Loans, to refinance
certain existing Indebtedness of the Borrower and its
Subsidiaries, to finance the cash portion of the obligations
of Holdco in connection with the Transaction, to finance the
cash portion of the Grafalloy Acquisition and to pay the
transaction fees and expenses
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associated with the Transaction and the Grafalloy Acquisition;
provided, that the aggregate amount of such transaction fees
and expenses shall not exceed $13,000,000; and
(ii) in the case of any Revolving Loans and the Swing
Line Loans, for working capital and general corporate purposes
of the Borrower and its Subsidiaries, including acquisitions
permitted under the Loan Documents; and
(b) use Letters of Credit only for purposes of supporting
working capital and general corporate purposes of the Borrower and its
Subsidiaries.
SECTION 7.1.10. Hedging Obligations. Within twelve months following the
Closing Date, the Administrative Agent shall have received evidence satisfactory
to it that the Borrower and its Subsidiaries have entered into interest rate
swap, cap, collar or similar arrangements (including without limitation such
Indebtedness accruing interest at a fixed rate by its terms) designed to protect
the Borrower and its Subsidiaries against fluctuations in interest rates with
respect to at least 50% of the aggregate principal amount of the Term Loans and
the Subordinated Notes for a period of at least three years from the Closing
Date with terms reasonably satisfactory to the Administrative Agent.
SECTION 7.2. Negative Covenants. The Borrower agrees with the Agents,
the Issuer and each Lender that, until all Commitments have terminated and all
Obligations have been paid and performed in full (or, in the case of Letter of
Credit Outstandings, cash collateralized in a manner satisfactory to the
Issuer), the Borrower will perform the obligations set forth in this Section
7.2.
SECTION 7.2.1. Business Activities. The Borrower will not, and will not
permit any of its Subsidiaries to, engage in any business activity, except for
any business in which the Borrower and its Subsidiaries are engaged on the date
hereof and such businesses as may be incidental or reasonably related thereto
(the "True Temper Business") .
SECTION 7.2.2. Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness, other than,
without duplication, the following:
(a) Indebtedness in respect of the Credit Extensions and other
Obligations;
(b) until the Closing Date, Indebtedness identified in Item
7.2.2(b) ("Indebtedness to be Paid") of the Disclosure Schedule;
(c) Indebtedness existing as of the Closing Date which is
identified in Item 7.2.2(c) ("Ongoing Indebtedness") of the Disclosure
Schedule, and refinancings and replacements thereof in a principal
amount not exceeding the principal amount of the Indebtedness so
refinanced or replaced and with an average life to maturity of not less
than the then average life to maturity of the Indebtedness so
refinanced or replaced;
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(d) Indebtedness in an aggregate principal amount not to
exceed $7,500,000 at any time outstanding which is incurred by the
Borrower or any of its Subsidiaries to finance its acquisition or costs
of construction or improvement (or refinancing the purchase price
thereof within 180 days of the purchase) of assets permitted to be
acquired pursuant to clause (a) of Section 7.2.7;
(e) Hedging Obligations of the Borrower or any of its
Subsidiaries in respect of the Credit Extensions or otherwise entered
into by the Borrower or any Subsidiary to hedge against interest rate,
currency exchange rate or commodity price risk relating to commodity
agreements for the purchase of raw materials used by the Borrower or
any of its Subsidiaries, in each case arising in the ordinary course of
business of the Borrower and its Subsidiaries and not for speculative
purposes;
(f) unsecured Indebtedness incurred in the ordinary course of
business (including open accounts extended by suppliers on normal trade
terms in connection with purchases of goods and services, and surety
and performance bonds and similar instruments, but excluding
Indebtedness incurred through the borrowing of money or Contingent
Liabilities);
(g) Indebtedness in respect of Capitalized Lease Liabilities
to the extent permitted by clause (a) of Section 7.2.7;
(h) Indebtedness in respect of the Subordinated Notes in an
aggregate amount not to exceed $100,000,000, and Indebtedness which
refinances such Indebtedness; provided, however, that after giving
effect to such refinancing, (i) the principal amount of outstanding
Indebtedness is not increased, (ii) neither the tenor nor the average
life thereof is reduced, (iii) such refinancing Indebtedness shall be
unsecured, and (iv) the refinancing Indebtedness is subordinated to the
same degree as the Indebtedness being refinanced;
(i) unsecured Indebtedness of the Borrower to any wholly-owned
U.S. Subsidiary of the Borrower, or unsecured Indebtedness of any
wholly-owned U.S. Subsidiary of the Borrower to the Borrower or any
other wholly-owned U.S. Subsidiary of the Borrower evidenced by one or
more promissory notes in form and substance satisfactory to the
Administrative Agent which have been executed and delivered to (and
indorsed to the order of) the Administrative Agent in pledge pursuant
to a Pledge Agreement (to the extent required thereby);
(j) Assumed Indebtedness of the Borrower and its Subsidiaries
incurred in connection with an Investment permitted under clauses (g)
and (n) of Section 7.2.5, the aggregate principal amount of which at
any time outstanding shall be credited against, and shall reduce, the
amount of permitted Investments provided in such clauses (g) and (n),
respectively;
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(k) Indebtedness of any Non-U.S. Subsidiary of the Borrower
owing to any other Non-U.S. Subsidiary of the Borrower;
(l) Indebtedness of the Borrower consisting of promissory
notes having the terms set forth in Schedule III hereto and issued to
officers, directors and employees (or their estates or beneficiaries
under their estates) of Holdco, the Borrower or any Subsidiary of
Holdco as consideration for the purchase or redemption of Capital Stock
of Holdco, in all cases only upon death, disability, retirement or
termination of employment;
(m) Indebtedness of the Borrower and its Subsidiaries arising
from agreements providing for indemnification, adjustment of purchase
price or similar obligations, or from guarantees or letters of credit,
surety bonds or performance bonds securing the performance of the
Borrower or any such Subsidiary pursuant to such agreements, in
connection with acquisitions or dispositions of any business, assets or
Subsidiary of the Borrower and its Subsidiaries and in connection with
Investments permitted pursuant to clauses (g) and (n) of Section 7.2.5,
the aggregate principal amount of which at any time outstanding shall
be credited against, and shall reduce, the amount of permitted
Investments provided in such clauses (g) and (n), respectively;
(n) Indebtedness in respect of incentive, non-compete,
consulting, deferred compensation, earn-out or other similar
arrangements incurred by the Borrower in connection with Investments
permitted pursuant to clause (n) of Section 7.2.5; and
(o) other Indebtedness of the Borrower and its Subsidiaries in
an aggregate amount not to exceed $10,000,000;
provided, however, that no Indebtedness otherwise permitted by clauses (g), (j),
(l) or (o) shall be permitted if, immediately before or after giving effect to
the incurrence thereof, any Default shall have occurred and be continuing.
SECTION 7.2.3. Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any
of its property, revenues or assets, whether now owned or hereafter acquired,
except:
(a) Liens securing payment of the Obligations, granted
pursuant to any Loan Document;
(b) until the Closing Date, Liens securing payment of
Indebtedness of the type permitted and described in clause (b) of
Section 7.2.2;
(c) Liens granted prior to the Closing Date to secure payment
of Indebtedness of the type permitted and described in clause (c) of
Section 7.2.2;
(d) Liens granted (i) to secure payment of Indebtedness of the
type permitted and described in clause (d) of Section 7.2.2 and
covering only those assets acquired with the
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proceeds of such Indebtedness, and (ii) in respect of any interest or
title of a lessor in any asset that is the subject of any Capitalized
Lease Liabilities to the extent permitted by clause (a) of Section
7.2.7.
(e) Liens for taxes, assessments or other governmental charges
or levies not at the time delinquent or thereafter payable without
penalty or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on the books of such Person;
(f) Liens of carriers, warehousemen, mechanics, materialmen,
landlords and similar Liens (i) incurred in the ordinary course of
business for sums not overdue for a period of more than 30 days or
which do not in the aggregate materially detract from the value of the
property that is the subject of such Lien, or (ii) being diligently
contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on
the books of such Person;
(g) Liens incurred in the ordinary course of business (i) in
connection with workmen's compensation, unemployment insurance or other
forms of governmental insurance or benefits, (ii) to secure performance
of tenders, bids, statutory obligations, leases and contracts (other
than for borrowed money) entered into in the ordinary course of
business or (iii) to secure obligations on surety or appeal bonds,
performance or return-of-money bonds or other obligations of a similar
nature;
(h) judgment Liens in existence less than 30 days after the
entry thereof or with respect to which execution has been stayed or the
payment of which is covered in full (subject to a customary deductible)
by insurance maintained with responsible insurance companies;
(i) Liens with respect to easements, rights-of-way,
restrictions and other similar charges or encumbrances which,
individually or in the aggregate, do not materially interfere with the
occupation, use and enjoyment by the Borrower or any of its
Subsidiaries of the properties encumbered thereby in the ordinary
course of their business;
(j) Liens with respect to minor imperfections of title and
easements, rights-of-way, restrictions, reservations, permits,
servitudes and other similar encumbrances on real property and fixtures
which do not materially detract from the value or materially impair the
use by the Borrower or any such Subsidiary in the ordinary course of
its business of the property subject thereto;
(k) licenses, sublicenses, leases or subleases granted by the
Borrower or any of its Subsidiaries to any other Person in the ordinary
course of business;
(l) Liens in the nature of trustees' Liens granted pursuant to
any indenture governing any Indebtedness permitted by Section 7.2.2, in
each case in favor of the
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trustee under such indenture and securing only obligations to pay
compensation to such trustee, to reimburse its expenses and to
indemnify it under the terms thereof;
(m) Liens of sellers of goods to the Borrower and any of its
Subsidiaries arising under Article 2 of the UCC or similar provisions
of applicable law in the ordinary course of business, covering only the
goods sold and securing only the unpaid purchase price for such goods
and related expenses; and
(n) Liens securing Assumed Indebtedness of the Borrower and
its Subsidiaries permitted pursuant to clause (j) of Section 7.2.2 and,
to the extent the principal amount thereof does not exceed $5,000,000,
Liens securing Indebtedness of the Borrower and its Subsidiaries
permitted pursuant to clause (o) of Section 7.2.2; provided, however,
that (i) any such Liens attach only to the property of the Subsidiary
acquired, or the property acquired, in connection with such Assumed
Indebtedness and shall not attach to any assets of the Borrower or any
of its Subsidiaries theretofore existing or which arise after the date
thereof and (ii) the Assumed Indebtedness and other secured
Indebtedness of the Borrower and its Subsidiaries secured by any such
Lien shall not exceed 100% of the fair market value of the assets being
acquired in connection with such Assumed Indebtedness.
SECTION 7.2.4. Financial Covenants.
(a) Minimum EBITDA The Borrower will not permit EBITDA for the
period of four consecutive Fiscal Quarter ending on the last day of any
Fiscal Quarter occurring during any period set forth below to be less
than the amount set forth opposite such period:
<TABLE>
<CAPTION>
Period EBITDA
------ ------
<S> <C>
10/1/1998 through 3/31/1999 $18,000,000
4/1/1999 through 9/30/1999 $19,000,000
10/1/1999 through 3/31/2000 $20,000,000
4/1/2000 through 9/30/2000 $21,000,000
10/1/2000 through 3/31/2001 $22,000,000
4/1/2001 through 9/30/2001 $23,000,000
10/1/2001 through 3/31/2002 $24,000,000
4/1/2002 through 9/30/2002 $25,000,000
10/1/2002 through 3/31/2003 $26,000,000
4/1/2003 through 9/30/2003 $27,000,000
</TABLE>
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<TABLE>
<S> <C>
10/1/2003 through 3/31/2004 $28,000,000
4/1/2004 and thereafter $29,000,000.
</TABLE>
(b) Leverage Ratio. The Borrower will not permit the Leverage
Ratio as of the end of any Fiscal Quarter occurring during any period
set forth below to be greater than the ratio set forth opposite such
period:
<TABLE>
<CAPTION>
Period Leverage Ratio
------ --------------
<S> <C>
10/1/1998 through 9/30/1999 6.50:1.0
10/1/1999 through 3/31/2000 6.00:1.0
4/1/2000 through 9/30/2000 5.50:1.0
10/1/2000 through 12/31/2000 5.25:1.0
1/1/2001 through 6/30/2001 5.00:1.0
7/1/2001 through 12/31/2001 4.50:1.0
1/1/2002 through 6/30/2002 4.00:1.0
7/1/2002 through 12/31/2002 3.50:1.0
1/1/2003 through 12/31/2003 3.00:1.0
1/1/2004 and thereafter 2.50:1.0.
</TABLE>
(c) Interest Coverage Ratio. The Borrower will not permit the
Interest Coverage Ratio as of the end of any Fiscal Quarter occurring
during any period set forth below to be less than the ratio set forth
opposite such period:
<TABLE>
<CAPTION>
Period Interest Coverage Ratio
------ -----------------------
<S> <C>
10/1/1998 through 9/30/1999 1.30:1.0
10/1/1999 through 3/31/2000 1.40:1.0
4/1/2000 through 9/30/2000 1.50:1.0
10/1/2000 through 6/30/2001 1.60:1.0
7/1/2001 through 6/30/2002 1.70:1.0
7/1/2002 through 12/31/2002 1.90:1.0
1/1/2003 through 6/30/2003 2.00:1.0
</TABLE>
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<TABLE>
<CAPTION>
Period Interest Coverage Ratio
------ -----------------------
<S> <C>
7/1/2003 through 12/31/2003 2.25:1.0
1/1/2004 through 12/31/2004 2.50:1.0
1/1/2005 and thereafter 3.00:1.0.
</TABLE>
(d) Fixed Charge Coverage Ratio. The Borrower will not permit
the Fixed Charge Coverage Ratio as of the end of any Fiscal Quarter
occurring during any period set forth below to be less than the ratio
set forth opposite such period:
<TABLE>
<CAPTION>
Fixed Charge
Period Coverage Ratio
------ --------------
<S> <C>
10/1/1998 through 12/31/1999 1.00:1.0
1/1/2000 through 12/31/2001 1.10:1.0
1/1/2002 and thereafter 1.25:1.0.
</TABLE>
SECTION 7.2.5. Investments. The Borrower will not, and will not permit
any of its Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) Investments existing on the Closing Date and identified in
Item 7.2.5(a) ("Ongoing Investments") of the Disclosure Schedule;
(b) Cash Equivalent Investments;
(c) without duplication, Investments permitted as either
Indebtedness pursuant to Section 7.2.2 or Liens permitted pursuant to
Section 7.2.3;
(d) without duplication, Investments permitted as Restricted
Payments pursuant to Section 7.2.6;
(e) without duplication, Investments permitted as Capital
Expenditures pursuant to Section 7.2.7 or made as expenditures of the
type referred to in clause (i) of the proviso to the definition of the
term "Capital Expenditures";
(f) Investments resulting by operation of clause (c) of
Section 7.2.9 in respect of non-cash consideration or clause (a) of
Section 7.2.8;
(g) the Grafalloy Acquisition for aggregate consideration
(other than Indebtedness permitted to be incurred pursuant to clause
(j) and (m) of Section 7.2.2) not to exceed $8,000,000;
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(h) Investments in the form of loans to officers, directors
and employees of the Borrower and its Subsidiaries in an aggregate
amount at any time outstanding not to exceed $1,000,000 in cash;
(i) in the ordinary course of business, Investments by the
Borrower in any of its wholly-owned U.S. Subsidiaries, or by any such
wholly-owned U.S. Subsidiary in any of its wholly-owned U.S.
Subsidiaries;
(j) Investments made or held by any Non-U.S. Subsidiary in any
other Non-U.S. Subsidiary;
(k) extensions of trade credit in the ordinary course of
business;
(l) Investments (including debt obligations and Capital Stock)
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;
(m) Investments in the form of loans made to Holdco in an
aggregate amount not to exceed the aggregate amount of Restricted
Payments permitted to be made to Holdco pursuant to clauses (c) through
(e) of Section 7.2.6 to the extent such loans are made in lieu of such
Restricted Payments;
(n) other Investments in an aggregate amount at any one time
not to exceed $15,000,000 in any single transaction or series of
related transactions or $30,000,000 in the aggregate;
provided, however, that
(o) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent Investment"
may continue to be held for no more than 180 days following the date
that such Investment no longer meets the requirements of such
definition;
(p) no Investment otherwise permitted by clause (c) (except to
the extent permitted under Section 7.2.2), (d), (g), (h) or (n) shall
be permitted to be made if, immediately before or after giving effect
thereto, any Default shall have occurred and be continuing; and
(q) the permitted Investments level set forth in clause (n)
above shall be exclusive of the amount of Investments actually made
with (i) cash equity contributions made, directly or indirectly, by any
Person other than the Borrower and its Subsidiaries, after the Closing
Date to the Borrower or any of its Subsidiaries and specifically
identified in a certificate delivered by an Authorized Officer of the
Borrower to the Agents prior to the
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time such capital contribution is made and (ii) repayments by Holdco to
the Borrower in respect of the loans referred to in clause (m) above.
SECTION 7.2.6. Restricted Payments, etc. On and at all times after the
Closing Date:
(a) the Borrower will not, and will not permit any of its
Subsidiaries to, declare, pay or make any dividend or distribution (in
cash, property or obligations) on any shares of any class of Capital
Stock (now or hereafter outstanding) of the Borrower or on any
warrants, options or other rights with respect to any shares of any
class of Capital Stock (now or hereafter outstanding) of the Borrower
(other than (i) dividends or distributions payable in common stock or
warrants to purchase its common stock or (ii) splits or
reclassifications of its Capital Stock into additional or other shares
of a similar class of its Capital Stock, provided that such other class
of Capital Stock (x) is not (by its terms, by the terms of any security
into which it is convertible or exchangeable or otherwise) redeemable
at the option of the holder thereof, redeemable on or prior to
September 30, 2006 or convertible or exchangeable for debt securities
and (y) does not require the payment of dividends in cash) or apply, or
permit any of its Subsidiaries to apply, any of its funds, property or
assets to the purchase, redemption, exchange, sinking fund or other
retirement of, or agree or permit any of its Subsidiaries to purchase,
redeem or exchange, any shares of any class of Capital Stock (now or
hereafter outstanding) of the Borrower or Holdco, or warrants, options
or other rights with respect to any shares of any class of Capital
Stock (now or hereafter outstanding) of the Borrower or Holdco;
(b) the Borrower will not, and will not permit any of its
Subsidiaries to, (i) directly or indirectly, make any payment or
prepayment of principal of, or make any payment of interest on any
Subordinated Note or any promissory note referred to in clause (l) of
Section 7.2.2 on any day other than the stated, scheduled date for such
payment or prepayment set forth in the documents and instruments
memorializing such Subordinated Note (except in connection with the
application of Excluded Equity Proceeds of the type described in clause
(b) of the definition thereof or proceeds received by the Borrower in
respect of Indebtedness of the type permitted pursuant to clause (h) of
Section 7.2.2 which refinances such Subordinated Note) or any such
promissory note, or which would violate the subordination provisions of
such Subordinated Note or any such promissory note, or (ii) redeem,
purchase or defease any Subordinated Note (except in connection with
the application of Excluded Equity Proceeds of the type described in
clause (b) of the definition thereof or proceeds received by the
Borrower in respect of refinancing Indebtedness of the type permitted
pursuant to clause (h) of Section 7.2.2 which refinances such
Subordinated Note) or any such promissory note (the foregoing
prohibited acts referred to clauses (a) and (b) are herein collectively
referred to as "Restricted Payments");
provided, however, that
(c) notwithstanding the provisions of clause (a) or (b) above,
the Borrower shall be permitted to make Restricted Payments to Holdco
to the extent necessary to enable
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Holdco to (or, in the case of clause (c)(iii)(3) below, to make
payments in respect of the promissory notes described in such clause
(c)(iii)(3))
(i) pay expenses incurred by Holdco in the ordinary
course and solely in Holdco's capacity as a holding company or
for services rendered on behalf of the Borrower, including,
without limitation, (a) customary and reasonable salary, bonus
and other benefits payable to officers, employees and
consultants of Holdco, (b) customary and reasonable fees and
expenses paid to members of the Board of Directors of Holdco
or payments in respect of indemnification obligations, (c)
reasonable general corporate overhead expenses of Holdco and
(d) management, consulting or advisory fees paid to Holdco or
to permit Holdco to pay management, consulting or advisory
fees pursuant to the Management Services Agreement (as in
effect on the Closing Date); provided, however, (A) with
respect to clauses (a) through (c) above, the aggregate amount
paid pursuant to all such clauses shall not exceed $2,000,000
in any Fiscal Year, and (B) with respect to clause (d) above,
the amount of advisory fees shall not exceed $500,000 in any
Fiscal Year, the amount of transaction fees in any Fiscal Year
shall not exceed 1% of the aggregate transaction value
(whether related to a single or series of related
transactions), and the aggregate amount paid in respect of
clause (d) above shall not exceed $1,500,000 in any Fiscal
Year,
(ii) make payments in respect of Taxes,
(iii) so long as (A) no Default shall have occurred
and be continuing on the date such Restricted Payment is
declared or to be made, nor would a Default result from the
making of such Restricted Payment, (B) after giving effect to
the making of such Restricted Payment the Borrower shall be in
pro forma compliance with the covenants set forth in Section
7.2.4 for the most recent full Fiscal Quarter immediately
preceding the date of the payment of such Restricted Payment
for which the relevant financial information has been
delivered pursuant to clause (a) or clause (b) of Section
7.1.1, and (C) a chief financial Authorized Officer of the
Borrower shall have delivered a certificate to the Agents in
form and substance satisfactory to the Agents (including a
calculation of the Borrower's compliance with the covenants
set forth in Section 7.2.4) certifying as to the accuracy of
clauses(c)(iii)(A) and (c)(iii)(B) above, (1) purchase,
redeem, acquire or otherwise retire for value shares of
Capital Stock of Holdco held by directors, officers or
employees of Holdco, the Borrower or any of its Subsidiaries,
or options on any such shares or related stock appreciation
rights or similar securities owned by such directors, officers
or employees (or their estates or beneficiaries under their
estates), in all cases only upon death, disability,
retirement, termination of employment or pursuant to the terms
of such stock option plan or any other agreement under which
such shares of Capital Stock, options, related rights or
similar securities were issued, (2) make payments in
respect of any promissory note referred to in clause (e) of
Section 5.12 of the Holdco Guaranty and Pledge Agreement, or
(3) make payments in respect of any promissory note referred
to in clause (1) of Section 7.2.2 in an aggregate amount, in
the case of this clause (c)(iii), not to exceed $2,000,000 in
any Fiscal Year (it being
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acknowledged and agreed that the amount available to make such
Restricted Payment shall be increased in any Fiscal Year by an
amount (the "Additional Amount") equal to the sum of (x) the
aggregate cash proceeds received by the Borrower after the
Closing Date and during such Fiscal Year (net of any such
proceeds constituting Net Equity Proceeds required to be
applied pursuant to Section 3.1.1) from any issuance of
Capital Stock of Holdco, and warrants, options and other
rights to acquire Capital Stock of Holdco, by Holdco to
directors, officers or employees of Holdco, the Borrower or
any of its Subsidiaries and (y) the aggregate amount of
key-man life insurance proceeds that are applied towards
Restricted Payments pursuant to this clause (c)(iii));
provided, that the Borrower can carry forward to each
succeeding Fiscal Year the aggregate amount of Restricted
Payments permitted (but not made) pursuant to this clause
(c)(iii) in prior Fiscal Years; provided, further, that in no
event shall the amount of Restricted Payments made pursuant to
this clause (c)(iii) exceed in the aggregate $5,000,000 plus
the sum of the Additional Amounts; and
(iv) pay lease payment obligations owed by Holdco in
respect of the Specified Leases (as defined in the Holdco
Guaranty and Pledge Agreement) to which Holdco is a party.
(d) notwithstanding the provisions of clauses (a) and (b)
above, the Borrower and its Subsidiaries shall be permitted to pay
dividends to Holdco subsequent to the fifth anniversary of the Closing
Date to enable Holdco to pay cash interest on the Discount Notes in
accordance with the terms of such Indebtedness in an aggregate amount
not to exceed 25% of Excess Cash Flow for the period from January 1,
1999 through the most recently ended Fiscal Quarter so long as (A)
after giving effect to the making of such Restricted Payment, (i) the
Leverage Ratio shall be less than 4.0:1.0 on a pro forma basis and (ii)
the Borrower shall be in pro forma compliance with the Fixed Charge
Coverage Ratio covenant set forth in clause (d) of Section 7.2.4, in
each case for the most recent full Fiscal Quarter immediately preceding
the date of the making of such Restricted Payment for which the
relevant financial information has been delivered pursuant to clause
(a) or clause (b) of Section 7.1.1 and (B) a chief financial Authorized
Officer of the Borrower shall have delivered a certificate to the
Administrative Agent (including a calculation of the Leverage Ratio and
Fixed Charge Coverage Ratio in reasonable detail) certifying to the
accuracy of clause (A) above and certifying that no Default shall have
occurred and be continuing on the date such Restricted Payment is made,
nor would a Default result from the making of such Restricted Payment;
and
(e) notwithstanding the provisions of clauses (a) and (b)
above, the Borrower and its Subsidiaries shall be permitted to make the
Restricted Payments in respect of the Closing Date Dividend and other
obligations of Holdco under to the Stock Purchase Agreement in respect
of purchase price adjustments and indemnification obligations
thereunder.
SECTION 7.2.7. Capital Expenditures, etc. (a) The Borrower will not,
and will not permit any of its Subsidiaries to, make or commit to make Capital
Expenditures in any Fiscal Year, except Capital Expenditures (i) which do not
aggregate in excess of $6,000,000 in such
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Fiscal Year plus (ii) an aggregate amount equal to $15,000,000 over the term of
this Agreement; provided, however, that to the extent the amount of Capital
Expenditures permitted to be made in any Fiscal Year pursuant to this Section
7.2.7 exceeds the aggregate amount of Capital Expenditures actually made during
such Fiscal Year, up to 50% of such excess amount may be carried forward to (but
only to) the next two succeeding Fiscal Years (any such amount to be certified
by the Borrower to the Administrative Agent in the Compliance Certificate
delivered for the last Fiscal Quarter of such Fiscal Year, and any such amount
carried forward to a succeeding Fiscal Year shall be deemed to be used prior to
the Borrower and its Subsidiaries using the amount of Capital Expenditures
permitted by this Section 7.2.7 without giving effect to such carry-forward).
(b) The parties acknowledge and agree that the permitted Capital
Expenditure level set forth in clause (a) above shall be exclusive of the amount
of Capital Expenditures actually made with cash equity capital contributions
made, directly or indirectly, by any Person other than the Borrower and its
Subsidiaries, after the Closing Date to the Borrower or any of its Subsidiaries
and specifically identified in a certificate delivered by an Authorized Officer
of the Borrower to the Agents prior to the time such capital contribution is
made.
SECTION 7.2.8. Consolidation, Merger, etc. The Borrower will not, and
will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate
with, or merge into or with, any other corporation, or purchase or otherwise
acquire all or substantially all of the assets of any Person (or of any division
thereof) except
(a) (x) any such Subsidiary may liquidate or dissolve
voluntarily into, and may merge or consolidate with and into, the
Borrower or any wholly-owned U.S. Subsidiary of the Borrower, (y) any
such Non-U.S. Subsidiary may liquidate or dissolve into, and may merge
or consolidate with and into, any other Non-U.S. Subsidiary, and (z)
the assets or stock of any Subsidiary may be purchased or otherwise
acquired by the Borrower or any wholly-owned U.S. Subsidiary of the
Borrower; and
(b) so long as no Default has occurred and is continuing or
would occur after giving effect thereto, the Borrower or any of its
Subsidiaries may purchase all or substantially all of the assets of any
Person, or acquire such Person by merger, if permitted (without
duplication) by Section 7.2.7 to be made as a Capital Expenditure or if
permitted (without duplication) by Section 7.2.5 to be made as an
Investment.
SECTION 7.2.9. Asset Dispositions, etc. The Borrower will not, and will
not permit any of its Subsidiaries to, sell, transfer, lease, contribute or
otherwise convey, or grant options, warrants or other rights with respect to,
all or any substantial part of its assets (including accounts receivable and
Capital Stock of Subsidiaries, but excluding transfers resulting from a Casualty
Event) to any Person, unless
(a) such sale, transfer, lease, contribution or conveyance is
in the ordinary course of its business or is permitted by Sections
7.2.3, 7.2.5, 7.2.6, 7.2.8 or 7.2.13; or
(b) (x) such sale, transfer, lease, contribution or conveyance
is limited to equipment and (y) within 365 days, the Net Disposition
Proceeds generated from such
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sale, transfer, lease, contribution or conveyance are applied to the
acquisition of replacement items of equipment which are the functional
equivalent of the equipment sold, transferred, leased, contributed or
conveyed; or
(c) (x) such sale, transfer, lease, contribution or conveyance
of such assets is for fair market value and the consideration consists
of no less than 75% in cash, (y) the fair market value of such assets,
together with the fair market value of all other assets sold,
transferred, leased, contributed or conveyed pursuant to this clause
(c) since the Closing Date, does not exceed (individually or in the
aggregate) $15,000,000 over the term of this Agreement and (z) the Net
Disposition Proceeds generated from such sale, transfer, lease,
contribution or conveyance are applied as Net Disposition Proceeds, to
the extent required therein, to prepay the Loans pursuant to the terms
of clause (c) of Section 3.1.1 and Section 3.1.2.
SECTION 7.2.10. Modification of Certain Agreements. Without the prior
written consent of the Required Lenders, the Borrower will not, and will not
permit any of its Subsidiaries to, consent to any amendment, supplement,
amendment and restatement, waiver or other modification of any of the terms or
provisions contained in, or applicable to, the Discount Notes or the
Subordinated Notes or any Material Document (including the Bridge Note
Agreement, each agreement setting forth the terms of any Indebtedness that
refinances the Subordinated Notes and each agreement setting forth the terms of
any Indebtedness that refinances the Discount Notes (each of the foregoing
agreements) or any schedules or exhibits related thereto (collectively, the
"Restricted Agreements"), in each case which would (i) materially adversely
affect the rights or remedies of the Lenders or the Borrower's or any other
Obligor's ability to perform hereunder or under any Loan Document, or materially
increase the obligations of the Borrower or any Subsidiary thereunder to the
detriment of the Lenders, (ii) increase the cash consideration payable in
respect of the Transaction or, in the case of the Stock Purchase Agreement,
increase the Borrower's or any of its Subsidiaries' obligations or liabilities,
contingent or otherwise (other than adjustments to the cash consideration
payable in respect of the Transaction made pursuant to the terms of the Stock
Purchase Agreement), (iii) increase the principal amount of, or (other than in
respect of the refinancing of the Subordinated Notes or Discount Notes, in each
case originally issued on the Closing Date) increase the interest rate on, or
(other than in respect of the refinancing of the Subordinated Notes or Discount
Notes, in each case originally issued on the Closing Date) add or increase any
fee with respect to, the Discount Notes or the Subordinated Notes or any
Indebtedness that refinances the Discount Notes or the Subordinated Notes,
advance any dates upon which payments of principal or interest are due thereon
or change any of the covenants with respect thereto in a manner which is more
restrictive to the Borrower or any of its Subsidiaries, or (iv) change the
subordination provisions thereof (including any default or conditions to an
event of default relating thereto), or change any collateral therefor (other
than to release such collateral), if (in the case of this clause (iv)), the
effect of such amendment or change, individually or together with all other
amendments or changes made, is to increase the obligations of the obligor
thereunder or to confer any additional rights on the holders of such Discount
Notes or Subordinated Notes or any Indebtedness that refinances the Discount
Notes or the Subordinated Notes, or any such Restricted Agreement (or a trustee
or other representative on their behalf).
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SECTION 7.2.11. Transactions with Affiliates. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into, or cause, suffer or
permit to exist any arrangement or contract with any of its other Affiliates
(other than another Obligor) unless such arrangement or contract is fair and
equitable to the Borrower or such Subsidiary and is an arrangement or contract
of the kind which would be entered into by a prudent Person in the position of
the Borrower or such Subsidiary with a Person which is not one of its
Affiliates; provided, however, that the Borrower may enter into and perform its
obligations under the Management Services Agreement, the Transition Services
Agreement, employment arrangements, indemnification and compensation plans with
its officers and employees, and the documents, agreements and instruments
entered into, or made, by the Borrower in connection with the Recapitalization.
SECTION 7.2.12. Negative Pledges, Restrictive Agreements, etc. The
Borrower will not, and will not permit any of its Subsidiaries to, enter into
any agreement (excluding this Agreement, any other Loan Document and solely with
respect to clause (a) below, any other agreement governing any Indebtedness
permitted either by clause (h) of Section 7.2.2, in the case of each such other
agreement, as in effect on the Closing Date or by clause (d) of Section 7.2.2 as
to the assets financed with the proceeds of such Indebtedness) prohibiting
(a) (i) the creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or hereafter acquired
(other than (A) in the case of any assets acquired with the proceeds of
any Indebtedness permitted under clause (g) of Section 7.2.2 or subject
to Capitalized Lease Liabilities permitted under such clause (g),
customary limitations and prohibitions contained in such Indebtedness,
(B) in the case of any Indebtedness permitted under clauses (i), (j)
and (k) of Section 7.2.2, customary limitations in respect of the
Subsidiary of the Borrower that has incurred such Indebtedness and its
assets; provided, that such limitations shall be limited solely to such
Subsidiary (and any of its Subsidiaries) and its (and their) assets and
(C) customary non-assignment provisions in contracts, leases and
licenses), or (ii) the ability of the Borrower or any other Obligor to
amend or otherwise modify this Agreement or any other Loan Document; or
(b) the ability of any Subsidiary to make any payments,
directly or indirectly, to the Borrower by way of dividends, advances,
repayments of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts the
ability of any such Subsidiary to make any payment, directly or
indirectly, to the Borrower (other than customary limitations in
respect of any Indebtedness permitted under clauses (i), (j) and (k) of
Section 7.2.2 that are applicable to the Subsidiary of the Borrower
that has incurred such Indebtedness and its assets; provided, that such
limitations shall be limited solely to such Subsidiary (and any of its
Subsidiaries) and its (and their) assets).
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SECTION 7.2.13. Sale and Leaseback. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any agreement or arrangement with
any other Person providing for the leasing by the Borrower or any of its
Subsidiaries of real or personal property (other than the Olive Branch Facility)
having a fair market value of more than $1,000,000 in the aggregate at any time
outstanding which has been or is to be sold or transferred by the Borrower or
any of its Subsidiaries to such other Person or to any other Person to whom
funds have been or are to be advanced by such Person on the security of such
property or rental obligations of the Borrower or any of its Subsidiaries.
SECTION 7.2.14. Stock of Subsidiaries. The Borrower will not permit any
Subsidiary to issue any Capital Stock (whether for value or otherwise) to any
Person other than the Borrower or another wholly-owned Subsidiary of the
Borrower.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following events
or occurrences described in this Section 8.1 shall constitute an "Event of
Default".
SECTION 8.1.1. Non-Payment of Obligations. (a) The Borrower shall
default in the payment or prepayment when due of any principal of any Loan, (b)
the Borrower shall default in the payment when due of any Reimbursement
Obligation or deposit of cash collateral for purposes pursuant to Section 2.6.4,
or (c) the Borrower or any other Obligor shall default (and such default shall
continue unremedied for a period of five Business Days) in the payment when due
of any interest or fee with respect to the Loans or Commitments or of any other
Obligation.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of
the Borrower or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it or any other writing or certificate furnished
by or on behalf of the Borrower or any other Obligor to the Administrative Agent
or any Lender for the purposes of or in connection with this Agreement or any
such other Loan Document (including any certificates delivered pursuant to
Article V) is or shall be incorrect when made in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations.
The Borrower shall default in the due performance and observance of any of its
obligations under (a) clauses (d) or (e) of Section 7.1.1, Section 7.1.9,
Section 7.1.10 or Section 7.2, or (b) Section 7.1.1 (other than clauses (d) or
(e) ) and such Default shall continue unremedied for a period of five Business
Days.
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. The
Borrower or any other Obligor shall default in the due performance and
observance of any other agreement contained herein or in any other Loan Document
executed by it, and such default shall continue unremedied for a period of 30
days after notice thereof shall have been given to the Borrower by the
Administrative Agent or the Required Lenders.
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SECTION 8.1.5. Default on Other Indebtedness. A default shall occur in
the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness (other than Indebtedness
described in Section 8.1.1) of the Borrower or any of its Subsidiaries or any
other Obligor having a principal amount, individually or in the aggregate, in
excess of $5,000,000, or a default shall occur in the performance or observance
of any obligation or condition with respect to such Indebtedness if the effect
of such default is to accelerate the maturity of any such Indebtedness or such
default shall continue unremedied for any applicable period of time sufficient
to permit the holder or holders of such Indebtedness, or any trustee or
Administrative Agent for such holders, to cause such Indebtedness to become due
and payable prior to its expressed maturity.
SECTION 8.1.6. Judgments. Any judgment or order for the payment of
money in excess of $5,000,000 (not covered by insurance from a responsible
insurance company that is not denying its liability with respect thereto) shall
be rendered against the Borrower or any of its Subsidiaries or any other Obligor
and either
(a) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order, or
(b) there shall be any period of 30 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect.
SECTION 8.1.7. Pension Plans. Any of the following events shall occur
with respect to any Pension Plan:
(a) the institution of any steps by the Borrower, any member
of its Controlled Group or any other Person to terminate a Pension Plan
if, as a result of such termination, the Borrower or any such member
could be required to make a contribution to such Pension Plan, or could
reasonably expect to incur a liability or obligation to such Pension
Plan, in excess of $5,000,000; or
(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under section 302(f) of ERISA.
SECTION 8.1.8. Control of the Borrower. Any Change in Control shall
occur.
SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Borrower or any of its
Subsidiaries (other than an Immaterial Subsidiary) or any other Obligor shall
(a) become insolvent or generally fail to pay, or admit in
writing its inability to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of
a trustee, receiver, sequestrator or other custodian for the Borrower
or any of its Subsidiaries (other than an Immaterial Subsidiary) or any
other Obligor or any property of any thereof, or make a general
assignment for the benefit of creditors;
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(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Borrower or any of
its Subsidiaries (other than an Immaterial Subsidiary) or any other
Obligor or for a substantial part of the property of any thereof, and
such trustee, receiver, sequestrator or other custodian shall not be
discharged within 60 days, provided that the Borrower, each Subsidiary
and each other Obligor hereby expressly authorizes the Administrative
Agent and each Lender to appear in any court conducting any relevant
proceeding during such 60-day period to preserve, protect and defend
their rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of the Borrower or any
of its Subsidiaries (other than an Immaterial Subsidiary) or any other
Obligor, and, if any such case or proceeding is not commenced by the
Borrower or such Subsidiary or such other Obligor, such case or
proceeding shall be consented to or acquiesced in by the Borrower or
such Subsidiary or such other Obligor or shall result in the entry of
an order for relief or shall remain for 60 days undismissed, provided
that the Borrower, each Subsidiary and each other Obligor hereby
expressly authorizes the Administrative Agent and each Lender to appear
in any court conducting any such case or proceeding during such 60-day
period to preserve, protect and defend their rights under the Loan
Documents; or
(e) take any action authorizing, or in furtherance of, any of
the foregoing.
SECTION 8.1.10. Impairment of Security, etc. (a) Any Loan Document, or
any Lien granted thereunder (other than in respect of the property of an
Immaterial Subsidiary), shall (except in accordance with its terms), in whole or
in part, terminate, cease to be effective or cease to be the legally valid,
binding and enforceable obligation of any Obligor party thereto; (b) the
Borrower, any other Obligor or any other party shall, directly or indirectly,
contest in any manner such effectiveness, validity, binding nature or
enforceability; or (c) any Lien securing any Obligation shall, in whole or in
part, cease (other than as a result of any action or inaction taken or not taken
by any Agent or any Lender or if such cessation is covered by insurance meeting
the requirements set forth in Section 7.1.4 that lists the Administrative Agent
(for the benefit of the Lenders) as an additional insured or loss payee) to be a
perfected first priority Lien, subject only to those exceptions expressly
permitted by such Loan Document.
SECTION 8.1.11. Subordination. The subordination provisions relating to
the Subordinated Notes or any Indebtedness the proceeds of which refinances the
Subordinated Notes (the "Subordination Provisions") shall fail to be enforceable
by the Lenders (which have not effectively waived the benefits thereof) in
accordance with the terms thereof, or the principal or interest on any Loan,
Reimbursement Obligation or other Obligations shall fail to constitute
"Designated Senior Debt" (as defined in the Bridge Note Agreement) or
"designated senior indebtedness" (or any other similar term) under the documents
relating to any Indebtedness the proceeds of which refinances the Subordinated
Notes), or the Borrower or any of its Subsidiaries shall, directly or
indirectly, disavow or contest in any manner (i) the effectiveness, validity or
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enforceability of any of the Subordination Provisions, or (ii) that any of such
Subordination Provisions exist for the benefit of the Agents and the Lenders.
SECTION 8.1.12. Failure to Refinance or Extend Subordinated Notes. The
Borrower shall have failed to refinance Indebtedness in respect of the
Subordinated Notes originally issued on the Closing Date with Excluded Equity
Proceeds or the proceeds of Indebtedness permitted pursuant to clause (h) of
Section 7.2.2 prior to the Maturity Date (as defined in the Bridge Note
Agreement, pursuant to which the Subordinated Notes were originally issued) (the
"Bridge Note Maturity Date") and the Administrative Agent shall not have
received, prior to the Bridge Loan Maturity Date, evidence satisfactory to it
that the maturity of the Subordinated Notes will, effective on the Bridge Note
Maturity Date, be extended to a date not prior to March 30, 2006.
SECTION 8.2. Action if Bankruptcy. If any Event of Default described in
clauses (a) through (d) of Section 8.1.9 shall occur, the Commitments (if not
theretofore terminated) shall automatically terminate and the outstanding
principal amount of all outstanding Loans and all other Obligations shall
automatically be and become immediately due and payable, without notice or
demand.
SECTION 8.3. Action if Other Event of Default. If any Event of Default
(other than any Event of Default described in clauses (a) through (d) of Section
8.1.9) shall occur for any reason, whether voluntary or involuntary, and be
continuing, the Administrative Agent, upon the direction of the Required
Lenders, shall by notice to the Borrower declare all or any portion of the
outstanding principal amount of the Loans and other Obligations to be due and
payable and/or the Commitments (if not theretofore terminated) to be terminated,
whereupon the full unpaid amount of such Loans and other Obligations which shall
be so declared due and payable shall be and become immediately due and payable,
without further notice, demand or presentment, and/or, as the case may be, the
Commitments shall terminate.
ARTICLE IX
THE ADMINISTRATIVE AGENT
SECTION 9.1. Actions. Each Lender hereby appoints DLJ as its
Syndication Agent and First Chicago as its Administrative Agent under and for
purposes of this Agreement, the Notes and each other Loan Document. Each Lender
authorizes the Agents to act on behalf of such Lender under this Agreement, the
Notes and each other Loan Document and, in the absence of other written
instructions from the Required Lenders received from time to time by the Agents
(with respect to which each of the Agents agrees that it will comply, except as
otherwise provided in this Section or as otherwise advised by counsel), to
exercise such powers hereunder and thereunder as are specifically delegated to
or required of the Agents by the terms hereof and thereof, together with such
powers as may be reasonably incidental thereto. The Agents may execute any of
their respective duties under this Agreement, the Notes and each other Loan
Document by or through their respective employees, agents and attorneys-in-fact.
Each Lender hereby indemnifies (which indemnity shall survive any termination of
this Agreement) the Agents, pro rata according to such Lender's percentage of
the Total Exposure Amount, from and against any and all liabilities,
obligations, losses, damages, claims, costs or expenses of any kind
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or nature whatsoever which may at any time be imposed on, incurred by, or
asserted against, either of the Agents in any way relating to or arising out of
this Agreement, the Notes and any other Loan Document, including reasonable
attorneys' fees, and as to which any Agent is not reimbursed by the Borrower;
provided, however, that no Lender shall be liable for the payment of any portion
of such liabilities, obligations, losses, damages, claims, costs or expenses
which are determined by a court of competent jurisdiction in a final proceeding
to have resulted solely from such Agent's gross negligence or wilful misconduct.
An Agent shall not be required to take any action hereunder, under the Notes or
under any other Loan Document, or to prosecute or defend any suit in respect of
this Agreement, the Notes or any other Loan Document, unless it is indemnified
hereunder to its satisfaction. If any indemnity in favor of either of the Agents
shall be or become, in such Agent's determination, inadequate, such Agent may
call for additional indemnification from the Lenders and cease to do the acts
indemnified against hereunder until such additional indemnity is given.
SECTION 9.2. Funding Reliance, etc. Unless the Administrative Agent
shall have been notified by telephone, confirmed in writing, by any Lender by
3:00 p.m., Chicago time, on the day prior to a Borrowing or Disbursement with
respect to a Letter of Credit pursuant to Section 2.6.2 that such Lender will
not make available the amount which would constitute its Percentage of such
Borrowing on the date specified therefor, the Administrative Agent may assume
that such Lender has made such amount available to the Administrative Agent and,
in reliance upon such assumption, make available to the Borrower a corresponding
amount. If and to the extent that such Lender shall not have made such amount
available to the Administrative Agent, such Lender and the Borrower severally
agree to repay the Administrative Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date the
Administrative Agent made such amount available to the Borrower to the date such
amount is repaid to the Administrative Agent, at the interest rate applicable at
the time to Loans comprising such Borrowing.
SECTION 9.3. Exculpation. None of the Agents or the Arranger nor any of
their respective directors, officers, employees or agents shall be liable to any
Lender for any action taken or omitted to be taken by it under this Agreement or
any other Loan Document, or in connection herewith or therewith, except for its
own willful misconduct or gross negligence, nor responsible for any recitals or
warranties herein or therein, nor for the effectiveness, enforceability,
validity or due execution of this Agreement or any other Loan Document, nor for
the creation, perfection or priority of any Liens purported to be created by any
of the Loan Documents, or the validity, genuineness, enforceability, existence,
value or sufficiency of any collateral security, nor to make any inquiry
respecting the performance by the Borrower of its obligations hereunder or under
any other Loan Document. None of the Agents or the Arranger nor any of their
respective directors, officers, employees or agents shall be responsible for or
have any duty to ascertain, inquire into or verify (i) any statement, warranty
or representation made in connection with any Loan Document or any borrowing
hereunder, (ii) the performance or observance of any of the covenants or
agreements of any Obligor under any Loan Document, including, without
limitation, any agreement by an Obligor to furnish information directly to each
Lender, (iii) the satisfaction of any condition specified in Article V, expect
receipt of items required to be delivered solely to the Administrative Agent,
(iv) the existence or possible existence of any Default or Event of Default, or
(v) the financial condition of the Borrower or any other Obligor. Any such
inquiry which may be made by an Agent or the Issuer shall not
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obligate it to make any further inquiry or to take any action. The Agents and
the Issuer shall be entitled to rely upon advice of counsel concerning legal
matters and upon any notice, consent, certificate, statement or writing which
the Agents or the Issuer, as applicable, believe to be genuine and to have been
presented by a proper Person.
SECTION 9.4. Successor. The Syndication Agent may resign as such upon
one Business Day's notice to the Borrower and the Administrative Agent. The
Administrative Agent may resign as such at any time upon at least 30 days' prior
notice to the Borrower and all Lenders. The Administrative Agent may be removed
at any time with or without cause by written notice received by the
Administrative Agent from the Required Lenders, such removal to be effective on
the date specified in such notice. If the Administrative Agent at any time shall
resign or be removed, the Required Lenders may, with the prior consent of the
Borrower (which consent shall not be unreasonably withheld or delayed) appoint
another Lender as a successor Administrative Agent which shall thereupon become
the Administrative Agent hereunder. If no successor Administrative Agent shall
have been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Administrative Agent's giving
notice of resignation or receiving notice of removal, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be one of the Lenders or a commercial banking
institution organized under the laws of the U.S. (or any State thereof) or a
U.S. branch or agency of a commercial banking institution, and having a combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall be entitled to receive from the
retiring Administrative Agent such documents of transfer and assignment as such
successor Administrative Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Administrative Agent, and the retiring Administrative Agent shall
be discharged from its duties and obligations under this Agreement. After any
retiring Administrative Agent's resignation or removal hereunder as the
Administrative Agent, the provisions of (i) this Article IX shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Administrative Agent under this Agreement, and (ii) Section 10.3 and Section
10.4 shall continue to inure to its benefit. Notwithstanding anything else to
the contrary in this Section 9.4, the Administrative Agent may at any time,
without the consent of the Borrower or any Lender, appoint an Affiliate which is
a commercial banking institution as a successor Administrative Agent.
SECTION 9.5. Credit Extensions by Each Agent and Issuer. Each Agent and
the Issuer shall have the same rights and powers with respect to (i) in the case
of the Agents, the Credit Extensions made by it or any of its Affiliates and
(ii) in the case of the Issuer, the Loans made by it or any of its Affiliates,
as any other Lender and may exercise the same as if it were not an Agent or the
Issuer. Each Agent, the Issuer and each of their respective Affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower or any Subsidiary or Affiliate of the Borrower as if
such Agent or Issuer were not an Agent or Issuer hereunder.
SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has,
independently of the Agents, the Arranger, the Issuer and each other Lender, and
based on such Lender's review of the financial information of the Borrower, this
Agreement, the other Loan Documents (the
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terms and provisions of which being satisfactory to such Lender) and such other
documents, information and investigations as such Lender has deemed appropriate,
made its own credit decision to extend its Commitments. Each Lender also
acknowledges that it will, independently of the Agents, the Arranger, the Issuer
and each other Lender, and based on such other documents, information and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or any other Loan
Document.
SECTION 9.7. Copies, etc. The Administrative Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by the Borrower pursuant to the terms of this
Agreement (unless concurrently delivered to the Lenders by the Borrower). The
Administrative Agent will distribute to each Lender each document or instrument
received for its account and copies of all other communications received by the
Administrative Agent from the Borrower for distribution to the Lenders by the
Administrative Agent in accordance with the terms of this Agreement. The Agent
shall have no duty to disclose to the Lenders information that is not required
to be furnished by the Borrower to the Agents, but that may be voluntarily
furnished by the Borrower to the Agents (either in their capacity as Agent or in
their individual capacity).
SECTION 9.8. The Syndication Agent and the Administrative Agent.
Notwithstanding anything else to the contrary contained in this Agreement or any
other Loan Document, the Syndication Agent and the Administrative Agent, each in
such capacity, shall have no duties or responsibilities under this Agreement or
any other Loan Document nor 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
Syndication Agent or the Administrative Agent, as applicable, in such capacity
except as are explicitly set forth herein or in the other Loan Documents. Each
Lender hereby waives, and agrees not to assert, any claim against the
Syndication Agent or the Administrative Agent on any agency theory or any other
theory of liability for breach of fiduciary duty.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to in writing by the Borrower and the Required Lenders; provided,
however, that no such amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to in writing by each Lender;
(b) modify this Section 10.1, or clause (a) of Section 10.10,
change the definition of "Required Lenders", increase any Commitment
Amount or the Percentage of any
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Lender, reduce any fees described in Section 3.3 (other than the
administration fee referred to in Section 3.3.2), release any
Subsidiary Guarantor (other than an Immaterial Subsidiary) from its
obligations under the Subsidiary Guaranty, release Holdco from its
obligations under the Holdco Guaranty and Pledge Agreement, or release
all or substantially all of the collateral security (except in each
case as otherwise specifically provided in this Agreement, the
Subsidiary Guaranty, a Security Agreement or a Pledge Agreement) or
extend any Commitment Termination Date shall be made without the
written consent of each Lender adversely affected thereby;
(c) extend the due date for, or reduce the amount of, any
scheduled repayment of principal of or interest on or fees payable in
respect of any Loan or reduce the principal amount of or rate of
interest on or fees payable in respect of any Loan or any Reimbursement
Obligations (which shall in each case include the conversion of all or
any part of the Obligations into equity of any Obligor), shall be made
without the written consent of the holder of the Note evidencing such
Loan or, in the case of a Reimbursement Obligation, the Issuer owed,
and those Lenders participating in, such Reimbursement Obligation;
(d) affect adversely the interests, rights or obligations of
any Agent, the Issuer or the Arranger (in its capacity as Agent, Issuer
or Arranger), unless consented to in writing by such Agent, the Issuer
or the Arranger, as the case may be;
(e) (i) amend, modify or waive clause (f) of Section 3.1.1 or
(ii) have the effect (either immediately or at some later time) of
enabling the Borrower to satisfy a condition precedent to the making of
a Revolving Loan or the issuance of a Letter of Credit without the
written consent of Lenders holding at least 51% of the Revolving Loan
Commitments; or
(f) amend, modify or waive the provisions of clause (a)(i) of
Section 3.1.1 or clause (b) of Section 3.1.2 or effect any amendment,
modification or waiver that by its terms adversely affects the rights
of Lenders participating in any Tranche differently from those of
Lenders participating in other Tranches, without the written consent of
the holders of the Notes evidencing at least 51% of the aggregate
amount of Loans outstanding under the Tranche or Tranches affected by
such modification, or, in the case of a modification affecting the
Revolving Loan Commitment Amount, the Lenders holding at least 51% of
the Revolving Loan Commitments.
No failure or delay on the part of any Agent, the Issuer, any Lender or the
holder of any Note in exercising any power or right under this Agreement or any
other Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on the Borrower in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by any Agent, the Issuer,
any Lender or the holder of any Note under this Agreement or any other Loan
Document shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
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SECTION 10.2. Notices. Except as otherwise provided herein or in
another Loan Document, all notices, requests and other communications provided
to any party hereto under this Agreement or any other Loan Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such party at
its address or facsimile number set forth on Schedule II hereto or, in the case
of a Lender which becomes a party hereto after the date hereof, as set forth in
the Lender Assignment Agreement pursuant to which such Lender becomes a Lender
hereunder or at such other address or facsimile number as may be designated by
such party in a notice to the other parties. Any notice, (i) if mailed and
properly addressed with postage prepaid, shall be deemed given 72 hours after
such notice is deposited in the mails, (ii) if properly addressed and sent by
pre-paid courier service, shall be deemed given when received, or (iii) if
transmitted by facsimile, shall be deemed given when transmitted (and telephonic
confirmation of receipt thereof has been received); provided, that notices to
the Administrative Agent under Articles II and III shall not be effective until
received by the Administrative Agent.
Unless otherwise stated, any notice received by the Administrative
Agent shall be deemed to be received on a Business Day only if it is received
prior to 12:00 noon, Chicago time, on such Business Day. If such notice is
received by the Administrative Agent after 12:00 noon, Chicago time, it shall be
deemed to be received on the next succeeding Business Day.
SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees to pay
on demand all reasonable expenses of each Agent (including the reasonable fees
and out-of-pocket expenses of counsel to the Agents and of local or foreign
counsel, if any, who may be retained by counsel to the Agents) in connection
with
(a) the syndication by the Syndication Agent and the Arranger
of the Loans, the negotiation, preparation, execution and delivery of
this Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from
time to time hereafter be required, whether or not the transactions
contemplated hereby are consummated;
(b) the filing, recording, refiling or rerecording of the
Mortgages, the Pledge Agreements and the Security Agreements and/or any
Uniform Commercial Code financing statements relating thereto and all
amendments, supplements and modifications to any thereof and any and
all other documents or instruments of further assurance required to be
filed or recorded or refiled or rerecorded by the terms hereof or of
any Mortgage, any Pledge Agreement or any Security Agreement; and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save the Agents and the Lenders
harmless from all liability for, any stamp or other similar taxes which may be
payable in connection with the execution or delivery of this Agreement, the
Borrowings hereunder, the issuance of the Notes, the issuance of the Letters of
Credit, or any other Loan Documents. The Borrower also agrees to reimburse each
Agent and each Lender upon demand for all reasonable out-of-pocket expenses
(including reasonable attorneys' fees and legal expenses) incurred by such Agent
or such Lender
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in connection with (x) the negotiation of any restructuring or "work-out",
whether or not consummated, of any Obligations and (y) the enforcement of any
Obligations.
SECTION 10.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitment,
the Borrower indemnifies, exonerates and holds each Agent, the Arranger, the
Issuer and each Lender and each of their respective partners, trustees,
officers, directors, employees and agents (collectively, the "Indemnified
Parties") free and harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities and damages, and expenses incurred in
connection therewith (irrespective of whether any such Indemnified Party is a
party to the action for which indemnification hereunder is sought), including
reasonable attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them as a result
of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Credit
Extension;
(b) the entering into and performance of this Agreement and
any other Loan Document by any of the Indemnified Parties (including
any action brought by or on behalf of the Borrower as the result of any
determination by the Required Lenders pursuant to Article V not to make
any Credit Extension hereunder but excluding any such action in which a
court of competent jurisdiction in a final non-appealable judgment
determined that such Lenders breached their obligations hereunder in
respect of such Credit Extension);
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or assets of any
Person, whether or not such Agent, the Arranger, the Issuer or such
Lender is party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to
the protection of the environment or the Release by the Borrower or any
of its Subsidiaries of any Hazardous Material; or
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by the Borrower or any Subsidiary thereof of
any Hazardous Material (including any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any
Environmental Law), regardless of whether caused by, or within the
control of, the Borrower or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or wilful misconduct. Each Obligor and its permitted successors and
assigns hereby waive, release and agree not to make any claim, or bring any cost
recovery action against, any Agent, the Arranger, the Issuer or any Lender under
CERCLA or any state equivalent, or any similar law now existing or hereafter
enacted, except to the extent arising out of the gross negligence or wilful
misconduct of any
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Indemnified Party. It is expressly understood and agreed that to the extent that
any of such Persons is strictly liable under any Environmental Laws, such
Obligor's obligation to such Person under this indemnity shall likewise be
without regard to fault on the part of such Obligor, to the extent permitted
under applicable law, with respect to the violation or condition which results
in liability of such Person. If and to the extent that the foregoing undertaking
may be unenforceable for any reason, such Obligor hereby agrees to make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
SECTION 10.5. Survival. The obligations of the Borrower under Sections
4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders under
Section 4.8 and Section 9.1, shall in each case survive any termination of this
Agreement, the payment in full of all Obligations and the termination of all
Commitments. The representations and warranties made by the Borrower and each
other Obligor in this Agreement and in each other Loan Document shall survive
the execution and delivery of this Agreement and each such other Loan Document.
SECTION 10.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 10.7. Headings. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
SECTION 10.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE
NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCLUDING THE
LAW OF CONFLICTS BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
This Agreement, the Notes and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersede any prior agreements, written or oral, with respect thereto.
SECTION 10.10. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the
Administrative Agent and all Lenders; and
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(b) the rights of sale, assignment and transfer of the Lenders
are subject to Section 10.11.
SECTION 10.11. Sale and Transfer of Loans and Notes; Participations in
Loans and Notes. Each Lender may assign, or sell participations in, its Loans
and Commitments to one or more other Persons in accordance with this Section
10.11.
SECTION 10.11.1. Assignments. Any Lender (an "Assignor Lender"),
(a) with the written consents of the Borrower, the
Administrative Agent and (in the case of any assignment of
participations in Letters of Credit or Revolving Loan Commitments) the
Issuer and the Swing Line Lender ((x) which consents shall not be
unreasonably delayed or withheld, (y) which consents of the
Administrative Agent and the Issuer and the Swing Line Lender shall not
be required in the case of assignments made (1) to DLJ or any of its
Affiliates or (2) by DLJ or any of its Affiliates to any commercial
bank, fund which is regularly engaged in making, purchasing or
investing in loans or securities or other financial institution the
long-term certificate of deposit rating or long-term senior unsecured
debt rating of which as determined by S&P or Moody's is at least BBB or
Baa2 and (z) which consent of the Borrower shall not be required at any
time when an Event of Default shall have occurred and be continuing),
may at any time assign and delegate to one or more commercial banks,
funds which are regularly engaged in making, purchasing or investing in
loans or securities or other financial institutions, and
(b) with notice to the Borrower, the Administrative Agent and
(in the case of any assignment of participations in Letters of Credit
or Revolving Loan Commitments) the Issuer, but without the consent of
the Borrower, the Administrative Agent, the Issuer or the Swing Line
Lender, may assign and delegate to any of its Affiliates or to any
other Lender or to a Related Fund of any Lender
(each such Person described in either of the foregoing clauses as being the
Person to whom such assignment and delegation is to be made, being hereinafter
referred to as an "Assignee Lender"), all or any fraction of such Lender's total
Loans, participations in Letters of Credit and Letter of Credit Outstandings
with respect thereto and Commitments (which assignment and delegation shall be,
as among Revolving Loan Commitments, Revolving Loans and participations in
Letters of Credit, of a constant, and not a varying, percentage) in a minimum
aggregate amount equal to the lesser of (i) $2,500,000 or (ii) the then
remaining amount of such Lender's Loans and Commitments; provided, however, that
any such Assignee Lender will comply, if applicable, with the provisions
contained in Section 4.6 and the Borrower, each other Obligor and the Agents
shall be entitled to continue to deal solely and directly with such Lender in
connection with the interests so assigned and delegated to an Assignee Lender
until (x) written notice of such assignment and delegation, together with
payment instructions, addresses and related information with respect to such
Assignee Lender, shall have been given to the Borrower and the Administrative
Agent by such Lender and such Assignee Lender, (y) such Assignee Lender shall
have executed and delivered to the Borrower and the Administrative Agent a
Lender Assignment
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Agreement, accepted by the Administrative Agent, and (z) the processing fees
described below shall have been paid.
From and after the date that the Administrative Agent accept such Lender
Assignment Agreement, (i) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such Assignee Lender
in connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (ii)
the Assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents. Within ten Business Days after its receipt of notice that the
Administrative Agent has received an executed Lender Assignment Agreement, the
Borrower shall execute and deliver to the Administrative Agent (for delivery to
the relevant Assignee Lender), and to the extent requested, new Notes evidencing
such Assignee Lender's assigned Loans and Commitments and, if the Assignor
Lender has retained Loans and Commitments hereunder, replacement Notes in the
principal amount of the Loans and Commitments retained by the Assignor Lender
hereunder (such Notes to be in exchange for, but not in payment of, those Notes
then held by such Assignor Lender). Each such Note shall be dated the date of
the predecessor Notes. The Assignor Lender shall mark the predecessor Notes
"exchanged" and deliver them to the Borrower. Accrued interest on that part of
the predecessor Notes evidenced by the new Notes, and accrued fees, shall be
paid as provided in the Lender Assignment Agreement. Accrued interest on that
part of the predecessor Notes evidenced by the replacement Notes shall be paid
to the Assignor Lender. Accrued interest and accrued fees shall be paid at the
same time or times provided in the predecessor Notes and in this Agreement. Such
Assignor Lender or such Assignee Lender must also pay a processing fee to the
Administrative Agent upon delivery of any Lender Assignment Agreement in the
amount of $3,500, unless such assignment and delegation is by a Lender to its
Affiliate or to a Related Fund or if such assignment and delegation is by a
Lender to a Federal Reserve Bank (or, if such Lender 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), as provided below or is otherwise consented to by
the Administration Agent. Any attempted assignment and delegation not made in
accordance with this Section 10.11.1 shall be null and void. Nothing contained
in this Section 10.11.1 shall prevent or prohibit any Lender from pledging its
rights (but not its obligations to make Loans or participate in Letters of
Credit of Letter of Credit Outstandings) under this Agreement and/or its Loans
and/or its Notes hereunder (i) to a Federal Reserve Bank in support of
borrowings made by such Lender from such Federal Reserve Bank or (ii) in the
case of a Lender that 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;
provided, that any such assignment to a trustee shall be subject to the
provisions of clause (a) of this Section 10.11.1. In the event that S&P, Moody's
or Thompson's BankWatch (or InsuranceWatch Ratings Service, in the case of
Lenders that are insurance companies (or Best's Insurance Reports, if such
insurance company is not rated by Insurance Watch Ratings Service)) shall, after
the date that any Lender with a Commitment to make Revolving Loans or
participate in Letters of Credit becomes a Lender, downgrade the long-term
certificate of deposit rating or long-term senior unsecured debt rating of such
Lender, and the resulting rating shall be below BBB-, Baa3 or C (or BB, in the
case of Lender that is an insurance company (or B, in the case of an insurance
company not rated by InsuranceWatch Ratings Service)) respectively, then the
Borrower (with the consent of the Administrative Agent, the Swing Line Lender
and the
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Issuer) shall have the right, but not the obligation, upon notice to such Lender
and the Administrative Agent, to replace such Lender with an Assignee Lender in
accordance with and subject to the restrictions contained in this Section, and
such Lender hereby agrees to transfer and assign without recourse (in accordance
with and subject to the restrictions contained in this Section) all its
interests, rights and obligations in respect of its Revolving Loan Commitment
under this Agreement to such Assignee Lender; provided, however, that (i) no
such assignment shall conflict with any law, rule and regulation or order of any
governmental authority and (ii) such Assignee Lender shall pay to such Lender in
immediately available funds on the date of such assignment the principal of and
interest and fees (if any) accrued to the date of payment on the Loans made, and
Letters of Credit participated in, by such Lender hereunder and all other
amounts accrued for such Lender's account or owed to it hereunder.
SECTION 10.11.2. Participations. Any Lender may at any time sell to one
or more commercial banks or other Persons (each such commercial bank and other
Person being herein called a "Participant") participating interests in any of
the Loans, Commitments, participations in Letters of Credit and Letters of
Credit Outstandings or other interests of such Lender hereunder; provided,
however, that
(a) no participation contemplated in this Section shall
relieve such Lender from its Commitments or its other obligations
hereunder or under any other Loan Document;
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations;
(c) the Borrower and each other Obligor and the Agents shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and each
of the other Loan Documents;
(d) no Participant, unless such Participant is an Affiliate of
such Lender, or is itself a Lender, shall be entitled to require such
Lender to take or refrain from taking any action hereunder or under any
other Loan Document, except that such Lender may agree with any
Participant that such Lender will not, without such Participant's
consent, agree to (i) any reduction in the interest rate or amount of
fees that such Participant is otherwise entitled to, (ii) a decrease in
the principal amount, or an extension of the final Stated Maturity
Date, of any Loan in which such Participant has purchased a
participating interest or (iii) a release of all or substantially all
of the collateral security under the Loan Documents or any Subsidiary
Guarantor that is not an Immaterial Subsidiary under any Subsidiary
Guaranty, in each case except as otherwise specifically provided in a
Loan Document; and
(e) the Borrower shall not be required to pay any amount under
Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4 that is greater than the
amount which it would have been required to pay had no participating
interest been sold.
The Borrower acknowledges and agrees, subject to clause (e) above, that, to the
fullest extent permitted under applicable law, each Participant, for purposes of
Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 10.3 and 10.4, shall be considered a
Lender.
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SECTION 10.12. Confidentiality. The Lenders shall hold all non-public
information obtained pursuant to the requirements of this Agreement in
accordance with their customary procedures for handling confidential information
of this nature and in accordance with safe and sound banking practices and in
any event may make disclosure to any of their examiners, Affiliates, outside
auditors, counsel and other professional advisors in connection with this
Agreement or as reasonably required by any bona fide transferee, participant or
assignee or as required or requested by any governmental agency or
representative thereof or pursuant to legal process; provided, however, that
(a) 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 an 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;
(b) prior to any such disclosure pursuant to this Section
10.12, each Lender shall require any such bona fide transferee,
participant and assignee receiving a disclosure of non-public
information to agree in writing
(i) to be bound by this Section 10.12; and
(ii) to require such Person to require any other
Person to whom such Person discloses such non-public
information to be similarly bound by this Section 10.12; and
(c) except as may be required by an order of a court of
competent jurisdiction and to the extent set forth therein, no Lender
shall be obligated or required to return any materials furnished by the
Borrower or any Subsidiary.
SECTION 10.13. Other Transactions. Nothing contained herein shall
preclude the Agents or any other Lender from engaging in any transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Affiliates in which the Borrower or such
Affiliate is not restricted hereby from engaging with any other Person.
SECTION 10.14. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE
AGENT, THE LENDERS OR THE BORROWER THAT IS BROUGHT IN THE STATE OF NEW YORK
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW
YORK LOCATED IN NEW YORK COUNTY OF THE STATE OF NEW YORK OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF
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ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE
BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AND
EXPRESSLY AND IRREVOCABLY APPOINTS CT CORPORATION SYSTEM AS ITS DOMICILE AND
ADDRESS FOR SERVICE OF PROCESS FOR PURPOSES OF ANY ACTION AS TO WHICH IT HAS
SUBMITTED TO JURISDICTION AS SET FORTH IN THIS SECTION 10.14, AND AGREES THAT
SERVICE UPON SUCH AUTHORIZED AGENT SHALL BE DEEMED IN EVERY RESPECT SERVICE OF
PROCESS UPON THE BORROWER OR ITS SUCCESSORS AND ASSIGNS, AND, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, SHALL BE TAKEN AND HELD TO BE VALID PERSONAL
SERVICE UPON IT. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER
MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF ANY AGENT,
ANY LENDER OR THE ISSUER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR AFFECT THE RIGHT OF ANY SUCH PERSON TO BRING ANY ACTION OR PROCEEDING
AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION. TO
THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 10.15. Waiver of Jury Trial. THE AGENTS, THE LENDERS, THE
ISSUER AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) BASED HEREON, OR ARISING OUT
OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF THE AGENTS, THE LENDERS, THE ISSUER OR THE BORROWER. THE BORROWER
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN
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<PAGE> 105
DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE AGENTS, THE LENDERS AND THE ISSUER ENTERING INTO THIS
AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
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EXHIBIT 10.4
SECURITIES PURCHASE AGREEMENT
DATED AS OF
SEPTEMBER 30, 1998
AMONG
TRUE TEMPER CORPORATION
AND
THE PURCHASER PARTY HERETO
<PAGE> 2
SECURITIES PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1.DEFINITIONS.............................................................................................1
Section 1.01. Definitions............................................................................1
Section 1.02. Accounting Terms and Determinations...................................................11
ARTICLE 2.PURCHASE AND SALE OF SECURITIES; TERMS OF SECURITIES...................................................11
Section 2.01. Commitment to Purchase................................................................11
Section 2.02. Takedown Procedures...................................................................12
Section 2.03. Fees..................................................................................12
Section 2.04. Mandatory Termination of Commitments..................................................12
Section 2.05. Interest..............................................................................12
Section 2.06. Maturity of Notes; Prepayment of Notes................................................13
Section 2.07. Taxes.................................................................................14
ARTICLE 3.REPRESENTATIONS AND WARRANTIES.........................................................................16
Section 3.01. Corporate Existence and Power.........................................................16
Section 3.02. Authorization, Execution and Enforceability...........................................16
Section 3.03. Governmental Authorization............................................................17
Section 3.04. Contravention.........................................................................17
Section 3.05. Financial Information.................................................................17
Section 3.06. Litigation............................................................................18
Section 3.07. Environmental Matters.................................................................18
Section 3.08. Taxes.................................................................................19
Section 3.09. Subsidiaries..........................................................................19
Section 3.10. Governmental Regulations..............................................................19
Section 3.11. Full Disclosure.......................................................................19
Section 3.12. Capitalization........................................................................20
Section 3.13. Solicitation..........................................................................20
Section 3.14. Non-fungibility.......................................................................20
Section 3.15. Permits...............................................................................20
Section 3.16. Representations in Other Financing Documents and in Material
Recapitalization Documents............................................................21
Section 3.17. No Undisclosed Liabilities............................................................21
Section 3.18. ERISA Matters.........................................................................21
ARTICLE 4.REPRESENTATIONS AND WARRANTIES OF PURCHASER............................................................21
Section 4.01. Purchase for Investment; Authority; Binding Agreement.................................21
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 5.CONDITIONS PRECEDENT TO PURCHASE.......................................................................22
Section 5.01. Conditions to Purchaser's Obligation at Takedown......................................22
ARTICLE 6.COVENANTS..............................................................................................24
Section 6.01. Information...........................................................................24
Section 6.02. Payment of Obligations................................................................25
Section 6.03. Insurance.............................................................................25
Section 6.04. Conduct of Business and Maintenance of Existence......................................25
Section 6.05. Compliance with Laws..................................................................26
Section 6.06. Inspection of Property, Books and Records.............................................26
Section 6.07. Investment Company Act................................................................26
Section 6.08. Limitation on Debt....................................................................26
Section 6.09. Restricted Payments; Voluntary Prepayments............................................27
Section 6.10. Investments...........................................................................27
Section 6.11. Negative Pledge.......................................................................28
Section 6.12. Transactions with Affiliates..........................................................28
Section 6.13. Consolidations, Mergers and Sales of Assets; Ownership of Subsidiaries................28
Section 6.14. Use of Proceeds.......................................................................29
Section 6.15. Restrictions on Certain Amendments....................................................29
Section 6.16. Limitation on Sales of Assets and Subsidiary Stock....................................29
Section 6.17. Sale and Leaseback Transactions.......................................................29
Section 6.18. Assumed Debt..........................................................................29
Section 6.19. Business Activities...................................................................29
ARTICLE 7.EVENTS OF DEFAULT......................................................................................29
Section 7.01. Events of Default Defined; Acceleration of Maturity; Waiver of Default................29
ARTICLE 8.LIMITATION ON TRANSFERS................................................................................32
Section 8.01. Restrictions on Transfer..............................................................32
Section 8.02. Restrictive Legends...................................................................32
Section 8.03. Notice of Proposed Transfers..........................................................32
ARTICLE 9.MISCELLANEOUS..........................................................................................33
Section 9.01. Notices...............................................................................33
Section 9.02. No Waivers; Amendments................................................................33
Section 9.03. Indemnification.......................................................................34
Section 9.04. Expenses..............................................................................36
Section 9.05. Payment...............................................................................36
Section 9.06. Confidentiality.......................................................................37
</TABLE>
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<TABLE>
<S> <C>
Section 9.07. Successors and Assigns................................................................37
Section 9.08. Brokers...............................................................................37
Section 9.09. New York Law; Submission to Jurisdiction; Waiver of Jury Trial........................37
Section 9.10. Severability..........................................................................37
Section 9.11. Counterparts..........................................................................38
</TABLE>
SCHEDULES
Schedule 3.04 Contravention
Schedule 3.07 Environmental Matters
Schedule 3.09 Subsidiaries
Schedule 3.12 Capitalization of the Company
Schedule 6.08 Debt
Schedule 6.10 Investments
Schedule 6.11 Liens
EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Note
Exhibit C Form of Debt Registration Rights Agreement
Exhibit D Form of Warrant Agreement
Exhibit E Form of Equity Registration Rights Agreement
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<PAGE> 5
SECURITIES PURCHASE AGREEMENT
AGREEMENT dated as of September 30, 1998 among True Temper
Corporation and the Purchaser.
The parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.01. Definitions. The following terms, as used
herein, have the following meanings:
"Accreted Value" means, for each $1,000 face amount of Notes
as of any date of determination prior to the Maturity Date, the sum of (i) the
initial offering price of each Note and (ii) that portion of the excess of the
principal amount of each Note over such initial offering price which shall have
been accreted thereon through such date, such amount to be so accreted on a
daily basis and compounded quarterly on each March 31, June 30, September 30 and
December 31 at the rate of 10.5% per annum (subject to adjustment pursuant to
Section 2.05) from the date of issuance of the Notes through the date of
determination.
"Administrative Agent" means The First National Bank of
Chicago, in its capacity as administrative agent under the Senior Credit
Facilities, and any successor thereto.
"Affiliate" means, with respect to any Person, any other
Person that, directly or indirectly, controls, is controlled by or is under
common control with such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this Agreement, as amended from time to time
in accordance with its terms.
"Applicable Premium" means, with respect to any Note on any
date of redemption with respect thereto, the excess of (A) the present value at
such date of redemption of (1) the principal amount of such Note at the Maturity
Date plus (2) all required interest payments due on such Note through the
Maturity Date (excluding accrued but unpaid interest), computed using a discount
rate equal to the Treasury Rate on such date of redemption plus .50% over (B)
the Accreted Value of such Note.
"Asset Sale" means any sale, lease or other disposition
(including any such transaction effected by way of merger or consolidation) by
the Company or any of its Subsidiaries of any asset, including without
limitation any sale and leaseback transaction, but excluding (i) dispositions in
the ordinary course of business, (ii) dispositions to the Company or a
wholly-owned Subsidiary of the Company; (iii) the licensing of intellectual
property in the ordinary course of business, and (iv) cash payments otherwise
permitted under this Agreement; provided, that
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<PAGE> 6
any disposition not excluded pursuant to clauses (i) through (iv) shall
constitute an Asset Sale only if, and solely to the extent that, the Net Cash
Proceeds therefrom, together with the Net Cash Proceeds from all other such
dispositions effected by the Company and its Subsidiaries after the date hereof,
exceed $1,000,000.
"Base Financial Statements" has the meaning set forth in
Section 3.05(a).
"Black & Decker" means The Black & Decker Corporation, a
Maryland corporation, and its successors.
"Business Acquisition" means (i) an Investment by the Company
or any of its Subsidiaries in any other Person pursuant to which such Person
shall become a Subsidiary or shall be merged into or consolidated with the
Company or any of its Subsidiaries or (ii) an acquisition by the Company or any
of its Subsidiaries of the property and assets of any Person (other than the
Company or any of its Subsidiaries) that constitute a substantial part of the
assets of such Person or of any division or other business unit of such Person.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in the City of New York or London are
authorized or required by law to close.
"Cash Equivalents" means (i) United States dollars, (ii)
Government Securities having maturities of not more than six months from the
date of acquisition, (iii) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any lender party to the Senior Credit Facilities or
with any domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the rating of "P-2" (or higher) from Moody's
Investors Service, Inc. or "A-3" (or higher) from Standard & Poor's Corporation
and in each case maturing within six months after the date of acquisition and
(vi) any fund investing exclusively in investments of the type described in
clauses (i) through (v) above.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of any association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) in the nature of corporate stock, (iii) in the case of a partnership
or limited liability company, any and all partnership or membership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on a balance
sheet in accordance with U.S. GAAP.
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<PAGE> 7
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than the Principals or their Related Parties
(as defined below), (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), other than the Principals and their
Related Parties, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more
than 50% of the Voting Stock of the Company (measured by voting power rather
than number of shares), or (iv) the first day on which a majority of the members
of the Board of Directors of the Company are not Continuing Directors.
"Code" means the Internal Revenue Code of 1986, as amended,
and any regulation promulgated thereunder.
"Commission" means the Securities and Exchange Commission.
"Commitment" means, with respect to the Purchaser, the amount
set forth opposite its name on the signature pages hereto.
"Common Stock" means the authorized common stock, par value
$.01 per share, of the Company.
"Company" means True Temper Corporation, a Delaware
corporation.
"Company Corporate Documents" means the certificate of
incorporation and by-laws of the Company.
"Consolidated Subsidiary" means, at any date with respect to
any Person, any Subsidiary or other entity, the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
if such statements were prepared as of such date.
"Continuing Directors" means as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of hereof, (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election or (iii) was nominated by the Principals (or any entity
controlled by the Principals) pursuant to the Stockholders Agreement.
"Debt" of any Person means, with respect to any Person, any
indebtedness of such Person, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or bankers' acceptances or representing Capital
Lease Obligations or the balance deferred and unpaid of the purchase price of
any property or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense or trade payable, if and to the extent any
of the foregoing
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<PAGE> 8
indebtedness (other than letters of credit and Hedging Obligations) would appear
as a liability upon a balance sheet of such Person prepared in accordance with
U.S. GAAP, as well as all indebtedness of others secured by a Lien on any asset
of such Person (whether or not such Indebtedness is assumed by such Person) and,
to the extent not otherwise included, the Guarantee by such Person of any
indebtedness of any other Person. The amount of any Indebtedness outstanding as
of any date shall be (i) the accreted value thereof, in the case of any
Indebtedness that does not require current payments of interest, and (ii) the
principal amount thereof, together with any interest thereon that is more than
30 days past due, in the case of any other Indebtedness.
"Debt Incurrence" means any incurrence by the Company or any
of its Subsidiaries of any Debt, other than Debt permitted under Section 6.08.
"Debt Registration Rights Agreement" means the Debt
Registration Rights Agreement, dated as of September 30, 1998, between the
Company and the Purchaser, in the form attached as Exhibit C to this Agreement,
as amended, supplemented or otherwise modified from time to time.
"Default" means any Event of Default or any event or condition
which, with the giving of notice or lapse of time or both, would, unless cured
or waived, become an Event of Default.
"DLJSC" means Donaldson, Lufkin & Jenrette Securities
Corporation, a Delaware corporation, and its successors.
"dollars" or "$" mean lawful currency of the United States of
America.
"Environmental Laws" means any and all statutes, laws,
judicial decisions, regulations, ordinances, rules, judgments, orders, decrees,
codes, injunctions, permits, governmental grants, licenses and governmental
restrictions relating to the effect of the environment or Hazardous Materials on
human health, the environment or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Materials or wastes into the environment,
including ambient air, surface water, ground water or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, Hazardous Materials
or wastes or the clean-up or other remediation thereof.
"Environmental Report" means the Environmental Due Diligence
Audit in respect of the Company and its Subsidiaries prepared by Strata
Environmental in September 1998.
"Equity Investors" means True Temper Sports, LLC, a Delaware
limited liability company organized at the direction of Cornerstone Equity
Investors IV, L.P., GS Private Equity Partners, L.P., GS Private Equity Partners
Offshore, L.P., Randolph Street Partners 1998 DIF, LLC, Randolph Street Partners
and certain current members of management of the Company and certain of its
Subsidiaries.
"Equity Issuance" means the issuance of any equity securities
by the Company or any of its Subsidiaries (including without limitation any
equity securities issued pursuant to the exercise
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<PAGE> 9
of stock options or warrants or the Permanent Financing), but excluding (i) any
subscription agreement incentive plan or similar arrangement with any officer,
employee or director of the Company or any of its Subsidiaries, or (ii) the
issuance of any Capital Stock of the Company or any of its Subsidiaries to any
officer, director or employee of the Company or any of its Subsidiaries.
"Equity Registration Rights Agreement" means the Equity
Registration Rights Agreement, dated as of September 30, 1998, among the Company
and the Purchaser, in the form attached as Exhibit E to this Agreement, as
amended, supplemented or otherwise modified from time to time.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any regulation promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Company or any Subsidiary of the Company
is treated as a single employer under Title IV of ERISA or, solely for purposes
of Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code. ERISA Affiliate shall not include Black
& Decker or any other entity that would be an ERISA Affiliate solely as a result
of Black & Decker's classification as an ERISA Affiliate.
"Escrow Agent" means Snoga Inc., a Delaware corporation.
"Escrow Agreement" means the escrow agreement, dated as of
September 30, 1998, among the Company, the Purchaser and the Escrow Agent, in
the form attached as Exhibit A to this Agreement, as amended, supplemented or
otherwise modified from time to time.
"Event of Default" has the meaning set forth in Section 7.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Expiration Date" has the meaning set forth in Section 2.01.
"Extension Fee" means that certain cash duration fee, to be
paid to the Purchaser on the first anniversary of the Issuance Date, in an
amount equal to 3.00% of the Accreted Value of Notes outstanding on such date.
"Financing Documents" means this Agreement, the Notes, the
Debt Registration Rights Agreement, the Equity Registration Rights Agreement,
the Warrant Agreement, the Warrants and the Escrow Agreement.
"Grafalloy Transaction" means the acquisition by Cornerstone
Equity Investors IV, L.P., or its assignee (including the Company) of all of the
outstanding capital stock of Grafalloy Corporation.
"Guarantee Obligation" means as to any Person (the
"guaranteeing person"), any obligation of (a) the guaranteeing person or (b)
another Person (including, without limitation, any
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<PAGE> 10
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 Debt,
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 against loss in
respect thereof; provided, however, that the term Guarantee Obligation shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee 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 Guarantee
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 Guarantee
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 Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined in
good faith by the Person to whom such Guarantee Obligation is payable.
"Hazardous Materials" means (i) asbestos; (ii) polychlorinated
biphenyls; (iii) petroleum, its hazardous derivatives, by-products and other
hydrocarbons; and (iv) any other toxic, radioactive, caustic or otherwise
hazardous substance regulated under Environmental Laws.
"Hazardous Materials Contamination" means contamination of the
buildings, facilities, soil or groundwater on or of the property of the Company
by Hazardous Materials, or any derivatives thereof, or on or of any other
property as a result of Hazardous Materials, or any derivatives thereof,
generated on, emanating from or disposed of in connection with the property of
the Company.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates, currency exchange rates or commodities prices.
"Holder" means any holder of any Note.
"Intellectual Property Rights" means any patent, trade mark,
service mark, registered design, trade name or copyright required to carry on
the business of the Company and such other business as may be permitted by the
terms of this Agreement and which is carried on at the relevant time.
"Interest Payment Date" means each March 31, June 30,
September 30 and December 31 (or, if any such date is not a Business Day, the
next succeeding Business Day).
"Investment" means any investment in any Person, whether by
means of share purchase, capital contribution, loan, time deposit, Guarantee
Obligation or otherwise.
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"Issuance Date" means the date the Notes are issued by the
Company and purchased by the Purchaser.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Majority Holders" means (i) at any time prior to the issuance
of the Notes, the holders of a majority of the Commitments and (ii) at any time
thereafter, the holders of voting rights with respect to waivers, amendments and
other actions permitted or required to be taken by Holders under the terms of
the Notes constituting a majority of such voting rights attributable to the
aggregate outstanding amount of Notes at such time.
"Material Adverse Effect" means a material adverse affect on
the properties, condition (financial or otherwise) operations, performances,
projections, prospects or business of the Company and its Subsidiaries, taken as
a whole.
"Material Recapitalization Documents" means the
Recapitalization Agreement, as amended from time to time in accordance with
Section 6.15, and such other agreements entered into in connection therewith.
"Maturity Date" means the eleventh anniversary of the Issuance
Date.
"Multiemployer Plan" means any Plan that is a multiemployer
plan as defined in Section 3(37) or 4001(a)(3) of ERISA.
"Net Cash Proceeds" means, with respect to any transaction, an
amount equal to the cash proceeds received by the Company or any of its
Subsidiaries from or in respect of such transaction (including any non-cash
proceeds of such transaction to the extent sold for cash within 30 days of such
transaction), less (i) any expenses (including commissions) reasonably incurred
by the Company or such Subsidiary in respect of such transaction, (ii) the
amount of any Debt secured by a Lien on a related asset and discharged from the
proceeds of such transaction and (iii) any taxes paid or payable by the Company
or such Subsidiary with respect to such transaction (as reasonably estimated by
the Company's chief financial officer in good faith).
"Notes" means the Company's Senior Increasing Rate Discount
Notes substantially in the form set forth as Exhibit B hereto.
"Other Taxes" has the meaning set forth in Section 2.07(a).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any of its functions under ERISA.
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"Permanent Financing" means any Debt Incurrence or Equity
Issuance following the date hereof for the purpose of refinancing the Notes.
"Permits" means all domestic and foreign licenses, permits and
approvals required for the full operation of the Company and its Subsidiaries,
including provincial, state, federal, city and county permits and approvals.
"Permitted Business" means any business in which the Company
and its Subsidiaries are engaged on the Issuance Date or any business reasonably
related, incidental or ancillary thereto.
"Permitted Liens" means Liens expressly permitted to exist by
the terms of Section 6.11 hereof.
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or any agency or political subdivision thereof) or other
entity of any kind.
"Plan" means any employee benefit plan as defined in Section
3(3) of ERISA to which the Company, any Subsidiary or any ERISA Affiliate has,
or, within the six years preceding the date of this Agreement, had, any
liability or in respect of which the Company or any Subsidiary of the Company or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Prime Rate" means, for any day, a rate per annum equal to the
rate of interest publicly announced by The Bank of New York (or its successor)
from time to time in The City of New York as its prime, reference or base rate,
it being understood that such rate is one of such bank's base rates and serves
as a basis upon which effective rates of interest are calculated for those loans
making reference thereto and may not be the lowest of such bank's base rates.
"Principals" means Cornerstone Equity Investors IV, L.P. and
its Affiliates, GS Private Equity Partners, L.P., GS Private Equity Partners
Offshore, L.P., Randolph Street Partners 1998 DIF, LLC and Randolph Street
Partners.
"Purchaser" means Emhart, Inc., a Delaware corporation, and
its successors.
"Qualified Plan" means a Plan (other than a Multiemployer
Plan) which is "a pension plan" (as defined in Section 3(2) of ERISA) intended
to be tax-qualified under Section 401(a) of the Code.
"Recapitalization" means the reorganization, recapitalization
and sale of stock of the Company pursuant to the terms of the Recapitalization
Agreement.
"Recapitalization Agreement" means the Reorganization,
Recapitalization and Stock Purchase Agreement, dated as of June 29, 1998, among
Black & Decker, the Company and TTSI
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LLC, as amended by Amendment No. 1 thereto, dated as of August 1, 1998 and
Amendment No. 2 thereto, dated as of September 30, 1998, and as further amended
from time to time in accordance with Section 6.15.
"Related Party" with respect to any Principal means (A) any
controlling stockholder or partner, 50% (or more) owned Subsidiary, or spouse or
immediate family member (in the case of an individual) of such Principal or (B)
any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding (directly or
through one or more Subsidiaries) a 50.1% or more controlling interest of which
consist of the Principals and/or such other Persons referred to in the
immediately preceding clause (A).
"Restricted Payment" means (i) any dividend or other
distribution on any shares of the capital stock of the Company (except dividends
payable solely in shares of its capital stock) or (ii) any payment on account of
the purchase, redemption, retirement or acquisition of (a) any shares of the
capital stock of the Company or (b) any option, warrant or other right to
acquire shares of the capital stock of the Company.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facilities" means a $57,500,000 senior secured
financing consisting of a six year $20,000,000 non-amortizing revolving credit
facility and term loans in aggregate principal amount of $37,500,000 consisting
of a $10,000,000 Term A Loan due 2004 and a $27,500,000 Term B Loan due 2005, in
each case, under that certain Credit Agreement, dated as of September 30, 1998,
among TTSI, the Subsidiaries of TTSI party thereto, the lenders party thereto,
DLJ Capital Funding, Inc., as syndication agent, Donaldson, Lufkin & Jenrette
Securities Corporation, as lead arranger and The First National Bank of Chicago,
as administrative agent for the lenders, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time, provided that the principal amount
thereof does not exceed $57,500,000, plus the amount of reasonable expenses
incurred in connection therewith (other than as a result of currency
fluctuations) less (a) the amount of all scheduled principal repayments actually
made from time to time hereafter of term Debt thereunder and (b) the amount of
all principal repayments actually made from time to time hereafter of revolving
Debt thereunder to the extent made with the net cash proceeds of Asset Sales to
the extent applied to permanently reduce the revolving commitments thereunder.
"Shelf Registration" means a "shelf" registration statement on
any appropriate form pursuant to Rule 415 (or similar rule that may be adopted
by the Commission) under the Securities Act.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Registration S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Sponsors" means Cornerstone Equity Investors IV, L.P..
"Stockholders' Agreement" means the Stockholders' Agreement,
dated as of September 30, 1998, among the Equity Investors, the Company and
Emhart Industries, Inc., a
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wholly-owned subsidiary of Black & Decker, as amended, supplemented or otherwise
modified from time to time.
"Subordinated Notes" means TTSI's 10 1/2% Senior Subordinated
Increasing Rate Notes or the refinancing thereof.
"Subsidiary" means, with respect to any Person, any
corporation or other entity of which a majority of the capital stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are at the time
directly or indirectly owned by such Person.
"Taxes" has the meaning set forth in Section 2.07(a).
"Transfer" means any disposition of Notes that would
constitute a sale thereof under the Securities Act.
"Treasury Rate" means, as of any date, the yield to maturity
as of such date of United States Treasury securities with a constant maturity
(as compiled and published in the most recent Federal Reserve Statistical
Release H.15 (519) that has become publicly available at least two Business Days
prior to such date (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the
remaining term to maturity of the Notes; provided, however, that if such term to
maturity is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.
"TTSI" means True Temper Sports, Inc., a Delaware corporation,
and a wholly-owned subsidiary of the Company.
"U.S. GAAP" means generally accepted accounting principles as
in effect from time to time in the United States of America.
"Voting Stock" means, in respect of any Person, any class or
classes of Capital Stock of such Person pursuant to which the holders thereof
have the general voting power under ordinary circumstances to elect at least a
majority of the board of directors, managers or trustees of such Person
(irrespective of whether or not, at the time, stock of any other class or
classes shall have, or might have, voting power by reason of the happening of
any contingency).
"Warrants" means the warrants to purchase common stock of the
Company to be issued pursuant to the Warrant Agreement.
"Warrant Agreement" means the warrant agreement, dated as of
September 30, 1998, between the Company and the Purchaser in the form attached
as Exhibit D to this Agreement, as amended, supplemented or otherwise modified
from time to time.
"Warrant Shares" has the meaning set forth in Section 5.01(o).
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Section 1.02. Accounting Terms and Determinations. 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 U.S. GAAP applied on a consistent basis (except for changes
concurred in by the Company's independent public accountants).
ARTICLE 2.
PURCHASE AND SALE OF SECURITIES; TERMS OF SECURITIES
Section 2.01. Commitment to Purchase.
(a) Subject to the terms and conditions set forth herein and
in reliance on the representations and warranties of the Company contained
herein and in the other Financing Documents, the Company may at its option issue
and sell to the Purchaser on the Issuance Date, and the Purchaser agrees to
purchase on the Issuance Date, Notes with an initial Accreted Value equaling the
Purchaser's Commitment. The purchase price for the Notes shall be 100% of the
initial Accreted Value thereof.
(b) Each Commitment will terminate (the "Expiration Date") on
the earliest of (i) the termination of the Recapitalization Agreement in
accordance with the terms thereof prior to the consummation of the
Recapitalization, (ii) the consummation of the Recapitalization without the
issuance of the Notes (if such date occurs prior to the Issuance Date), (iii)
the date on which the Company, any of its Subsidiaries or the Sponsors commences
the marketing of any proposed Permanent Financing with respect to which DLJSC or
any of its Affiliates is not the sole manager, sole agent, sole initial
purchaser or sole underwriter (if such date occurs prior to the Issuance Date)
and (iv) 5:00 P.M. (New York City time) on October 15, 1998 (if such date occurs
prior to the Issuance Date); provided, that if at any time on or after the date
hereof an Event of Default shall have occurred and be continuing, the Purchaser
may at its option terminate its Commitment by notice to the Company, such
termination to be effective upon the giving of such notice; and provided further
that each Commitment shall automatically terminate, without notice to the
Company or any other action on the part of the Purchaser, upon the occurrence of
any of the events specified in Sections 7.01(e) and 7.01(f) with respect to the
Company.
(c) No Commitment is revolving in nature, and principal
amounts of Notes prepaid in accordance with Section 2.06 may not be resold to
the Purchaser hereunder.
Section 2.02. Takedown Procedures.
As partial consideration for the sale of stock and other
transactions contemplated by the Reorganization, Recapitalization and Stock
Purchase Agreement, dated as of June 29, 1998, among Black & Decker, TTSI and
TTSI LLC, the Company shall deliver to the Purchaser a single Note representing
the aggregate principal amount at the Maturity Date of Notes to be purchased by
the Purchaser registered in the name of the Purchaser, or, if requested by the
Purchaser, separate Notes in such other denominations and registered in such
name or names as shall be designated by the Purchaser by notice to the Company
at least one Business Day prior to the Issuance Date.
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Section 2.03. Fees.
(a) The Company shall pay the Purchaser a fee of $375,000.
(b) On the first anniversary of the Issuance Date, the Company
shall pay the Purchaser the Extension Fee.
Section 2.04. Mandatory Termination of Commitments.
Each Commitment shall terminate on the Expiration Date.
Section 2.05. Interest
(a) Each Note will accrete at the rate in effect under clause
(b), (c) or (e) of this Section, compounded quarterly to the Maturity Date, on
each Interest Payment Date of each year in which such Note remains outstanding
commencing with the first Interest Payment Date after the date of issuance
thereof. No cash interest will be payable on the Notes prior to the Maturity
Date. Interest on each Note shall be calculated at the rates per annum set forth
below, and shall accrue from and including the most recent Interest Payment Date
to which interest has been paid on such Note (or if no interest has accrued on
such Note, from the date of issuance thereof) to but excluding the date on which
payment in full of the principal sum of such Note has been made.
(b) The interest rate applicable to each Note shall be a
floating rate per annum equal to the sum of (i) the Prime Rate in effect from
time to time plus (ii) 2.00% plus (iii) an additional percentage amount equal to
1.00% from and including the Interest Payment Date falling on March 31, 1999 and
increasing by 0.50% effective on each Interest Payment Date thereafter until the
earlier of (x) the date the principal amount of, and accrued and unpaid interest
on, if any, such Note is paid in full and (y) the first anniversary of the
Issuance Date or, in any case, if less, the maximum rate permitted by applicable
law. Interest on each Note will be calculated on the basis of a 365-day year and
paid for the actual number of days elapsed.
(c) The interest rate applicable to each Note commencing on
the first anniversary of the Issuance Date shall be a floating rate per annum
equal to greatest of (i) the sum of (A) the Prime Rate in effect from time to
time plus (B) 4.00%, (ii) the sum of (A) the Treasury Rate plus (B) 7.00%, (iii)
the sum of (A) the DLJ High Yield Composite Index plus (B) 3.00%, and (iv) the
sum of (A) the interest rate applicable to such Note on the day immediately
preceding the first anniversary of the Issuance Date plus (B) .50%, in each
case, increasing by .50% on each Interest Payment Date thereafter until the date
the principal amount of, and accrued and unpaid interest on, if any, such Note
is paid in full.
(d) In addition to any adjustments to the Interest Rate set
forth in subsections (b) and (c) of this Section 2.05, if, pursuant to the terms
of the Debt Registration Rights Agreement, a Shelf
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Registration with respect to the Notes either (i) has not been filed with the
Commission on or prior to the 90th day following the first anniversary of the
Issuance Date or (ii) has not been declared effective by the Commission on or
prior to the 180th day following the first anniversary of the Issuance Date,
then the Company shall pay liquidated damages thereafter of $.192 per week per
$1,000 principal amount of Notes outstanding until the date on which the Shelf
Registration is declared effective by the Commission. Following the
effectiveness of the Shelf Registration, the Company shall also pay such
liquidated damages beginning on the first date on which such Shelf Registration
ceases to remain effective and shall continue at such increased interest rate
until such Shelf Registration is again declared effective by the Commission.
(e) The Purchaser may, on the first anniversary of the
Issuance Date, fix the interest rate on the Notes at a rate to be determined by
the Purchaser in its sole discretion provided that such rate shall not exceed
seventeen percent (17.00%).
(f) Notwithstanding anything to the contrary set forth above,
at no time shall the per annum interest rate on the Notes exceed seventeen
percent (17.00%), nor shall the per annum interest rate on the Notes be lower
than ten percent (10.00%).
Section 2.06. Maturity of Notes; Prepayment of Notes.
(a) The Notes shall mature on the Maturity Date.
(b) The Company at its option may, upon ten days' written
notice to the Holders, at any time, prepay all or any part of the Notes at a
redemption price equal to 100.00% of the Accreted Value or the principal amount
of the Notes, as the case may be, so prepaid together with any accrued interest
to the date of prepayment, plus the Applicable Premium as of the date of
prepayment if the interest rate has been fixed in accordance with Section
2.05(e).
(c) The Company shall, within five days of receipt by the
Company or any of its Subsidiaries of the Net Cash Proceeds of any Permanent
Financing and within thirty days of receipt by the Company or any of its
Subsidiaries of the Net Cash Proceeds of any Asset Sale, in each case, to the
extent not required to be used to repay the Subordinated Notes or Debt under the
Senior Credit Facilities and not subject to any period during which the Company
or any of its Subsidiaries may reinvest such proceeds prior to a requirement to
repay Debt under the Senior Credit Facilities, redeem an amount of the Notes
equal to the amount of such Net Cash Proceeds (less any amounts not required to
be paid as a result of the requirement in subsection (d) of this Section 2.06),
at a redemption price equal to 100.00% of the Accreted Value or the principal
amount of the Notes, as the case may be, so prepaid together with accrued
interest to the date of prepayment, plus the Applicable Premium as of the date
of prepayment if the interest rate has been fixed in accordance with Section
2.05(e).
(d) Any prepayment of the Notes pursuant to Section 2.06(b)
shall be in a minimum amount of at least $1,000,000 of Accreted Value, unless
less than $1,000,000 of Accreted Value of the Notes remain outstanding, in which
case all of the Notes must be prepaid. Any prepayment of the Notes pursuant to
Section 2.06(c) shall be in a minimum amount which is a multiple of $1,000 times
the number of Holders at the time of such prepayment.
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(e) Any partial prepayment shall be made so that the Notes
then held by each Holder shall be prepaid in an amount which shall bear the same
ratio, as nearly as may be, to the total amount being prepaid as the Accreted
Value principal amount of such Notes, as the case may be, held by such Holder
shall bear to the aggregate Accreted Value or principal amount of all Notes, as
the case may be, then outstanding. In the event of a partial prepayment, upon
presentation of any Note the Company shall execute and deliver to or on the
order of the Holder, at the expense of the Company, a new Note in principal
amount at the Maturity Date equal to the remaining outstanding portion of such
Note.
Section 2.07. Taxes.
(a) For the purposes of this Section, the following terms have
the following meanings:
"Taxes" means any and all present or future taxes, duties,
levies, imposts, deductions, charges or withholdings with respect to any payment
by the Company pursuant to this Agreement or under any Note or any other
Financing Document, and all liabilities with respect thereto, excluding, in the
case of the Purchaser or any other Holder, taxes imposed on the net income of
the Purchaser or such Holder and franchise or similar taxes imposed on the net
income of the Purchaser or such Holder, by a jurisdiction under the laws of
which the Purchaser or such Holder is organized or in which its principal
executive office or the office holding any Notes or any Financing Document is
located.
"Other Taxes" means any present or future stamp or documentary
taxes and any other excise or property taxes, or similar charges or levies,
which arise from any payment made pursuant to this Agreement or under any Note
or any other Financing Document or from the execution, delivery, registration,
recordation or enforcement of, or otherwise with respect to, this Agreement or
any Note or any other Financing Document.
(b) All payments by the Company to or for the account of the
Purchaser or any other Holder under any Financing Document shall be made without
deduction for any Taxes or Other Taxes; provided that, if the Company shall be
required by law to deduct any Taxes or Other Taxes from any such payment, the
sum payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section), the Purchaser or such Holder (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
the Company shall make such deductions, the Company shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law and the Company shall promptly furnish to the Purchaser or
such Holder (as the case may be) the original or a certified copy of a receipt
or other documentation available to the Company evidencing payment thereof.
(c) The Company agrees to indemnify the Purchaser and each
other Holder for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted (whether or not
correctly) by any jurisdiction on amounts payable under this Section) paid by
the Purchaser or such Holder (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto;
provided, however, that
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<PAGE> 19
the Company shall not be obligated to make any payment pursuant to this Section
2.07(c) in respect of penalties or interest attributable to any Taxes or Other
Taxes, if written demand therefor has not been made by the Purchaser or such
Holder (as the case may be) within 60 days from the date on which the Purchaser
or Holder received written notice of the imposition of Taxes or Other Taxes by
the relevant taxing authority, or for any additional imposition which may arise
from the failure of the Purchaser or the Holder (as the case may be) to apply
payments in accordance with the applicable tax law after the Company has made
the payments required hereunder. After the Purchaser or a Holder (as the case
may be) receives written notice of the imposition of Taxes, the Purchaser or
Holder will act in good faith to notify the Company of its obligations
thereunder as soon as reasonably possible.
(d) The Company shall have no obligation for Taxes under
Section 2.07(b) or Section 2.07(c) for or on account of:
(i) any Taxes (other than Other Taxes) that would not
have been so imposed but for the existence of any present or former
connection between the Purchaser or Holder or the beneficial owner (or
between a fiduciary, settlor, beneficiary, member, or shareholder of,
or possessor of a power over, the Purchaser, Holder or beneficial
owner, if the Purchaser, Holder or beneficial owner is an estate, a
trust, a partnership or corporation) and the jurisdiction imposing the
Tax other than merely holding such Note or any Financing Document, or
the receipt of payments in respect thereof, including, without
limitation, the Purchaser, Holder or beneficial owner (or such
fiduciary, settlor, beneficiary, member, shareholder, or possessor)
being or having been a citizen or resident thereof, or being or having
been engaged in a trade or business or having a permanent establishment
or other fixed base therein, or making or having made an election the
effect of which is to subject the Purchaser, Holder or beneficial owner
(or such fiduciary, settlor, beneficiary, member, shareholder, or
possessor) to such Tax;
(ii) any Taxes in the nature of estate, inheritance
or gift taxes;
(iii) any Tax that is imposed or withheld by reason
of the failure of the Holder or beneficial owner of a Note to comply
with a written request by the Company, addressed to such Holder or
beneficial owner, to provide information concerning the nationality,
residence or identity of such Holder or beneficial owner, if providing
such information under a statute, treaty, regulation or administrative
practice of the jurisdiction imposing such Tax would result in a
complete exemption from such Tax;
(iv) any Taxes imposed on any payment on a Note to a
Holder that is a fiduciary or partnership or other than sole beneficial
owner of such payment to the extent a beneficiary or settlor with
respect to such fiduciary or a member of such partnership or a
beneficial owner would not have been entitled to the payment of taxes
had such beneficiary, settlor, member or beneficial owner directly
received its beneficial or distributive share of such payment; and
(v) any combination of items (i) through (iv) above.
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(e) If the Company determines in good faith that a reasonable
basis exists for contesting the imposition of a Tax or Other Tax with respect to
the Purchaser or a Holder, the Purchaser or Holder shall cooperate with the
Company in challenging such Tax or Other Tax at the Company's expense
(including, without limitation, any additional costs, expenses or Taxes incurred
by the Purchasers or Holders, as the case may be, as a result of such contesting
of such Taxes) if requested by the Company; provided, however, that nothing in
this Section 2.07(e) shall require the Purchaser or Holder to submit to the
Company any tax returns or any part thereof, or to prepare or file any tax
returns other than as the Purchaser or Holder in it sole discretion shall
determine.
(f) The Purchaser and each Holder agrees, to the extent
reasonable and without material cost to it, to cooperate with the Company to
minimize any amounts payable by the Company under this Section 2.07.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Purchaser (both
before and after giving effect to the Recapitalization) as set forth below:
Section 3.01. Corporate Existence and Power.
The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted and as proposed to be conducted after the
Recapitalization.
Section 3.02. Authorization, Execution and Enforceability.
(a) The execution, delivery and performance by the Company of
the Financing Documents and the issuance of the Notes by the Company have been
duly and validly authorized and are within its corporate powers. Each of the
Financing Documents (other than the Notes) and the Material Recapitalization
Documents to which it is a party has been duly authorized, executed and
delivered by the Company and constitutes its valid and binding agreement
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency and other similar laws affecting creditors' rights generally and
equitable principles of general applicability. When executed and delivered by
the Company against payment therefor in accordance with the terms hereof, the
Notes will constitute valid and binding obligations of the Company, enforceable
in accordance with their terms, subject to applicable bankruptcy, insolvency and
other similar laws affecting creditors' rights generally and equitable
principles of general applicability.
(b) The Warrants have been duly authorized by the Company and,
when executed and authenticated pursuant to the terms of the Warrant Agreement
and delivered to the Escrow Agent pursuant to the provisions of this Agreement,
will be valid and binding obligations of the Company, enforceable against it in
accordance with their terms, subject to applicable bankruptcy, insolvency and
other similar laws affecting creditors' rights generally and equitable
principles of general applicability.
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<PAGE> 21
(c) The Warrant Shares to be issued upon exercise of the
Warrants have been duly authorized and reserved for issuance by the Company and
will be issued at the times and in the manner required by the Warrant Agreement
and, upon due exercise of a Warrant, the Warrant Shares issued will be validly
issued, fully paid and nonassessable.
Section 3.03. Governmental Authorization.
The execution and delivery by the Company of each of the
Financing Documents and the Material Recapitalization Documents to which it is a
party did not and will not, the issuance and sale of the Notes and the Warrants
and Warrant Shares by the Company will not, and the consummation of the
transactions contemplated hereby and thereby will not, require any action by or
in respect of, or filing with, any governmental body, agency or governmental
official except such actions and filings which (i) have been taken or made and
remain in full force and effect, or (ii) if not taken or made, will not have a
material adverse effect on the validity or enforceability of the Financing
Documents and the Material Recapitalization Documents.
Section 3.04. Contravention.
Except as set forth on Schedule 3.04, the execution and
delivery by the Company of the Financing Documents and the Material
Recapitalization Documents to which it is a party did not and will not, the
issuance and sale of the Notes and the Warrants and Warrant Shares by the
Company will not, and the consummation of the transactions contemplated hereby
and thereby will not, (A) contravene or constitute a default under or violation
of any provision of (i) applicable law or regulation, (ii) the Company Corporate
Documents or (iii) any agreement, judgment, injunction, order, decree or other
instrument binding upon it or any of its assets, except, in the case of clauses
(i) and (iii), for such contraventions, defaults or violations that would not
reasonably be expected to result in a Material Adverse Effect, or (B) result in
the creation or imposition of any Lien on any asset of the Company or any of its
Subsidiaries other than Liens created or imposed pursuant to the Senior Credit
Facilities.
Section 3.05. Financial Information.
(a) (i) The combined balance sheets of the Company and its
Subsidiaries as of December 31, 1995, December 31, 1996 and December 31, 1997
and the related combined statements of profit and loss and cash flows for the
fiscal years ended December 31, 1995, December 31, 1996 and December 31, 1997
(collectively, the "Base Financial Statements"), audited by Ernst & Young (ii)
the unaudited combined balance sheets of the Company and its Subsidiaries as of
December 31, 1993 and December 31, 1994 and the related unaudited combined
statements of profit and loss and cash flows for the fiscal years ended December
31, 1993 and December 31, 1994, and (iii) the unaudited interim combined balance
sheets of the Company and its Subsidiaries as of June 30, 1997 and June 30, 1998
and the related combined interim statements of profit and loss and cash flows
for the six moths ended June 30, 1997 and June 30, 1998, in the case of each of
clauses (i), (ii) and (iii), have been prepared in conformity with U.S. GAAP,
fairly present the combined financial position of such entities as of each such
date and their combined results of operations, changes in stockholders' equity
and cash flows for each such period.
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(b) The pro forma combined balance sheets as of December 31,
1997 and June 30, 1998 and the related pro forma combined statements of profit
and loss for the fiscal year ended December 31, 1997 and the six months ended
June 30, 1998 have been prepared on a basis consistent with the Base Financial
Statements of the Company and its Subsidiaries and give effect to assumptions
used in the preparation thereof on a reasonable basis and in good faith and
present fairly the historical and proposed transactions contemplated by the
Recapitalization; and such pro forma financial statements comply as to form in
all material respects with the requirements applicable to pro forma financial
statements included in registration statements on Form S-1 under the Securities
Act.
(c) There has occurred no material adverse change in the
business, assets or financial condition of the Company and its Subsidiaries,
taken as a whole, since December 31, 1997.
Section 3.06. Litigation.
There is no action, suit or proceeding pending or, to the
knowledge of the Company, threatened against the Company, any of its
Subsidiaries, any Plan or any fiduciary of any Plan before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could have a material
adverse effect on the Financing Documents or the Recapitalization.
Section 3.07. Environmental Matters.
Except as provided on Schedule 3.07 and except to the extent
that the following would not reasonably be expected to result in a Material
Adverse Effect:
(a) No property owned, leased or operated by the Company or
any of its Subsidiaries is affected by any Hazardous Materials Contamination.
(b) No asbestos or asbestos-containing materials are present
on any of the properties now or previously owned, leased or operated by the
Company or any of its Subsidiaries.
(c) No polychlorinated biphenyls in regulated concentrations
are located on or in any properties now or previously owned, leased or operated
by the Company or any of its Subsidiaries, in the form of electrical
transformers, fluorescent light fixtures with ballasts, cooling oils or any
other device.
(d) No underground storage tanks are located on any properties
now or previously owned, leased or operated by the Company or any of its
Subsidiaries, or were located on any such property and subsequently removed or
filled.
(e) No written notice, notification, demand, CERCLA-related
request for information, complaint, citation, summons, investigation,
administrative order, consent order or consent agreement, litigation or
settlement with respect to Hazardous Materials or Hazardous Materials
Contamination has been issued to the Company or is pending, as the case may be,
or, to the Company's knowledge, proposed, threatened or anticipated, in each
case, with respect to or in connection with the operation of any properties now
or previously owned, leased or operated by the Company or any of its
Subsidiaries. Except to the extent the following would not result in a Material
Adverse Effect, all such properties and their existing and prior uses by the
Company, and,
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to the Company's knowledge, the uses of the properties prior to the Company's
ownership, lease or operation comply and at all times have complied with any
applicable governmental requirements relating to environmental matters or
Hazardous Materials and there is no condition on any of such properties which is
in violation of any applicable governmental requirements relating to Hazardous
Materials, and neither the Company nor any of its Subsidiaries has received any
communication from or on behalf of any governmental authority that any such
condition exists.
(f) For purposes of this Section 3.07, the terms "Company" and
"Subsidiary" shall include any business or business entity (including a
corporation) which is, in whole or in part, a predecessor of the Company or any
Subsidiary to the extent the Company would be liable for the liabilities of such
predecessor under any applicable Environmental Laws.
Section 3.08. Taxes.
(a) All income tax returns and all other tax returns which are
required to be filed by or on behalf of the Company and its Subsidiaries have
been filed and all taxes shown as due on such returns have been paid or adequate
reserves have been established on the books of the Company, except to the extent
that the failure to file any such returns or pay any such taxes would not
reasonably be expected to result in a Material Adverse Effect and except for any
such taxes that are being contested in good faith by appropriate proceedings and
for which appropriate reserves have been established in accordance with U.S.
GAAP. The charges, accruals and reserves on the books of the Company in respect
of taxes or other governmental charges have been established in accordance with
U.S. GAAP.
(b) There is no tax, levy, impost, deduction, charge or
withholding imposed by any governmental instrumentality either (i) on or by
virtue of the execution, delivery, performance, enforcement or admissibility
into evidence of any Financing Document or (ii) on any payment to be made by the
Company pursuant to any Financing Document. The Company is permitted under
applicable laws to pay any additional amounts payable by it under Section 2.07.
Section 3.09. Subsidiaries.
Other than those listed on Schedule 3.09, the Company has no
Subsidiaries.
Section 3.10. Governmental Regulations.
None of the Company or any of its Subsidiaries is or will be
subject to regulation under the Investment Company Act of 1940, as amended, the
Public Utility Holding Company Act of 1935, as amended, the Federal Power Act,
the Interstate Commerce Act or to any other statute, rule or regulation limiting
its ability to incur Indebtedness for borrowed money.
Section 3.11. Full Disclosure.
The information heretofore furnished by the Sponsors or the
Company to the Purchaser in writing for purposes of or in connection with the
Financing Documents or any transaction contemplated hereby does not, and all
such information hereafter furnished by the Sponsors or the Company to the
Purchaser will not (in each case as amended or supplemented and taken together
and on the date as of which such information is furnished), contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein, in the light of the circumstances
under which they
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<PAGE> 24
are made, not misleading. The Company has disclosed to the Purchaser any and all
facts which materially and adversely affect or may affect (to the extent the
Company can now reasonably foresee), the business, assets or financial position
of the Company or the ability of the Company to perform its obligations under
the Financing Documents or to complete the Permanent Financing.
Section 3.12. Capitalization.
At the Issuance Date, after giving effect to the
Recapitalization, the capitalization of the Company will be as set forth on
Schedule 3.12. All of the issued and outstanding shares of Common Stock are,
and, as of the time of the closing of the Recapitalization, will be, validly
issued, fully paid and nonassessable and free and clear of any Lien or other
right or claim (other than Liens created under the Senior Credit Facilities) and
except as contemplated in the Stockholders' Agreement, the holders thereof are
not entitled to any preemptive or other similar rights. Except for the Material
Recapitalization Documents or as set forth on Schedule 3.12, there are no
subscriptions, options, warrants, rights, convertible securities, exchangeable
securities or other agreements or commitments of any character pursuant to which
the Company is required to issue any shares of its capital stock.
Section 3.13. Solicitation. No form of general solicitation or
general advertising was used by the Company or, to the best of its knowledge,
any other Person acting on behalf of the Company, in connection with the offer
and sale of the Notes. Neither the Company nor any Person acting on behalf of
the Company has, either directly or indirectly, sold or offered for sale to any
Person any of the Notes or any other similar security of the Company except as
contemplated by this Agreement, and the Company represents that neither the
Company nor any person acting on its behalf other than the Purchaser and its
Affiliates will sell or offer for sale to any Person any such security to, or
solicit any offers to buy any such security from, or otherwise approach or
negotiate in respect thereof with, any Person or Persons so as thereby to bring
the issuance or sale of any of the Notes within the provisions of Section 5 of
the Securities Act.
Section 3.14. Non-fungibility. When the Notes are issued and
delivered pursuant to this Agreement, the Notes will not be of the same class
(within the meaning of Rule 144A under the Securities Act) as securities which
are (i) listed on a national securities exchange registered under Section 6 of
the Exchange Act or (ii) quoted in a U.S. automated inter-dealer quotation
system.
Section 3.15. Permits. Except to the extent any of the
following would not result in a Material Adverse Effect: (a) the Company and its
Subsidiaries have all Permits as are necessary for the conduct of their
respective businesses as it has been carried on; (b) all such Permits are in
full force and effect, and each of the Company and its Subsidiaries has
fulfilled and performed all obligations with respect to such Permits; (c) no
event has occurred which allows, or after notice or lapse of time would allow,
revocation or termination by the issuer thereof or which results in any other
impairment of the rights of the holder of any such Permit; and (d) each of the
Company and its Subsidiaries has no reason to believe that any governmental body
or agency is considering limiting, suspending or revoking any such Permit.
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<PAGE> 25
Section 3.16. Representations in Other Financing Documents and
in Material Recapitalization Documents.
(a) Each of the representations and warranties of the Company
set forth in any of the other Financing Documents is true and correct in all
material respects.
(b) Each of the representations and warranties of the Company
set forth in any of the Material Recapitalization Documents is true and correct
in all material respects.
Section 3.17. No Undisclosed Liabilities.
Neither the Company nor any of its Subsidiaries has any
material liability (absolute or contingent) except (A) those shown on the
financial statements described in Sections 6.01(a) and (b) and (B) those
incurred under the Financing Documents.
Section 3.18. ERISA Matters.
During the twelve consecutive months ending on the date of the
execution and delivery of this Agreement, no steps have been taken to terminate
any Qualified Plan, and no contribution failure has occurred with respect to any
Qualified Plan sufficient to give rise to a Lien under section 302(f) of ERISA,
which, in the aggregate, is reasonably expected to lead to liability on the part
of the Company or any ERISA Affiliate in excess of $1,000,000. No condition
exists or event or transaction has occurred with respect to any Qualified Plan
which could reasonably be expected to result in the incurrence by the Company of
any material liability, fine or penalty other than as could not reasonably be
expected to have a Material Adverse Effect. Since the date of the last period
covered by the Base Financial Statements, none of the Company, any Subsidiary or
any ERISA Affiliate has taken any action that could be expected to increase (i)
any contingent liability with respect to any post-retirement benefit under a
Welfare Plan, other than liability for continuation coverage described in part 6
of Subtitle B of Title I of ERISA or (ii) any contingent liability with respect
to any Qualified Plan or Multiemployer Plan, except as would not have a Material
Adverse Effect.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.01. Purchase for Investment; Authority; Binding
Agreement.
The Purchaser represents and warrants to the Company that:
(a) the Purchaser is an Accredited Investor within the meaning
of Rule 501(a) under the Securities Act and the Notes to be acquired by it
pursuant to this Agreement are being acquired for its own account without a view
toward distribution and the Purchaser will not offer, sell, transfer, pledge,
hypothecate or otherwise dispose of the Notes unless pursuant to a transaction
either registered under, or exempt from registration under, the Securities Act;
(b) the execution, delivery and performance of this Agreement
and the purchase of the Notes pursuant hereto are within the Purchaser's
corporate powers and have been duly and validly authorized by all requisite
corporate action;
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<PAGE> 26
(c) this Agreement has been duly executed and delivered by the
Purchaser;
(d) this Agreement constitutes a valid and binding agreement
of the Purchaser enforceable in accordance with its terms; and
(e) the Purchaser has such knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of its investment in the Notes and the Purchaser is capable of bearing the
economic risks of such investment.
ARTICLE 5.
CONDITIONS PRECEDENT TO PURCHASE
Section 5.01. Conditions to Purchaser's Obligation at
Takedown.
The obligation of the Purchaser to purchase the Notes to be
issued and sold by the Company on the Issuance Date is subject to the
satisfaction of the following conditions contemporaneously with such purchase:
(a) (i) Each of the conditions to the parties' obligations
under the Material Recapitalization Documents shall have been satisfied or, with
the prior written consent of the Purchaser, waived and (ii) the Recapitalization
shall have been completed on the terms set forth in the Material
Recapitalization Documents (as such terms may have been amended or waived with
the consent of the Purchaser).
(b) The Purchaser shall have received executed copies of each
of the Material Recapitalization Documents, the Financing Documents and the
Stockholders' Agreement, each of which shall be in full force and effect and no
term or condition thereof shall have been amended, waived or otherwise modified
without the prior written consent of the Purchaser.
(c) There shall exist no action, suit, investigation,
litigation or proceeding pending or to the Company's knowledge threatened in any
court or before any arbitrator or any governmental instrumentality that could
reasonably be expected to (A) have a material adverse effect on any Financing
Document, the Material Recapitalization Document, the Notes or the
Recapitalization or any of the other transactions contemplated thereby or hereby
or (B) result in a Material Adverse Effect.
(d) The Purchaser shall have received evidence satisfactory to
them of the substantially simultaneous repayment in full of all existing Debt of
the Company and its Subsidiaries (other than Debt permitted under Sections 6.08)
and the termination of each existing Lien on any asset securing any such Debt.
(e) The Purchaser shall have received opinions, dated on or
prior to the Issuance Date, of Kirkland & Ellis, special counsel for the
Company, in the form and substance satisfactory to the Purchaser.
(f) All fees and expenses payable to the Purchaser hereunder
shall have been paid in full.
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(g) The representations and warranties of the Company
contained in the Financing Documents shall be true and correct in all material
respects on and as of the Issuance Date as if made on and as of such date and
the Company shall have performed and complied with all covenants and agreements
required by the Financing Documents to be performed by it or complied with by it
at or prior to the Issuance Date.
(h) There shall not exist any Default.
(i) The Purchaser shall have received the Notes to be issued
on the Issuance Date, duly executed by the Company in the denominations and
registered in the names specified in or pursuant to Section 2.02.
(j) The capitalization, tax and corporate and ownership
structure (including the articles of incorporation and by-laws) of the Company
and its Subsidiaries before and after the consummation of the Recapitalization
shall be consistent with that set forth in documents provided to the Purchaser
prior to the date hereof or shall otherwise be satisfactory to the Purchaser in
all material respects.
(k) The Purchaser shall have received a certificate of the
Secretary or Assistant Secretary of the Company, dated as of a date reasonably
satisfactory to the Purchaser, certifying (A) (i) that attached thereto is a
true, complete and correct copy of resolutions duly adopted by the Board of
Directors of the Company, authorizing (1) the execution, delivery and
performance of the Financing Documents to which it is a party, and (2) the
transactions contemplated hereby, and (ii) that such resolutions have not been
amended, modified, revoked or rescinded, (B) as to the incumbency and specimen
signature of each officer executing any Financing Documents on its behalf, and
(C) true and complete copies of its constituent documents, and such certificates
and the resolutions attached thereto shall be in form and substance satisfactory
to the Purchaser.
(l) Pursuant to the terms of the Escrow Agreement, the Company
shall have executed and delivered to the Escrow Agent fully authenticated
Warrants, unregistered or registered in blank, representing the right to
purchase at any time up to an aggregate of 2.1% of the fully-diluted common
stock of the Company, calculated after giving effect to the transactions
occurring on or prior to the Issuance Date (the "Warrant Shares"), exercisable
for a period of seven years at a price equal to $.01 per share.
(m) All matters relating to the transactions contemplated by
this Agreement, the Financing Documents, the Purchase Agreement, the Senior
Credit Facilities, the Stockholders' Agreement and the transactions contemplated
hereby and thereby shall be satisfactory to the Purchaser in its discretion, and
the Purchaser shall have received such additional certificates, legal and other
opinions and documentation as they shall reasonably request.
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ARTICLE 6.
COVENANTS
The Company agrees that, from and after the Issuance Date and
so long as any Notes remain outstanding and unpaid, and for the benefit of the
Purchaser and the Holders:
Section 6.01. Information.
The Company will deliver to the Purchaser:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Company, a consolidated balance sheet of the
Company and its Subsidiaries as of the end of such fiscal year and the related
consolidated statements of income and cash flows) for such fiscal year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all reported on in a manner acceptable to the Commission by independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the Company,
a consolidated balance sheet of the Company and its Subsidiaries as of the end
of such quarter and the related consolidated statement of income for such
quarter and for the portion of the Company's fiscal year ended at the end of
such quarter and the related consolidated statement of cash flow for the portion
of the Company's fiscal year ended at the end of such quarter, setting forth in
each case in comparative form the figures for the corresponding quarter and the
corresponding portion of the Company's previous fiscal year, all certified
(subject to footnote presentation and normal year-end adjustments) as to
fairness of presentation and consistency by the chief financial officer or the
chief accounting officer of the Company and, if required, with footnote
reconciliation to U.S. GAAP;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the chief
financial officer or the chief accounting officer of the Company (i) setting
forth in reasonable detail the calculations required to establish whether the
Company was in compliance with the requirements of Sections 6.08 through 6.11,
inclusive, on the date of such financial statements and (ii) stating whether any
Default exists on the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action which the Company is taking or
proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements confirming the
calculations set forth in the officer's certificate delivered simultaneously
therewith pursuant to clause (c) above;
(e) within five days after any executive officer of the
Company obtains knowledge of a Default, if such Default is then continuing, a
certificate of the chief financial officer or the chief accounting officer of
the Company setting forth the details thereof and the action which the Company
is taking or proposes to take with respect thereto;
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<PAGE> 29
(f) promptly upon the filing thereof, copies of all
applications, registration statements or reports which the Company or any of its
Subsidiaries shall have filed with the Commission or any other national or
international stock exchange;
(g) promptly following the commencement thereof, notice and a
description in reasonable detail of any litigation or proceeding to which the
Company or any of its Subsidiaries is a party in which the amount involved is
$1,000,000 or more;
(h) promptly following the occurrence thereof, notice and a
description in reasonable detail of any material adverse change in the business,
assets or financial position of the Company and its Subsidiaries taken as a
whole;
(i) promptly following the occurrence thereof, notice and a
copy of any amendment entered into with respect to the Senior Credit Facilities;
and.
(j) from time to time such additional information regarding
the financial position or business of the Company and its Subsidiaries as the
Purchaser may reasonably request.
Section 6.02. Payment of Obligations.
The Company will pay and discharge, and will cause each
Subsidiary to pay and discharge, material obligations and liabilities,
including, without limitation, tax liabilities, at or before such obligations
and liabilities become due, except where the same may be contested in good faith
by appropriate proceedings, and will maintain, and will cause each Subsidiary to
maintain, in accordance with U.S. GAAP, appropriate reserves for the accrual of
any of the same.
Section 6.03. Insurance.
The Company shall, and shall cause each of its Subsidiaries
to, keep its insurable properties adequately insured at all times by financially
sound and reputable insurers; maintain such other insurance, to such extent and
against such risks, including fire and other risks insured against by extended
coverage, as is customary with companies in the same or similar businesses
operating in the same or similar locations, including (i) public liability
insurance against claims for personal injury or death or property damage
occurring upon, in, about in connection with the use of any properties owned,
occupied or controlled by it and (ii) business interruption insurance; and
maintain such other insurance as may be required by law.
Section 6.04. Conduct of Business and Maintenance of
Existence.
The Company will continue, and will cause each Subsidiary to
continue, to engage in business of the same general type as now conducted by the
Company and its Subsidiaries, and will preserve, renew and keep in full force
and effect, and will cause each Subsidiary to preserve, renew and keep in full
force and effect their respective corporate existence and their respective
rights, privileges and franchises necessary or desirable in the normal conduct
of business, except that (i) the Company may discontinue any immaterial line of
business of the Company and its Subsidiaries if the Board of Directors of the
Company determines that such discontinuation is in the best interests of the
Company and not disadvantageous to the holder of any Note and (ii) nothing in
this Section 6.04 shall prohibit the merger or consolidation of any wholly-owned
Subsidiary of the Company with or into any other wholly-owned Subsidiary of the
Company.
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Section 6.05. Compliance with Laws.
(a) The Company will comply, and cause each Subsidiary to
comply, in all material respects with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities (including, without
limitation, Environmental Laws and ERISA and the rules and regulations
thereunder where noncompliance could reasonably be expected to have a Material
Adverse Effect).
(b) The Company will take all actions to ensure that (i) the
obligations of the Company under the Financing Documents are at all times valid,
binding and enforceable against the Company in accordance with their terms under
all applicable laws, and (ii) the Financing Documents may be admitted into
evidence in any relevant jurisdiction.
Section 6.06. Inspection of Property, Books and Records.
The Company will keep, and will cause each Subsidiary to keep,
proper books of record and account in which full, true and correct entries shall
be made of all dealings and transactions in relation to its business and
activities; and will permit, and will cause each Subsidiary to permit,
representatives of the Purchaser at reasonable times and intervals, and upon
reasonable notice, but, unless an Event of Default shall have occurred and be
continuing, not more frequently than once in each fiscal year, to visit its
corporate offices, to discuss its financial matters with its officers and, only
in the presence of a representative of the Company (whose attendance at such
discussion cannot be unreasonably refused), its independent public accountants
(and the Company hereby authorizes such independent public accountants to
discuss the Company's financial matters with the Purchaser or its
representatives, so long as a representative of the Company is present) and to
examine any of its books or other financial records.
Section 6.07. Investment Company Act.
The Company will not be or become an open-end investment
trust, unit investment trust or face-amount certificate company that is or is
required to be registered under the Investment Company Act of 1940, as amended.
Section 6.08. Limitation on Debt.
Neither the Company nor any Subsidiary will create, incur,
assume or suffer to exist any Debt, except:
(a) Debt outstanding on the date of this Agreement (other than
Debt incurred under the Senior Credit Facilities and the Subordinated Notes) and
identified in Schedule 6.08 and refinancings and replacements thereof in a
principal amount not exceeding the principal amount of the Debt so refinanced or
replaced on terms no less favorable to the Holders of the Notes than those in
place on the date of this Agreement and with an average life to maturity of not
less than the then average life to maturity of the Debt so refinanced or
replaced;
(b) Debt of the Company evidenced by the Notes and Debt of
TTSI evidenced by the Subordinated Notes;
(c) Debt under the Senior Credit Facilities, in a principal
amount not to exceed $50,000,000 (in addition to Debt incurred under clause (f)
below);
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(d) Debt owing to the Company or a Subsidiary;
(e) Debt incurred by the Company or any of its Subsidiaries
that is represented by Capital Lease Obligations, mortgage financings or
purchase money obligations; provided, that the amount of such Debt does not
exceed 90% of the fair market value of the asset so financed and that the
maximum aggregate amount of all Debt permitted under this clause (e) shall not
at any time exceed $1,000,000;
(f) Debt incurred by the Company or any of its Subsidiaries in
connection with the Grafalloy Transaction in an amount not to exceed $7,500,000
(which may be borrowed pursuant to the Senior Credit Facilities);
(g) other unsecured Debt of the Company and its Subsidiaries
in an aggregate amount at any time outstanding not to exceed $1,000,000;
(h) other Debt the Net Cash Proceeds of which are applied in
accordance with Section 2.06 to prepay all amounts owing under the Notes; and
(i) the incurrence by the Company or any of its Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or hedging:
(i) interest rate risk with respect to any floating rate Debt that is permitted
by the terms of this Agreement to be outstanding; (ii) exchange rate risk with
respect to any agreement or Indebtedness of such Person payable in a currency
other than U.S. dollars; or (iii) commodities risk relating to commodities
agreements, entered into in the ordinary course of business, for the purchase of
raw material used by the Company and its Subsidiaries.
Section 6.09. Restricted Payments; Voluntary Prepayments.
(a) The Company will not declare or make any Restricted
Payment other than Restricted Payments contemplated in connection with the
Recapitalization; provided, however, the foregoing will not prohibit the
purchase, redemption, retirement or acquisition of any equity securities of the
Company or any of its Subsidiaries from any officer, director or employee
(whether current or former) of the Company or any of its Subsidiaries pursuant
to any subscription agreement, incentive plan, employment agreement,
stockholders agreement or similar agreement; provided, however, the aggregate
amount paid shall not exceed (i) $1,000,000 in any fiscal year (with unused
amounts in any fiscal year being carried over to succeeding fiscal years subject
to a maximum (without giving effect to clause (ii)) of $2,000,000 in any fiscal
year, plus (ii) the aggregate cash proceeds received by the Company from any
issuance or reissuance of any equity securities of the Company or any of its
Subsidiaries to any officer, director or employee of the Company or any of its
Subsidiaries.
(b) The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, optionally redeem, retire, purchase,
acquire, defease or otherwise make any payment, other than required interest
payments, in respect of any Debt which is subordinated to or pari passu with the
Notes, other than payments in respect of Debt owing to the Company or a
Subsidiary.
Section 6.10. Investments.
The Company will not, and will not permit any of its
Subsidiaries to, make or acquire any Investment in any Person other than (i)
Investments in existence on the date hereof and identified on Schedule 6.10;
(ii) Investments in Cash Equivalents; (iii) Investments made after the date
hereof in Persons which are direct or indirect Subsidiaries immediately after
such Investment is made; (iv) Investments in the form of loans to officers,
directors and employees of the Company and its Subsidiaries for the sole purpose
of purchasing common stock of the Company (or purchases of such loans made by
others) in an aggregate amount at any time outstanding not to exceed $1,000,000;
(v) any Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with Section 6.18
hereof; (vi) any acquisition of assets solely in exchange for the issuance of
Common Stock of the Company and (vii) the Grafalloy Transaction, provided, such
Investment does not exceed an aggregate fair market value of $7,500,000. Without
limiting the generality of the foregoing, the Company will not make, or permit
any of its Subsidiaries to make, any Business Acquisition other than (i) the
Grafalloy Transaction and (ii) any Business Acquisition with respect to which
the consideration paid by the Company consists solely of Common Stock.
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Section 6.11. Negative Pledge.
The Company will not create, assume or suffer to exist any
Lien on any asset now owned or hereafter acquired by it, except:
(a) the Liens identified on Schedule 6.11;
(b) other Liens approved by the Majority Holders securing Debt
permitted by Section 6.08;
(c) Liens securing the Senior Credit Facilities;
(d) Liens securing Debt permitted by Sections 6.08(e) and
6.08(i); and
(e) Liens arising in the ordinary course of its business which
(i) do not secure Debt, (ii) do not secure any obligation in an amount exceeding
$1,000,000 and (iii) do not in the aggregate materially detract from the value
of the assets of the Company and its Subsidiaries, taken as a whole, or
materially impair the use thereof in the operation of its business.
Section 6.12. Transactions with Affiliates.
The Company will not, and will not permit any Subsidiary to,
directly or indirectly, pay any funds to or for the account of, make any
investment (whether by acquisition of stock or indebtedness, by loan, advance,
transfer of property, guarantee or other agreement to pay, purchase or service,
directly or indirectly, any Debt, or otherwise) in, lease, sell, transfer or
otherwise dispose of any assets, tangible or intangible, to, or participate in,
or effect any transaction in connection with any joint enterprise or other joint
arrangement with, any Affiliate, except on terms to the Company or such
Subsidiary no less favorable than terms that could be obtained by the Company or
such Subsidiary from a Person that is not an Affiliate, as determined, in the
case of any transaction with a value of $1,000,000 or more, in good faith by the
Board of Directors of the Company; provided, that no determination of the Board
of Directors shall be required with respect to any of the following: (i)
transactions entered into in the ordinary course of business; (ii) transactions
entered into in connection with the execution or performance of the Company's
obligations under the Management Services Agreement; (iii) any transaction among
True Temper Funding, Inc. or any of its Affiliates on the one hand and the
Company on the other hand; and (iv) the Grafalloy Transaction.
Section 6.13. Consolidations, Mergers and Sales of Assets;
Ownership of Subsidiaries.
(a) Neither the Company nor any of its Subsidiaries will
consolidate or merge with or into any other Person; provided, that (i) any
wholly-owned Subsidiary of the Company may merge or consolidate with or into any
other wholly-owned Subsidiary and (ii) the Company or any Subsidiary may merge
with an Affiliate for the sole purpose of reincorporating in a new jurisdiction.
The Company will not, and will not permit its Subsidiaries to, sell, lease or
otherwise transfer, directly or indirectly, any substantial part of the assets
of the Company and its Subsidiaries, taken as a whole, to any other Person.
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(b) The Company will at all times continue to own, directly or
indirectly, 100% of the capital stock of each Person which is a wholly-owned
Subsidiary of the Company on the date hereof.
Section 6.14. Use of Proceeds.
The proceeds from the issuance and sale of the Notes by the
Company pursuant to this Agreement shall be used to fund the Recapitalization
and to pay related fees and expenses.
Section 6.15. Restrictions on Certain Amendments.
The Company will not amend or waive, or suffer to be amended
or waived, any Corporate Document or any Material Recapitalization Document from
the respective forms thereof delivered to the Purchaser pursuant to Section 5.01
in a way which has a material adverse effect on the Holders or the Purchaser
without the prior written consent of the Purchaser.
Section 6.16. Limitation on Sales of Assets and Subsidiary
Stock.
The Company shall not, and shall not permit any of its
Subsidiaries to, enter into any agreement with respect to or consummate any
Asset Sale, unless (a) at least 75% of the consideration received by the Company
or such Subsidiary, as the case may be, is in the form of cash or Cash
Equivalents; provided, that any securities sold for cash within 30 days of the
consummation of such Asset Sale shall be considered cash for purposes hereof and
(y) the consideration received by the Company is at least equal to the fair
market value of the assets or property sold, transferred or otherwise disposed
of (as determined in good faith by the Board of Directors of the Company) and
the Net Cash Proceeds thereof are applied in accordance with Section 2.06(c).
Section 6.17. Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its
Subsidiaries to, enter into any sale and leaseback transaction.
Section 6.18. Assumed Debt.
At all times during the 45 days following the Issuance Date,
the Company shall have unused revolving commitments available for drawing under
the Senior Credit Facilities and/or letters of credit under the Senior Credit
Facilities in a principal amount equal to the outstanding principal amount of
all outstanding Debt set forth on Schedule 6.08 with respect to which any
default or event of default exists on the Issuance Date. If any such default or
event of default with respect to any such outstanding Debt is not cured or
waived on or prior to the date occurring 45 days after the Issuance Date, the
Company shall pay or cause to be paid the principal amount of such Debt
outstanding on such 45th day.
Section 6.19. Business Activities.
The Company will not, and will not permit any Subsidiary to,
engage in any business other than a Permitted Business, except to such extent as
would not be material to the Company and its Subsidiaries taken as a whole.
ARTICLE 7.
EVENTS OF DEFAULT
Section 7.01. Events of Default Defined; Acceleration of
Maturity; Waiver of Default.
In case one or more of the following (each, an "Event of
Default"), whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by
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<PAGE> 34
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, shall
have occurred and be continuing:
(a) default in the payment of all or any part of the principal
or premium, if any, on any of the Notes as and when the same shall become due
and payable either at maturity, upon any redemption, by declaration or
otherwise; or
(b) [Reserved]; or
(c) failure on the part of the Company for 30 days after
written notice from a Holder to observe or perform any of the covenants
contained in Sections 6.07 through 6.19 of this Agreement; or
(d) failure on the part of the Company to observe or perform
any other of the covenants or agreements contained in the Financing Documents,
if such failure shall continue for a period of 30 days after the date on which
written notice thereof shall have been given to the Company by a Holder; or
(e) the Company or any of its Significant Subsidiaries shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect in any
jurisdiction or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing; or
(f) an involuntary case or other proceeding shall be commenced
against the Company or any of its Significant Subsidiaries seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of 90 days; or an order for relief shall be entered against the Company
or any of its Significant Subsidiaries under the bankruptcy laws as now or
hereafter in effect in any jurisdiction; or
(g) there shall be a default in respect of any Debt of the
Company or any of its Significant Subsidiaries (other than such defaults
existing with respect to the Debt set forth on Schedule 3.04 during the period
ending on the date that is 45 days after the Issuance Date) in an aggregate
principal amount in excess of $1,000,000 whether such Debt now exists or shall
hereafter be created (excluding the Notes) if such default results in
acceleration of the maturity of such Debt; or the Company or any of its
Subsidiaries shall fail to pay at maturity any such Debt whether such Debt now
exists or shall hereafter be created; or
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<PAGE> 35
(h) a final judgment for the payment of money which exceeds
$1,000,000 shall be rendered against the Company or any of its Subsidiaries by a
court of competent jurisdiction and shall remain undischarged for a period
(during which execution shall not be effectively stayed) of 60 days after such
judgment becomes final; or
(i) any representation, warranty, certification or statement
made or deemed made by the Company or any of its Subsidiaries in any Financing
Document or which is contained in any certificate, document or financial or
other statement furnished at any time under or in connection with any Financing
Document shall prove to have been untrue in any material respect when made or
deemed made; or
(j) a Change of Control has occurred; or
(k) any of the Financing Documents shall for any reason fail
to constitute the valid and binding agreement of the Company; or
(l) any of the following events, to the extent that such
events, singly or in the aggregate, could reasonably be expected to give rise to
a liability of the Company, any Subsidiary or any ERISA Affiliate in excess of
$1,000,000: (i) the Company, any Subsidiary or any ERISA Affiliate shall fail to
pay when due any amount or amounts, which such entity shall have become liable
to pay under Title IV of ERISA; (ii) notice of intent to terminate a Qualified
Plan shall be filed under Title IV of ERISA by the administrator of any Plan,
the Company, any Subsidiary, any ERISA Affiliate or any combination of the
foregoing; (iii) the PBGC shall institute proceedings under Title IV of ERISA to
terminate, impose liability (other than for premiums due under Section 4007 of
ERISA and not in default) in respect of or cause a trustee to be appointed to
administer, any Plan; (iv) a condition shall exist by reason of which the PBGC
would be entitled to obtain a decree adjudicating that any Qualified Plan (other
than the Formica Corporation Employee Retirement Plan) be terminated; or (v) the
Company, any Subsidiary or any ERISA Affiliate shall incur a partial or complete
withdrawal from a Multiemployer Plan; then, and in each and every such case
(other than under clauses (e) and (f) with respect to the Company), unless the
principal of all the Notes shall have already become due and payable, the
Majority Holders (or, if at such time the Purchaser no longer hold at least 50%
of the aggregate outstanding principal amount of the Notes, Holders of at least
33 1/3% of the aggregate outstanding principal amount of the Notes), by notice
in writing to the Company and the agent bank under the Senior Credit Facilities,
may declare the entire principal amount of the Notes together with accrued
interest thereon to be immediately due and payable; provided that (a) for so
long as the Senior Credit Facilities are in effect, such acceleration shall not
become effective until the earlier of (i) five Business Days after the notice of
acceleration is given to the Administrative Agent and (ii) the date on which the
Debt under the Senior Credit Facilities is accelerated; and, (b)for as long as
the Subordinated Notes are outstanding, such acceleration shall not become
effective until the earlier of (i) five Business Days after the notice of
acceleration is given to the holders of Subordinated Notes (or their
representatives), and (ii) the date on which the Debt under the Subordinated
Notes is accelerated. If an Event of Default specified in clauses (e) or (f)
occurs, the principal of and accrued interest on the Notes will be immediately
due and payable without any notice, declaration or other act on the part of the
Holders. The Majority Holders may annul any such notice of acceleration or past
Defaults (other than monetary Defaults not yet cured) by delivering a notice of
annulment to the Company and the Administrative Agent. If an Event of Default
shall occur and be continuing, the Purchaser shall have the right to appoint one
(1) representative to serve as a member of the Company's Board
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<PAGE> 36
of Directors; provided, however, that such right shall terminate if the
Purchaser no longer holds at least 50% of the aggregate outstanding principal
amount of the Notes.
ARTICLE 8.
LIMITATION ON TRANSFERS
Section 8.01. Restrictions on Transfer.
From and after the Issuance Date, none of the Notes shall be
transferable except upon the conditions specified in Sections 8.02 and 8.03,
which conditions are intended to ensure compliance with the provisions of the
Securities Act in respect of the Transfer of any of such Notes or any interest
therein. The Purchaser will cause any proposed transferee of any Notes (or any
interest therein) held by it to agree to take and hold such Notes (or any
interest therein) subject to the provisions and upon the conditions specified in
this Section 8.01 and in Sections 8.02 and 8.03.
Section 8.02. Restrictive Legends.
(a) Each Note issued to the Purchaser or to a subsequent
transferee shall (unless otherwise permitted by the provisions of Section
8.02(b) or Section 8.03) include a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD, UNLESS IT HAS
BEEN REGISTERED UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE AND
THEN ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET
FORTH IN THE SECURITIES PURCHASE AGREEMENT DATED AS OF
SEPTEMBER 30, 1998, A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER OF THIS SECURITY AT ITS
PRINCIPAL EXECUTIVE OFFICE.
(b) Any Holders of Notes registered pursuant to the Securities
Act and qualified under applicable state securities laws may exchange such Notes
on transfer for new securities that shall not bear the legend set forth in
paragraph (a) of this Section 8.02.
Section 8.03. Notice of Proposed Transfers.
(a) Five Business Days prior to any proposed Transfer (other
than Transfers of Notes (i) registered under the Securities Act, (ii) to an
Affiliate of DLJSC or a general partnership in which DLJSC, or any of its
Affiliates is one of the general partners or (iii) to be made in reliance on
Rule 144A under the Securities Act) of any Notes, the holder thereof shall give
written notice to the Company of such holder's intention to effect such
Transfer, setting forth the manner and circumstances of the proposed Transfer,
and shall be accompanied by (i) an opinion of counsel reasonably satisfactory to
the Company addressed to the Company to the effect that the proposed Transfer of
such Notes may be effected without registration under the Securities Act, (ii)
such
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<PAGE> 37
representation letters in form and substance reasonably satisfactory to the
Company to ensure compliance with the provisions of the Securities Act and (iii)
such letters in form and substance reasonably satisfactory to the Company from
each such transferee stating such transferee's agreement to be bound by the
terms of this Agreement. Such proposed Transfer may be effected only if the
Company shall have received such notice of transfer, opinion of counsel,
representation letters and other letters referred to in the immediately
preceding sentence, whereupon the holder of such Notes shall be entitled to
Transfer such Notes in accordance with the terms of the notice delivered by the
holder to the Company. Each Note transferred as above provided shall bear the
legend set forth in Section 8.02(a) except that such Note shall not bear such
legend if the opinion of counsel referred to above is to the further effect that
neither such legend nor the restrictions on Transfer in Sections 8.01 through
8.03 are required in order to ensure compliance with the provisions of the
Securities Act.
(b) Five Business Days prior to any proposed Transfer of any
Notes to be made in reliance on Rule 144A under the Securities Act ("Rule
144A"), the holder thereof shall give written notice to the Company of such
holder's intention to effect such Transfer, setting forth the manner and
circumstances of the proposed Transfer and certifying that such Transfer will be
made (i) in full compliance with Rule 144A and (ii) to a transferee that (A)
such holder reasonably believes to be a "qualified institutional buyer" within
the meaning of Rule 144A and (B) is aware that such Transfer will be made in
reliance on Rule 144A. Such proposed Transfer may be effected only if the
Company shall have received such notice of transfer, whereupon the holder of
such Notes shall be entitled to Transfer such Notes in accordance with the terms
of the notice delivered by the holder to the Company. Each Note transferred as
above provided shall bear the legend set forth in Section 8.02(a).
ARTICLE 9.
MISCELLANEOUS
Section 9.01. Notices.
All notices, demands and other communications to any party
hereunder shall be in writing (including facsimile or similar writing) and shall
be given to such party at its address set forth on the signature pages hereof,
or such other address as such party may hereinafter specify for the purpose.
Each such notice, demand or other communication shall be effective (i) if given
by facsimile, when such facsimile is transmitted to the facsimile number
specified on the signature page hereof, or (ii) if given by overnight courier,
addressed as aforesaid or by any other means, when delivered at the address
specified in this Section.
Section 9.02. No Waivers; Amendments.
(a) No failure or delay on the part of any party in exercising
any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or remedy preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy. The remedies provided for herein are cumulative and are not exclusive
of any remedies that may be available to any party at law or in equity or
otherwise.
(b) Any provision of this Agreement may be amended,
supplemented or waived if, but only if, such amendment, supplement or waiver is
in writing and is signed by the Company
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<PAGE> 38
and the Majority Holders; provided, that without the consent of each Holder of
any Note affected thereby, an amendment, supplement or waiver may not (a) reduce
the aggregate principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver, (b) reduce the rate or extend the time for
payment of interest on any Note, (c) reduce the principal amount of or extend
the stated maturity of any Note or (d) make any Note payable in money or
property other than as stated in the Notes. In determining whether the Holders
of the requisite principal amount of Notes have concurred in any direction,
consent, or waiver as provided in this Agreement or in the Notes, Notes which
are owned by the Company or any other obligor on or guarantor of the Notes, or,
except for DLJSC and its Affiliates by any Person controlling, controlled by, or
under common control with any of the foregoing, shall be disregarded and deemed
not to be outstanding for the purpose of any such determination; and provided,
further, that no such amendment, supplement or waiver which affects the rights
of the Purchaser and its Affiliates otherwise than solely in their capacities as
Holders of Notes shall be effective with respect to them without their prior
written consent.
Section 9.03. Indemnification.
(a) The Company (the "Indemnifying Party") agrees to indemnify
and hold harmless the Purchaser, its Affiliates, and each Person, if any, who
controls the Purchaser, or any of its Affiliates, within the meaning of the
Securities Act or the Exchange Act (a "Controlling Person"), and the respective
partners, agents, employees, officers and directors of the Purchaser, its
Affiliates and any such Controlling Person (each an "Indemnified Party," and
collectively, the "Indemnified Parties"), from and against any and all losses,
claims, damages, liabilities and expenses (including, without limitation and as
incurred, reasonable costs of investigating, preparing or defending any such
claim or action, whether or not such Indemnified Party is a party thereto)
arising out of, or in connection with any activities contemplated by this
Agreement or any other services rendered in connection herewith, including, but
not limited to, losses, claims, damages, liabilities or expenses arising out of
or based upon any untrue statement or any alleged untrue statement of a material
fact or any omission or any alleged omission to state a material fact in any of
the disclosure or offering or confidential information documents (the
"Disclosure Documents") pertaining to any of the transactions or proposed
transactions contemplated herein, including any eventual refinancing or resale
of the Notes, provided, that the Indemnifying Party will not be responsible for
any claims, liabilities, losses, damages or expenses that are determined by
final judgment of a court of competent jurisdiction to result solely from such
Indemnified Party's gross negligence, willful misconduct or bad faith. The
Indemnifying Party also agrees that (i) no Purchaser shall have liability
(except for breach of provisions of this Agreement) for claims, liabilities,
damages, losses or expenses, including legal fees, incurred by the Indemnifying
Party in connection with this Agreement, unless they are determined by final
judgment of a court of competent jurisdiction to result from the Purchaser's
gross negligence, willful misconduct or bad faith and (ii) no Purchaser shall in
any event have any liability to the Company on any theory of liability for
special, indirect, consequential or punitive damages (as opposed to direct or
actual damages) arising out of, or in connection with, or as a result of this
Agreement.
(b) If any action shall be brought against an Indemnified
Party with respect to which indemnity may be sought against the Indemnifying
Party under this Agreement, such Indemnified Party shall promptly notify the
Indemnifying Party in writing and the Indemnifying
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<PAGE> 39
Party shall, if requested by such Indemnified Party or if the Indemnifying Party
desires to do so, assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Party and payment of all
reasonable fees and expenses. The failure to so notify the Indemnifying Party
shall not affect any obligations the Indemnifying Party may have to such
Indemnified Party under this Agreement or otherwise unless the Indemnifying
Party is materially adversely affected by such failure. Such Indemnified Party
shall have the right to employ separate counsel in such action and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party, unless: (i) the Indemnifying Party has
failed to assume the defense and employ counsel reasonably satisfactory to such
Indemnified Party or (ii) the named parties to any such action (including any
impleaded parties) include such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel that there may be
one or more legal defenses available to it which are different from or
additional to those available to the Indemnifying Party, in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of such action
or proceeding on behalf of such Indemnified Party, provided, however, that the
Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be responsible hereunder for the reasonable fees and expenses
of more than one such firm of separate counsel, in addition to any local
counsel, which counsel shall be designated by the Purchaser. The Indemnifying
Party shall not be liable for any settlement of any such action effected without
the written consent of the Indemnifying Party (which shall not be unreasonably
withheld) and the Indemnifying Party agrees to indemnify and hold harmless each
Indemnified Party from and against any loss or liability by reasons of
settlement of any action effected with the consent of the Indemnifying Party. In
addition, the Indemnifying Party will not, without the prior written consent of
the Purchaser, settle or compromise or consent to the entry of any judgment in
or otherwise seek to terminate any pending or threatened action, claim, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not any Indemnified Party is a party thereto) unless such
settlement, compromise, consent or termination includes an express unconditional
release of the Purchaser and the other Indemnified Parties, reasonably
satisfactory in form and substance to the Purchaser, from all liability arising
out of such action, claim, suit or proceeding.
(c) If for any reason the foregoing indemnity is unavailable
to an Indemnified Party or insufficient to hold an Indemnified Party harmless,
then in lieu of indemnifying the Indemnified Party, the Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such claims, liabilities, losses, damages, or expenses (i) in such proportion
as is appropriate to reflect the relative benefits received by the Indemnifying
Party on the one hand and by the Purchaser on the other from the transactions
contemplated by this Agreement or (ii) if the allocation provided by clause (i)
is not permitted under applicable law, in such proportion as is appropriate to
reflect not only the relative benefits received by the Indemnifying Party on the
one hand and the Purchaser on the other, but also the relative fault of the
Indemnifying Party and the Purchaser as well as any other relevant equitable
considerations. Notwithstanding the provisions of this Section 9.03, the
aggregate contribution of all Indemnified Parties shall not exceed the amount of
fees actually received by the Purchaser pursuant to this Agreement. It is hereby
further agreed that the relative benefits to the Indemnifying Party on the one
hand and the Purchaser
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<PAGE> 40
on the other with respect to the transactions contemplated hereby shall be
deemed to be in the same proportion as (i) the aggregate principal amount of
Notes issued by the Company bears to (ii) the fees actually received by the
Purchaser pursuant to this Agreement. The relative fault of the Indemnifying
Party on the one hand and the Purchaser on the other with respect to the
transactions contemplated hereby shall be determined by reference to, among
other things, whether any untrue or alleged untrue statement of material fact or
the omission or alleged omission to state a material fact related to information
supplied by the Indemnifying Party or by the Purchaser and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. No Indemnified Party shall have any liability to the
Indemnifying Party or any other person in connection with the services rendered
pursuant to the Commitment except for the liability for claims, liabilities,
losses or damages finally determined by a court of competent jurisdiction to
have resulted from action taken or omitted to be taken by such Indemnified Party
in bad faith or to be due to such Indemnified Party's willful misconduct, or
gross negligence. 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.
(d) The indemnification, contribution and expense
reimbursement obligations set forth in this Section 9.03 (i) shall be in
addition to any liability the Indemnifying Party may have to any Indemnified
Party at common law or otherwise, (ii) shall survive the termination of this
Agreement and the payment in full of the Notes and (iii) shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Purchaser or any other Indemnified Party.
Section 9.04. Expenses.
The Company agrees to pay all reasonable out-of-pocket costs,
expenses and other payments in connection with the purchase and sale of the
Notes as contemplated by this Agreement including without limitation (i)
reasonable fees and disbursements of special counsel and any local counsel for
the Purchaser incurred in connection with the preparation of this Agreement,
(ii) all reasonable out-of-pocket expenses of the Purchaser, including
reasonable fees and disbursements of counsel, in connection with any waiver or
consent hereunder or any amendment hereof or any Default or alleged Default
hereunder and (iii) if an Event of Default occurs, all reasonable out-of-pocket
expenses incurred by the Purchaser and each Holder of Notes, including
reasonable fees and disbursements of a single counsel (which counsel shall be
selected by the Purchaser if the Purchaser is a Holder of Notes when such Event
of Default occurs), in connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
Section 9.05. Payment.
The Company agrees that, so long as the Purchaser shall own
any Notes purchased by it from the Company hereunder, the Company will make
payments to the Purchaser of all amounts due thereon by wire transfer by 1:00
P.M. (New York City time) on the date of payment to such account as is specified
beneath the Purchaser's name on the signature page hereof or to such other
account or in such other similar manner as the Purchaser may designate to the
Company in writing.
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<PAGE> 41
Section 9.06. Confidentiality.
The Purchaser shall not use confidential information obtained
from the Company by virtue of the transactions contemplated by this Agreement
or their other relationships with the Company in connection with the
performance by the Purchaser of services for other companies, and the Purchaser
shall not furnish any such information to other companies. The Purchaser has no
obligation to use in connection with the transactions contemplated by this
Agreement, or to furnish to the Company, confidential information obtained from
other companies.
Section 9.07. Successors and Assigns.
This Agreement shall be binding upon and shall inure to the
benefit of the Company, the Purchaser, the holders of Debt and under the Senior
Credit Facilities and their respective successors and assigns; provided that
the Company may not assign or otherwise transfer its rights or obligations
under this Agreement to any other Person without the prior written consent of
the Majority Holders. All provisions hereunder purporting to give rights to the
Purchaser and its Affiliates, or to Holders are for the express benefit of such
Persons.
Section 9.08. Brokers.
The Company represents and warrants that, except for DLJSC,
it has not employed any broker, finder, financial advisor or investment banker
who might be entitled to any brokerage, finder's or other fee or commission in
connection with the Recapitalization or the sale of the Notes.
Section 9.09. New York Law; Submission to Jurisdiction; Waiver
of Jury Trial.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 9.10. Severability.
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
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<PAGE> 42
Section 9.11. Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be an original with the same effect as if the signatures
thereto and hereto were upon the same instrument.
[SIGNATURE PAGES FOLLOW]
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<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers, as of the
date first above written.
TRUE TEMPER CORPORATION
By:
---------------------------------
Name:
Title:
Address for Notices:
True Temper Corporation
8275 Tournament Drive, Suite 200
Memphis, TN 38125
Attention: Chief Financial Officer
with a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022
Attention: Frederick Tanne
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<PAGE> 44
PURCHASER:
Commitment:
$25,000,000 [Initial Accreted Value]
{EMHART, INC.}
By:
------------------------
Name:
Title:
Address for Notices:
C/O The Black & Decker Corporation
701 East Joppa Road
Towson, MD 21286
Attention: Chief Financial Officer
Telecopy: (410) 716-3318
with a copy to:
Miles & Stockbridge P.C.
10 Light Street
Baltimore, MD 21202
Attention: Glenn C. Campbell
Wiring Instructions:
ABA#
A/C#
for further credit to
A/C#
Attention:
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<PAGE> 45
SCHEDULE 3.04
CONTRAVENTION
NONE
<PAGE> 46
SCHEDULE 3.07
ENVIRONMENTAL MATTERS
All matters set forth in the reports entitled "Environmental Review, True Temper
Sports, Inc., 8706 Deerfield Drive, Olive Branch, Mississippi 38654" and
"Environmental Review, True Temper Sports, Highway 25 South, Amory, Mississippi
38821" prepared by Strata Environmental, copies of which have been provided to
Purchaser.
<PAGE> 47
SCHEDULE 3.09
SUBSIDIARIES
True Temper Sports, Inc., a Delaware corporation
<PAGE> 48
SCHEDULE 3.12
CAPITALIZATION OF HOLDINGS
SEE ATTACHED
<PAGE> 49
SCHEDULE 6.08
DEBT
NONE
<PAGE> 50
SCHEDULE 6.10
INVESTMENTS
NONE
<PAGE> 51
SCHEDULE 6.11
LIENS
Liens described under Section 7.2.3 to the Senior Credit Facilities.
<PAGE> 52
EXHIBIT B
[FORM OF NOTE]
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT, AS
SUCH TERM IS DEFINED IN SECTION 1271 ET SEQ. OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED. UPON INQUIRY MADE BY ANY HOLDER HEREOF, ADDRESSED TO TRUE
TEMPER CORPORATION, 8275 TOURNAMENT DRIVE, SUITE 200, MEMPHIS, TENNESSEE 38125,
ATTENTION: CHIEF FINANCIAL OFFICER, TRUE TEMPER CORPORATION WILL PROVIDE A
STATEMENT SETTING FORTH THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT,
THE ISSUE DATE AND THE YIELD TO MATURITY WITH RESPECT TO THE NOTE HELD BY SUCH
HOLDER.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR
SOLD, UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE AND THEN
ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE SECURITIES
PURCHASE AGREEMENT DATED AS OF SEPTEMBER 30, 1998, A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER OF THIS SECURITY AT ITS PRINCIPAL EXECUTIVE OFFICE
No. __ $___________
TRUE TEMPER CORPORATION
Senior Increasing Rate Discount Note
TRUE TEMPER CORPORATION, a Delaware corporation (together with
its successors, the "Company"), for value received hereby promises to pay to
Emhart, Inc. and registered assigns (the "Holder") the initial principal sum of
_______________________________ plus the amounts by which the principal has been
increased in accordance with Section 2.05 of the Securities Purchase Agreement
(as defined) by wire transfer of immediately available funds to the Holder's
account at such bank in the United States as may be specified in writing by the
Holder to the Company, on the Maturity Date in 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, and to accrete interest on the unpaid
principal amount hereof on the dates and at the rate or rates provided for in
the Securities Purchase Agreement. Reference is made to the Securities Purchase
Agreement for provisions for the prepayment hereof and the acceleration of the
maturity hereof.
This Note is one of a duly authorized issue of Senior
Increasing Rate Discount Notes of the Company (the "Notes") referred to in the
Securities Purchase Agreement, dated as of September 30, 1998, among the Company
and the Purchaser named therein (as the same may be amended from time to time in
accordance with its terms, the "Securities Purchase Agreement"). The
<PAGE> 53
Notes are transferable and assignable to one or more purchasers (in minimum
denominations of $5,000,000 or larger multiples of $1,000,000), in accordance
with the limitations set forth in the Securities Purchase Agreement. The Company
agrees to issue from time to time replacement Notes in the form hereof to
facilitate such transfers and assignments.
The Company shall keep at its principal office a register (the
"Register") in which shall be entered the names and addresses of the registered
holders of the Notes and particulars of the respective Notes held by them and of
all transfers of such Notes. References to the "Holder" or "Holders" shall mean
the Person listed in the Register as the payee of any Note. The ownership of the
Notes shall be proven by the Register.
This Note shall be deemed to be a contract under the laws of
the State of New York, and for all purposes shall be construed in accordance
with the laws of said State. The parties hereto, hereby waive presentment,
demand, notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, except as
specifically provided herein, and assent to extensions of the time of payment,
or forbearance or other indulgence without notice.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.
Dated: September 30, 1998
TRUE TEMPER CORPORATION
By:
------------------------
Name:
Title:
<PAGE> 1
Exhibit 12.1
TRUE TEMPER SPORTS
Schedule 12 Data - Statement of Ratio of Earnings To Fixed Charges
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, SEPTEMBER 28, SEPTEMBER 29,
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
EARNINGS
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income Before Taxes (10,902) 3,105 3,098 5,852 10,140 7,492 (26,548)
FIXED CHARGES
Interest Expense 11 38 24 20 30 16 10
Interest Factor of Operating Rents 85 87 88 94 91 73 80
Total Fixed Charges 96 125 112 114 121 89 90
EARNINGS, AS ADJUSTED (10,806) 3,230 3,210 5,966 10,261 7,581 (26,458)
RATIO OF EARNINGS TO FIXED CHARGES N/A 26 29 52 85 85 (294)
</TABLE>
<PAGE> 1
Exhibit 23.1
DRAFT
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 6, 1998, with respect to the financial statements
of True Temper Sports, Inc. included in the Registration Statement (Form S-4)
and related Prospectus of True Temper Sports, Inc. for the registration of 10
7/8% Senior Subordinated Notes in the amount of $100,000,000 , due 2008.
/s/ Ernst & Young LLP
February 10, 1999
Baltimore, Maryland
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
--------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036
New York, New York (Zip Code)
(Address of principal
executive offices)
--------------------------
TRUE TEMPER SPORTS, INC.
(Exact name of REGISTRANT as specified in its charter)
Delaware 52-2112620
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
8275 Tournament Drive, Suite 200 38125
Memphis, Tennessee (Zip code)
(Address of principal executive offices)
--------------------------
10 7/8% Senior Subordinated Notes due 2008
(Titles of the indenture securities)
<PAGE> 2
-2-
GENERAL
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.
Federal Reserve Bank of New York (2nd District), New York,
New York (Board of Governors of the Federal Reserve System).
Federal Deposit Insurance Corporation, Washington, D. C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3,4,5,6,7,8,9,10,11,12,13,14 and 15.
The registrant is currently not in default under any of its outstanding
securities for which United States Trust Company of New York is
Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11,
12, 13, 14 and 15 of Form T-1 are not required under General
Instruction B.
16. List of Exhibits
T-1.1 -- Organization Certificate, as amended, issued by
the State of New York Banking Department to transact
business as a Trust Company, is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
<PAGE> 3
- 3 -
16. List of Exhibits
(cont'd)
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
T-1.4 -- The By-Laws of United States Trust Company of New
York, as amended, is incorporated by reference to
Exhibit T-1.4 to Form T-1 filed on September 15, 1995
with the Commission pursuant to the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform
Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section
321(b) of the Trust Indenture Act of 1939, as amended
by the Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the
trustee pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of February 11, 1999, the trustee had 2,999,020 shares of Common
Stock outstanding, all of which are owned by its parent company, U. S.
Trust Corporation. The term "trustee" in Item 2, refers to each of
United States Trust Company of New York and its parent company, U. S.
Trust Corporation.
In answering Item 2 in this statement of eligibility, as to matters
peculiarly within the knowledge of the obligor or its directors, the
trustee has relied upon information furnished to it by the obligor and
will rely on information to be furnished by the obligor and the trustee
disclaims responsibility for the accuracy or completeness of such
information.
---------------------
<PAGE> 4
- 4 -
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, United States Trust Company 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 11th day of February 1999.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
By: _______________________________________
Patricia Stermer
Assistant Vice President
<PAGE> 5
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
/s/Gerard F. Ganey
------------------
By: Gerard F. Ganey
Senior Vice President
<PAGE> 6
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash and Due from Banks $ 104,220
Short-Term Investments 207,292
Securities, Available for Sale 578,874
Loans 2,061,582
Less: Allowance for Credit Losses 17,199
----------
Net Loans 2,044,383
Premises and Equipment 58,263
Other Assets 124,079
----------
TOTAL ASSETS $3,117,111
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 709,221
Interest Bearing 1,908,861
----------
Total Deposits 2,618,082
Short-Term Credit Facilities 170,644
Accounts Payable and Accrued Liabilities 146,324
----------
TOTAL LIABILITIES $2,935,050
==========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 53,041
Retained Earnings 111,402
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 2,623
----------
TOTAL STOCKHOLDER'S EQUITY 182,061
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $3,117,111
==========
</TABLE>
I, Richard E. Brinkmann, Managing Director & Comptroller of the named bank do
hereby declare that this Statement of Condition has been prepared in conformance
with the instructions issued by the appropriate regulatory authority and is true
to the best of my knowledge and belief.
Richard E. Brinkmann, Managing Director & Controller
February 1, 1999
<TABLE> <S> <C>
<ARTICLE> 5 EXHIBIT 27.1
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997 DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1995 JAN-01-1995 JAN-01-1997 JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1995 DEC-31-1996 DEC-31-1997 SEP-28-1997 SEP-29-1996
<CASH> 457 793 1,299 9 1,084
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 8,384 7,236 8,433 9,999 11,996
<ALLOWANCES> 302 266 268 94 446
<INVENTORY> 10,777 10,741 11,373 8,920 8,964
<CURRENT-ASSETS> 19,430 18,519 21,186 18,758 21,793
<PP&E> 46,177 48,252 49,663 49,190 50,732
<DEPRECIATION> 22,154 24,911 27,962 27,306 29,671
<TOTAL-ASSETS> 168,533 163,186 160,341 159,031 118,460
<CURRENT-LIABILITIES> 12,369 11,099 13,469 11,142 10,663
<BONDS> 0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
<COMMON> 0 0 0 0 0
<OTHER-SE> 156,164 151,907 146,716 147,691 107,747
<TOTAL-LIABILITY-AND-EQUITY> 168,533 163,186 160,341 159,031 118,460
<SALES> 67,531 71,603 82,597 63,166 71,892
<TOTAL-REVENUES> 0 0 0 0 0
<CGS> 49,228 49,628 53,886 41,761 45,308
<TOTAL-COSTS> 64,374 65,679 72,403 55,627 98,365
<OTHER-EXPENSES> 59 72 54 47 75
<LOSS-PROVISION> 80 50 54 41 38
<INTEREST-EXPENSE> 24 20 30 16 10
<INCOME-PRETAX> 3,098 5,852 10,140 7,492 (26,548)
<INCOME-TAX> 2,612 3,647 5,277 3,915 5,814
<INCOME-CONTINUING> 486 2,205 4,863 3,577 (32,362)
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 486 2,205 4,863 3,577 (32,362)
<EPS-PRIMARY> 0 0 0 0 0
<EPS-DILUTED> 0 0 0 0 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10 7/8% SENIOR SUBORDINATED NOTES DUE 2008
OF
TRUE TEMPER SPORTS, INC.
PURSUANT TO THE PROSPECTUS DATED
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1999 UNLESS EXTENDED
(THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal
should be completed, signed, and submitted to the Exchange Agent:
<TABLE>
<S> <C> <C>
By Overnight Courier: By Hand: By Registered or Certified Mail:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
770 Broadway, 13th Floor 111 Broadway P.O. Box 844
New York, New York 10003 Lower Level Cooper Station
Attn: Corporate Trust Services New York, New York 10006 New York, New York 10276-0844
Attn: Corporate Trust Services Attn: Corporate Trust Services
</TABLE>
By Facsimile:
212-780-0592
Attn: Corporate Trust Services
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS 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
800-548-6565 OR BY FACSIMILE AT 212-780-0592.
The undersigned hereby acknowledges receipt of the Prospectus dated
(the "Prospectus") of True Temper Sports, Inc., a Delaware
corporation (the "Issuer"), and this Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Issuer's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of its 10 7/8% Senior
Subordinated Notes due 2008 (the "Exchange Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration Statement, for each $1,000 in principal amount of its outstanding
10 7/8% Senior Subordinated Notes due 2008 (the "Notes"), of which $100,000,000
aggregate principal amount is outstanding. Capitalized terms used but not
defined herein have the meanings ascribed to them in the Prospectus.
The undersigned hereby tenders the Notes described in Box 1 below (the
"Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. 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 ("Beneficial Owners")
a duly completed and executed form of "Instruction 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.
<PAGE> 2
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns, and transfers to, or upon the
order of, the Issuer, all right, title, and interest in, to, and under the
Tendered Notes.
Please issue the Exchange Notes exchanged for Tendered Notes in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions" below (Box 3), please send or cause to be sent the
certificates for the Exchange Notes (and accompanying documents, as appropriate)
to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned with
respect to the Tendered Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Issuer or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Issuer, on the books of
the registrar for the Notes and deliver all accompanying evidences of transfer
and authenticity to, or upon the order of, the Issuer upon receipt by the
Exchange Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon acceptance by the Issuer of the Tendered Notes
pursuant to the Exchange Offer, and (ii) receive 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 undersigned understands that tenders of Notes pursuant to the
procedures described under the caption "The Exchange Offer" in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Issuer upon the terms and subject to the conditions of the
Exchange Offer, subject only to withdrawal of such tenders on the terms set
forth in the Prospectus under the caption "The Exchange Offer-Withdrawal of
Tenders." All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and any Beneficial Owner(s), and
every obligation of the undersigned or any Beneficial Owners hereunder shall be
binding upon the heirs, representatives, successors, and assigns of the
undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign, and transfer the Tendered
Notes and that the Issuer will acquire good and unencumbered title thereto, free
and clear of all liens, restrictions, charges, encumbrances, and adverse claims
when the Tendered Notes are acquired by the Issuer as contemplated herein. The
undersigned and each Beneficial Owner will, upon request, execute and deliver
any additional documents reasonably requested by the Issuer or the Exchange
Agent as necessary or desirable to complete and give effect to the transactions
contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired by
the undersigned and any Beneficial Owner(s) in the ordinary course of business
of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each
Beneficial Owner 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, (iii) except as otherwise disclosed in
writing herewith, neither the undersigned nor any Beneficial Owner is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Issuer, and
(iv) the undersigned and each Beneficial Owner acknowledge and agree that any
person participating in the Exchange Offer with the intention or for the purpose
of distributing the Exchange Notes must comply with the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the "Securities
Act"), in connection with a secondary resale of the Exchange Notes acquired by
such person and cannot rely on the position of the Staff of the Securities and
Exchange Commission (the "Commission") set forth in the no-action letters that
are discussed in the section of the Prospectus entitled "The Exchange Offer." In
addition, by accepting the Exchange Offer, the undersigned hereby (i) represents
and warrants that, if the undersigned or any Beneficial Owner of the Notes is a
Participating Broker-Dealer, such Participating Broker-Dealer acquired the Notes
for its own account as a result of market-making activities or other trading
activities and has not entered into any arrangement or understanding with the
Company or any affiliate of the Company (within the meaning of Rule 405 under
the Securities Act) to distribute the New Notes to be received in the Exchange
Offer, and (ii) acknowledges that, by receiving New Notes for its own account in
exchange for Notes, where such Notes were acquired as a result of market-making
activities or other trading activities, such Participating
2
<PAGE> 3
Broker-Dealer will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes.
[ ] 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 DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
"Use of Guaranteed Delivery" BELOW (Box 4).
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE "Use of Book-Entry Transfer" BELOW (Box 5).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF NOTES TENDERED
(ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
AGGREGATE
NAME(S) AND ADDRESS(ES) OF REGISTERED NOTE HOLDER(S), CERTIFICATE PRINCIPAL AMOUNT AGGREGATE
EXACTLY AS NAME(S) APPEAR(S) ON NOTE CERTIFICATE(S) NUMBER(S) OF REPRESENTED BY PRINCIPAL AMOUNT
(PLEASE FILL IN, IF BLANK) NOTES* CERTIFICATE(S) TENDERED**
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
TOTAL
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Notes. All
other tenders must be in integral multiples of $1,000 of principal
amount. Unless otherwise indicated in this column, the principal amount
of all Note Certificates identified in this Box 1 or delivered to the
Exchange Agent herewith shall be deemed tendered. See Instruction 4.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
BOX 2
BENEFICIAL OWNER(S)
- -------------------------------------------------------------------------------------------------------------------------
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED NOTES
BENEFICIAL OWNER OF TENDERED NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR NOTES AND UNTENDERED NOTES
ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE UNDERSIGNED AT
AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any untendered Notes to:
Name(s):
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Tax Identification or
Social Security No.:
BOX 4
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution which Guaranteed Delivery:
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY
TRANSFER.
Name of Tendering Institution:
Account Number:
Transaction Code Number:
4
<PAGE> 5
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
X Signature Guarantee
- ----------------------------------------------- (If required by Instruction 5)
X
- ----------------------------------------------- Authorized Signature
(SIGNATURE OF REGISTERED X
HOLDER(S) OR AUTHORIZED SIGNATORY) -----------------------------------------------
Note: The above lines must be signed by the
registered holder(s) of Notes as their name(s) Name:
appear(s) on the Notes or by persons(s) -----------------------------------------------
authorized to become registered holder(s) (PLEASE PRINT)
(evidence of which authorization must be
transmitted with this Letter of Transmittal). Title:
If signature is by a trustee, executor, -----------------------------------------------
administrator, guardian, attorney-in-fact,
officer, or other person acting in a fiduciary Name of Firm:
or representative capacity, such person must -----------------------------------------
set forth his or her full title below. See (MUST BE AN ELIGIBLE INSTITUTION AS DEFINED IN
Instruction 5. INSTRUCTION 2)
Name(s): Address:
- ---------------------------------------------- -----------------------------------------------
- ----------------------------------------------- -----------------------------------------------
-----------------------------------------------
Capacity: (INCLUDE ZIP CODE)
- -----------------------------------------------
- ----------------------------------------------- Area Code and Telephone Number:
-----------------------------------------------
Street Address:
- ---------------------------------------- Dated:
- ----------------------------------------------- -----------------------------------------------
- -----------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- -----------------------------------------------
Tax Identification or Social Security Number:
- -----------------------------------------------
</TABLE>
BOX 7
BROKER-DEALER STATUS
- --------------------------------------------------------------------------------
[ ] Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities.
5
<PAGE> 6
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: TRUE TEMPER SPORTS, INC.
- ----------------------------------------------------------------------------------------------------------------------------
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 PART 1 -- PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION Social Security
TREASURY NUMBER ("TIN") IN THE BOX AT RIGHT AND CERTIFY BY Number or TIN
SIGNING AND DATING BELOW
INTERNAL REVENUE SERVICE
-----------------------------------------------------------------------------------------
PART 2 -- Check the box if you are NOT subject to backup withholding under the
provisions of section 3406(a)(1)(C) of the Internal Revenue Code because (1) you have
not been notified that you are subject to backup withholding as a result of failure to
report all interest or dividends or (2) the Internal Revenue Service has notified you
that you are no longer subject to backup withholding. [ ]
- ----------------------------------------------------------------------------------------------------------------------------
CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I PART 3 --
CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM IS
TRUE, CORRECT AND COMPLETE. Awaiting TIN [ ]
SIGNATURE ------------------------ DATE--------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
6
<PAGE> 7
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES. A properly completed
and duly executed copy of this Letter of Transmittal, including Substitute Form
W-9, and any other documents required by this Letter of Transmittal must be
received by the Exchange Agent at its address set forth herein, and either
certificates for Tendered Notes must be received by the Exchange Agent at its
address set forth herein or such Tendered Notes must be transferred pursuant to
the procedures for book-entry transfer described in the Prospectus under the
caption "Exchange Offer -- Book-Entry Transfer" (and a confirmation of such
transfer received by the Exchange Agent), in each case prior to 5:00 p.m., New
York City time, on the Expiration Date. The method of delivery of certificates
for Tendered Notes, this Letter of Transmittal and all other required documents
to the Exchange Agent is at the election and risk of the tendering holder and
the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Instead of delivery by mail, it is recommended
that the Holder use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure timely delivery. No Letter of
Transmittal or Notes should be sent to the Company. Neither the Issuer nor the
registrar is under any obligation to notify any tendering holder of the Issuer's
acceptance of Tendered Notes prior to the closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available, and who cannot deliver their
Notes, this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date must tender their Notes according to
the guaranteed delivery procedures set forth below, including completion of Box
4. Pursuant to such procedures: (i) such tender must be made by or through a
firm which is a member of a recognized Medallion Program approved by the
Securities Transfer Association Inc. (an "Eligible Institution") and the Notice
of Guaranteed Delivery must be signed by the holder; (ii) prior to the
Expiration Date, the Exchange Agent must have received from the holder and the
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by mail or hand delivery) setting forth the name and address of the
holder, the certificate number(s) of the Tendered Notes and the principal amount
of Tendered Notes, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after the
Expiration Date, this Letter of Transmittal together with the certificate(s)
representing the Notes and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) such properly completed
and executed Letter of Transmittal, as well as all other documents required by
this Letter of Transmittal and the certificate(s) representing all Tendered
Notes in proper form for transfer, must be received by the Exchange Agent within
five New York Stock Exchange trading days after the Expiration Date. Any holder
who wishes to tender Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery relating to such Notes prior to 5:00 p.m., New York City
time, on the Expiration Date. Failure to complete the guaranteed delivery
procedures outlined above will not, of itself, affect the validity or effect a
revocation of any Letter of Transmittal form properly completed and executed by
an Eligible Holder who attempted to use the guaranteed delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name Tendered Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may execute
and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered Notes
who is not the registered holder must arrange promptly with the registered
holder to execute and deliver this Letter of Transmittal on his or her behalf
through the execution and delivery to the registered holder of the Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner form accompanying this Letter of Transmittal.
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes held by the holder is tendered, the tendering holder should fill
in the principal amount tendered in the column labeled "Aggregate Principal
Amount Tendered" of the box entitled "Description of Notes Tendered" (Box 1)
above. The entire principal amount of Notes delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Notes held by the holder is not tendered, then Notes for
the principal amount of Notes not tendered and Exchange Notes issued in exchange
7
<PAGE> 8
for any Notes tendered and accepted will be sent to the Holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, as soon as practicable following the
Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued
(and any untendered principal amount of Notes is to be reissued) in the name of
the registered holder(s), then such registered holder(s) need not and should not
endorse any Tendered Notes, nor provide a separate bond power. In any other
case, such registered holder(s) must either properly endorse the Tendered Notes
or transmit a properly completed separate bond power with this Letter of
Transmittal, with the signature(s) on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be endorsed
or accompanied by appropriate bond powers, in each case, signed as the name(s)
of the registered holder(s) appear(s) on the Tendered Notes, with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Issuer, evidence satisfactory to the Issuer of their authority to so act must be
submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Notes are tendered (i) by a registered holder
who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in
the applicable box (Box 3), the name and address to which the Exchange Notes
and/or substitute Notes for principal amounts not tendered or not accepted for
exchange are to be sent, if different from the name and address of the person
signing this Letter of Transmittal. In the case of issuance in a different name,
the taxpayer identification or social security number of the person named must
also be indicated.
7. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the transfer and
exchange of Tendered Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with this
Letter of Transmittal, the amount of such transfer taxes will be billed directly
to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide the
Issuer (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual, is his or her social
security number. If the Issuer is not provided with the correct TIN, the Holder
may be subject to backup withholding and a $50 penalty imposed by the Internal
Revenue Service. (If withholding results in an over-payment of taxes, a refund
may be obtained.) Certain holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting
8
<PAGE> 9
requirements. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.
To prevent backup withholding, each holder of Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 set forth
herein, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN), and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding. If the Tendered Notes are registered in more than one name or are
not in the name of the actual owner, consult the "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for information on
which TIN to report.
The Issuer reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Issuer's obligation regarding backup
withholding.
9. 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 Issuer in its sole discretion, which
determination will be final and binding. The Issuer reserves the right to reject
any and all Notes not validly tendered or any Notes the Issuer's acceptance of
which would, in the opinion of the Issuer or their counsel, be unlawful. The
Issuer also reserves the right to waive any conditions of the Exchange Offer or
defects or irregularities in tenders of Notes as to any ineligibility of any
holder who seeks to tender Notes in the Exchange Offer. The interpretation of
the terms and conditions of the Exchange Offer (including this Letter of
Transmittal and the instructions hereto) by the Issuer shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Notes must be cured within such time as the Issuer
shall determine. Neither the Issuer, the Exchange Agent nor any other person
shall be under any duty to give notification of defects or irregularities with
respect to tenders of Notes, nor shall any of them incur any liability for
failure to give such notification. Tenders of Notes will not be deemed to have
been made until such defects or irregularities have been cured or waived. Any
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 soon as practicable following the
Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive or modify any of the conditions in the Exchange Offer in the case
of any Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes or transmittal of this Letter of Transmittal will be
accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering Holder
whose Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated herein for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Issuer
will accept for exchange all validly tendered Notes as soon as practicable after
the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Issuer shall be
deemed to have accepted tendered Notes when, as and if the Issuer has given
written or oral notice (immediately followed in writing) thereof to the Exchange
Agent. If any Tendered Notes are not exchanged pursuant to the Exchange Offer
for any reason, such unexchanged Notes will be returned, without expense, to the
undersigned at the address shown in Box 1 or at a different address as may be
indicated herein under "Special Delivery Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offer."
9
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
10 7/8% SENIOR SUBORDINATED NOTES DUE 2008
OF
TRUE TEMPER SPORTS
PURSUANT TO THE PROSPECTUS DATED , 1999
This form must be used by a holder of 10 7/8% Senior Notes due 2008 (the
"Notes") of True Temper Sports, Inc., a Delaware corporation (the "Company"),
who wishes to tender Notes to the Exchange Agent pursuant to the guaranteed
delivery procedures described in "The Exchange Offer -- Guaranteed Delivery
Procedures" of the Company's Prospectus, dated (the
"Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any
holder who wishes to tender Notes pursuant to such guaranteed delivery
procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date of the Exchange Offer.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1999 UNLESS EXTENDED
(THE "EXPIRATION DATE").
United States Trust Company
(the "Exchange Agent")
<TABLE>
<S> <C> <C>
By Overnight Courier: By Hand: By Registered or Certified Mail:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
770 Broadway, 13th Floor 111 Broadway P.O. Box 844
New York, New York 10003 Lower Level Cooper Station
Attn: Corporate Trust Services New York, New York 10006 New York, New York 10276-0844
Attn: Corporate Trust Services Attn: Corporate Trust Services
</TABLE>
By Facsimile:
212-780-0592
Attn: Corporate Trust Services
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS 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, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT
800-548-6565, OR BY FACSIMILE AT 212-780-0592.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<S> <C> <C>
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE SIGN AND COMPLETE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Signatures of Registered Holder(s) or Date:
Authorized Signatory: -----------------------------------------------,
- ------------------------------------ 1998
- -------------------------------------------------
- ------------------------------------------------- Address:
Name(s) of Registered Holder(s): -------------------------------------------------
- ------------------------------------------------- -------------------------------------------------
- -------------------------------------------------
- ------------------------------------------------- Area Code and Telephone No.:
--------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Notes or on a security position
listing as the owner of Notes, or by person(s) authorized to become Holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal
(or facsimile thereof), together with the Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility 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, on the fifth New York Stock Exchange
trading day following the Expiration Date.
<TABLE>
<S> <C>
Name of firm:
------------------------------------------
-----------------------------------------------
(AUTHORIZED SIGNATURE)
Address: Name:
- ----------------------------------------------- -----------------------------------------------
(PLEASE PRINT)
Title:
- ----------------------------------------------- -----------------------------------------------
(INCLUDE ZIP CODE)
Area Code and
Tel. No.: Dated: , 1998
- -----------------------------------------------
</TABLE>
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST BE
MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE> 4
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date. The
method of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes referred
to herein, the signature must correspond with the name(s) written on the face of
the Notes without alteration, enlargement, or any change whatsoever. If this
Notice of Guaranteed Delivery is signed by a participant of the Book-Entry
Transfer Facility whose name appears on a security position listing as the owner
of the Notes, the signature must correspond with the name shown on the security
position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Notes or signed as the name of the participant shown on the Book-Entry
Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
4
<PAGE> 1
EXHIBIT 99.3
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
TRUE TEMPER SPORTS, INC.
10 7/8% SENIOR SUBORDINATED NOTES DUE 2008
To Registered Holder and/or Participant of the Book-Entry Transfer
Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
(the "Prospectus") of True Temper Sports, Inc., a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the 10 7/8% Senior Subordinated Notes due 2008 (the
"Notes") held by you for the account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the 10 7/8% Senior Subordinated Notes due 2008
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY):
$
[ ] NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instruct you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (FILL IN
STATE) , (ii) the undersigned is acquiring the Exchange Notes in
the ordinary course of business of the undersigned, (iii) the undersigned is not
participating, does not participate, and has no arrangement or understanding
with any person to participate in the distribution of the Exchange Notes, (iv)
the undersigned acknowledges that any person participating in the Exchange Offer
for the purpose of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended (the "Act"), in connection with a secondary resale transaction of the
Exchange Notes acquired by such person and cannot rely on the position of the
Staff of the Securities and Exchange Commission set forth in no-action letters
that are discussed in the section of the Prospectus entitled "The Exchange
Offer -- Resales of the Exchange Notes," and (v) the undersigned is not an
"affiliate," as defined in Rule 405 under the Act, of the Company; (b) to agree,
on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c)
to take such other action as necessary under the Prospectus or the Letter of
Transmittal to effect the valid tender of such Notes.
<PAGE> 2
SIGN HERE
Name of beneficial owner(s):
- --------------------------------------------------------------------------------
Signature(s):
- --------------------------------------------------------------------------------
Name (please print):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Telephone number:
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security Number:
- ----------------------------------------------------------------
Date:
- --------------------------------------------------------------------------------
2
